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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 1999.
Registration No. 333-[ ]
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
ECHOSTAR DBS CORPORATION
AFFILIATE GUARANTORS LISTED ON SCHEDULE ATTACHED HERETO
(Exact name of Registrant as specified in its charter)
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<S><C>
COLORADO 5064 84-1328967
(STATE OF REGISTRANT'S INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
CLASSIFICATION CODE NUMBER) NUMBER)
DAVID K. MOSKOWITZ, ESQ.
5701 SOUTH SANTA FE DRIVE SENIOR VICE PRESIDENT, GENERAL COUNSEL AND
LITTLETON, COLORADO 80120 SECRETARY
(303) 723-1000 ECHOSTAR DBS CORPORATION
5701 SOUTH SANTA FE DRIVE
LITTLETON, COLORADO 80120
(303) 723-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE) TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT
FOR SERVICE)
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WITH A COPY TO:
DAVID W. AMBROSIA, ESQ.
WINTHROP, STIMSON, PUTNAM & ROBERTS
ONE BATTERY PARK PLAZA
NEW YORK, NY 10004
(212) 858-1000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the Securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
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. / /
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CALCULATION OF REGISTRATION FEE
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TITLE OF SECURITIES TO BE REGISTERED AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
REGISTERED OFFERING PRICE AGGREGATE OFFERING REGISTRATION FEE
PER NOTE (1) PRICE
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<S> <C> <C> <C> <C>
9 1/4% Senior Notes due 2006 $375,000,000 100.0% $375,000,000 $104,250
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9 3/8% Senior Notes due 2009 $1,625,000,000 100.0% $1,625,000,000 $451,750
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Guarantees of the 9 1/4% Senior Notes and the 9 3/8% (2) (2) (2) (2)
Senior Notes by affiliates of EchoStar DBS Corporation
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TOTAL $2,000,000,000 100.0% $2,000,000,000 $556,000
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(1) Estimated solely for the purpose of computing the amount of the
registration fee, pursuant to Rule 457 under the Securities Act of 1933.
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, no registration
fee is required with respect to the guarantees.
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS 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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE>
SCHEDULE OF ADDITIONAL REGISTRANT GUARANTORS
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EXACT NAME OF GUARANTOR REGISTRANTS AS SPECIFIED STATE OF PRIMARY STANDARD I.R.S.
IN THEIR RESPECTIVE CHARTERS FORMATION INDUSTRIAL CLASSIFICATION EMPLOYER IDENTIFICATION
NUMBER NUMBER
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<S> <C> <C> <C>
DIRECTSAT CORPORATION DELAWARE 5064 54-1547458
ECHO ACCEPTANCE CORPORATION COLORADO 5064 84-1082359
ECHOSPHERE CORPORATION COLORADO 5064 84-0833457
DISH INSTALLATION NETWORK CORPORATION COLORADO 5064 84-1195952
ECHOSTAR TECHNOLOGIES CORPORATION TEXAS 5064 76-0033570
HT VENTURES, INC. COLORADO 5064 84-1239150
ECHOSTAR INTERNATIONAL CORPORATION COLORADO 5064 84-1258859
SATELLITE SOURCE, INC. COLORADO 5064 84-1045974
ECHOSTAR SATELLITE CORPORATION COLORADO 5064 84-1114039
HOUSTON TRACKER SYSTEMS, INC. COLORADO 5064 84-1462072
ECHOSTAR NORTH AMERICA CORPORATION COLORADO 5064 84-1282886
SKY VISTA CORPORATION COLORADO 5064 84-1469204
ECHOSTAR INDONESIA, INC. COLORADO 5064 84-1253832
DIRECT BROADCASTING SATELLITE CORPORATION COLORADO 5064 84-1328968
ECHOSTAR SATELLITE BROADCASTING CORPORATION COLORADO 5064 84-1337871
DISH, LTD. NEVADA 5064 88-0312499
ECHOSTAR SPACE CORPORATION COLORADO 5064 84-1307367
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<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 28, 1999
PROSPECTUS
ECHOSTAR DBS CORPORATION
OFFER TO EXCHANGE
$375,000,000 OF ITS 9 1/4% SENIOR NOTES DUE 2006
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR ALL OUTSTANDING 9 1/4% SENIOR NOTES DUE 2006
AND
$1,625,000,000 OF ITS 9 3/8% SENIOR NOTES DUE 2009
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR ALL OUTSTANDING 9 3/8% SENIOR NOTES DUE 2009
The Exchange Offer will expire at 5:00 p.m., New York City Time, on
, 1999, unless extended.
THE REGISTERED NOTES
- - The terms of each of the Notes to be issued in the Exchange Offer are
substantially identical to each of the outstanding Notes that we issued on
January 25, 1999, except for certain transfer restrictions, registration
rights and liquidated damages provisions relating to the outstanding Notes.
Sometimes we refer to the Notes to be issued in the Exchange Offer as the
Exchange Notes and the Notes issued on January 25, 1999 as the Old Notes.
- - Interest on the Notes is payable semi-annually in arrears on each February
1 and August 1, commencing August 1, 1999.
- - The Notes are general senior unsecured obligations of the Company and will
rank equally in right of payment to each other and to all our existing and
future senior unsecured obligations and will rank senior in right of
payment to all our existing and future junior obligations. The Notes are
effectively junior to secured obligations to the extent of the collateral
securing such obligations, including any borrowings under our future
secured credit facilities. The Notes are guaranteed on a senior unsecured
basis by substantially all of our subsidiaries and certain of our
affiliates.
MATERIAL TERMS OF THE EXCHANGE OFFER
- - Expires at 5:00 p.m., New York City time, on , 1999, unless
extended.
- - All outstanding Notes that are validly tendered and not validly withdrawn
will be exchanged for an equal principal amount of Exchange Notes which are
registered under the Securities Act of 1933, as amended.
- - The exchange of Notes will not be a taxable exchange for U.S. federal
income tax purposes.
- - We will not receive any proceeds from the Exchange Offer.
- - Tenders of outstanding Old Notes may be withdrawn at any time prior to the
expiration of the Exchange Offer.
CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE 23 OF THIS PROSPECTUS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE NOTES TO BE DISTRIBUTED IN THE
EXCHANGE OFFER, NOR HAVE ANY OF THESE ORGANIZATIONS DETERMINED
THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTA-
TION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1999.
4
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TABLE OF CONTENTS
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Page
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Prospectus Summary 6
The EchoStar Organization 22
Risk Factors 23
Use of Proceeds 41
Capitalization 50
Selected Financial Data 51
Management's Discussion and Analysis of Financial Condition and Results of Operations 54
Business 65
Management 93
Certain Relationships and Related Transactions 98
Security Ownership of Certain Beneficial Owners and Management 99
Description of the Notes 101
Certain United States Federal Income Tax Considerations 144
United States ERISA Considerations 147
Plan of Distribution 147
Legal Matters 149
Experts 149
Where You Can Find More Information 149
Index to Financial Statements F-1
</TABLE>
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE GUARANTORS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY, TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER TO SELL OR SOLICITATION WOULD
BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF
THIS PROSPECTUS.
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FORWARD-LOOKING STATEMENTS
All statements contained herein, as well as statements made in press
releases and oral statements that may be made by EchoStar or by officers,
directors or employees acting on its behalf, that are not statements of
historical fact constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
could cause the actual results of the Company to be materially different from
historical results or from any future results expressed or implied by such
forward-looking statements. Among the factors that could cause actual results to
differ materially are the following: a total or partial loss of a satellite due
to operational failures, space debris or otherwise; a decrease in sales of
digital equipment and related services to international service providers; a
decrease in DISH Network subscriber growth; an increase in subscriber
acquisition costs; impediments to the retransmission of local or distant
broadcast network signals; lower than expected demand for the Company's delivery
of local broadcast network signals; an unexpected business interruption due to
the failure of third-parties to remediate year 2000 issues; the inability of the
Company to retain or obtain necessary authorizations from the Federal
Communications Commission (FCC); an increase in competition from cable, direct
broadcast satellite (DBS), other satellite system operators and other providers
of subscription television services; the introduction of new technologies and
competitors into the subscription television business; a merger of existing DBS
competitors; a change in the regulations governing the subscription television
service industry; the outcome of any litigation in which ECC or the Company may
be involved; failure to consummate the 110 Acquisition with The News Corporation
Limited and MCI WorldCom, Inc. (MCI) whereby ECC would issue equity securities
in exchange for two satellites that have not yet been completed or the failure
of such satellites to be successfully launched or to become operational or a
delay in such launch or operation; general business and economic conditions; and
other risk factors described from time to time in reports filed with the
Securities and Exchange Commission (SEC or Commission) by ECC or the Company. 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.
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS AND
THE NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. "WE," "OUR" AND THE
"COMPANY" AS USED IN THIS PROSPECTUS REFER TO ECHOSTAR DBS CORPORATION, A
COLORADO CORPORATION (DBS CORP.), DIRECT BROADCASTING SATELLITE CORPORATION,
A COLORADO CORPORATION, AND THE SUBSIDIARIES OF DBS CORP. AS USED IN THIS
PROSPECTUS, "ECC" REFERS TO ECHOSTAR COMMUNICATIONS CORPORATION, A NEVADA
CORPORATION, OR, IF THE CONTEXT REQUIRES, TO ECC TOGETHER WITH ITS
SUBSIDIARIES. "OLD NOTES" REFERS TO OUR 9 1/4% SENIOR NOTES DUE 2006 AND OUR
9 3/8% SENIOR NOTES DUE 2009 THAT WERE ISSUED ON JANUARY 25, 1999 AND
"EXCHANGE NOTES" REFERS TO OUR 9 1/4% SENIOR NOTES AND OUR 9 3/8% SENIOR
NOTES OFFERED PURSUANT TO THIS PROSPECTUS. "NOTES" REFERS TO THE OLD NOTES
AND THE EXCHANGE NOTES, COLLECTIVELY.
THE EXCHANGE OFFER
We completed on January 25, 1999 the private offering of an aggregate of
$2,000,000,000 of Notes consisting of $375,000,000 9 1/4% Senior Notes due 2006
and 1,625,000,000 9 3/8% Senior Notes due 2009. We entered into registration
rights agreements with the initial purchasers in the private offering in which
we agreed, among other things, to deliver to you this Prospectus and to complete
the
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Exchange Offer within 210 days of the issuance of the Old Notes. You are
entitled to exchange in the Exchange Offer your outstanding Old Notes for
registered Exchange Notes with substantially identical terms. If the Exchange
Offer is not completed by August 23, 1999, and in certain other circumstances,
liquidated damages, in addition to interest that would otherwise accrue on the
Notes, will accrue at the rates described herein. You should read the
discussion under the headings "-- Summary Description of the Notes" and
"Description of the Notes" for further information regarding the registered
notes.
We believe that the Exchange Notes offered in the Exchange Offer may be
resold by you without compliance with the registration and prospectus delivery
provisions of the Securities Act, subject to certain conditions. You should
read the discussion under the headings "--Summary of the Terms of Exchange
Offer" and "The Exchange Offer" for further information regarding the Exchange
Offer and resale of the Notes.
THE COMPANY
We are a leading provider of DBS programming services in the United States,
a significant international supplier of digital satellite receiver systems and a
provider of other satellite services. We commenced our subscription satellite
television service, the DISH Network, in March 1996, after the successful launch
of our first satellite (EchoStar I) in December 1995. Since that time, we have
launched three additional satellites (EchoStar II, EchoStar III and EchoStar
IV) and we now have more operational DBS satellites than any other DBS operator
in the United States. As of December 31, 1998, DISH Network had more than
1.9 million subscribers, an increase of approximately 900,000 subscribers during
the past 12 months. We added approximately 330,000 subscribers during the fourth
quarter of 1998, which we estimate represents almost 40% of all new satellite
subscribers in the United States during that period. Average monthly programming
revenue during the third quarter of 1998 was approximately $40 per subscriber.
The introduction of DBS receivers is widely regarded as the most successful
introduction of a consumer electronics product in United States history,
surpassing the rollout of color televisions, VCRs and compact disc players. As
of December 31, 1998, approximately 9 million United States households
subscribed to DBS and other digital direct-to-home (DTH) satellite services. We
believe that there is still significant unsatisfied demand for high quality,
reasonably priced television programming.
We have authorizations for more United States licensed DBS frequencies than
any other DBS competitor, including 21 frequencies at an orbital slot (119
degrees West Longitude) that is capable of providing DBS service to the entire
continental United States (known as "full CONUS"). From that orbital slot, we
provide consumers in the continental United States with a choice of
approximately 200 channels of digital television programming and CD quality
audio programming. DISH Network subscribers can choose from a variety of
programming packages that we believe have a better price-to-value relationship
than packages currently offered by most subscription television providers,
particularly cable TV operators.
In November 1998, we announced an agreement with The News Corporation
Limited, its ASkyB subsidiary and MCI to purchase MCI's authorization for 28
additional DBS frequencies at the 110 degrees WL full CONUS orbital slot,
together with two satellites (EchoStar V and EchoStar VI) that are to be
delivered in-orbit and other related assets and rights (the 110 Acquisition).
Assuming consummation of the 110 Acquisition and successful launch of EchoStar V
and EchoStar VI, we expect that the DISH Network will have the capacity to
expand its current offering of more than 200 channels to approximately 500 video
and audio channels broadcast nationwide. Subscribers can receive DISH Network
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programming through a single 18-inch dish. EchoStar V and EchoStar VI are
currently scheduled to be launched during 1999.
DISH Network programming is available to any subscriber who purchases or
leases an 18-inch satellite dish, an EchoStar digital satellite receiver, a
user-friendly remote control and related components that together constitute an
EchoStar receiver system. EchoStar receiver systems are fully compatible with
MPEG-II, the world digital standard for computers and consumer electronics
products, and provide image and sound quality superior to current analog cable
TV service.
EchoStar receiver systems are designed and engineered by our EchoStar
Technologies Corporation (ETC) business unit. ETC has contracted for the
manufacture of EchoStar receiver systems with third parties in accordance with
ETC specifications. Our satellite receivers have won numerous awards from
dealers, retailers and industry trade publications. In addition to supplying
EchoStar receiver systems for the DISH Network, ETC supplies similar receiver
systems to international satellite TV service providers. Currently, ETC has two
major customers, subsidiaries of the national telephone companies in Spain
(Telefonica) and Canada (Bell Canada). Additionally, we design "turn-key"
satellite systems for third parties. As part of the 110 Acquisition, News
Corporation, which has interests in several major international satellite TV
service providers, agreed to purchase at least 500,000 digital satellite
receivers. ETC is actively soliciting additional business to supply receiver
systems to several satellite TV projects in various stages of development around
the world, although we cannot provide assurance as to the ultimate success of
those efforts.
Our Satellite Services business unit primarily leases capacity on our
satellites to customers on either a monthly (full-time) or hourly (part-time)
basis. Full-time customers tend to be international services that broadcast
foreign language programming to DISH Network subscribers. Part-time customers
are typically Fortune 1000 companies that use our satellite network for business
television (BTV) service to communicate with employees, customers and suppliers
located around the United States. In addition, we are actively developing a wide
range of Internet and high-speed data services that we expect to offer to
consumers beginning in 1999.
Our primary objective is to continue to expand our DISH Network subscriber
base, as well as to develop as an integrated, full-service satellite company. To
achieve this objective, we seek to:
- - LEVERAGE OUR SIGNIFICANT SHARE OF DBS SPECTRUM. ECC currently has FCC
authorizations for more DBS capacity than any other domestic satellite TV
service provider, with four high-power satellites currently in orbit. We
will continue to expand our digital video and audio programming offerings
with additional satellite-delivered programming, high definition television
(HDTV) offerings, sports, movies, foreign language, business, educational
and other niche programming. We also plan to introduce Internet and
high-speed data services during 1999. By expanding our local and other
programming services and by introducing Internet and high-speed data
services, we believe that we will be able to differentiate ourselves from
other subscription TV service providers that do not have the channel
capacity to offer similar services or cannot expand their capacity in a
cost effective manner. Consummation of the 110 Acquisition should further
enhance our ability to add programming and strengthen our product offering.
- - ENHANCE OUR POSITION AS A PROVIDER OF VALUE-ORIENTED PROGRAMMING AND
RECEIVER SYSTEMS. We employ a "value-based" strategy with respect to
pricing decisions for DISH Network programming and EchoStar receiver
systems. We believe that DISH Network offers consumers more video and audio
programming for less money than most other subscription TV services. For
example, our
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entry level "America's Top 40" programming package is priced at $19.99 per
month as compared to, on average, more than $30 per month for comparable
cable TV service (typically consisting of 54 analog channels). Customers
can add up to seven premium movie channels for an additional $11 per month,
or about the same amount that cable subscribers typically pay for only one
or two movie channels. The Company's fourth quarter 1998 promotion, the
DISH Network One-Rate Plan, provides a $249 rebate on the purchase of
certain EchoStar receiver systems if the subscriber commits to a year's
purchase of America's Top 100 CD programming and two premium channel
packages for a monthly fee of $48.98. Also in the fourth quarter of 1998,
we announced a price guarantee to consumers, ensuring no price increases
for our most popular programming packages through March 2000. In addition,
we believe that our digital video receiver systems are produced at a lower
cost than those of most other manufacturers of similar equipment. We have
been able to leverage this advantage by acquiring DISH Network subscribers
at what we believe to be a substantially lower cost than any of our DBS
competitors while offering consumers a wide array of features and
functionality in EchoStar receiver systems.
- - CONTINUE TO EXPAND DISTRIBUTION CHANNELS. We continue to strengthen our
sales and distribution channels, which include an independent dealer
network, consumer electronics retail and direct sales representatives. We
are approaching 18,000 points of sale across the United States, up from
approximately 12,000 points of sale 12 months ago. The majority of our
subscriber activations have come from our independent dealer network, which
consists primarily of local retailers who specialize in TV and home
entertainment systems. We intend to increase our distribution channels and
further expand our points of sale into more traditional consumer
electronics retailers (e.g., our agreement with Sears to distribute
EchoStar receiver systems). Presently, we have agreements with four
manufacturers, SCI, VTech, JVC and Philips, to produce EchoStar receiver
systems.
- - DEVELOP ECHOSTAR TECHNOLOGIES CORPORATION AND SATELLITE SERVICES
BUSINESSES. We believe that ETC and Satellite Services offer strategic
opportunities for the Company in the future. ETC has been able to leverage
its research and development on EchoStar receiver systems by selling
similar products to international satellite TV service providers. In
addition, the design by ETC of receiver systems for international customers
has resulted in improvements in the design and economies of scale in
production of EchoStar receiver systems for the DISH Network. ETC has
generated significant revenue for the Company during 1997 and 1998.
Likewise, although Satellite Services is not yet a fully developed
business, we believe that providing Satellite Services to BTV and other
customers can enhance DISH Network subscriber growth by increasing
visibility for the DISH Network, and because many BTV customers might also
subscribe to DISH Network's other programming service offerings.
- - EMPHASIZE ONE-STOP SHOPPING. We believe that providing outstanding
service, convenience and value are essential to developing long-term
customer relationships. We offer consumers a "one-stop shopping" service
which includes programming, installation, maintenance, reliable customer
service and satellite reception equipment. To enhance responsiveness to our
customers, we have established a single telephone number (1-800-333-DISH),
which customers can call 24 hours a day, seven days a week to order
EchoStar receiver systems, activate and modify programming services,
schedule installation and obtain technical support and warranty services.
We believe we are the only DBS provider to offer a comprehensive
single-point customer service function.
We have evaluated and expect to continue to evaluate possible acquisition
transactions and the possible disposition of certain of our businesses on an
ongoing basis and at any given time we may be engaged in discussions or
negotiations with respect to possible acquisitions or dispositions within the
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DBS field as well as other areas of opportunity.
Our principal offices are located at 5701 South Santa Fe Drive, Littleton,
Colorado 80120, and our telephone number is (303) 723-1000.
RECENT DEVELOPMENTS
110 ACQUISITION
The 110 Acquisition was announced on November 30, 1998. Under the 110
Acquisition agreement, ECC will acquire MCI's license to operate 28 DBS
frequencies at the 110 degrees WL full CONUS orbital location; two Space
Systems/ Loral-built satellites, to be delivered in-orbit and currently expected
to be launched during 1999; a recently-constructed digital broadcast operations
center located in Gilbert, Arizona; a worldwide license agreement to manufacture
and distribute set-top boxes internationally using NDS Limited
encryption/decoding technology; a commitment by an affiliated entity of News
Corporation to purchase from ETC a minimum of 500,000 set-top boxes; and a
three-year no fee retransmission consent agreement for DISH Network to
rebroadcast FOX Broadcasting Company owned-and-operated local station signals to
their respective markets. The transferors will bear the costs of the
construction, launch and insurance of the two Space Systems/Loral-built
satellites, including launch insurance and one year of in-orbit service
insurance. ECC and MCI also agreed that MCI will have the non-exclusive right to
bundle DISH Network service with MCI's telephony service offerings on mutually
agreeable terms. In addition, we have agreed to carry the FOX News Channel on
the DISH Network. We received standard program launch support payments in
exchange for carrying the programming.
Beneficial interest in substantially all of the assets and rights to be
acquired by ECC in the 110 Acquisition will be transferred to us promptly after
closing.
If ECC's Class A common stock (Nasdaq: DISH) trades between $15.00 per
share and $39.00 per share during the 20 business days prior to closing the 110
Acquisition, News Corporation will receive 24,030,000 newly-issued shares of
ECC's Class A common stock and MCI will receive 5,970,000 newly-issued shares of
ECC's Class A common stock, a total of approximately 37% of ECC's fully-diluted
equity and approximately 8.5% of the total voting power of ECC. If the average
closing price of ECC's Class A common stock for the 20 business days preceding
the closing of the 110 Acquisition exceeds $39 per share, the number of the
newly-issued shares will be determined by dividing $1.17 billion by such price.
If the 110 Acquisition had been consummated on January 25, 1999, ECC would have
been required to issue 24,258,760 Class A Shares, constituting approximately
31.8% of ECC's fully-diluted equity and 7.0% of ECC's total voting power.
By combining the capacity of the newly acquired satellites at the 110
degrees WL orbital slot and our current satellites at 119 degrees WL (which is
subject to FCC approval which has been applied for), we expect that our DISH
Network will have the capacity to provide approximately 500 channels of
programming, Internet and high-speed data services and HDTV nationwide through a
single 18 inch dish, and would be positioned to become a one-dish solution for
satellite-delivered local programming in major markets across the United States.
We also expect that our DISH Network will have the capacity to serve Alaska,
Hawaii, Puerto Rico and the United States territories in the Caribbean.
In connection with the 110 Acquisition, the litigation between ECC and News
Corporation described below under "Business -- Legal Proceedings" will be stayed
and dismissed with prejudice upon closing or if the transaction is terminated
for reasons other than the breach by, or failure to fulfill a condition within
the control of, News Corporation or MCI, or in certain other limited
circumstances.
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The 110 Acquisition is subject to receipt of regulatory approvals and the
approval of ECC's shareholders. See "Business -- Government Regulation" and
"Risk Factors -- Opposition to, and Risk of Loss of, Certain EchoStar
Authorizations." ECC's Board of Directors has approved the 110 Acquisition.
Although the FCC has not yet provided approval for the 110 Acquisition, the
Federal Trade Commission and the United States Department of Justice provided
"early termination" of Hart-Scott-Rodino antitrust review of the 110 Acquisition
on December 16, 1998. The FCC has placed the 110 Acquisition on public notice.
Comments on, or petitions to deny, the transaction were required to be filed by
January 14, 1999. The U.S. Department of Justice has filed comments requesting
prompt grant of the 110 Acquisition application. Several parties have opposed
the application on various grounds or have requested conditions, including,
without limitation, arguing that alien ownership limitations and other broadcast
qualification requirements apply, requesting program access conditions with
respect to News Corporation's programming, and requesting conditions in
connection with service to Alaska and Hawaii, including requesting service to
Hawaii from 110 degrees WL as well as from the 148 degrees WL orbital location,
with respect to which ECC has filed a still pending request for a waiver of the
obligation to serve Alaska and Hawaii. We cannot be sure how the FCC would rule
on any of these oppositions or requests. The entire FCC formal pleading cycle is
expected to be completed by early February 1999, with FCC approval of the
transaction possible shortly thereafter. To our knowledge, no other regulatory
approvals are necessary in order to consummate the 110 Acquisition. The
transaction must also be approved by ECC's shareholders. Charles W. Ergen,
Chairman, President and Chief Executive Officer of ECC and its controlling
shareholder, has agreed to vote in favor of the transaction.
ECC TENDER OFFERS
ECC announced on December 23, 1998, that it had commenced cash tender
offers (Tender Offers) as part of a plan to refinance most of its existing
indebtedness at more favorable interest rates and terms. ECC offered to
purchase any and all of the following debt securities issued by its direct
and indirect subsidiaries: the 12 1/2% Senior Secured Notes due 2002 issued
by EchoStar DBS Corporation; the 12 7/8% Senior Secured Discount Notes due
2004 issued by Dish, Ltd.; and the 13 1/8% Senior Secured Discount Notes due
2004 issued by EchoStar Satellite Broadcasting Corporation. ECC also
announced that it had sent to all holders of ECC's issued and outstanding 12
1/8% Series B Senior Redeemable Exchangeable Preferred Stock due 2004 a
notice to exchange all of the outstanding shares of Series B Preferred into
12 1/8% Senior Preferred Exchange Notes due 2004 on the terms and conditions
set forth in the certificate of designation relating to the Series B
Preferred. The Senior Preferred Exchange Notes were issued on January 4,
1999. Immediately following the exchange, ECC commenced an offer to purchase
any and all outstanding Senior Preferred Exchange Notes. The Tender Offers
for the first three issues of notes were consummated on January 25, 1999,
concurrently with the offering of the Old Notes, with holders of more than
99% of each issue of debt securities tendering their notes and consenting to
certain amendments to the indentures governing the notes that eliminated
substantially all of the restrictive covenants and amended certain other
provisions. The Tender Offer for the Senior Preferred Exchange Notes will
expire on February 1, 1999, unless extended. The Company has been advised by
the depositary for such Tender Offer that it has received tenders and
consents from holders of more than 99% of the outstanding Senior Preferred
Exchange Notes.
REORGANIZATION
In order to streamline the organization and operations of the ECC group of
companies, ECC plans to implement a reorganization as illustrated below under
"The EchoStar Organization." Pursuant to the reorganization plan, we will place,
subject to FCC approval, ownership of all of the group's DBS satellites and
related FCC authorizations and licenses into EchoStar Satellite Corporation, a
wholly
11
<PAGE>
owned subsidiary of EchoStar DBS Corporation. DirectSat Corporation and Direct
Broadcasting Satellite Corporation, the current owners of EchoStar II and
EchoStar III, will both be merged into EchoStar Satellite Corporation.
Dish, Ltd. and EchoStar Satellite Broadcasting Corporation will be merged into
EchoStar DBS Corporation. EchoStar DBS Corporation currently owns EchoStar IV,
which, like the other DBS satellites and related FCC authorizations for
frequencies (including those acquired in the 110 Acquisition), will be
transferred to EchoStar Satellite Corporation. Our companies that currently hold
FCC DBS authorizations have filed applications with the FCC to effect these "pro
forma" assignments of their licenses to EchoStar Satellite Corporation.
Consummation of the reorganization is contingent upon receipt of those FCC
approvals.
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $375,000,000 aggregate
principal amount of outstanding 9 1/4% Senior Notes due 2006 and $1,625,000,000
aggregate principal amount of outstanding 9 3/8% Senior Notes due 2009 for an
equal aggregate principal amount of Exchange Notes. Each series of Exchange
Notes will be obligations of the Company entitled to the benefits of the
indenture governing such series of the outstanding Old Notes. The form and terms
of the Exchange Notes are identical in all material respects to the form and
terms of the outstanding Old Notes except that the Exchange Notes have been
registered under the Securities Act, and therefore are not entitled to the
benefits of the registration rights granted under the registration rights
agreements, executed as part of the offering of the outstanding Old Notes. As a
result of this registration, the Exchange Notes will not bear legends
restricting their transfer.
Registration Rights You are entitled to exchange your Old Notes for
Agreements registered Exchange Notes with substantially
identical terms. The Exchange Offer is intended
to satisfy these rights. After the Exchange
Offer is complete, you will no longer be
entitled to any exchange or registration rights
with respect to your Old Notes, except in
certain limited circumstances.
The Exchange Offer We are offering to exchange $1,000 principal
amount of our Exchange Notes which have been
registered under the Securities Act for each
$1,000 principal amount of the applicable
series of outstanding Old Notes.
In order to be exchanged, an outstanding Old
Note must be properly tendered and accepted.
All outstanding Old Notes that are validly
tendered and not validly withdrawn will be
exchanged. The following principal amounts of
the Old Notes are outstanding: $375,000,000
9 1/4% Senior Notes due 2006 and $1,625,000,000
9 3/8 % Senior Notes due 2009. We will issue
registered notes on or promptly after the
expiration of the Exchange Offer.
12
<PAGE>
Resale of the Exchange Notes Based on an interpretation by the staff of the
SEC set forth in no-action letters issued to
third parties, including "Exxon Capital
Holdings Corporation" (available May 13, 1988),
"Morgan Stanley & Co. Incorporated" (available
June 5, 1991), "Mary Kay Cosmetics, Inc."
(available June 5, 1991) and "Warnaco, Inc."
(available October 11, 1991), we believe that
the Exchange Notes issued in the Exchange Offer
may be offered for resale, resold and otherwise
transferred by you without compliance with the
registration and prospectus delivery provisions
of the Securities Act if: the Exchange Notes
issued in the Exchange Offer are being acquired
by you in the ordinary course of your business;
you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate in
the distribution of the Exchange Notes issued
to you in the Exchange Offer; you are not a
broker-dealer who purchased such outstanding
Old Notes directly from us for resale pursuant
to Rule 144A or any other available exemption
under the Securities Act; and you are not an
"affiliate" of ours. If our belief is
inaccurate and you transfer any Note issued to
you in the Exchange Offer without delivering a
prospectus meeting the requirement of the
Securities Act or without an exemption from
registration of your Old Notes from such
requirements, you may incur liability under the
Securities Act. We do not assume or indemnify
you against such liability. Each broker-dealer
that is issued Exchange Notes in the Exchange
Offer for its own account in exchange for Old
Notes which were acquired by such broker-dealer
as a result of market-making or other trading
activities must acknowledge that it will
deliver a prospectus meeting the requirements
of the Securities Act, in connection with any
resale of the Exchange Notes issued in the
Exchange Offer. The Letter of Transmittal
states that by so acknowledging and by
delivering a prospectus, such broker-dealer
will not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. A broker-dealer may use this
Prospectus for an offer to resell, resale or
other retransfer of the Exchange Notes issued
to it in the Exchange Offer. We have agreed to
use our best efforts to make this Prospectus
and any amendment or supplement to this
Prospectus available to any such broker-dealer
for use in connection with any such resales. We
believe that no registered holder of the
outstanding Old Notes is an affiliate (as such
term is defined in Rule 405 of the Securities
Act) of the Company. The Exchange Offer is not
being made to, nor will we accept surrenders
for exchange from, holders of outstanding Old
Notes in any jurisdiction in which this
Exchange Offer or the acceptance thereof would
not be in compliance with the securities or
blue sky laws of such jurisdiction.
13
<PAGE>
Expiration Date The Exchange Offer will expire at 5:00 p.m.,
New York City time, , 1999, unless
we decide to extend the expiration date.
Accrued Interest on the The Old Notes and the Exchange Notes will bear
Exchange Notes and the interest from January 25, 1999. Old Notes that
Outstanding Old Notes are accepted for exchange will cease to accrue
interest from the date of completion of the
Exchange Offer. Consequently, holders who
exchange their outstanding Old Notes for
Exchange Notes will receive the same interest
payment on August 1, 1999 (the first interest
payment date with respect to the outstanding
Old Notes and the Exchange Notes to be issued
in the Exchange Offer) that they would have
received had they not accepted the Exchange
Offer.
Termination of the Exchange We may terminate the Exchange Offer if we
Offer determine that our ability to proceed with the
Exchange Offer could be materially impaired due
to any legal or governmental action, new law,
statute, rule or regulation or any
interpretation of the staff of the SEC of any
existing law, statute, rule or regulation. We
do not expect any of the foregoing conditions
to occur, although we cannot assure you that
such conditions will not occur. Holders of
outstanding Old Notes will have certain rights
against us under the registration rights
agreements executed as part of the offering of
the outstanding Old Notes if we fail to
consummate the Exchange Offer.
14
<PAGE>
Procedures for Tendering
Outstanding Old Notes If you are a holder of an Old Note and you wish
to tender your Old Note for exchange pursuant
to the Exchange Offer, you must transmit to
U.S. Bank Trust National Association, as
Exchange Agent, on or prior to the Expiration
Date: either a properly completed and duly
executed Letter of Transmittal, which
accompanies this Prospectus, or a facsimile of
the Letter of Transmittal, including all other
documents required by the Letter of
Transmittal, to the Exchange Agent at the
address set forth on the cover page of the
Letter of Transmittal; or a computer-generated
message transmitted by means of the Automated
Tender Offer Program system of The Depository
Trust Company (DTC) and received by the
Exchange Agent and forming a part of a
confirmation of book-entry transfer in which
you acknowledge and agree to be bound by the
terms of the Letter of Transmittal; and, either
a timely confirmation of book-entry transfer of
your outstanding Old Notes into the Exchange
Agent's account at DTC pursuant to DTC's
procedure for book-entry transfers described in
this Prospectus under the heading "The Exchange
Offer--How to Tender" must be received by the
Exchange Agent on or prior to the Expiration
Date; or the documents necessary for compliance
with the guaranteed delivery procedures
described below. By executing the Letter of
Transmittal, each holder will represent to us
that, among other things, the Exchange Notes to
be issued in the Exchange Offer are obtained in
the ordinary course of business of the person
receiving such Exchange Notes whether or not
such person is the holder, neither the holder
nor any such other person has an arrangement or
understanding with any person to participate in
the distribution or such Exchange Notes and
neither the holder nor any such other person is
an "affiliate," as defined in Rule 405 under
the Securities Act, of the Company.
Special Procedures for If you are the beneficial owner of Old Notes
Beneficial Owners and your name does not appear on a security
position listing of DTC as the holder of such
Old Notes or if you are a beneficial owner of
registered Old Notes that are registered in the
name of a broker, dealer, commercial bank,
trust company or other nominee and you wish to
tender such Old Notes or registered Old Notes
in the Exchange Offer, you should promptly
contact the person in whose name your Old Notes
are registered and instruct such person to
tender on your behalf. If such beneficial
holder wishes to tender on its own behalf such
beneficial holder must, prior to completing and
executing the Letter of Transmittal and
delivering its outstanding Old Notes, either
make appropriate arrangements to register
ownership of the outstanding Old Notes in such
holder's name or obtain a properly completed
bond power from the registered holder. The
transfer of record ownership may take
considerable time.
15
<PAGE>
Guaranteed Delivery Procedure If you wish to tender your Old Notes and time
will not permit your required documents to
reach the Exchange Agent by the Expiration
Date, or the procedure for book-entry transfer
cannot be completed on time or certificates for
registered Old Notes cannot be delivered on
time, you may tender your Old Notes pursuant to
the procedures described in this Prospectus
under the heading "The Exchange Offer --
Guaranteed Delivery Procedures."
Withdrawal Rights You may withdraw the tender of your Old Notes
at any time prior to 5:00 p.m., New York City
time, on , 1999, the business day
prior to the Expiration Date, unless your Old
Notes were previously accepted for exchange.
Acceptance of Outstanding Old Subject to certain conditions (as summarized
Notes and Delivery of above in "-- Termination of the Exchange Offer"
Exchange Notes and described more fully under the "The
Exchange Offer"), we will accept for exchange
any and all outstanding Old Notes that are
properly tendered in the Exchange Offer prior
to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes issued
pursuant to Exchange Offer will be delivered
promptly following the Expiration Date.
Certain U.S. Federal Income An exchange of Old Notes for Exchange Notes
Tax Consequences will not be taxable to holders. See "Certain
United States Federal Tax Consequences - the
Exchange Offer."
Use of Proceeds We will not receive any proceeds from the
issuance of Exchange Notes pursuant to the
Exchange Offer. We will pay all expenses
incident to the Exchange Offer.
Exchange Agent U.S. Bank Trust National Association is serving
as Exchange Agent in connection with the
Exchange Offer. The Exchange Agent can be
reached at Corporate Trust Trustee
Administration, 180 E. 5th Street, St. Paul,
Minnesota 55101. For more information with
respect to the Exchange Offer, the telephone
number for the Exchange Agent is (651) 244-8162
and the facsimile number for the Exchange Agent
is (651) 244-1537.
Consequences of Not If you do not exchange your Old Notes in the
Exchanging Old Notes Exchange Offer, your Old Notes will continue to
be subject to the restrictions or transfer set
forth in the legend on the certificate for your
Old Notes. In general, you may offer or sell
your Old Notes only if they are registered
under, offered or sold pursuant to an exemption
from, or offered or sold in a transaction not
subject to, the Securities Act and applicable
state securities laws. We do not currently
intend to register the Old Notes under the
Securities Act. See "The Exchange Offer."
SUMMARY DESCRIPTION OF THE NOTES
The Exchange Offer applies to $375,000,000 aggregate principal amount of
9 1/4% Senior Notes due 2006 and $1,625,000,000 aggregate principal amount of
9 3/8% Senior Notes due 2009. The form and terms of the Exchange Notes are
substantially identical to the form and terms of the Old Notes, except that
the Exchange Notes have been registered under the Securities Act, and
therefore, will not bear
16
<PAGE>
legends restricting the transfer thereof. Each series of the Exchange Notes
will evidence the same debt as the applicable series of Old Notes and will be
entitled to the benefits of the applicable Indenture. See "Description of the
Notes." As used in this summary of the Notes, the "Company" refers to EchoStar
DBS Corporation and not to its Subsidiaries, and "Subsidiaries" refers to
EchoStar DBS Corporation's direct and indirect subsidiaries and Direct Broadcast
Satellite Corporation, a wholly-owned subsidiary of ECC (DBSC).
Securities Offered $375.0 million aggregate principal amount of 9 1/4%
Notes due 2006 (the Seven Year Notes).
$1.625 billion aggregate principal amount of 9 3/8%
Notes due 2009 (the Ten Year Notes).
Maturity Date February 1, 2006 for the Seven Year Notes;
February 1, 2009 for the Ten Year Notes.
Interest Payment Dates Interest will accrue at the rate of 9 1/4% per annum
on the Seven Year Notes and 9 3/8% per annum on the
Ten Year Notes, and will be payable semi-annually in
cash on February 1 and August 1 of each year,
commencing August 1, 1999.
Ranking The Notes rank senior in right of payment to all
subordinated indebtedness of the Company and PARI
PASSU in right of payment to each other and to all
senior indebtedness of the Company. Although the
Notes are titled "Senior," the Company has not
issued, and does not have any plans to issue, any
indebtedness to which the Notes would be senior.
The Notes and the Guarantees are effectively junior
to secured obligations of the Company and its
subsidiaries to the extent of the collateral
securing those obligations, including borrowings
under the Company's future secured credit
facilities.
As of September 30, 1998, the long-term indebtedness
of the Company and its Subsidiaries aggregated
approximately $1.52 billion. On a pro forma basis,
after giving effect to issuance of the Notes and
application of the net proceeds therefrom and to the
reorganization, the Company's aggregate consolidated
Indebtedness as of September 30, 1998, for purposes
of the indentures relating to the Notes (the
Indentures), would have been approximately 2.07
billion. See "Description of the Notes" and
"Capitalization."
Optional Redemption of Except as set forth below, the Seven Year Notes are
the Seven Year Notes not redeemable at the Company's option prior to
February 1, 2003. Thereafter, the Seven Year Notes
are subject to redemption, at the option of the
Company, in whole or in part, at the redemption
prices set forth herein. In addition, at any time
prior to February 1, 2002, the Company may redeem
Seven Year Notes at a redemption price equal to
109.250% of the principal amount thereof, together
with accrued and unpaid interest thereon to the
redemption date, with the net proceeds of one or
more public or private sales of certain Equity
Interests of the Company (other than proceeds from a
sale to any Subsidiary of the Company), provided
that: (1) at least 65% of the Seven Year Notes
remain outstanding immediately after the occurrence
of such redemption; and (2) such redemption occurs
within 120 days of the date of the closing of any
such sale.
17
<PAGE>
Optional Redemption of Except as set forth below, the Ten Year Notes are
the Ten Year Notes not redeemable at the Company's option prior to
February 1, 2004. Thereafter, the Ten Year Notes are
subject to redemption, at the option of the Company,
in whole or in part, at the redemption prices set
forth herein. In addition, at any time prior to
February 1, 2002, the Company may redeem Ten Year
Notes at a redemption price equal to 109.375% of the
principal amount thereof, together with accrued and
unpaid interest thereon to the redemption date, with
the net proceeds of one or more public or private
sales of certain Equity Interests of the Company
(other than proceeds from a sale to any Subsidiary
of the Company), provided that: (1) at least 65% of
the Ten Year Notes remain outstanding immediately
after the occurrence of such redemption; and (2)
such redemption occurs within 120 days of the date
of the closing of any such sale.
Change of Control Upon the occurrence of a Change of Control (as
defined herein), the Company will be required to
make an offer to each holder of Notes to repurchase
all or any part of such holder's Notes at a purchase
price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest thereon to
the date of repurchase.
Offer to Purchase Upon the occurrence of certain events described
under "Description of the Notes--Certain
Covenants--Excess Proceeds Offer," the Company will
be required to offer to repurchase a specified
amount of Notes at a purchase price equal to 101% of
the principal amount thereof, together with accrued
and unpaid interest thereon to the date of
repurchase.
Guarantees The Ten Year Notes and the Seven Year Notes are
guaranteed by substantially all of the Restricted
Subsidiaries, on a senior basis, which guarantee
ranks PARI PASSU with all senior unsecured
indebtedness of such Restricted Subsidiaries. ECC
and the subsidiaries of ECC that are not also
subsidiaries of the Company (other than DBSC) are
not obligated under or guaranteeing in any manner
the Company's obligations under the Ten Year Notes
and the Seven Year Notes. See "Description of the
Notes--Guarantees."
Certain Other Covenants Each Indenture restricts, among other things, the
payment of dividends, the repurchase of stock and
subordinated indebtedness of the Company, the making
of certain other Restricted Payments (as defined),
the incurrence of certain indebtedness and the
issuance of preferred stock, certain asset sales,
the creation of certain liens, certain mergers and
consolidations, and transactions with Affiliates (as
defined).
Registration Rights; Pursuant to registration rights agreements relating
Liquidated Damages to each series of Notes among the Company, the
Guarantors and the Initial Purchasers (the
Registration Rights Agreements), the Company and the
Guarantors agreed:
(1) to file a registration statement (the Exchange
Offer Registration Statement) on or prior to
April 25, 1999 relating to an exchange offer
for the Old Notes and Guarantees (the Exchange
Offer); and
18
<PAGE>
(2) to use their best efforts to cause the Exchange
Offer Registration Statement to be declared
effective by the SEC on or prior to July 24,
1999.
In certain circumstances, the Company and the
Guarantors will be required to provide a shelf
registration statement (the Shelf Registration
Statement) to cover resales of the Notes and
Guarantees by the holders thereof. If the Company
and the Guarantors do not comply with their
obligations under the Registration Rights Agreement,
they will be required to pay Liquidated Damages to
holders of the Notes under certain circumstances.
See "Description of the Notes--Registration Rights;
Liquidated Damages." Our filing of the registration
statement of which this Prospectus is a part is
intended to satisfy the requirement to file the
Exchange Offer Registration Statement.
SUMMARY FINANCIAL DATA
The following summary financial data and the selected financial data
presented elsewhere in this prospectus for the five years ended December 31,
1997, are derived from the Combined and Consolidated Financial Statements of the
Company, audited by Arthur Andersen LLP, independent public accountants. The
following summary financial data with respect to the nine months ended
September 30, 1997 and 1998, are unaudited; however, in the opinion of
management, such data reflect all adjustments (consisting only of normal
recurring adjustments) necessary to fairly present the data for such interim
periods. Operating results for interim periods are not necessarily indicative of
the results that may be expected for a full year. The data set forth in this
table should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," the Company's Combined and
Consolidated Financial Statements and the notes thereto, and other financial
information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
----------------------- SEPTEMBER 30,
-------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT RATIOS, SUBSCRIBERS (UNAUDITED)
AND PER SUBSCRIBER DATA)
STATEMENTS OF OPERATIONS
DATA:
Revenue $ 211,563 $ 179,313 $ 148,520 $ 197,103 $ 475,902 $ 296,460 $ 696,944
Operating income (loss) 18,204 13,216 (8,006) (108,865) (224,336) (178,033) (55,994)
Net income (loss) (1) 12,272 90 (12,361) (101,676) (323,424) (248,937) (170,960)
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
------------------------
ACTUAL AS ADJUSTED
------ -----------
<S> <C> <C>
(UNAUDITED)
BALANCE SHEET DATA:
Cash, cash equivalents and marketable investment securities (2) $ 44,300 $ 300,746
Total assets(3) 1,467,422 2,819,094
Long-term debt, net of current portion 1,517,786 2,049,547
Total stockholders' equity (deficit)(3) (464,722) 355,188
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
SEPTEMBER 30,
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
Other Data:
DISH Network subscribers -- -- -- 350,000 1,040,000 820,000 1,609,000
Average monthly revenue $-- $ -- $-- $35.50 $38.50 $39.10 $39.20
per subscriber
EBITDA (4) 19,881 15,459 (4,892) (65,496) (51,500) (44,488) 21,603
Net cash flows from:
Operating activities 30,215 24,205 (21,888) (22,836) (7,549) (47,967) (40,068)
Investing activities (20,910) (338,565) (1,431) (294,962) (306,079) (307,581) (19,309)
Financing activities (6,199) 325,011 19,764 342,287 337,247 346,887 39,619
Ratio of earnings to
fixed charges (5) 18.0x -- -- -- -- -- --
Deficiency of earnings
to fixed charges (5) $-- $(5,206) $(44,315) $(188,347) $(366,447) $(276,734) $(192,359)
</TABLE>
- -----------
(1) Certain of the Company's subsidiaries operated under Subchapter S of
the Internal Revenue Code of 1986, as amended, and comparable provisions of
applicable state income tax laws, until December 31, 1993. The net income
for the year ended December 31, 1993, presented above is net of pro forma
income taxes of $7,846, determined as if the Company had been subject to
corporate federal and state income taxes for those years.
(2) Excludes restricted cash and marketable investment securities, which
have been reclassified and included in the As Adjusted amount.
(3) As adjusted to give effect to the offering of the Old Notes and the
application of the net proceeds thereof and the 110 Acquisition.
Consummation of the 110 Acquisition is subject to receipt of regulatory
approval and approval of ECC's shareholders. There will be no pro forma
effect to the Company's Statement of Operations as a result of the 110
Acquisition.
(4) The Company believes it is common practice in the telecommunications
industry for investment bankers and others to use various multiples of
current or projected EBITDA (earnings before interest, taxes, depreciation
and amortization) for purposes of estimating current or prospective
enterprise value and as one of many measures of operating performance.
Conceptually, EBITDA measures the amount of income generated each period
that could be used to service debt, because EBITDA is independent of the
actual leverage employed by the business; but EBITDA ignores funds needed
for capital expenditures and expansion. Some investment analysts track the
relationship of EBITDA to total debt as one measure of financial strength.
However, EBITDA does not purport to represent cash provided or used by
operating activities and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles.
EBITDA differs significantly from cash flows from operating activities
reflected in the consolidated statement of cash flows. Cash from operating
activities is net of interest and taxes paid and is a more comprehensive
determination of periodic income on a cash (vs. accrual) basis, exclusive
of non-cash items of income and expenses such as depreciation and
amortization. In contrast, EBITDA is derived from accrual basis income and
is not reduced for cash invested in working capital. Consequently, EBITDA
is not affected by the timing of receivable collections or when accrued
expenses are paid. The Company is aware of no uniform standards for
determining EBITDA and believes presentations of EBITDA may not be
calculated consistently by different entities in the same or similar
businesses. However, the Company has consistently calculated the EBITDA
amounts shown above to equal "operating income (loss)" plus depreciation
and amortization (including subscriber acquisition costs amortization of
$16 million and $121 million for the years ended December 31, 1996 and
1997, and $95 million and $19 million for the nine months ended
September 30, 1997 and 1998, respectively).
(5) 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 and 1997 and the nine
months ended September 30, 1997 and 1998, earnings were insufficient to
cover the fixed charges. On a pro forma basis, using an assumed effective
annual interest rate of 9.6% and assuming that the Tender Offers had been
consummated as of the beginning of the applicable period, the Company's pro
forma earnings would have been inadequate to cover its pro forma fixed
charges for the year ended December 31, 1997, by $341 million and for the
nine months ended September 30, 1998, by $165 million.
20
<PAGE>
SUMMARY SATELLITE DATA
<TABLE>
<CAPTION>
ECHOSTAR I ECHOSTAR II ECHOSTAR III ECHOSTAR IV(1) ECHOSTAR V (2) ECHOSTAR VI(2)
<S> <C> <C> <C> <C> <C> <C>
Orbital slot 119 degrees WL 119 degrees WL 61.5 degrees WL 148 degrees WL 110 degrees WL 110 degrees WL
Transponders 16 @ 24 MHz 16 @ 24 MHz 16/32 @ 24 MHz 10/20 @ 24 MHz 16/32 @ 24 MHz 16/32 @ 24
(3)(4) (3)(4) (3) MHz (3)
Approximate 128 channels 128 channels 128/256 channels 80/160 channels 160/256 channels 160/256
channel channels
capacity (5)
Output power 130 watts 130 watts 230/120 watts 230/120 watts 220/110 watts 240/120 watts
Expected end of 2011 2011 2012 2010 2014 2014
commercial
life (6)
Coverage area Continental United States Eastern and Western and Continental United States,
and certain regions of Central United Central United Alaska, Hawaii, Puerto Rico and
Canada and Mexico States States certain regions of Canada and
Mexico
</TABLE>
- -----------
(1) Firm authorization to operate EchoStar IV at 148 degrees WL has not
yet been obtained; EchoStar IV currently operates under Special Temporary
Authorization.
(2) Use of EchoStar V and EchoStar VI and the frequencies at 110 degrees
WL is contingent upon the closing of the 110 Acquisition and successful
launch of EchoStar V and EchoStar VI. Consummation of this transaction is
subject to receipt of regulatory approval.
(3) The transponders on each of these satellites can be independently
switched to provide a range from 16 transponders operating at 220 or 230
watts of power each (240 watts in the case of EchoStar VI) to 32
transponders operating at 110 or 120 watts of power each subject to note 4.
(4) Although EchoStar III has experienced an anomaly, the satellite has
not experienced any loss of capacity to date. See "Risk Factors--Risk that
We Will be Unable to Settle with Insurers" below. EchoStar IV was designed
to operate a total of 32 transponders in 120 watt mode, or 16 transponders
in 230 watt mode. As a result of the failure of the solar panels on
EchoStar IV to properly deploy, EchoStar IV is currently capable of
sustaining a maximum of only 20 transponders. That number will decrease
over time, but based on existing data the Company expects that
approximately 16 transponders will probably be available over the entire
expected 12 year life of the satellite, absent additional failures.
(5) ECC's DBS authorizations do not allow full use of that channel
capacity. They specifically cover: (i) 11 of the 16 transponders (a maximum
of approximately 88 video channels) on EchoStar I; (ii) 10 of the 16
transponders (a maximum of approximately 80 video channels) on EchoStar II;
(iii) 11 of the 16 transponders (a maximum of approximately 88 video
channels) on EchoStar III; (iv) 24 of the 32 frequencies at 148 degrees WL,
where EchoStar IV currently operates under Special Temporary Authorization
(in light of EchoStar IV's technical constraints, its maximum temporarily
authorized effective capacity is 160 video channels); (v) a total of 29
transponders at 110 degrees WL to be operated on EchoStar V and EchoStar VI
assuming consummation of the 110 Acquisition and successful launch of the
satellites (a maximum of approximately 290 video channels with two
satellites operating in high power mode or 232 video channels with one
satellite operating over all 29 frequencies in low-power mode)
(authorization has not yet been obtained). With digital compression, each
transponder or frequency can yield 8 or more video channels (8 in low-power
mode, 10 in high-power mode).
(6) The expected end of commercial life of each satellite has been
estimated by ECC based on each satellite's actual or expected launch date
and the terms of the construction and launch contracts. The minimum design
life is 12 years. The licenses are issued for ten year periods, and would,
unless renewed by the FCC, expire prior to the end of the minimum design
life. See "Risk Factors."
21
<PAGE>
THE ECHOSTAR ORGANIZATION
The following chart illustrates ECC's present corporate structure prior to
completion of the planned reorganization and where significant assets and rights
are held. The Notes will be guaranteed by DBSC and substantially all of the
Company's direct and indirect Wholly Owned Restricted Subsidiaries (as defined),
until such time as the reorganization has been completed. The following page
sets forth a chart illustrating ECC's corporate structure following consummation
of the reorganization, and pro forma for the offering.
<TABLE>
<S><C>
-------------------------
| ECHOSTAR COMMUNICATIONS |
| CORPORATION |
| |
| NASDAQ: DISH, DISHP |
| |
| ISSUER OF THE |
| SERIES A AND SERIES C |
| PREFERRED STOCK |
| |
| ISSUER OF THE SENIOR |
| PREFERRED EXCHANGE |
| NOTES |
-------------------------
|
----------------------------------------------------------
| | |
--------------------------- -------------------------- -------------------------- ----------------------
| DIRECT BROADCASTING | | ECHOSTAR DBS | | ECHOSTAR | | DISH NETWORK |
| SATELLITE | | CORPORATION | | SPACE CORPORATION | | CREDIT CORPORATION |
| CORPORATION | | | | | | |
| | | ISSUER OF THE | |- RESIDUAL RIGHTS RELATING| |-CONSUMER FINANCING OF|
| - ECHOSTAR III SATELLITE | | NOTES AND THE | | TO LAUNCH CONTRACT FOR | | ECHOSTAR RECEIVER |
|-11 FREQUENCIES 61.5DEG. WL| | 1997 NOTES | | ECHOSTAR III | | SYSTEMS |
|-11 FREQUENCIES 175DEG. WL| | | -------------------------- ----------------------
--------------------------- | -ECHOSTAR IV SATELLITE |
|-24 FREQUENCIES 148DEG. WL|
--------------------------
|
--------------------------
| ECHOSTAR SATELLITE |
| BROADCASTING |
| CORPORATION |
| |
| ISSUER OF THE |
| 1996 NOTES |
--------------------------
|
--------------------------
| DISH, LTD. |
| |
| ISSUER OF THE |
| 1994 NOTES |
--------------------------
|
------------------------------------------------------------------------------------------------
| | | | |
--------------------------- ------------------ --------------------------- ---------------- --------------------------
| ECHOSTAR TECHNOLOGIES | | ECHOSPHERE | | ECHOSTAR | | ECHOSTAR | | DIRECTSAT |
| CORPORATION | | CORPORATION | | SATELLITE | | INTERNATIONAL | | CORPORATION |
| | | | | CORPORATION | | CORPORATION | | |
| -U.S. DISTRIBUTION OF | |-U.S. DISTRIBUTION| | | | | |-ECHOSTAR II SATELLITE |
| ECHOSTAR RECEIVER SYSTEMS | | OF DTH PRODUCTS | |-DISH NETWORK AND SATELLITE| |-INTERNATIONAL | |-10 FREQUENCIES 119DEG. WL|
| FOR DISH NETWORK AND | | AND ECHOSTAR | | SERVICES | | DISTRIBUTION | |-11 FREQUENCIES 175DEG. WL|
| DTH PRODUCTS TO | | RECEIVER SYSTEMS | |-ECHOSTAR I SATELLITE | | OF DTH PRODUCTS| |-1 FREQUENCY 110DEG. WL |
| ECHOSPHERE AND OTHER | | FOR THE DISH | |-11 FREQUENCIES 119DEG. WL | ---------------- --------------------------
| DISTRIBUTORS | | NETWORK TO | |-DBS PROGRAMMING CONTRACTS |
|-INTERNATIONAL DISTRIBUTION| | SATELLITE | |-DIGITAL BROADCAST CENTER |
| OF DBS AND DTH PRODUCTS | | RETAILERS | |-THREE CUSTOMER SERVICE |
| -RESEARCH AND DEVELOPMENT | ------------------ | CENTERS |
| OF DBS STAND-ALONE AND | ---------------------------
| INTEGRATED PRODUCTS |
---------------------------
</TABLE>
22
<PAGE>
The following chart illustrates ECC's expected corporate structure and where
significant assets and rights are, or are expected to be, held pro forma for
the offering and the planned reorganization.
<TABLE>
<S><C>
--------------------------------
| ECHOSTAR COMMUNICATIONS |
| CORPORATION |
| |
| NASDAQ: DISH, DISHP |
| |
|- ISSUER OF SERIES C PREFERRED|
| STOCK |
--------------------------------
|
-----------------------
| |
--------------- -----------------------
| ECHOSTAR DBS | | DISH NETWORK |
| CORPORATION | | CREDIT CORPORATION |
| | | |
|- ISSUER OF THE| |- CONSUMER FINANCING OF|
| NOTES | | ECHOSTAR RECEIVER |
| | | SYSTEMS |
--------------- -----------------------
|
---------------------------------------------------------------------------------------
| | | |
------------------------- ---------------------- ---------------------------- ---------------------------
| ECHOSTAR | | ECHOSPHERE | | ECHOSTAR | | ECHOSTAR INTERNATIONAL |
| TECHNOLOGIES | | CORPORATION | | SATELLITE | | CORPORATION |
| CORPORATION | |- U.S. DISTRIBUTION OF| | CORPORATION | |-INTERNATIONAL DISTRIBUTION|
| -U.S. DISTRIBUTION OF | | DTH PRODUCTS AND | |-DISH NETWORK AND | | OF DTH PRODUCTS |
| ECHOSTAR RECEIVER | | ECHOSTAR RECEIVER | | SATELLITE SERVICES | ---------------------------
| SYSTEMS FOR DISH | | SYSTEMS FOR THE DISH| |-ECHOSTAR I SATELLITE |
| NETWORK AND DTH | | NETWORK TO SATELLITE| |-ECHOSTAR II SATELLITE |
| PRODUCTS TO ECHOSPHERE | | RETAILERS | |-ECHOSTAR III SATELLITE |
| AND OTHER DISTRIBUTORS | ---------------------- |-ECHOSTAR IV SATELLITE |
| -INTERNATIONAL | |-CONTRACTS FOR ECHOSTAR V |
| DISTRIBUTION OF DBS AND| | AND ECHOSTAR VI* |
| DTH PRODUCTS |-11 FREQUENCIES 61.5DEG. WL|
| -RESEARCH AND | |-29 FREQUENCIES 110DEG. WL |
| DEVELOPMENT OF | |-21 FREQUENCIES 119DEG. WL |
| DBS STAND-ALONE AND | |-24 FREQUENCIES 148DEG. WL |
| INTEGRATED PRODUCTS | |-22 FREQUENCIES 175DEG. WL |
| -NEWS CORPORATION | |-DBS PROGRAMMING CONTRACTS |
| AFFILIATE TECHNOLOGY | |-DIGITAL BROADCAST CENTER |
| LICENSE AND 500,000 | |-ARIZONA DIGITAL BROADCAST |
| UNIT BOX ORDER.** | | CENTER* |
------------------------- |-THREE CUSTOMER SERVICE |
| CENTERS. |
----------------------------
</TABLE>
- ------------------------
*Subject to FCC approval and consummation of the 110 Acquisition.
**Subject to consummation of the 110 Acquisition.
RISK FACTORS
Holders of the Old Notes should consider carefully all of the information
contained in this Prospectus, which may be generally applicable to the Old Notes
as well as to the Exchange Notes, before deciding whether to tender their Old
Notes for the Exchange Notes offered hereby and, in particular, the following
factors:
23
<PAGE>
CONSEQUENCES OF NOT EXCHANGING NOTES. If you do not exchange your Old
Notes for the Exchange Notes pursuant to the Exchange Offer, you will continue
to be subject to the restrictions on transfer of your Old Notes described in the
legend on your Old Notes. The restrictions on transfer of your Old Notes arise
because we issued the Old Notes pursuant to exemptions from, or in transactions
not subject to, the registration requirements of the Securities Act and
applicable state securities laws. In general, you may only offer or sell the
Old Notes if they are registered under the Securities Act and applicable state
securities laws, or offered and sold pursuant to an exemption from such
requirements. We do not intend to register the Old Notes under the Securities
Act. In addition, if you exchange your Old Notes in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes, you may be
deemed to have received restricted securities and, if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. To the extent Old
Notes are tendered and accepted in the Exchange Offer, the trading market, if
any, for the Old Notes would be adversely affected. See "The Exchange Offer."
HOLDERS RESPONSIBLE FOR COMPLIANCE WITH EXCHANGE OFFER PROCEDURES;
CONSEQUENCES OF FAILURE TO EXCHANGE. We will issue the Exchange Notes in
exchange for the Old Notes pursuant to this Exchange Offer only after we have
timely received such Old Notes, along with a properly completed and duly
executed Letter of Transmittal and all other required documents. Therefore, if
you want to tender your Old Notes in exchange for Exchange Notes, you should
allow sufficient time to ensure timely delivery. Neither the Exchange Agent nor
the Company is under any duty to give notification of defects or irregularities
with respect to the tender of Old Notes for exchange. The Exchange Offer will
expire at 5:00 p.m. New York City time on , 1999, or on a
later extended date and time as we may decide (the Expiration Date). Old Notes
that are not tendered or are tendered but not accepted for exchange will,
following the Expiration Date and the consummation of this Exchange Offer,
continue to be subject to the existing restrictions upon transfer thereof. In
general, the Old Notes may not be offered or sold, unless registered under the
Securities Act or except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act. In addition, if you are still holding any Old
Notes after the Expiration Date and the Exchange Offer has been consummated,
subject to certain exceptions, you will not be entitled to any rights to have
such Old Notes registered under the Securities Act or to any similar rights
under the Registration Rights Agreements (subject to limited exceptions, if
applicable). We do not currently anticipate that we will register the Old Notes
under the Securities Act.
The Exchange Notes and any Old Notes having the same maturity which remain
outstanding after consummation of the Exchange Offer will vote together as a
single class for purposes of determining whether Holders of the requisite
percentage thereof have taken certain actions or exercised certain rights under
the related Indenture.
REQUIREMENTS FOR TRANSFER OF EXCHANGE NOTES. Based on interpretations by
staff of the SEC, as set forth in no-action letters issued to third parties, we
believe that you may offer for resale, resell and otherwise transfer the
Exchange Notes without compliance with the registration and prospectus delivery
provisions of the Securities Act, subject to certain limitations. These
limitations include that you are not an "affiliate" of ours within the meaning
of Rule 405 under the Securities Act, that you acquire your Exchange Notes in
the ordinary course of your business and that you have no arrangement with any
person to participate in the distribution of such Exchange Notes. However, we
have not submitted a no-action letter to the SEC regarding this Exchange Offer
and we cannot assure you that the SEC would make a similar determination with
respect to the Exchange Offer as in such other circumstances. If you are an
affiliate of the Company, are engaged in or intend to engage in or have any
arrangement or understanding with respect to a distribution of the Exchange
Notes to be acquired pursuant to the Exchange Offer, you
24
<PAGE>
- may not rely on the applicable interpretations of the staff of
the SEC and
- must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction.
Each broker-dealer that receives Exchange Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus meeting
the requirements under the Securities Act in connection with any resale of such
Exchange Notes. The Letter of Transmittal states that by so acknowledging and
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes where the Old Notes
exchanged for such Exchange Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities. We have agreed
to use our best efforts to make this Prospectus available to any participating
broker-dealer for use in connection with any such resale. See "Plan of
Distribution." However, to comply with the securities laws of certain
jurisdictions, if applicable, the Exchange Notes may not be offered or sold
unless they have been registered or qualified for sale in such jurisdictions or
an exemption from registration or qualification is available.
RESTRICTIVE COVENANTS. The Indentures relating to each series of Notes
contain restrictive covenants that, among other things, limit our ability and
the ability of our subsidiaries to:
- - incur additional indebtedness;
- - issue preferred stock;
- - sell assets;
- - create, incur or assume liens;
- - create dividend and other payment restrictions with respect to our
subsidiaries;
- - merge, consolidate or sell assets;
- - enter into transactions with affiliates; and
- - pay dividends.
These restrictions may inhibit our ability to manage our business and to
react to changing market conditions. See "Description of the Notes."
SUBSTANTIAL LEVERAGE. Our Company is highly leveraged, which makes us
vulnerable to changes in general economic conditions. We have substantial debt
service requirements. The Indenture for each series of Notes restricts our and
our subsidiaries' ability to incur additional debt. Thus it is, and will
continue to be, difficult for us and our subsidiaries to obtain additional debt
if required or desired in order to implement our business strategy. Since
substantially all of our operations are conducted through our subsidiaries, our
ability to service our debt obligations, including our obligations under the
Notes, 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. Some of our subsidiaries may become parties to other agreements that
severely restrict their ability to obtain additional debt financing for working
capital, capital expenditures and general corporate purposes. As of
September 30, 1998, we had outstanding long-
25
<PAGE>
term debt (including both the current and long-term portion) of approximately
$1.5 billion. On a pro forma basis, after giving effect to issuance of the Notes
and application of the net proceeds therefrom and to the reorganization, the
Company's aggregate consolidated Indebtedness as of September 30, 1998, for
purposes of the Indentures would have been approximately $2.07 billion. Although
the Notes are titled "Senior," we have not issued, and do not have any plans to
issue, any indebtedness to which the Notes would be senior. 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.
COMPETITION. The subscription television industry is highly competitive.
We face competition from 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. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
COMPETITION FROM DBS AND OTHER SATELLITE SYSTEM OPERATORS. We compete with
companies offering programming through various satellite broadcasting systems.
One competitor, DIRECTV, Inc., has launched three DBS satellites and has 27
frequencies at 101 degrees WL that are capable of full CONUS coverage. DIRECTV
and United States Satellite Broadcasting Company, Inc. (USSB), which operates
five more frequencies on one of DIRECTV's satellites, currently offer more than
200 channels of combined DBS video and audio programming. As of November 30,
1998, DIRECTV had approximately 4.3 million subscribers. DIRECTV and USSB are in
an advantageous position with regard to market entry, programming (particularly
in light of DIRECTV's exclusive sports programming) and, possibly, volume
discounts for programming offers. DIRECTV's parent recently announced an
agreement whereby it would acquire the business and assets of USSB in a
transaction expected to be completed in mid-1999. In addition to the 5 USSB
frequencies at 101 degrees WL, this combination would give DIRECTV access to
three additional DBS frequencies controlled by USSB at 110 degrees WL.
We also face competition from PrimeStar, Inc. (PrimeStar). PrimeStar
currently leases a Fixed-Satellite Service (FSS) satellite at 85 degrees WL and
as of November 30, 1998, had approximately 2.3 million subscribers. It has also
applied for FCC authorization to acquire control over TCI Satellite
Entertainment, Inc. (TSAT), a company that has an authorization for 11 DBS
frequencies at 119 degrees WL and has launched a satellite to that location.
DIRECTV's parent recently announced an agreement whereby it would acquire
PrimeStar's satellite broadcasting businesses. In addition, two other United
States satellite companies, including a subsidiary of Loral Space and
Communications Limited (Loral), have conditional permits for a comparatively
small number of DBS assignments that can be used to provide service to portions
of the United States.
The FCC has proposed to allocate additional expansion spectrum for DBS
services, and has separately indicated that it may apply to the International
Telecommunication Union (ITU) for allocation of additional DBS orbital locations
capable of providing service to the United States. Further, Canada, Mexico and
other countries have been allotted, or may use, various orbital locations
capable of providing service to the United States. In general, non-United States
licensed satellites are not presently allowed to provide domestic DBS or DTH
service in the United States. However, the United States has signed protocols
with Mexico and Argentina allowing DBS and DTH service from satellites licensed
by these countries to the United States and vice versa. The FCC already has
permitted a company, Televisa International, LLC (Televisa), to provide DTH
service in the United States through a Mexican licensed satellite from an
orbital location with full CONUS coverage. In addition, the United States has
indicated its willingness to enter into DBS/DTH protocols with other countries.
We cannot be sure that these and
26
<PAGE>
other recent developments will not create significant additional competition in
the market for subscription television services.
There are a number of additional frequencies over which programming can be
delivered via geostationary satellite, including low power C-band, medium and
high powered Ka-band, Ku-band, and extended Ku-band, as well as proposed
non-geostationary satellite systems that would operate over these frequencies.
These satellite frequencies can be used to provide us with additional
competition. See "Business--Competition -- Other DBS and DTH Satellite System
Operators."
COMPETITION FROM CABLE TELEVISION AND OTHER TERRESTRIAL SYSTEMS. We
encounter substantial competition in the subscription television market from
cable television and other terrestrial 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 98 million United
States television households, and approximately 67% of total television
households currently subscribe to cable. Cable television operators currently
have an advantage relative to us with regard to the provision of local
programming as well as the provision of 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, synchronous high speed
data transmission, and telephone service on upgraded cable plant. As a result of
these and other factors, there can be no assurance that we will be able to
continue to expand our subscriber base or compete effectively against cable
television operators. See "Business--Competition--Cable Television."
New and advanced Local Multi-Point Distribution Services are still in the
development stage. In addition, digital video compression over existing
telephone lines, and digital "wireless cable" are being implemented and
supported by entities such as regional telephone companies which are likely to
have greater resources than ECC. When fully deployed, these new technologies
could have a material adverse effect on the demand for DBS services. Moreover,
mergers, joint ventures, and alliances among franchise, wireless or
SMATV/private cable television operators, Regional Bell Operating Companies
(RBOCs) and others may result in providers capable of offering bundled cable
television and telecommunications services in competition with ECC. For
instance, AT&T is in the process of acquiring cable operator TCI, subject to
certain approvals. There can be no assurance that we will be able to compete
successfully with existing competitors or new entrants in the market for pay
television services. See "Business--Competition--Telephone Companies."
EXPECTED OPERATING LOSSES. Due to the substantial expenditures required to
complete construction, launch and deployment of the EchoStar DBS system and
introduction of our DISH Network service to consumers, we have sustained
significant losses in recent periods. Our operating losses were $109 million,
$224 million and $56 million for the years ended December 31, 1996 and 1997, and
the nine months ended September 30, 1998, respectively. We had net losses of
$102 million, $323 million and $171 million during those same periods.
Improvements in our results of operations are largely dependent upon our ability
to increase our customer base while maintaining our price structure, controlling
subscriber turnover (the rate at which subscribers terminate service), and
effectively managing our costs. No assurance can be given that we will be
effective with regard to these matters. In addition, we incur significant
acquisition costs to obtain DISH Network subscribers. The high cost of obtaining
new subscribers magnifies the negative effects of subscriber turnover. See
"--Risk of Inability to Manage Rapidly Expanding Operations" and "--Subscriber
Turnover." We anticipate that we will continue to experience operating losses
through at least 2000. There can be no assurance that such operating losses will
not continue beyond 2000. See "Management's Discussion and Analysis of
27
<PAGE>
Financial Condition and Results of Operations--Liquidity and Capital Resources."
POTENTIAL NEED FOR ADDITIONAL CAPITAL. We may require additional funds to
acquire DISH Network subscribers. In addition, we have conditional licenses or
applications pending with the FCC for a two satellite Ku-band system, a two
satellite FSS Ka-band system, a two satellite extended Ku-band system and a six
satellite low earth orbit satellite system. We will need to raise additional
funds for the foregoing purposes. Further, there are a number of factors, some
of which are beyond our control or ability to predict, that could require us to
raise additional capital. These factors include higher than expected subscriber
acquisition costs, a defect in or the loss of any satellite or an increase in
the cost of acquiring subscribers due to additional competition, among other
things. There can be no assurance 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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
RISK THAT WE WILL BE UNABLE TO PURCHASE NOTES TENDERED UPON A CHANGE OF
CONTROL. There can be no assurance that we will have sufficient funds to
repurchase the Notes upon a Change of Control (as defined in the "Description of
the Notes"). If we do not have sufficient funds to redeem all Notes tendered for
purchase upon the occurrence of a Change of Control, and if we are unable to
raise additional capital there could be an Event of Default under the Indentures
governing the Notes. No assurance can be given that additional capital would be
available on acceptable terms, or at all.
DISTRIBUTION CHANNELS. At this time, EchoStar receiver systems are
primarily manufactured by SCI Technology, Inc. (SCI) and to a lesser extent by
JVC and VTech. Unlike DIRECTV, we do not currently have numerous manufacturing
agreements or arrangements with several consumer products manufacturers other
than JVC and Philips. As a result, our receivers (and consequently our
programming services) are less well known to consumers, and, due in part to the
lack of product recognition and demand, our receiver systems are carried for
sale in fewer retail outlets (approximately 18,000) than DIRECTV (approximately
30,000).
RISK THAT WE WILL BE UNABLE TO SETTLE WITH INSURERS. During October 1998,
EchoStar III experienced an anomaly which, together with previous anomalies to
date, has resulted in the failure of 3 traveling-wave-tube amplifiers (TWTAs)
and the loss of use of a total of 6 TWTAs. The satellite is equipped with a
total of 44 TWTAs. Only 11 TWTAs are necessary to fully utilize DBSC's 11
frequencies at 61.5 degrees WL, where the satellite is located. Although there
has been no interruption of service for our customers and no interruption of
service is presently expected, we are presently working with Lockheed Martin to
investigate the cause and potential implications of the anomalies. Lockheed
Martin has informally advised us that it is possible the anomaly may result in
the loss of additional transponders in the future.
As a result of the anomaly related to the TWTAs, we have instructed our
broker to notify our insurance carriers of an occurrence under the terms of the
EchoStar III launch insurance policy. The EchoStar III launch insurance policy
provides for insurance of $219.3 million covering the period from launch of the
satellite (October 5, 1997) plus 365 days. Under that policy, we have until
March 1999 to file a claim for either a constructive total or partial loss. It
may be several weeks before all of the data required in connection with the
filing of a claim can be accumulated. Pending completion of the anomaly
investigation, we have transitioned to a 60 day, $200 million in-orbit insurance
policy on EchoStar III at standard industry rates which was renewed through
February 2, 1999. However, the policy contains an exclusion for future TWTA
losses based on similar anomalies. As a result of the exclusion, and in the
28
<PAGE>
event that comprehensive coverage for the TWTA anomalies is ultimately denied
under the launch insurance policy, we could potentially experience uninsured
losses of capacity on EchoStar III in the future, up to and including a total
loss of capacity. Although there can be no assurance, we expect that in-orbit
insurance can be procured on more traditional terms in the future if the anomaly
investigation is satisfactorily concluded and no further failures occur in the
interim.
EchoStar IV is currently able to operate a maximum of only 20 transponders
as a result of a solar array anomaly. The number of available transponders will
decrease over time, but based on existing data, we expect that approximately 16
transponders will probably be available over the entire 12 year design life of
the satellite, absent significant additional or other failures. In
September 1998, we filed a $219.3 million insurance claim for a constructive
total loss (as defined in the launch insurance policy) related to EchoStar IV.
We cannot provide any assurance as to whether we will receive the amount claimed
or, if the full amount of the claim is received, that we will retain title to
Echostar IV with its reduced capacity.
EFFECT OF LOSS OF 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 of ECC. The loss of Mr. Ergen
could have an adverse effect on our business. We do not maintain "key man"
insurance. Although all executives (other than executive officers) of the
Company have executed agreements limiting their ability to work for or consult
with competitors if they leave the Company, the Company does not have any
employment agreements with any executive officer of the Company.
DEPENDENCE ON THIRD PARTY PROGRAMMERS. We are dependent 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 cancelled prior to
expiration of their original term. In the event that any such agreements are not
renewed or are cancelled, there can be no assurance that we would be able to
obtain substitute programming, or that such substitute programming would be
comparable in quality or cost to our existing programming. 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 attractively offer it to our customers at competitive prices.
See "Business--Programming."
Pursuant to the Cable Television Consumer Protection and Competition Act of
1992 (the Cable Act) and the FCC's rules, programming developed by vertically
integrated cable-affiliated programmers generally must be offered to all
multi-channel video programming distributors on non-discriminatory terms and
conditions. The Cable Act and the FCC's rules also prohibit certain exclusive
programming contracts. We purchase a substantial percentage of our programming
from cable-affiliated programmers. Certain of the restrictions on
cable-affiliated programmers will expire in 2002 unless extended by the FCC. As
a result, any expiration of, amendment to, or interpretation of, the Cable Act
and the FCC's rules that permits the cable industry or programmers to
discriminate in the sale of programming against competing businesses, such as
ours, could adversely affect our ability to acquire programming at all or to
acquire programming on a cost-effective basis. In addition, laws, regulations
and the need to obtain certain retransmission consents and copyright licenses
may limit our ability to implement a local programming strategy in multiple
markets. See "Business--Government Regulation--Satellite Home Viewer Act and
Retransmission Consent."
On May 19, 1998, we filed a complaint against Comcast, a major cable
provider, seeking access to the sports programming controlled by Comcast in the
Philadelphia area. The FCC has denied a
29
<PAGE>
separate complaint filed by DIRECTV requesting access to the same programming,
partly on the basis that the programming is delivered to the distributors
terrestrially, rather than by satellite. Therefore, we cannot be sure as to how
the FCC will act on our complaint against Comcast. There is a risk that
cable-affiliated programming vendors may seek to deny their programming to us or
to discriminate against us by switching to terrestrial delivery of the
programming or that they may seek to acquire sports franchises and secure
exclusive programming, making our offering comparatively less attractive.
On January 14, 1999, ECC filed a program access complaint with the FCC
against Speedvision Network, L.L.C. ("Speedvision") and Outdoor Life Network,
L.L.C. ("Outdoor Life Network") seeking access to the programming controlled by
these two networks. ECC's program access complaint alleges that the conduct of
Speedvision and Outdoor Life Network in cutting off ECC's access to programming
after five days of carriage constitutes an unreasonable refusal to deal and a
prohibited unfair practice under the Communications Act and the FCC's rules. ECC
cannot be sure how the FCC will act on ECC's complaint against Speedvision and
Outdoor Life Network. Speedvision has cut off the service allegedly based on its
view that ECC has breached a November 1998 contract between the parties.
Speedvision and Outdoor Life Network have sued ECC in federal district court in
Connecticut requesting several remedies. We cannot be sure how the court will
rule on this complaint.
RISKS OF INFRINGEMENT OF PATENTS AND PROPRIETARY RIGHTS. Our ability to
obtain patents and other intellectual property rights is material to our
business. Many of our competitors have obtained, and may obtain in the future,
patents that cover or affect products or services directly or indirectly related
to those that we offer. There can be no assurance that we are aware of all
patents that may potentially be infringed by our products. In addition, patent
applications in the United States are confidential until a patent is issued and,
accordingly, we cannot evaluate the extent to which our products may infringe
claims contained in pending patent applications. In general, if a court
determines that one or more of our products infringes on patents 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 patents or
to redesign those products in such a way as to avoid infringing the patent
claims. 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. Various parties have contacted us, claiming
patent and other intellectual property rights with respect to components within
the EchoStar DBS system. We cannot be certain that we would be able to obtain
such licenses 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. See "Business--Legal Proceedings."
DEPENDENCE ON SATELLITES AND SINGLE DIGITAL BROADCAST CENTER. Prior to the
expiration of the anticipated useful lives of our satellites, we will need to
obtain replacement satellites. We cannot be certain that replacements will be
available when required or, if available, that they will be available at
reasonable prices, and on other acceptable terms. Various FCC approvals would be
required with respect to replacement satellites, including but not limited to
renewal of our ten year DBS licenses. We cannot be certain that the FCC will
grant the required approvals, or that conditions would not be imposed by the FCC
on such grants.
We will continue to rely upon a single digital broadcast center located in
Cheyenne, Wyoming for key operations such as reception of programming signals,
encryption and compression. If a natural or other disaster damaged the digital
broadcast center, there can be no assurance that we would be able to continue to
provide programming services to our customers.
DEPENDENCE ON SINGLE RECEIVER MANUFACTURER. EchoStar receiver systems are
currently
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manufactured primarily by SCI, a high-volume contract electronics manufacturer.
VTech recently began manufacturing certain EchoStar receiver systems for us. JVC
manufactures other consumer electronics products incorporating our receiver
systems. If SCI is unable for any reason to produce receivers in a quantity
sufficient to meet our requirements, our ability to add additional DISH Network
subscribers and grow our Technology business would be materially impaired.
Likewise, our results of operations would be adversely affected.
SUBSCRIBER MANAGEMENT. The Company's contract with its current subscriber
management and billing system service provider will expire in March 1999.
Because the Company's new subscriber management and billing system contract will
expire prior to the date that the new system is expected to be operational, the
Company will be required to renew or extend the existing contract for that
interim period. The Company presently expects that the terms of this interim
contract could be significantly less favorable than the present contract.
Accordingly, the Company expects that its DISH Network operating expenses could
increase during the second quarter of 1999 and these increased costs could
continue until the Company is able to either implement its new subscriber
management and billing system or is able to negotiate an extended contract in
the event the Company abandons the project. Our business could be materially
harmed if the existing contract is not renewed, and the new billing system does
not operate as expected.
CONSUMMATION OF THE 110 ACQUISITION. The 110 Acquisition is subject to
regulatory approval and other conditions. If the 110 Acquisition is not
consummated, then we may not be able to secure access to the 110 degrees WL
orbital slot on favorable terms or at all, which would have an adverse effect on
our ability to expand our business, and, under certain circumstances, the stay
of the News Corporation litigation may expire. We may be required to dismiss the
News Corporation litigation with prejudice even if the 110 Acquisition is not
consummated. See "Business--Legal Proceedings."
IMPEDIMENTS TO RETRANSMISSION OF LOCAL BROADCAST SIGNALS. We offer
(subject to certain conditions for eligibility) programming telecast by local
affiliates of national television networks to certain major population centers
within the continental United States via our DBS satellites. In order to
retransmit network station programming, satellite companies must have a
copyright license and also obtain the retransmission consent of the network
station, except for direct to home retransmissions to "unserved households," as
that term is defined in the Satellite Home Viewer Act (SHVA). Although we have
entered into a retransmission consent agreement covering FOX Network owned and
operated stations in connection with the 110 Acquisition, to date we have not
received, and we cannot be certain that we will obtain, retransmission consents
(to the extent required) from any local affiliate. Our inability to transmit
such programming could have an adverse effect on our business.
The SHVA establishes a "statutory" (or compulsory) copyright license that
generally allows a DBS operator, for a statutorily-established fee, to
retransmit local affiliate programming to subscribers for private home viewing
so long as that retransmission is limited to those persons in "unserved
households." An "unserved household," with respect to a particular television
network, is defined as one that cannot receive an over-the-air network signal of
"grade B" intensity (a standard of signal intensity as defined by the FCC) of a
primary network station affiliated with that network through the use of a
conventional outdoor rooftop antenna and has not, within the 90 days prior to
subscribing to the DBS service, subscribed to a cable service that provides the
signal of an affiliate of that network. Although we believe that the SHVA could
be read to allow us to retransmit the programs of a local network station to its
local market via DBS satellite (a view that is opposed by several other
parties), we also believe that the compulsory copyright license under the SHVA
and the retransmission consent rules of the Communications Act may not be
sufficient to permit us to implement our strategy to retransmit such
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programming in the most efficient and comprehensive manner and that new
legislation may be necessary for that purpose.
IMPEDIMENTS TO, AND INCREASED COSTS OF, RETRANSMISSION OF DISTANT BROADCAST
SIGNALS. The SHVA permits satellite retransmission of distant network signals,
but only to "unserved households," and of superstation signals. As described
above, the determination of whether a household qualifies as "unserved" for the
purpose of being eligible to receive a distant network signal by satellite under
the SHVA depends, among other things, on whether that household can receive a
signal of "Grade B intensity" as defined by the FCC.
The national networks and local affiliate stations have sued PrimeTime 24,
a satellite company whose signal feeds the Company had one time delivered,
challenging PrimeTime 24's methods of selling network programming until recently
to consumers based upon infringement of copyright. The United States District
Court for the Southern District of Florida entered a nationwide injunction
preventing PrimeTime 24 from selling its programming to consumers unless the
programming was sold according to certain stipulations in the injunction. The
injunction covers PrimeTime 24's "distributors" as well. The Plaintiff in the
Florida litigation informed ECC that it considered ECC a "distributor" for
purposes of that injunction. A federal district court in North Carolina has also
issued an injunction against PrimeTime 24 prohibiting certain distant signal
retransmissions to homes delineated by a contour in the Raleigh area. Other
copyright litigation against PrimeTime 24 is pending.
As a result of: (a) these rulings; (b) ECC's determination to sell local
network channels back into the area from which they originate; (c) 1997
adjustments to copyright royalties payable in connection with delivery of
network signals by satellite; and (d) a number of other regulatory, political,
legal contractual and business factors, during July 1998, ECC ceased delivering
PrimeTime 24 programming, and began uplinking and distributing network signals
directly. ECC has also implemented SHVA compliance procedures which will
materially restrict the market for the sale of network signals by ECC. CBS and
other broadcast networks have informed ECC that they believe ECC's method of
providing distant network programming violates the SHVA and hence infringes
their copyright.
On October 19, 1998, ECC filed a declaratory judgment action in the United
States District Court for the District of Colorado against the four major
networks. In the future, ECC may attempt to certify a class including the
networks as well as any and all owned and operated stations and any independent
affiliates. ECC has asked the court to enter a judgment declaring that ECC's
method of providing distant network programming does not violate the SHVA and
hence does not infringe the networks' copyrights. We cannot be sure that the
court will rule in our favor in this regard.
Certain national television broadcast networks (and their local affiliates)
have threatened to file counter-claims or separate lawsuits against ECC for both
the satellite retransmission of local-into-local and distant-into-local signals.
On November 5, 1998, the NBC, CBS, ABC and FOX networks, together with their
affiliate groups, acting on prior threats, filed a complaint in federal district
court in Miami against ECC, alleging, among other things, copyright
infringement. The plaintiffs in that action have also requested the issuance of
a preliminary injunction against ECC. In the event of a decision adverse to ECC
in any such litigation, significant damage awards and additional material
restrictions on the sale of network signals by ECC could result. Among other
things, ECC could be required to terminate delivery of distant network signals
to a material portion of its subscriber base. Further restrictions on the sale
of network channels imposed in the future could result in a less attractive
service, decreases in subscriber activations and subscription television
services revenue and an increase in subscriber churn.
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On November 17, 1998, in response to petitions for rulemaking filed by ECC
and another company, the FCC released a Notice of Proposed Rule Making
concerning the term "Grade B intensity" as used in the SHVA. The Notice of
Proposed Rule Making (NPRM) requested comment, or made tentative proposals on,
possible rules regarding Grade B intensity for purposes of the SHVA. We cannot
be sure that the FCC will in fact issue rules in this area, that these rules
will be favorable to us or that the federal courts will give weight to these
rules.
RISKS OF ADVERSE EFFECTS OF GOVERNMENT REGULATION. We are subject to the
regulatory authority of the United States government and the national
communications authorities of the countries in which we operate. Our business
prospects could be adversely affected by the adoption of new laws, policies or
regulations, or changes in the interpretation or application of existing laws,
policies and regulations, that modify the present regulatory environment, as
well as by our failure to comply with existing laws, policies and regulations.
We must comply with all applicable Communications Act requirements and FCC
regulations and policies, including, among other things, proceeding with
diligence to construct satellites and commence operations within prescribed
milestones and in accordance with the FCC's required filings of periodic
progress reports.
We believe that we remain free to set prices and serve customers according
to our business judgment, without rate regulation or the statutory obligation
under Title II of the Communications Act to avoid undue discrimination among
customers. However, we cannot be certain that the FCC would not find that we are
subject to the requirements of Title II. If the FCC were to make such a finding,
we would be required to comply with the applicable portions of Title II.
We believe that, because we engage in 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 be treated as a broadcast licensee with respect to our current
and future operations, and certain parties have requested such treatment. If the
FCC were to determine that we are, in fact, a broadcast licensee, we could be
required to comply with all regulatory obligations imposed upon broadcast
licensees.
The Communications Act, and the FCC's implementing regulations, provide
that, where subsidiaries of a holding company hold certain types of FCC
licenses, foreign nationals or their representatives may not own or vote in
excess of 25% of the total equity of the holding company, considered on a
fully-diluted basis, except upon an FCC public interest determination. Although
the FCC's International Bureau has ruled that these limitations do not apply to
subscription DBS authorizations, the ruling has been challenged and the question
remains open. Furthermore, the limitations will apply to our authorizations 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 FSS systems on a common carrier as
well as a non-common carrier basis.
A survey of our equity owners discloses that our foreign ownership in
January 1998 was under 5%. The 110 Acquisition, however, would result in the
issuance to an Australian corporation of stock in excess of these limitations if
they were to apply, and a separate FCC determination that such ownership was
consistent with the public interest might be required in order to avoid a
violation of the Communications Act and/or the FCC's rules.
The FCC has proposed allowing non-geostationary orbit (NGSO) FSS systems to
operate on a co-primary basis in frequencies including those used by ECC's
operational DBS satellites and its other
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proposed DBS and FSS operations. The FCC has also requested comment on a request
to allow a terrestrial service proposed by Northpoint to retransmit local
television signals and provide data services to DBS subscribers. Both of these
proposed operations, if authorized and implemented, may cause electrical
interference to ECC's current and future operations.
Pursuant to the Cable Act, the FCC recently imposed public interest
requirements upon DBS licensees that include the obligation to set aside four
percent of the licensee's channel capacity exclusively for non-commercial
programming of an educational or informational nature by "national educational
programming suppliers." Among other constraints, the FCC defined relatively
narrowly the type of suppliers for which that capacity should be reserved, and
required that the capacity be made available at substantially below-cost rates.
The FCC also applied to DBS providers the requirement of providing reasonable
access to time at low favored rates, and equal opportunity, for certain
qualified candidates for office. We cannot be sure that the implementation of
these rules will not result in additional burdens on the Company.
Although DBS operators like us currently are not subject to the "must
carry" requirements of the Cable Act, the cable industry and the broadcasters
have argued that DBS operators should be subject to these requirements, and the
broadcasters also have argued that satellite companies should not be allowed to
distribute local network signals unless they become subject to such
requirements. In the event the "must carry" requirements of the Cable Act are
revised to include DBS operators, or to the extent that new legislation or
regulation of a similar nature is promulgated, our future plans to provide local
programming may be adversely affected, and such must carry requirements could
cause the displacement of possibly more attractive programming.
The FCC has commenced a rulemaking which seeks to streamline and revise its
rules governing DBS. This rulemaking concerns many new possible DBS rules. There
can be no assurance about the content and effect of any new DBS rules ultimately
promulgated by the FCC.
OPPOSITION TO, AND RISK OF LOSS OF, CERTAIN ECHOSTAR AUTHORIZATIONS. Many
aspects of our operations require the retention or renewal of existing FCC
authorizations, or the procurement of additional authorizations. We have
licenses to operate EchoStar I and EchoStar II at 119 degrees WL, which both
expire in 2006, and a license to operate EchoStar III at 61.5 degrees WL, which
expires in 2008. Also, we have filed with the FCC an application for a license
to operate EchoStar IV as well as a request for a waiver of the requirement of
serving Alaska and Hawaii from 148 degrees WL. The State of Hawaii has requested
the imposition of several conditions on these requested authorizations, and we
have opposed many of these conditions. We cannot be sure that the FCC will grant
these requests or that it will not impose onerous conditions. We are currently
operating EchoStar IV at 148 degrees WL under Special Temporary Authorization
(STA), which is currently set to expire on February 21, 1999. Certain of our
pending and future requests to the FCC for extensions, waivers and approvals
have been, and are expected to continue to be, opposed by third parties.
An affiliate of the Company and wholly owned subsidiary of ECC has
requested FCC approval for the assignment to ECC of all FCC authorizations
involved in the 110 Acquisition, and the FCC has placed these applications (the
MCI/News Corp. Application) on public notice. Petitions to deny our comments
were due January 14, 1999, ECC's opposition was due January 25, 1999, and
replies are due February 1, 1999. The U.S. Department of Justice has filed
comments in support of the 110 Acquisition application. Several parties have
opposed the application on various grounds or have requested conditions,
including, without limitation, arguing that alien ownership limitations and
other broadcast qualification requirements apply, requesting program access
conditions with respect to News
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Corporation's programming, and requesting conditions in connection with service
to Alaska and Hawaii, including requesting service to Hawaii from 110 degrees WL
as well as from the 148 degrees WL orbital location, with respect to which ECC
has filed a still pending request for a waiver of the obligation to serve Alaska
and Hawaii. We cannot be sure how the FCC would rule on any of these oppositions
or requests. Although ECC has requested expedited action on the applications,
ECC cannot be sure that the FCC will grant them and/or that it will grant them
expeditiously. ECC notes that, in a 1995 rulemaking the FCC had imposed a
one-time rule, applicable only to the January 1996 DBS auction, which
effectively prevented DBS operators from using channels at more than one full
CONUS location. If the FCC were to reimpose this rule, we would not be able to
preserve both our requested authorization at 110 degrees WL and our existing
licenses at 119 degrees WL. Although we have vigorously argued in our
application that the FCC need not and should not reimpose that rule, we cannot
be sure how the FCC will rule in that regard.
The two satellites being manufactured for MCI (EchoStar V and EchoStar VI)
for use at the 100 degrees WL orbital slot are equipped with spot beams to
provide service to Alaska and Hawaii. The State of Hawaii has requested service
using 18-24 inch dishes. The satellites probably will not be capable of
providing service to substantial portions of Hawaii and Alaska with a dish that
small, particularly areas with heavy and consistent precipitation. The State of
Hawaii has requested the FCC to condition the transfer of control of the
licenses to EchoStar on provision of service to 18-24 inch dishes.
Furthermore, MCI's authorization is subject to still pending challenges
before the full FCC, and we cannot be sure how the FCC will rule on these
challenges. Moreover, our plan to use our authorized frequencies at 119 degrees
WL and our requested frequencies at 110 degrees WL in conjunction with a single
consumer dish may be subject to additional regulatory requirements and may
require a modification of the ITU plan. Furthermore, still pending before the
FCC is an application for minor modification of MCI's authorization. These and
possibly other modifications must be approved prior to the deployment of
satellites at that location, and we cannot be sure that the FCC will approve
them or that it will do so timely. Moreover, MCI has not yet received FCC
authorization in connection with certain types of Telemetry, Tracking and
Control (TT&C) operations of its proposed system, and we cannot be sure that
such authorization will be received.
The FCC's alien ownership requirements prohibit aliens from owning or
voting more than 25% of the equity interests of certain FCC licenses. It is
possible that News Corporation, which would be considered an "alien" for this
purpose, will acquire more than 25% of EchoStar's equity interests in connection
with the 110 Acquisition. See "Security Ownership of Certain Beneficial Owners
and Management -- Note (6)." EchoStar does not believe that the alien ownership
restriction will be applicable to the 110 Acquisition. If the FCC were to so
apply the restriction and the 110 Acquisition could not be restructured, the 110
Acquisition might not be consummated.
The TT&C 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 TT&C, 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 TT&C purposes. This could result in the inability to control
EchoStar I and a total loss of the satellite. Further, EchoStar II's TT&C
operations are in the "extended" C-band. Our authorization to use these
frequencies was set to expire on January 1, 1999. Although we have timely
applied for extension of that authorization to 2006, we cannot be sure that the
FCC will grant our request. Denial of this request could result in the inability
to control EchoStar II and the loss of that satellite. Also, ECC's rights under
the Dominion Agreement (as defined), which would give it certain limited rights
to operate certain additional
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frequencies at 61.5 degrees WL, will not be given effect in the absence of
certain FCC approvals, which have not yet been received and may not be
forthcoming.
With respect to the 24 orbital assignments at the 148 degrees WL orbital
slot, ECC is required, among other things, to have its entire system at the 148
degrees WL orbital slot operational by December 20, 2002. ECC cannot be sure
that it will meet this milestone.
All of our authorizations for satellite systems that are not yet
operational, including DirectSat's (at 110 degrees WL and 175 degrees WL),
DBSC's (at 175 degrees WL) and ESC's (for 11 unassigned western frequencies)
construction permits, ESC's FSS Ku-band and Ka-band authorizations and E-Sat's
Low Earth Orbit Mobile-Satellite Service license, are subject to construction
and progress obligations, milestones, reporting and other requirements. The FCC
has, in fact, indicated it may revoke, terminate, condition or decline to extend
or renew such authorizations if the permittee fails to comply with applicable
Communications Act requirements, including construction and operation
obligations. The FCC also has declared that it will carefully monitor the
reports required to be filed by DBS and FSS permittees. If we fail to file
adequate reports or to demonstrate progress in the construction of our satellite
systems, the FCC may cancel our authorizations for those systems. We have not
filed, or timely filed, all required reports or other filings in connection with
our authorized systems with the FCC. There is a risk that the FCC may find that
we have not complied fully with the FCC's due diligence or other requirements,
including the filing of reports and satisfaction of construction and payment
obligations consistent with the FCC's rules and the progress reports filed by
ECC. The construction permits of ESC for 11 unassigned western frequencies and
DBSC (at 175 degrees WL) have already expired, and although we have filed timely
requests for their extension, we cannot be sure how the FCC will act on these
requests. Further, ESC's FSS Ku-band license is subject to pending challenges by
PrimeStar and GE American Communications, Inc. and we cannot be sure that the
FCC will sustain that license or that it will not impose conditions unfavorable
to us. In addition, our other FSS authorizations, or requests for modifications
thereof, are subject to challenges. We cannot be sure that our licenses,
requests for modifications or applications will withstand such challenges.
RISK OF INABILITY TO MANAGE RAPIDLY EXPANDING 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 will also
need to continue to expand, train and manage our employee base, and our
management personnel will be required to assume even greater levels of
responsibility. If we are unable to manage our growth effectively, our business
and results of operations could be materially adversely affected.
SUBSCRIBER TURNOVER. From January 1, 1997, our monthly subscriber turnover
(which represents the number of subscriber disconnects during the period divided
by the weighted-average number of subscribers during the period) has averaged
less than 1.25%. If we are unable to control subscriber turnover, our financial
condition and results of operations would be adversely affected.
RISK OF SATELLITE DEFECT, LOSS OR REDUCED PERFORMANCE. Launch services are
provided in very few countries and locations around the world, and we have a
limited choice of launch services providers. If a foreign launch services
provider is used for EchoStar V or EchoStar VI, the satellite manufacturer will
be required to obtain from the United States government a technical data
exchange license and a satellite export license for that satellite. We could
also be subject to other restrictions by the United States government because of
policy towards the countries where launch services are provided. We cannot be
certain that these licenses will be obtained on time or at all, or that any
delay in getting these licenses will not have a materially adverse effect on our
business. Satellites are subject to significant risks, including
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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.
In the event of a failure or loss of any of EchoStar I, EchoStar II, or
EchoStar III, and subject to FCC consent, 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, there can be no assurance that such use would not adversely affect
our ability to meet the operation deadlines associated with our permits. Failure
to meet such deadlines could result in the loss of such permits and would have
an adverse effect on our operations.
LIMITED LIFE OF 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 and EchoStar IV is 12 years. There can be no assurance, however, as
to the useful lives of the satellites. Our operating results would be adversely
affected if the useful life of any of these satellites were significantly
shorter than 12 years. The satellite construction contracts for our satellites
contain no warranties in the event of a failure of EchoStar I, EchoStar II,
EchoStar III or EchoStar IV following launch. Additionally, a move of any of
these satellites, either temporarily or permanently, to another orbital
location, could decrease the orbital life of the satellite by up to six months
per movement.
RISK OF SATELLITE LOSS OR DAMAGE FROM ELECTROSTATIC STORM AND SPACE DEBRIS.
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. Our insurance policies include coverage for any
resulting physical damage. See "-- Insurance."
RISK OF SIGNAL THEFT. The delivery of subscription programming requires
the use of encryption technology. Signal theft or "piracy" in the C-band DTH,
cable television and European DBS industries has been widely reported. We
recently received reports that our encryption system has been compromised. If
our encryption technology is compromised in a manner that is not promptly
corrected, our revenue and our ability to contract for video and audio services
provided by programmers would be adversely affected. Published reports indicate
that the DIRECTV and USSB encryption systems have been compromised. A Canadian
court has ruled that pirating of DIRECTV programming is not illegal in Canada.
This ruling may encourage the attempted piracy of our programming in Canada,
resulting in lost revenue for ECC and increased piracy of DIRECTV programming.
Piracy of DIRECTV programming could result in increased sales of DIRECTV
receivers at the expense of loss of potential DISH Network subscribers. ECC can
take a number of different corrective measures to limit the amount of damage
that would be sustained by a breach of its conditional access system including,
as a last resort, complete replacement of the access control system. Any
security breach could result in a material reduction of DISH Network revenue
until repaired.
RISKS OF FAILURE OF COMPLEX TECHNOLOGY. Our DBS system is highly complex.
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 DBS system. As a result of
the introduction of such new applications and adaptations from time to time, our
DBS system may, at times, not function as expected.
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Technology in the satellite television industry is in a rapid and
continuing state of change as new technologies develop. Although the digital
compression technology utilized in connection with our DBS system is the world
standard, the integration and implementation of that technology is also
undergoing rapid change. There can be no assurance 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 DBS system may
occur that could adversely affect performance or operation of our DBS system and
could have an adverse effect on our business. Further, in the event that 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. See "Business -- Programming."
CONTROL OF THE COMPANY BY PRINCIPAL STOCKHOLDER. The Company is a wholly
owned subsidiary of ECC. Although Charles W. Ergen, the Chairman, Chief
Executive Officer and President of ECC, currently owns approximately 63% of the
total equity securities of ECC (assuming exercise of employee stock options), he
currently possesses approximately 94% of the total voting power. If the 110
Acquisition is completed and the Series A Preferred Stock of ECC is repurchased,
he will control 86% of the total voting power. Thus, Mr. Ergen will continue to
have the ability to elect a majority of the directors of ECC and to control all
other matters requiring the approval of ECC's stockholders. In addition,
pursuant to a voting agreement among Mr. Ergen, News Corporation and MCI, News
Corporation and MCI have agreed to vote their shares after consummation of the
110 Acquisition in accordance with the recommendation of the Board of Directors
of ECC for five years. See "Security Ownership of Certain Beneficial Owners and
Management." For Mr. Ergen's total voting power in ECC to be reduced to below
51%, his percentage ownership of the equity securities of ECC would have to be
reduced to below 10%.
INSURANCE. We procured in-orbit insurance for EchoStar I, EchoStar II and
EchoStar III. 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 satellite
insured under the policy. Such notification permits 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 health status of an insured satellite or any
loss occurring after risk has attached does not entitle the insurers to
renegotiate the policy terms. The in-orbit insurance policy for EchoStar I and
EchoStar II has a one-year policy period with a one-year extension provision.
The policy period will continue until June 25, 1999. The in-orbit coverage for
EchoStar III is for sixty days and will continue until February 2, 1999. There
can be no assurance that such renewals will be possible or can be at rates or on
terms favorable to us. For example, if EchoStar I, EchoStar II, EchoStar III or
other similar satellites experience anomalies while in orbit, the cost to renew
in-orbit insurance could increase significantly or coverage exclusions for
similar anomalies could be required. See "Business -- Insurance."
EchoStar IV is currently able to use a maximum of only 20 transponders as a
result of a solar array anomaly. The number of available transponders will
decrease over time. EchoStar IV has also experienced TWTA anomalies comparable
to those that occurred to EchoStar III which have resulted in the failure of
three TWTAs and the loss of use of a total of six TWTAs. Based on existing data,
we expect that approximately 16 transponders will probably be available over the
entire expected 12 year life of the satellite, absent significant additional
TWTA anomalies or other failures. In September 1998, we filed a $219.3 million
insurance claim for a total loss (as defined in the launch insurance policy)
related to EchoStar IV. However, if we were to receive $219.3 million, for a
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
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insurance policy. Although we believe we have suffered a total loss of EchoStar
IV in accordance with that definition in the launch insurance policy, we
presently intend to negotiate a settlement with the insurers that will
compensate us for the reduced satellite transmission capacity and allow us to
retain title to the asset. See "-- Risk that We Will be Unable to Settle with
Insurers" above.
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 the Company for any
loss. In addition, insurance will not reimburse the Company for business
interruption, loss of business and similar losses that might arise from delay in
the launch of any EchoStar satellite.
STATE TAXES. In addition to being subject to FCC regulation, operators of
satellite broadcast systems in the United States may be affected by imposition
of state and/or local sales taxes on satellite-delivered programming. According
to the Satellite Broadcasting and Communications Association, several states,
including Maryland, Missouri, North Dakota, New York and Washington, have either
adopted or proposed such taxes. Other states are in various stages of
considering proposals that would tax providers of satellite-delivered
programming and other communications providers. The adoption of state imposed
sales taxes could have adverse consequences to our business. However, the 1996
Act exempts DTH satellite service from the collection, or remittance, or both,
of any tax or fee imposed by any local taxing jurisdiction on such services.
CERTAIN OBLIGATIONS. We utilized satellite vendor financing in connection
with the purchase of each of our current satellites. Under the terms of that
financing, a portion of the purchase price for the satellites was deferred until
after the respective satellites were in orbit (the Outstanding Deferred
Payments). As of September 30, 1998, we had $18.9 million in principal amount
outstanding of Outstanding Deferred Payments relating to EchoStar I, $18.7
million relating to EchoStar II, $12.1 million relating to EchoStar III and
$13.0 million relating to EchoStar IV. The Outstanding Deferred Payments
relating to EchoStar I and EchoStar II are secured by substantially all of the
assets of Dish, Ltd. (a wholly-owned subsidiary of EchoStar DBS Corporation) and
its subsidiaries (subject to certain restrictions) and are guaranteed by ECC.
The consummation of the offering of the Old Notes and the reorganization might
result in breaches of certain covenants in favor of the holders of the
Outstanding Deferred Payments, in particular the holders of Outstanding Deferred
Payments relating to EchoStar I and EchoStar II. We believe that, if there is a
breach of such covenants, we may be liable to the holders of such Outstanding
Deferred Payments for damages, if any, arising out of such breach, including
possibly the obligation to repay such Outstanding Deferred Payments prior to the
scheduled maturity thereof together with the economic equivalent of interest
thereon through the scheduled maturity date.
RISKS ASSOCIATED WITH ACQUISITIONS. We have made a number of acquisitions
and will continue to review future acquisition opportunities. No assurances can
be given that acquisition candidates will continue to be available on terms and
conditions acceptable to us. Acquisitions, including the 110 Acquisition,
involve numerous risks, including, among other things, difficulties and expenses
incurred in connection with the acquisition and the subsequent assimilation of
the operations of the acquired company, adverse consequences of conforming the
acquired company's accounting policies to ours, the difficulty in operating
acquired businesses, the diversion of management's attention from other business
concerns and the potential loss of key employees of acquired companies. There
can be no assurance that any acquisition, including the 110 Acquisition, will be
successfully integrated into our on-going operations or that estimated cost
savings will be achieved. In addition, in the event that the operations of an
acquired business do not meet expectations, we may be required to restructure
the acquired business or
39
<PAGE>
write-off the value of some or all of the assets of the acquired business.
PENDING FEE DISPUTE. In connection with the News Corporation litigation,
ECC has a contingent fee arrangement with the lawyers representing ECC, which
provides for the lawyers to be paid a percentage of any net recovery obtained by
ECC in its dispute with News Corporation. Although they have not been specific,
the lawyers have asserted that they may be entitled to receive payments in
excess of $80 million to $100 million under this fee arrangement in connection
with the settlement of the dispute with News Corporation. ECC intends to
vigorously contest the lawyers' interpretation of the fee arrangement, which ECC
believes significantly overstates the magnitude of any ECC liability thereunder.
If the lawyers and ECC are unable to resolve this fee dispute under the fee
arrangement, the fee dispute would be resolved under arbitration. We cannot be
certain about the outcome of negotiations or arbitration regarding this fee
dispute. As the holder of the 110 Acquisition assets, we will be required to pay
any fee that is payable under the fee arrangement.
FRAUDULENT CONVEYANCE CONSIDERATIONS. We will use a portion of the net
proceeds of the Old Notes to make a distribution to ECC for repaying the Senior
Preferred Exchange Notes. See "Use of Proceeds." It is possible that creditors
of the Company may challenge the incurrence of indebtedness represented by the
Notes as a fraudulent conveyance under relevant federal and state statutes and,
under certain circumstances (including a finding that the Company was insolvent
at the time the Notes were issued), a court could hold that the Company's
obligations on the Notes may be voided or are subordinate to other obligations
of the Company. Our obligations under the Notes are guaranteed, jointly and
severally (the Subsidiary Guarantees), by DBSC and certain of our subsidiaries
(collectively the Subsidiary Guarantors). It is possible that the creditors of
the Subsidiary Guarantors may challenge the Subsidiary Guarantees as a
fraudulent conveyance under relevant federal and state statutes, and, under
certain circumstances (including a finding that a Subsidiary Guarantor was
insolvent at the time its Subsidiary Guarantee was issued), a court could hold
that the obligations of a Subsidiary Guarantor under a Subsidiary Guarantee may
be voided or are subordinate to other obligations of a Subsidiary Guarantor. In
addition, it is possible that the amount for which a Subsidiary Guarantor is
liable under a Subsidiary Guarantee may be limited. The measure of insolvency
for purposes of the foregoing may vary depending on the law of the jurisdiction
that is being applied. Generally, however, a company would be considered
insolvent if the sum of its debts is greater than all of its property at a fair
valuation or if the present fair saleable value of its is less than the amount
that will be required to pay its probable liability on its existing debts as
they become absolute and mature. The Indenture will provide that the obligations
of the Subsidiary Guarantors under the Subsidiary Guarantees will be limited to
amounts that will not result in the Subsidiary Guarantees being a fraudulent
conveyance under the applicable law. See "Description of the Notes --
Guarantees."
IMPACT OF YEAR 2000 ISSUE. An issue exists for all companies that rely on
computers as the year 2000 approaches. This issue involves computer programs and
applications that were written using two digits rather than four to identify the
applicable year, and could result in system failures or miscalculations. We have
undertaken an assessment to determine the extent of any necessary remediation,
and the anticipated costs thereof, to make our material equipment, systems and
applications year 2000 compliant. Costs in connection with any modifications to
make our systems compliant are not expected to be material. However, if such
modifications are not completed successfully or are not completed in a timely
manner, the year 2000 issue may have a material adverse impact on the operations
of the Company. Exposure could arise also from the impact on non-compliance by
certain software and/or equipment vendors and others with whom we conduct
business. No estimates can be made as to the potential adverse impact that may
result from non-compliance with the year 2000 issue by the
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<PAGE>
software and/or equipment vendors and others with whom we conduct business.
ABSENCE OF PUBLIC MARKET. The Exchange Notes are being offered to the
holders of the Old Notes. The Old Notes were offered and sold in January 1999
to a limited number of institutional investors and are eligible for trading in
Private Offerings, Resale and Trading through Automatic Linkages (PORTAL)
Market.
The Exchange Notes will constitute a new issue of securities, for which
there is no established trading market. If a trading market does not develop or
is not maintained, holders of the Exchange Notes may experience difficulty in
reselling the Exchange Notes or may be unable to sell them at all. If a market
for the Exchange Notes develops, any such market may be discontinued at any time
and the Exchange Notes could trade at prices that may be lower than the initial
prices thereof, depending on many factors, including prevailing interest rates,
the markets for similar services and the financial performance of the Company.
The Initial Purchasers have made a market in the Old Notes. Although there is
currently no market for the Exchange Notes, the Initial Purchasers have advised
us that they currently intend to make a market in the Exchange Notes. However,
they are not obligated to do so, and any such market-making with respect to the
Old Notes and the Exchange Notes may be discontinued at any time without notice.
In addition, such market-making activity will be subject to the limits imposed
by the Securities Act and the Securities Exchange Act of 1934, as amended (the
Exchange Act) and may be limited during the Exchange Offer and the pendency of
any shelf registration statement. See "Description of the Notes -- Registration
Rights; Liquidated Damages." Accordingly, we cannot provide assurance as to the
development or liquidity of any market for the Old Notes and the Exchange Notes.
We do not intend to apply for listing of any of the Notes on any securities
exchange or for quotation through the Nasdaq National Market or any other
securities quotation service.
USE OF PROCEEDS
There will be no cash proceeds to the Company from the Exchange Offer. The
gross proceeds to the Company from the Old Notes Offering were approximately
$2.0 billion, with net proceeds to the Company of approximately $1.8 billion.
The net proceeds from the Old Notes offering will be used to repurchase the
1994, 1996 and 1997 Notes, to fund a distribution to ECC for a repurchase of its
Senior Preferred Exchange Notes, to repay ECC loans to DBSC and to fund
subscriber acquisition and marketing expenses as well as general corporate
purposes. Although the estimates set forth under "Uses" below represent
EchoStar's best estimate of the intended use of the proceeds from the offering
of the Old Notes, the specific amounts allocated to each use may change
depending on such factors as unanticipated costs or requirements necessary for
development and operation of the EchoStar DBS System.
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------
<S> <C>
SOURCES:
Net proceeds from the Old Notes offering(1) $ 1,787,850
Cash contribution to the Company from ECC 200,000
---------
$ 1,987,850
---------
---------
USES:
Repurchase of 1994 Notes(2) $ 597,749
Repurchase of 1996 Notes(2) 502,300
Repurchase of 1997 Notes, including accrued interest(2) 378,125
Distribution to ECC for repurchase of Senior Preferred
Exchange Notes(3) 269,657
Repayment of ECC Loans to DBSC and accrued interest 60,156
Excess cash 179,863
---------
Total Uses $ 1,987,850
---------
---------
</TABLE>
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<PAGE>
- -----------
(1) Net proceeds from the offering are net of approximately $212.2 million of
estimated transaction costs, including discounts, commissions, expenses and
the excess of the tender price over the approximate accreted value or
principal amount, as applicable, of the 1994 Notes, the 1996 Notes and the
1997 Notes.
(2) Represents the approximate accreted value of the 1994 Notes and the 1996
Notes and the principal amount of the 1997 Notes plus accrued interest as
of January 25, 1999, the closing date of the Tender Offers therefor.
(3) Represents the proceeds required by ECC to repurchase the Senior Preferred
Exchange Notes pursuant to the Tender Offers. In addition, ECC will use
its existing cash to repurchase all of its outstanding shares of Series A
Cumulative Preferred Stock (the Series A Preferred Stock). Charles W.
Ergen, President and Chief Executive Officer of ECC, owns 1,535,847 shares
of Series A Preferred Stock and 80,834 shares are owned by James DeFranco,
Executive Vice President of ECC. The Series A Preferred Stock is
convertible into ECC Class A Common Stock, is entitled to cumulative
dividends at the rate of 8% per annum and is not redeemable by the holders
or ECC. The repurchase price will be based on the market price of ECC's
Class A Common Stock on or about the date of closing. Based on the closing
price of ECC's Class A Common Stock on January 26, 1999 of $55.63, the
repurchase price would be approximately $96 million. The above sources and
uses of proceeds exclude the repurchase of the Series A Preferred Stock.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The sole purpose of the Exchange Offer is to fulfill the obligations of the
Company and the Guarantors with respect to the registration of the Old Notes.
The Old Notes were originally issued and sold on January 25,1999 (the Issue
Date). Such sales were not registered under the Securities Act in reliance upon
the exemption provided in section 4(2) of the Securities Act and Rule 144A and
Regulation S promulgated under the Securities Act. In connection with the sale
of the Old Notes, the Company agreed to file with the SEC a registration
statement relating to the Exchange Offer (the Exchange Offer Registration
Statement), pursuant to which the Exchange Notes, consisting of another series
of senior notes of the Company covered by such Registration Statement and
containing substantially identical terms to the Old Notes, except as set forth
in this Prospectus, would be offered in exchange for Old Notes tendered at the
option of the holders thereof. If: (i) the applicable Exchange Offer is not
permitted by applicable law or SEC policy; or (ii) any holder of Transfer
Restricted Securities notifies the Company within the specific time period that:
(A) it is prohibited by law or SEC policy from participating in the Exchange
Offer; (B) it may not resell the Exchange Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and this Prospectus is not
appropriate or available for such resales; or (C) it is a broker-dealer and owns
Old Notes acquired directly from the Company or an affiliate of the Company, the
Company and the Guarantors will file with the SEC a registration statement (the
Shelf Registration Statement) to cover resales of the Old Notes by the holders
thereof who satisfy certain conditions relating to the provision of information
in connection with the Shelf Registration Statement. For purposes of the
foregoing, "Transfer Restricted Securities" means each Old Note until the
earliest of: (i) the date on which such Old Note has been exchanged in the
Exchange Offer and is entitled to be resold to the public by the holder thereof
without complying with prospectus delivery requirements; (ii) the date on which
such Note is disposed of by a broker-dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer
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<PAGE>
Registration Statement (including delivery of the prospectus contained therein);
(iii) the date on which such Old Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement; or (iv) the date on which such Old Note may be distributed to the
public pursuant to Rule 144(k) under the Securities Act. See "Description of the
Notes--Registration Rights; Liquidated Damages."
Holders of Old Notes will be required to make certain representations to
the Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth below.
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, upon the terms and subject to the
conditions set forth herein and in the Letter of Transmittal accompanying this
Prospectus (the Letter of Transmittal), $1,000 in principal amount of Exchange
Notes for each $1,000 in principal amount of Old Notes. The terms of the
Exchange Notes are substantially identical to the terms of the Old Notes for
which they may be exchanged pursuant to this Exchange Offer, except that the
Exchange Notes will generally be freely transferable by holders thereof, and the
holders of the Exchange Notes (as well as remaining holders of any Old Notes)
are not entitled to certain registration rights and certain liquidated damages
provisions which are applicable to the Old Notes under the Registration Rights
Agreement. Each series of Exchange Notes will evidence the same debt as the Old
Notes and will be entitled to the benefits of its respective Indenture. See
"Description of the Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered or accepted for exchange. Based on its view
of interpretations set forth in no-action letters issued by the Staff to third
parties, the Company believes that Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Old Notes may be offered for resale, resold
and otherwise transferred by holders thereof (other than any holder which is (i)
an Affiliate of the Company, (ii) a broker-dealer who acquired Old Notes
directly from the Company or (iii) a broker-dealer who acquired Old Notes as a
result of market-making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business, and such holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes. Any broker-dealer that resells Exchange
Notes that were received by it for its own account pursuant to the Exchange
Offer and any broker or dealer that participates in a distribution of such
Exchange Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. Broker-dealers who acquire
Old Notes as a result of market-making or other trading activities may use this
Prospectus, as supplemented or amended, in connection with resales of the
Exchange Notes. The Company has agreed that, for a period of one year after the
Exchange Offer is consummated, they will make this Prospectus available to any
broker-dealer for use in connection with any such resale. Any holder who
tenders in the Exchange Offer for the purpose of participating in a distribution
of the Exchange Notes or any other holder that cannot rely upon such
interpretations must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction.
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Tendering holders of Old Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Old Notes
pursuant to the Exchange Offer. The Exchange Notes will bear interest from
January 25, 1999. Holders of Old Notes whose Old Notes are accepted for
exchange will be deemed to have waived the right to have interest accrue, or to
receive any payment in respect of interest, on the Old Notes from January 25,
1999 to the date of the issuance of the Exchange Notes. Interest on the
Exchange Notes is payable semiannually in arrears on February 1 and August 1 of
each year, commencing August 1, 1999, accruing from January 25, 1999.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer expires on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., Eastern time, on unless the Company
in its sole discretion extends the period during which the Exchange Offer is
open, in which event the term "Expiration Date" means the latest time and date
on which the Exchange Offer, as so extended by the Company, expires. The
Company reserves the right to extend the Exchange Offer at any time and from
time to time prior to the Expiration Date by giving written notice to U.S. Bank
Trust National Association (the "Exchange Agent") and by timely public
announcement communicated by no later than 5:00 p.m. on the next business day
following the Expiration Date, unless otherwise required by applicable law or
regulation, by making a release to the Dow Jones News Service. During any
extension of the Exchange Offer, all Old Notes previously tendered pursuant to
the Exchange Offer will remain subject to the Exchange Offer.
The initial Exchange Date will be the first business day following the
Expiration Date. The Company expressly reserves the right to (i) terminate the
Exchange Offer and not accept for exchange any Old Notes for any reason,
including if any of the events set forth below under "--Conditions to the
Exchange Offer" shall have occurred and shall not have been waived by the
Company and (ii) amend the terms of the Exchange Offer in any manner, whether
before or after any tender of the Old Notes. If any such termination or
amendment occurs, the Company will notify the Exchange Agent in writing and will
either issue a press release or give written notice to the holder of the Old
Notes as promptly as practicable. Unless the Company terminates the Exchange
Offer prior to 5:00 p.m., Eastern time, on the Expiration Date, the Company will
exchange the Exchange Notes for Old Notes on the Exchange Date.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Company to record holders of Old Notes and will
be furnished to brokers, banks and similar persons whose names, or the names of
whose nominees, appear on the lists of holders for subsequent transmittal to
beneficial owners of Old Notes.
HOW TO TENDER
The tender to the Company of Old Notes by a holder thereof pursuant to one
of the procedures set forth below will constitute an agreement between such
holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
GENERAL PROCEDURES
A holder of an Old Note may tender the same by (i) properly completing and
signing the Letter of Transmittal or a facsimile thereof (all references in this
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or certificates
representing the Old Notes being tendered and any required signature guarantees
(or a timely
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<PAGE>
confirmation of a book-entry transfer (a "Book-Entry Confirmation") pursuant to
the procedure described below), to the Exchange Agent at its address set forth
on the back cover of this Prospectus on or prior to the Expiration Date or (ii)
complying with the guaranteed delivery procedures described below.
If tendered Old Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Old Notes are to be reissued) in the name
of the registered holder, the signature of such signer need not be guaranteed.
In any other case, the tendered Old Notes must be endorsed or accompanied by
written instruments of transfer in form satisfactory to the Company and duly
executed by the registered holder and the signature on the endorsement or
instrument of transfer must be guaranteed by a bank, broker, dealer, credit
union, savings association, clearing agency or other institution (each an
"Eligible Institution") that is a member of a recognized signature guarantee
medallion program within the meaning of Rule 17Ad-15 under the Exchange Act. If
the Exchange Notes and/or Old Notes not exchanged are to be delivered to an
address other than that of the registered holder appearing on the note register
for the Old Notes, the signature on the Letter of Transmittal must be guaranteed
by an Eligible Institution.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Old Notes should contact such holder promptly and instruct such holder
to tender Old Notes on such beneficial owner's behalf. If such beneficial owner
wishes to tender such Old Notes himself, such beneficial owner must, prior to
completing and executing the Letter of Transmittal and delivering such Old
Notes, either make appropriate arrangements to register ownership of the Old
Notes in such beneficial owner's name or follow the procedures described in the
immediately preceding paragraph. The transfer of record ownership may take
considerable time.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Exchange Offer within two business days after
receipt of this Prospectus, and any financial institution that is a participant
in the Book-Entry Transfer Facility's systems may make book-entry delivery of
Old Notes by causing the Book-Entry Transfer Facility to transfer such Old Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility in
accordance with the Book-Entry Transfer Facility's procedures for transfer.
However, although delivery of Old Notes may be effected through book-entry
transfer at the Book-Entry Transfer Facility, the Letter of Transmittal, with
any required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at the address
specified on the back cover of this Prospectus on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
THE METHOD OF DELIVERY OF OLD NOTES AND ALL OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE
TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold 31% of the gross proceeds otherwise
payable to a holder pursuant to the Exchange Offer if the holder
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<PAGE>
does not provide his, her or its taxpayer identification number (social security
number or employer identification number, as applicable) and certify that such
number is correct. Each tendering holder should complete and sign the main
signature form and the Substitute Form W-9 included as part of the Letter of
Transmittal, so as to provide the information and certification necessary to
avoid backup withholding, unless an applicable exemption exists and is proven in
a manner satisfactory to the Company and the Exchange Agent.
GUARANTEED DELIVERY PROCEDURES
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date, a tender may be effected if the Exchange Agent has received at
its office listed on the Letter of Transmittal on or prior to the Expiration
Date a letter, telegram or facsimile transmission from an Eligible Institution
setting forth the name and address of the tendering holder, the principal amount
of the Old Notes being tendered, the names in which the Old Notes are registered
and, if possible, the certificate numbers of the Old Notes to be tendered, and
stating that the tender is being made thereby and guaranteeing that within three
New York Stock Exchange trading days after the date of execution of such letter,
telegram or facsimile transmission by the Eligible Institution, the Old Notes,
in proper form for transfer, will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal (and
any other required documents). Unless Old Notes being tendered by the
above-described method (or a timely Book-Entry Confirmation) are deposited with
the Exchange Agent within the time period set forth above (accompanied or
preceded by a properly completed Letter of Transmittal and any other required
documents), the Company may, at its option, reject the tender. Copies of a
Notice of Guaranteed Delivery which may be used by Eligible Institutions for the
purposes described in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a timely Book-Entry Confirmation) is received
by the Exchange Agent. Issuances of Exchange Notes in exchange for Old Notes
tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or
facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Letter of Transmittal (and
any other required documents) and the tendered Old Notes (or a timely Book-Entry
Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of counsel to
the Company, be unlawful. The Company also reserves the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularities in
tenders of any particular holder whether or not similar defects or
irregularities are waived in the case of other holders. Neither the Company,
the Exchange Agent nor any other person will be under any duty to give
notification of any defects or irregularities in tenders or shall incur any
liability for failure to give any such notification. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
Letter of Transmittal and the instructions thereto) will be final and binding.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions,
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which are part of the Exchange Offer: The party tendering Old Notes for exchange
(the "Transferor") exchanges, assigns and transfers the Old Notes to the Company
and irrevocable constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Old Notes to be assigned, transferred
and exchanged. The Transferor represents and warrants that it has full power
and authority to tender, exchange, assign and transfer the Old Notes and to
acquire Exchange Notes issuable upon the exchange of such tendered Old Notes,
and that, when the same are accepted for exchange, the Company will acquire good
and unencumbered title to the tendered Old Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim.
The Transferor also warrants that it will, upon request, execute and deliver any
additional documents deemed by the Company to be necessary or desirable to
complete the exchange, assignment and transfer of tendered Old Notes. The
Transferor further agrees that acceptance of any tendered Old Notes by the
Company and the issuance of Exchange Notes in exchange therefor shall constitute
performance in full by the Company of its obligations under the Registration
Rights Agreement and that the Company shall have no further obligations or
liabilities thereunder (except in certain limited circumstances). All authority
conferred by the Transferor will survive the death or incapacity of the
Transferor and every obligation of the Transferor shall be binding upon the
heirs, legal representatives, successors, assigns, executors and administrators
of such Transferor.
By tendering Old Notes and executing the Letter of Transmittal, the
Transferor certifies that (a) it is not an Affiliate of the Company, that it is
not a broker-dealer that owns Old Notes acquired directly from the Company or an
Affiliate of the Company, that it is acquiring the Exchange Notes offered hereby
in the ordinary course of such Transferor's business and that such transferor
has no arrangement with any person to participate in the distribution of such
Exchange Notes or (b) that it is an Affiliate of the Company or of the Initial
Purchasers of the Old Notes in the Offering of Notes, and that it will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable to it.
WITHDRAWAL RIGHTS
Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at its
address set forth on the back cover of this Prospectus prior to the Expiration
Date. Any such notice of withdrawal must specify the person named in the Letter
of Transmittal as having tendered Old Notes to be withdrawn, the certificate
numbers of Old Notes to be withdrawn, the principal amount of Old Notes to be
withdrawn, a statement that such holder is withdrawing his election to have such
Old Notes exchanged, and the name of the registered holder of such Old Notes,
and must be signed by the holder in the same manner as the original signature of
the Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence satisfactory to the Company that the person withdrawing
the tender has succeeded to the beneficial ownership of the Old Notes being
withdrawn. The Exchange Agent will return the properly withdrawn Old Notes
promptly following receipt of notice of withdrawal. All questions as to the
validity of notices of withdrawals, including time of receipt, will be
determined by the Company, and such determination will be final and binding on
all parties.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange
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<PAGE>
of Old Notes validly tendered and not withdrawn and the issuance of the Exchange
Notes will be made on the Exchange Date. The Exchange Agent will act as agent
for the tendering holders of Old Notes for the purposes of receiving Exchange
Notes from the Company and causing the Old Notes to be assigned, transferred and
exchanged. Upon the terms and subject to conditions of the Exchange Offer,
delivery of Exchange Notes to be issued in exchange for accepted Old Notes will
be made by the Exchange Agent promptly after acceptance of the tendered Old
Notes. Old Notes not accepted for exchange by the Company will be returned
without expense to the tendering holders (or in the case of Old Notes tendered
by book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility pursuant to the procedures described above, such non-exchanged
Old Notes will be credited to an account maintained with such Book-Entry
Transfer Facility) promptly following the Expiration Date or, if the Company
terminates the Exchange Offer prior to the Expiration Date, promptly after the
Exchange Offer is so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue Exchange Notes
in respect of any properly tendered Old Notes not previously accepted and may
terminate the Exchange Offer (by oral or written notice to the Exchange Agent
and by timely public announcement communicated no later than 5:00 p.m. on the
next business day following the Expiration Date, unless otherwise required by
applicable law or regulation, by making a release to the Dow Jones News Service)
or, at its option, modify or otherwise amend the Exchange Offer, if: (a) there
shall be threatened, instituted or pending any action or proceeding before, or
any injunction, order or decree shall have been issued by, any court or
governmental agency or other governmental, regulatory or administrative agency
or commission, (i) seeking to restrain or prohibit the making or consummation of
the Exchange Offer or any other transaction contemplated by the Exchange Offer,
(ii) assessing or seeking any damages as a result thereof or (iii) resulting in
a material delay in the ability of the Company to accept for exchange some or
all of the Old Notes pursuant to the Exchange Offer; (b) any statute, rule,
regulation, order or injunction shall be sought, proposed, introduced, enacted,
promulgated or deemed applicable to the Exchange Offer or any of the
transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority, agency
or court, domestic or foreign, that in the sole judgment of the Company, might
directly or indirectly result in any of the consequences referred to in clauses
(a)(i) or (ii) above or, in the sole judgment of the Company, might result in
the holders of Exchange Notes having obligations with respect to resales and
transfers of Exchange Notes which are greater than those described in the
interpretations of the Staff refered to on the cover page of this Prospectus, or
would otherwise make it inadvisable to proceed with the Exchange Offer; or (c) a
material adverse change shall have occurred in the business, condition
(financial or otherwise), operations or prospects of the Company.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by it with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Company) giving rise to such condition or may be waived by the Company in whole
or in part at any time or from time to time in its sole discretion. The failure
by the Company at any time to exercise any of the foregoing rights will not be
deemed a waiver of any such right, and each right will be deemed an ongoing
right which may be asserted at any time or from time to time. In addition, the
Company has reserved the right, notwithstanding the satisfaction of each of the
foregoing conditions, to terminate or amend the Exchange Offer.
Any determination by the Company concerning the fulfillment or
nonfulfillment of any
48
<PAGE>
conditions will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no Exchange Notes will be issued in exchange for any such Old
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or qualification of the Indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
EXCHANGE AGENT
U.S. Bank Trust National Association has been appointed as the Exchange
Agent for the Exchange Offer. Letters of Transmittal must be addressed to the
Exchange Agent at:
U.S. Bank Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Telephone: (612) 244-8162
Facsimile: (612) 244-1537
Attention:
Delivery to an address other than as set forth herein, or transmission of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The Company
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers. The expenses to be
incurred in connection with the Exchange Offer, including the fees and expenses
of the Exchange Agent and printing, accounting, investment banking and legal
fees, will be paid by the Company and are estimated to be approximately
$250,000.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations
should not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Old Notes in any jurisdiction in which
the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to holders of Old Notes
in such jurisdiction. In any jurisdiction the securities laws or blue sky laws
of which require the Exchange Offer to be made by a licensed broker or dealer,
the Exchange Offer is being made on behalf of the Company by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.
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<PAGE>
DISSENTER AND APPRAISAL RIGHTS
HOLDERS OF OLD NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS
IN CONNECTION WITH THE EXCHANGE OFFER.
FEDERAL INCOME TAX CONSEQUENCES
The exchange of Old Notes for Exchange Notes by tendering holders will not
be a taxable exchange for federal income tax purposes, and such holders should
not recognize any taxable gain or loss or any interest income as a result of
such exchange. See "Certain United States Federal Income Tax Considerations."
OTHER
Participation in the Exchange Offer is voluntary and holders of Old Notes
should carefully consider whether to accept the terms and conditions thereof.
Holders of the Old Notes are urged to consult their financial and tax advisors
in making their own decisions on what action to take with respect to the
Exchange Offer.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of this Exchange Offer, the
Company will have fulfilled obligations contained in the terms of the Old Notes
and the Registration Rights Agreements. Holders of the Old Notes who do not
tender their Old Notes in the Exchange Offer will continue to hold such Old
Notes and will be entitled to all the rights and limitations applicable thereto
under the Indenture, except for any such rights under the Registration Rights
Agreements which by their terms terminate or cease to have further effect as a
result of the making of this Exchange Offer. See "Description of the Notes."
All untendered Old Notes will continue to be subject to the restriction on
transfer set forth in the Indenture. To the extent that Old Notes are tendered
and accepted in the Exchange Offer, the trading market, if any, for any
remaining Old Notes could be adversely affected. See "Risk
Factors--Consequences of Not Exchanging Notes."
The Company may in the future seek to acquire untendered Old Notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. The Company has no present plan to acquire any Old Notes which
are not tendered in the Exchange Offer.
CAPITALIZATION
The following table sets forth: (i) the combined and consolidated
capitalization of the Company, on a historical basis as of September 30, 1998,
and (ii) the combined and consolidated capitalization of the Company on an
adjusted basis assuming consummation of the 110 Acquisition and giving effect to
the offering of the Old Notes and the application of the net proceeds thereof.
The historical information in this table is derived from the Combined and
Consolidated Financial Statements of the Company, and should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Combined and Consolidated Financial
Statements and the notes thereto included elsewhere in this Prospectus.
50
<PAGE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash, cash equivalents, and marketable investment securities $ 44,300 $ 300,746
Restricted cash and marketable investment securities 76,583 -- (1)
Total cash, cash equivalents, and marketable investment securities 120,883 300,746 (2)
------------
Total assets $ 1,467,422 $ 2,819,094 (2)
------------
------------
Long-term debt (net of current portion):
Mortgages and notes payable $ 49,547 $ 49,547
Notes payable to ECC, including accrued interest 58,497 --
1994 Notes 552,776 --
1996 Notes 481,966 --
1997 Notes 375,000 --
9 1/4% Senior Notes due 2006 -- 375,000
9 3/8% Senior Notes due 2009 -- 1,625,000
Total long-term debt 1,517,786 2,049,547
Stockholder's equity (deficit):
Common Stock, $.01 par value, 3,000 shares authorized, issued and
outstanding -- --
Additional paid-in capital 145,164 1,515,164 (3)
Accumulated deficit (609,886) (1,159,976)(4)
Total stockholder's equity (deficit) (464,722) 355,188
------------ -------------
Total capitalization $ 1,053,064 $ 2,404,735
------------ -------------
------------ -------------
</TABLE>
- -----------
(1) Restrictions on cash held in escrow under the terms of indentures were
removed upon the prepayment of the applicable notes. The restricted cash
balances as of September 30, 1998 have been reclassified and included in
the "as adjusted" amount of cash, cash equivalents and marketable
investment securities.
(2) The increase in the Company's total assets includes the increase in cash
available to the Company for working capital of approximately $179.9
million as a result of the offering of the Old Notes (see "Use of
Proceeds"), plus $1.17 billion of assets to be acquired by ECC pursuant to
the 110 Acquisition and contributed to the Company.
(3) The increase in the Company's additional paid-in capital consists of $200
million in cash to be contributed to the Company by ECC and additional
assets valued at $1.17 billion, to be acquired by ECC in the 110
Acquisition and contributed to the Company.
(4) The increase in accumulated deficit results from (a) a distribution of the
offering proceeds to ECC of approximately $269.9 million to retire the
Senior Preferred Exchange Notes, including related costs of that Tender
Offer, (b) interest expense of approximately $51.1 million from September
30, 1998 through January 25, 1999, the date of consummation of the Tender
Offers and debt to be repurchased and paid, and (c) the estimated
extraordinary loss of approximately $229.1 million the Company expects to
report in 1999 upon the early retirement of the 1994 Notes, the 1996 Notes
and the 1997 Notes.
SELECTED FINANCIAL DATA
The following selected financial data as of, and for each of the five years
ended December 31, 1997, have been derived from, and are qualified by reference
to, the Company's Combined and Consolidated Financial Statements which have been
audited by Arthur Andersen LLP, independent public accountants. The following
selected financial data at September 30, 1998, and for the nine months ended
September 30, 1997 and 1998, are unaudited; however, in the opinion of
management, such data reflect all adjustments (consisting only of normal
recurring adjustments) necessary to fairly present the data for such interim
periods. This data should be read in conjunction with the Company's Combined
and Consolidated Financial Statements and related notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
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<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
----------------------- SEPTEMBER 30,
------------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT RATIOS, SUBSCRIBERS AND PER SUBSCRIBER DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenue:
DISH Network $ --- $ --- $ --- $ 57,888 $341,808 $ 225,928 $ 470,636
DTH equipment sales
and integration
services --- --- 35,816 77,390 90,263 37,410 190,787
Satellite services --- --- --- 5,822 11,135 7,879 15,805
C-band and other 211,563 179,313 112,704 56,003 32,696 25,243 19,716
--------- --------- --------- ---------- -------- ---------- ----------
Total revenue 211,563 179,313 148,520 197,103 475,902 296,460 696,944
Costs and Expenses:
DISH Network
operating
expenses --- --- --- 42,409 193,170 130,078 274,083
Cost of sales--DTH
equipment and
integration
services --- --- 30,404 75,984 60,918 25,998 131,050
Cost of Sales--
C-band and other 161,447 133,635 84,846 42,345 23,909 16,337 12,555
Marketing expenses 3,497 2,346 1,786 53,168 183,345 122,652 190,817
General and
administrative 26,738 27,873 36,376 48,693 66,060 45,883 66,836
Depreciation and
amortization 1,677 2,243 3,114 43,369 172,836 133,545 77,597
--------- --------- --------- ---------- -------- ---------- ----------
Total costs and
expenses 193,359 166,097 156,526 305,968 700,238 474,493 752,938
--------- --------- --------- ---------- -------- ---------- ----------
Operating income
(loss) $ 18,204 $ 13,216 $ (8,006) $ (108,865) $(224,336) $ (178,033) $ (55,994)
--------- --------- --------- ---------- -------- ---------- ----------
--------- --------- --------- ---------- -------- ---------- ----------
Net income (loss)(1) $ 12,272 $ 90 $ (12,361) $ (101,676) $(323,424) $ (248,937) $ (170,960)
--------- --------- --------- ---------- -------- ---------- ----------
--------- --------- --------- ---------- -------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30, 1998
------------------ ------------------------
1993 1994 1995 1996 1997 ACTUAL AS ADJUSTED(3)
---- ---- ---- ---- ---- ------ --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash
equivalents and
marketable
investment
securities (2) $ 27,232 $ 48,544 $ 14,161 $ 57,247 $ 65,965 $ 44,300 $ 300,746
Total assets 106,476 472,492 559,297 1,085,545 1,431,774 1,467,422 2,819,094
Long-term
obligations, net
of current
portion:
9 1/4% Senior
Notes due 2006 --- --- --- --- --- --- 375,000
9 3/8% Senior Notes
due 2009 --- --- --- --- --- --- 1,625,000
1994 Notes --- 334,206 382,218 437,127 499,863 552,776 ---
1996 Notes --- --- --- 386,165 438,512 481,966 ---
1997 Notes --- --- --- --- 375,000 375,000 ---
Mortgages and other
notes payable,
net of current
portion 4,702 5,393 33,444 51,428 51,846 49,547 49,547
Notes payable to
ECC, including
accumulated
interest --- --- --- 12,000 54,597 58,497 ---
Note payable to
stockholder 14,725 --- --- --- --- --- ---
Other long-term
obligations --- --- --- 7,037 19,500 27,954 27,954
Total stockholder's
equity (deficit) 49,700 103,808 92,892 (6,673) (313,770) (464,722) 355,188
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------- -------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
DISH Network
subscribers --- --- --- 350,000 1,040,000 820,000 1,609,000
Average monthly
revenue per
subscriber $ --- $ --- $ --- $ 35.50 $ 38.50 $ 39.10 $ 39.20
EBITDA (4) 19,881 15,459 (4,892) (65,496) (51,500) (44,488) 21,603
Net cash flows
from:
Operating
activities 30,215 24,205 (21,888) (22,836) (7,549) (47,967) (40,068)
Investing activities (20,910) (338,565) (1,431) (294,962) (306,079) (307,581) (19,309)
Financing activities (6,199) 325,011 19,764 342,287 337,247 346,887 39,619
Ratio of earnings to
fixed charges (5) 18.0x --- --- --- --- --- ---
Deficiency of
earnings to
fixed charges (5) $ --- $ (5,206) $ (44,315) $ (188,347) $(366,447) $ (276,734) $ (192,359)
</TABLE>
- -----------
(1) Certain of the Company's subsidiaries operated under Subchapter S of the
Internal Revenue Code of 1986, as amended, and comparable provisions of
applicable state income tax laws, until December 31, 1993. The net income
for 1993 presented above is net of pro forma income taxes of $7,846,
determined as if the Company had been subject to corporate federal and
state income taxes for those years.
(2) Excludes restricted cash and marketable investment securities.
(3) Gives effect to the offering of the Old Notes and the application of the
net proceeds thereof and is pro forma for the 110 Acquisition. Consummation
of the 110 Acquisition is subject to receipt of regulatory approval and
approval of ECC's shareholders. There is no pro forma effect to the
Company's Statements of Operations as a result of the 110 Acquisition.
(4) The Company believes it is common practice in the telecommunications
industry for investment bankers and others to use various multiples of
current or projected EBITDA (earnings before interest, taxes, depreciation
and amortization) for purposes of estimating current or prospective
enterprise value and as one of many measures of operating performance.
Conceptually, EBITDA measures the amount of income generated each period
that could be used to service debt, because EBITDA is independent of the
actual leverage employed by the business; but EBITDA ignores funds needed
for capital expenditures and expansion. Some investment analysts track the
relationship of EBITDA to total debt as one measure of financial strength.
However, EBITDA does not purport to represent cash provided or used by
operating activities and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles.
EBITDA differs significantly from cash flows from operating activities
reflected in the consolidated statement of cash flows. Cash from operating
activities is net of interest and taxes paid and is a more comprehensive
53
<PAGE>
determination of periodic income on a cash (vs. accrual) basis, exclusive
of non-cash items of income and expenses such as depreciation and
amortization. In contrast, EBITDA is derived from accrual basis income and
is not reduced for cash invested in working capital. Consequently, EBITDA
is not affected by the timing of receivable collections or when accrued
expenses are paid. The Company is aware of no uniform standards for
determining EBITDA and believes presentations of EBITDA may not be
calculated consistently by different entities in the same or similar
businesses. However, the Company has consistently calculated the EBITDA
amounts shown above to equal "operating income (loss)" plus depreciation
and amortization (including subscriber acquisition costs amortization of
$16 million and $121 million for the years ended December 31, 1996 and
1997, and $95 million and $19 million for the nine months ended
September 30, 1997 and 1998, respectively).
(5) 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 and 1997 and the nine
months ended September 30, 1997 and 1998, earnings were insufficient to
cover the fixed charges. On a pro forma basis using an assumed effective
interest rate of 9.6% and assuming that the Tender Offers had been
consummated as of the beginning of the applicable period, the Company's pro
forma earnings would have been inadequate to cover its pro forma fixed
charges for the year ended December 31, 1997, by $341 million and for the
nine months ended September 30, 1998, by $165 million.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The operations of the Company include three interrelated business units:
(i) the DISH Network; (ii) Technology; and (iii) Satellite Services. The
Company's principal business strategy is to continue to develop its subscription
television service in the United States to provide consumers with a competitive
alternative to cable television service.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998, COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1997.
REVENUE. Total revenue for the nine months ended September 30, 1998, was
$697 million, an increase of $401 million compared to total revenue for the nine
months ended September 30, 1997, of $296 million. The increase in total revenue
was primarily attributable to DISH Network subscriber growth combined with
increased revenue from the Company's technology business unit (Technology). The
Company expects that its revenues will continue to increase as the number of
DISH Network subscribers increases. Consistent with the increases in total
revenues and the number of DISH Network subscribers during the three months
ended September 30, 1998, the Company experienced a corresponding increase in
trade accounts receivable at September 30, 1998.
DISH Network subscription television services revenue totaled $460 million
for the nine months ended September 30, 1998, an increase of $267 million or
138%, compared to the same period in 1997. This increase was directly
attributable to the increase in the number of DISH Network subscribers. The
average number of DISH Network subscribers during the nine months ended
September 30, 1998, increased approximately 137% as compared to the same period
in 1997. Monthly revenue per subscriber approximated $39.20 and $39.10 during
the nine months ended September 30, 1998, and 1997, respectively. DISH Network
subscription television services revenue principally consists of revenue from
basic, premium and pay-per-view subscription television services. DISH Network
subscription television services will continue to increase to the extent the
Company is successful in increasing the number of DISH Network subscribers and
maintaining or increasing revenue per subscriber.
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<PAGE>
For the nine months ended September 30, 1998, DTH equipment sales and
integration services totaled $191 million, an increase of $154 million compared
to the nine months ended September 30, 1997. DTH equipment sales consist of
sales of digital set-top boxes and other digital satellite broadcasting
equipment by the Company to international DTH service operators. The Company
currently has agreements to provide equipment to DTH service operators in Spain
and Canada. The increase in DTH equipment sales and integration services revenue
was primarily attributable to an increase in the volume of set-top boxes sold.
Substantially all of the Company's Technology revenues have resulted from
sales to two international DTH providers. As a result, the Company's Technology
business currently is economically dependent on these two DTH providers. The
Company's future revenue from the sale of DTH equipment and integration services
in international markets depends largely on the success of these DTH operators
and continued demand for the Company's digital set-top boxes. Due to several
factors, the Company expects that its DTH equipment and integration services
revenue could decline during 1999 as compared to 1998 revenue for similar
periods. These factors include an expected decrease in demand resulting from the
fulfillment of initial stock orders combined with a decrease in the sales price
of digital set-top boxes due to increased competition from other providers of
DTH equipment. During July 1998, Telefonica, one of the two DTH service
providers described above, announced its intention to merge with Sogecable
(Canal Plus Satellite), one of its primary competitors. Although the Company has
binding purchase orders from Telefonica for additional 1998 and 1999 deliveries
of DTH equipment, the Company cannot yet predict what impact, if any,
consummation of this merger might have on its future sales to Telefonica.
However, in October 1998, Telefonica announced that the merger negotiations had
been suspended. Although the Company continues to actively pursue additional
distribution and integration service opportunities internationally, no assurance
can be given that any such additional negotiations will be successful.
Satellite services revenue totaled $16 million for the nine months ended
September 30, 1998, an increase of $8 million as compared to the same period in
1997. These revenues include, among other things, fees charged to content
providers for signal carriage and revenues earned from BTV customers. The
increase in satellite services revenue was primarily attributable to increased
BTV revenue.
DISH NETWORK OPERATING EXPENSES. DISH Network operating expenses totaled
$274 million for the nine months ended September 30, 1998, an increase of
$144 million or 111%, compared to the same period in 1997. The increase in DISH
Network operating expenses was consistent with, and primarily attributable to,
the increase in the number of DISH Network subscribers. DISH Network operating
expenses represented 60% and 67% of subscription television services revenue
during the nine months ended September 30, 1998 and 1997, respectively. Although
the Company expects DISH Network operating expenses as a percentage of
subscription television services revenue to decline modestly from 1998 levels in
future periods, there can be no assurance that this expense to revenue ratio
will not increase.
Subscriber-related expenses totaled $211 million for the nine months ended
September 30, 1998, an increase of $114 million compared to the same period in
1997. Such expenses, which include programming expenses, copyright royalties,
residuals payable to retailers and distributors, and billing, lockbox and other
variable subscriber expenses, totaled 46% of subscription television services
revenues for the nine months ended September 30, 1998, compared to 50% during
the nine months ended September 30, 1997. The decrease in subscriber-related
expenses as a percentage of subscription television services revenue resulted
primarily from a decrease in programming expenses on a per subscriber basis,
which resulted from a change in product mix combined with price discounts
received
55
<PAGE>
from certain content providers.
Customer service center and other expenses principally consist of costs
incurred in the operation of the Company's DISH Network customer service
centers, such as personnel and telephone expenses, as well as subscriber
equipment installation and other operating expenses. Customer service center and
other expenses totaled $46 million for the nine months ended September 30, 1998,
an increase of $23 million as compared to the nine months ended September 30,
1997. The increase in customer service center and other expenses resulted from
increased personnel expenses to support the growth of the DISH Network. Customer
service center and other expenses totaled 10% of subscription television
services revenue during the nine months ended September 30, 1998, compared to
12% of subscription television services revenue during the same period of the
prior year. Although the Company expects customer service center and other
expenses as a percentage of subscription television services revenue to remain
near 1998 levels in the future, there can be no assurance that this expense to
revenue ratio will not increase.
Satellite and transmission expenses include expenses associated with the
operation of the Company's digital broadcast center, contracted satellite TT&C
services, and satellite in-orbit insurance. Satellite and transmission expenses
increased $8 million during the nine months ended September 30, 1998, as
compared to the same period during 1997. This increase resulted from higher
satellite and other digital broadcast center operating expenses due to an
increase in the number of operational satellites. The Company expects satellite
and transmission expenses to continue to increase in the future as additional
satellites are launched. However, as our DISH Network subscriber base continues
to expand, the Company expects that such costs as a percentage of DISH Network
revenue may decline.
COST OF SALES -- DTH EQUIPMENT AND INTEGRATION SERVICES. Cost of sales --
DTH equipment and integration services totaled $131 million for the nine months
ended September 30, 1998, an increase of $105 million, as compared to the nine
months ended September 30, 1997. This increase is consistent with the increase
in DTH equipment revenue. Cost of sales--DTH equipment and integration services
principally includes costs associated with digital set-top boxes and related
components sold to international DTH operators. As a percentage of DTH equipment
revenue, cost of sales has averaged 69% for the nine months ended September 30,
1998. The Company expects that cost of sales will increase as a percentage of
DTH equipment revenue in the future due to increased competition from other
providers of DTH equipment.
MARKETING EXPENSES. Marketing expenses totaled $191 million for the nine
months ended September 30, 1998, an increase of $68 million or 56%, compared to
the same period in 1997. The increase in marketing expenses was primarily
attributable to the increase in subscriber promotion subsidies. Subscriber
promotion subsidies include the excess of transaction costs over transaction
proceeds at the time of sale of ECC receiver systems, activation allowances paid
to retailers, and other promotional incentives. The Company recognizes
subscriber promotion subsidies as incurred. These expenses totaled $165 million
for the nine months ended September 30, 1998, an increase of $66 million over
the same period in 1997. This increase resulted from increased subscriber
activations and the immediate recognition of all subscriber promotion subsidies
incurred in 1998, whereas during the nine-month period ended September 30, 1997,
a portion of such expenses were initially deferred and amortized over the
related prepaid subscription term (generally one year). Advertising and other
expenses totaled $26 million for the nine months ended September 30, 1998, an
increase of $2 million over the same period in 1997.
For the nine months ended September 30, 1998, the Company's subscriber
acquisition costs, inclusive of acquisition marketing expenses, totaled
$180 million (approximately $260 per new
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subscriber activation). Comparatively, the Company's subscriber acquisition
costs, inclusive of acquisition marketing expenses and deferred subscriber
acquisition costs, totaled $195 million (in excess of $350 per new subscriber
activation) during the same period in 1997. The decrease in the Company's
subscriber acquisition costs, on a per new subscriber activation basis,
principally resulted from decreases in the manufactured cost of EchoStar
receiver systems. The Company expects that its subscriber acquisition costs, on
a per new subscriber activation basis, will increase in the near-term as a
result of increased competition for DBS subscribers.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative (G&A)
expenses totaled $67 million for the nine months ended September 30, 1998, an
increase of $21 million as compared to the same period in 1997. The increase in
G&A expenses was principally attributable to increased personnel expenses to
support the growth of the DISH Network. G&A expenses as a percentage of total
revenue decreased to 10% for the nine months ended September 30, 1998 compared
to 15% for the corresponding period in 1997. Although the Company expects that
G&A expenses as a percentage of total revenue will continue to approximate 1998
levels or decline modestly in the future, there can be no assurance that this
expense to revenue ratio will not increase.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION. EBITDA for
the nine months ended September 30, 1998 improved to $22 million compared to
negative EBITDA of $44 million during the same period in 1997. This improvement
in EBITDA principally resulted from increases in Technology and DISH Network
revenues. The Company believes its ability to repay or refinance its existing
debt will be significantly influenced by its ability to continue to improve
reported EBITDA. However, EBITDA does not purport to represent cash provided by
or used by operating activities and should not be considered in isolation or as
a substitute for measures of performance prepared in accordance with generally
accepted accounting principles.
During the fourth quarter of 1998, the Company introduced the DISH Network
One-Rate Plan. Under the DISH Network One-Rate Plan, consumers are eligible to
receive a $249 rebate on the purchase of certain EchoStar receiver systems.
Consequently, subscribers who qualify to participate in the DISH Network
One-Rate Plan have a materially higher acquisition cost than other DISH Network
subscribers. The rebate is contingent upon the subscriber's one-year commitment
to subscribe to the America's Top 100 CD programming package and two premium
channel packages, committing the subscriber to a monthly programming payment of
at least $48.98. The consumer must pay the entire sales price of the system at
the time of purchase, but is not required to prepay for the programming. After
receiving the subscriber's first full programming payment (equal to $97.96 for
two months of programming), the Company issues a $249 rebate to the subscriber.
Although subscriber acquisition costs are materially higher under the DISH
Network One-Rate Plan, management believes that these customers represent lower
credit risk and therefore may be marginally less likely to churn than other DISH
Network subscribers. Although there can be no assurance as to the ultimate
duration of the DISH Network One-Rate Plan, it will continue through at least
March 1999.
The Company's subscriber acquisition costs, both in aggregate and on a per
subscriber basis, will increase in direct relation to the participation rate in
the DISH Network One-Rate Plan. The Company presently expects fewer than
one-third of its fourth quarter 1998 subscriber activations to result from the
DISH Network One-Rate Plan, and is expected to cause increased operating losses
in the near term. However, future consumer participation levels could be
significantly higher. To the extent that actual consumer participation levels
exceed present expectations and subscriber acquisition costs materially
increase, the Company's EBITDA results will be negatively impacted in the
near-term because subscriber acquisition costs are expensed as incurred.
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DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses for
the nine months ended September 30, 1998, (including amortization of subscriber
acquisition costs of $19 million) aggregated $78 million, a $56 million decrease
compared to the corresponding period in 1997. The decrease in depreciation and
amortization expenses principally resulted from the decrease in amortization of
subscriber acquisition costs (decrease of $76 million), partially offset by an
increase in depreciation related to the commencement of operation of EchoStar
III, EchoStar IV and other depreciable assets placed in service during 1998.
OTHER INCOME AND EXPENSE. Other expense, net totaled $115 million for
the nine months ended September 30, 1998, an increase of $44 million as
compared to the same period in 1997. The increase in other expense resulted
primarily from interest expense associated with the Company's 12 1/2% Senior
Secured Notes due 2002 (the 1997 Notes) and increases in interest expense
associated with increased accreted balances on its 12 7/8% Senior Secured
Discount Notes due 2004 (the 1994 Notes) and its 13 1/8% Senior Secured
Discount Notes due 2004 (the 1996 Notes).
YEAR ENDED DECEMBER 31, 1997, COMPARED TO THE YEAR ENDED DECEMBER 31, 1996.
REVENUE. Total revenue in 1997 was $476 million, an increase of 141%, or
$279 million, as compared to total revenue of $197 million in 1996. The increase
in total revenue in 1997 was primarily attributable to the operation of the DISH
Network during the entirety of 1997, combined with DISH Network subscriber
growth.
DISH Network subscription television services revenue totaled $299 million
during 1997, an increase of $249 million compared to 1996. This increase was
directly attributable to the operation of the DISH Network during the entirety
of 1997, combined with the increase in the number of DISH Network subscribers.
Average monthly revenue per subscriber approximated $38.50 during 1997 compared
to approximately $35.50 in 1996. The increase in monthly revenue per subscriber
was primarily due to additional channels added upon commencement of operations
of EchoStar II.
Other DISH Network revenue totaled $43 million in 1997, an increase of
$35 million compared to 1996. Other DISH Network revenue primarily consists of
incremental revenues over advertised subscription rates realized from the 1996
Promotion (a marketing promotion whereby consumers were able to purchase a
standard EchoStar receiver system for $199, conditioned upon the consumer's
prepaid one-year subscription to a programming package for approximately $300),
as well as installation revenue and loan origination and participation income.
In 1997, the Company recognized incremental revenues related to the 1996
Promotion of approximately $39 million, an increase of $34 million over 1996.
During 1997, DTH equipment sales and integration services totaled
$90 million. The Company currently has agreements for the sale of digital
satellite broadcasting equipment using its proprietary technology to two
international DTH service operators. The Company realized revenues of
$74 million related to these agreements during 1997. Of this amount, $59 million
related to sales of digital set-top boxes and other DTH equipment while
$15 million resulted from the provision of integration services (revenue from
uplink center design, construction oversight, and other project integration
services). DBS accessory sales totaled $10 million during 1997, an $8 million
increase compared to 1996.
DTH equipment sales and integration services revenue totaled $77 million
during 1996. These revenues consisted primarily of sales of EchoStar receiver
systems and related accessories prior to the August 1996 nationwide rollout of
the 1996 Promotion.
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Satellite services revenue totaled $11 million during 1997, an increase of
$5 million, or 91%, compared to 1996. The increase in satellite services revenue
was primarily attributable to an increase in the number of content providers,
increased usage by the Company's BTV customers, and an entire year of operation
in 1997.
C-band and other revenue totaled $33 million for 1997, a decrease of
$23 million compared to $56 million in 1996. Other revenue principally related
to domestic and international sales of C-band products and net domestic C-band
programming revenues. This decrease resulted from the world-wide decrease in
demand for C-band products and services. Effective January 1, 1998, ECC ceased
operation of its C-band programming business.
DISH NETWORK OPERATING EXPENSES. DISH Network operating expenses totaled
$193 million during 1997, an increase of $151 million as compared to 1996. The
increase in DISH Network operating expenses was primarily attributable to
operation of the DISH Network during the entirety of 1997 and the increase in
the number of DISH Network subscribers.
Subscriber-related expenses totaled $144 million in 1997, an increase of
$121 million compared to 1996. Such expenses totaled 48% of subscription
television services revenues, compared to 46% of subscription television
services revenues during 1996.
Satellite and transmission expenses increased $8 million in 1997 compared
to 1996 primarily as a result of the operation of the DISH Network (including
EchoStar II) during the entirety of 1997.
Customer service center and other operating expenses totaled $35 million in
1997, an increase of $22 million as compared to 1996. The increase in customer
service center and other operating expenses was directly attributable to the
operation of the DISH Network during the entirety of 1997, combined with the
increase in the number of DISH Network subscribers.
COST OF SALES -- DTH EQUIPMENT AND INTEGRATION SERVICES. Cost of
sales--DTH equipment and integration services totaled $61 million during 1997, a
decrease of $15 million, or 20%, as compared to 1996. During 1997, cost of
sales--DTH equipment and integration services principally represented costs
associated with set-top boxes and related components sold to international DTH
operators. For 1996, cost of sales--DTH equipment and integration services
totaled $76 million and represented costs of EchoStar receiver systems sold
prior to the August 1996 rollout of the 1996 Promotion.
COST OF SALES -- C-BAND AND OTHER. Cost of sales--C-band and other totaled
$24 million during 1997, a decrease of $18 million compared to 1996. This
decrease was consistent with the decrease in related revenues and resulted from
the world-wide decrease in the demand for C-band products and services.
MARKETING EXPENSES. Marketing expenses totaled $183 million for 1997, an
increase of $130 million as compared to 1996. The increase in marketing expenses
was primarily attributable to the increase in subscriber promotion subsidies.
These costs totaled $149 million during 1997, an increase of $114 million over
1996. This increase resulted from the commencement of the 1997 Promotion (a
marketing promotion that maintained the suggested retail price for a standard
EchoStar receiver system at $199, but eliminated the requirement for the
coincident purchase of an extended subscription commitment) and the increase in
the number of EchoStar receiver systems sold during 1997. Advertising and other
expenses increased $17 million to $35 million during 1997 as a result of
increased marketing activity and operation of the DISH Network during the
entirety of 1997.
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GENERAL AND ADMINISTRATIVE EXPENSES. G&A expenses totaled $66 million for
1997, an increase of $17 million as compared to 1996. The increase in G&A
expenses was principally attributable to increased personnel expenses to support
the growth of the DISH Network. G&A expenses as a percentage of total revenue
decreased to 14% during 1997 as compared to 25% during 1996.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION. EBITDA was
negative $52 million for 1997, as compared to negative EBITDA of $65 million for
1996. This improvement in EBITDA resulted from the factors affecting revenue and
expenses discussed above. EBITDA does not purport to represent cash provided by
or used by operating activities and should not be considered in isolation or as
a substitute for measures of performance prepared in accordance with generally
accepted accounting principles.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses for
1997 (including amortization of subscriber acquisition costs of $121 million)
aggregated $173 million in 1997, an increase of $130 million, as compared to
1996. The increase in depreciation and amortization expenses principally
resulted from amortization of subscriber acquisition costs (increase of
$105 million) and depreciation of EchoStar II (placed in service during the
fourth quarter of 1996).
OTHER INCOME AND EXPENSE. Other expense, net totaled $99 million during
1997, an increase of $51 million as compared to 1996. The increase in other
expense resulted primarily from interest expense associated with the 1997 Notes,
which were issued in June 1997, and increases in interest expense associated the
1994 Notes and the 1996 Notes due to higher accreted balances thereon. These
increases in interest expense were partially offset by increases in capitalized
interest. Capitalized interest (primarily related to satellite construction)
totaled $43 million during 1997, compared to $32 million during 1996.
INCOME TAX BENEFIT. The $55 million decrease in the income tax benefit
during 1997 principally resulted from ECC's decision to increase its valuation
allowance sufficient to fully offset net deferred tax assets arising during the
year. Realization of these assets is dependent on ECC generating sufficient
taxable income prior to the expiration of the net operating loss carryforwards.
ECC's net deferred tax assets ($67 million at each of December 31, 1996 and
1997) principally relate to temporary differences for amortization of original
issue discount on the 1994 Notes and 1996 Notes, net operating loss
carryforwards, and various accrued expenses which are not deductible until paid.
If future operating results differ materially and adversely from ECC's current
expectations, its judgment regarding the magnitude of its valuation allowance
may change.
YEAR ENDED DECEMBER 31, 1996, COMPARED TO THE YEAR ENDED DECEMBER 31, 1995.
REVENUE. Total revenue for 1996 was $197 million, an increase of
$48 million as compared to total revenue during 1995 of $149 million. This
increase resulted from the introduction of the DISH Network and was partially
offset by decreased sales of domestic and international C-band equipment and
decreased C-band programming revenues.
The DISH Network commenced operation in March 1996. During 1996, DISH
Network subscription television services revenues totaled $50 million and Other
DISH Network revenue approximated $8 million, of which approximately $5 million
related to incremental revenue realized on sales made pursuant to the 1996
Promotion.
During 1996, DTH equipment sales and integration services revenues
principally resulted from sales of EchoStar receiver systems and related
accessories prior to the August 1996 nationwide rollout of
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the 1996 Promotion. DTH equipment sales and integration services revenue for
1996 totaled $77 million, an increase of $41 million over 1995 revenues of
$36 million. During 1995, DTH equipment sales and integration services revenue
primarily related to sales of a competitor's DBS satellite receivers and related
accessories (Competitor DBS Receivers). All Competitor DBS Receivers were
manufactured and supplied by a third-party manufacturer.
C-band and other revenue totaled $56 million for 1996, a decrease of
$57 million compared to $113 million in 1995. Other revenue principally related
to domestic and international sales of C-band products and net domestic C-band
programming revenues. This decrease resulted from the world-wide decrease in
demand for C-band products and services.
DISH NETWORK OPERATING EXPENSES. DISH Network operating expenses totaled
$42 million for 1996 and represented 85% of subscription television services
revenue.
COST OF SALES -- DTH EQUIPMENT AND INTEGRATION SERVICES. For 1996, cost of
sales--DTH equipment and integration services totaled $76 million and
represented costs of EchoStar receiver systems sold prior to the August 1996
rollout of the 1996 Promotion. For 1995, cost of sales--DTH equipment and
integration services totaled $30 million and primarily represented costs of
sales associated with Competitor DBS Receivers.
COST OF SALES -- C-BAND AND OTHER. Cost of sales--C-band and other totaled
$42 million during 1996, a decrease of $43 million compared to 1995. This
decrease was consistent with the decrease in related revenues and resulted from
the decline in the world-wide demand for C-band products and services.
MARKETING EXPENSES. Marketing expenses totaled $53 million for 1996, an
increase of $51 million as compared to $2 million in 1995. The increase in
marketing expenses was primarily attributable to the increase in subscriber
promotion subsidies. These costs totaled $35 million in 1996. During 1996,
advertising and other expenses totaled $18 million, an increase of $16 million
compared to 1995, as a result of increased marketing activity associated with
the introduction of the DISH Network.
GENERAL AND ADMINISTRATIVE EXPENSES. G&A expenses totaled $49 million
during 1996, an increase of $13 million as compared to $36 million in 1995. The
increase in G&A expenses was principally attributable to increased personnel
expenses to support the introduction and growth of the DISH Network.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION. EBITDA was
negative $65 million for 1996 as compared to negative EBITDA of $5 million
during 1995. This deterioration in EBITDA resulted from the introduction of the
DISH Network in March 1996, combined with the decrease in C-band revenues
discussed above. EBITDA does not purport to represent cash provided by or used
by operating activities and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with generally
accepted accounting principles.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses for
1996 (including amortization of subscriber acquisition costs of $16 million)
aggregated $43 million, an increase of $40 million, as compared to $3 million in
1995. The increase in depreciation and amortization expenses principally
resulted from amortization of subscriber acquisition costs and depreciation of
EchoStar I and EchoStar II.
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OTHER INCOME AND EXPENSE. Other expense, net totaled $48 million for 1996,
an increase of $37 million, as compared to $11 million in 1995. The increase in
other expense resulted primarily from interest expense associated with the 1996
Notes, which were issued in March 1996, and increases in interest expenses
associated with the 1994 Notes (resulting from a higher accreted balance
thereon). These increases in interest expense were partially offset by increases
in capitalized interest. Capitalized interest (principally attributable to
satellite construction) totaled $32 million during 1996, compared to $26 million
during 1995.
INCOME TAX BENEFIT. The increase in the income tax benefit of $49 million
principally resulted from the increase in the net loss during 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Company's unrestricted cash, cash equivalents
and marketable investment securities totaled $44 million, compared to
$66 million as of December 31, 1997. During the nine months ended September 30,
1998 and 1997, net cash flows used in operations totaled $40 million and
$48 million, respectively. Capital expenditures totaled $134 million and
$175 million during those same periods. The Company's capital expenditures
during the first nine months of 1998 principally related to the ongoing
construction and launch of EchoStar IV, the expansion of the Company's digital
broadcast operations center, and building improvements to the Company's new
corporate headquarters.
The Company's working capital and capital expenditure requirements were
substantial during the three-year period ended December 31, 1997. Such
expenditures principally related to the ongoing development of the EchoStar DBS
system and the related commercial introduction of DISH Network service in
March 1996. Capital expenditures, including expenditures for satellite systems
under construction, totaled $134 million, $215 million and $222 million during
1995, 1996 and 1997, respectively.
During 1995, 1996 and 1997, net cash flows used in operations totaled
$22 million, $23 million, and $8 million, respectively. The Company expects that
its future working capital, capital expenditure and debt service requirements
will be satisfied from existing cash and investment balances, cash generated
from operations and advances from ECC. The Company's ability to generate
positive future operating and net cash flows is dependent upon its ability to
continue to rapidly expand its DISH Network subscriber base and its ability to
grow its Technology and Satellite Services businesses. There can be no assurance
that the Company will be successful in achieving its goals. The amount of
capital required to fund the Company's 1999 working capital and capital
expenditure needs will vary, dependent upon the level of success the Company
experiences relative to its goals. The Company's working capital and capital
expenditure requirements could increase materially in the event of increased
competition for subscription television customers, significant launch delays or
failures, or in the event of a general economic downturn, among other factors.
During 1995 and 1996, the Company's capital expenditure and working capital
requirements were funded principally from the proceeds of three offerings. In
June 1994, the Company consummated an offering (the 1994 Notes Offering) of the
1994 Notes and 3,744,000 Warrants (representing 2,808,000 shares of ECC's
Class A common stock). The 1994 Notes Offering resulted in net proceeds of
approximately $323 million. In June 1995, ECC completed an initial public
offering (the IPO) of 4 million shares of its Class A common stock, resulting in
net proceeds of approximately $63 million. During March 1996, EchoStar Satellite
Broadcasting Corporation (ESBC), a wholly owned subsidiary of ECC, consummated
an offering (the 1996 Notes Offering) of the 1996 Notes, resulting in aggregate
net
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proceeds of approximately $337 million. As of December 31, 1997, substantially
all of the proceeds of the 1994 Notes Offering, the IPO and the 1996 Notes
Offering had been used to fund the construction and development of the EchoStar
DBS system. During 1997 the Company's working capital and capital expenditure
requirements were funded principally by advances received from ECC.
On June 25, 1997 the Company consummated an offering (the 1997 Notes
Offering) of the 1997 Notes. The 1997 Notes Offering resulted in net proceeds of
$363 million. Interest accrues on the 1997 Notes at a rate of 12 1/2% and is
payable in cash semi-annually on January 1 and July 1 of each year, with the
first interest payment due January 1, 1998. Of the net proceeds from the 1997
Notes Offering, $109 million were placed in an escrow account (the Interest
Escrow) to fund semi-annual interest payments through January 1, 2000.
Additionally, $112 million of the net proceeds of the 1997 Notes Offering were
placed in a separate escrow account (the Satellite Escrow) to fund the
construction, launch and insurance of EchoStar IV. The 1997 Notes mature on
July 1, 2002.
On October 2, 1997, ECC consummated an offering (the Series B Preferred
Offering) of 12 1/8% Series B Senior Redeemable Exchangeable Preferred Stock due
2004, par value $0.01 per share (including any additional shares of such stock
issued from time to time in lieu of cash dividends, the Series B Preferred
Stock). The Series B Preferred Offering resulted in net proceeds to ECC of
$193 million. Each share of Series B Preferred Stock had a liquidation
preference of $1,000 per share. Dividends on the Series B Preferred Stock were
payable quarterly in arrears, commencing on January 1, 1998. The Series B
Preferred Stock was exchanged into 12 1/8% Senior Preferred Exchange Notes due
2004 (the Senior Preferred Exchange Notes) on January 4, 1999.
On December 23, 1998, the Company commenced Tender Offers to purchase for
cash all of the outstanding 1994 Notes, 1996 Notes and 1997 Notes. On January 4,
1999, ECC commenced a similar Tender Offer for the Senior Preferred Exchange
Notes. The Company has been advised by the depositary for the Tender Offers that
as of the date hereof it has received tenders and consents from holders of more
than 99% of the aggregate outstanding principal amount of each such series of
notes to eliminate substantially all restrictive covenants as well as to amend
certain provisions contained in the related indentures governing the 1994 Notes,
the 1996 Notes, the 1997 Notes and the Senior Preferred Exchange Notes.
Each of the indentures relating to the 1994 Notes, the 1996 Notes and the
1997 Notes contained restrictive covenants that impose significant restrictions
on the Company's thereunder, including with respect to the ability of such
Company's to incur indebtedness and pay dividends or make distributions.
Following consummation of the Tender Offers and related consent solicitations,
substantially all of such restrictions have been removed, and each such Company
is permitted under such indentures to distribute cash to the Company to, among
other things, service the interest and principal payment requirements on the
Notes. Because less than all of the 1994 Notes, the 1996 Notes and the 1997
Notes were tendered in the Tender Offers, prior to consummation of the
reorganization described previously, each of Dish, ESBC and the Company will
have continuing obligations under any of their securities not purchased in the
Tender Offers. Following consummation of such reorganization, any such remaining
debt securities will constitute obligations of the Company and will rank PARI
PASSU with the Notes.
SUBSCRIBER ACQUISITION COSTS
As previously described, the Company subsidizes the cost of EchoStar
receiver systems in order to stimulate DISH Network subscriber growth.
Consequently, the Company's subscriber acquisition costs are significant. During
the nine months ended September 30, 1998, the Company's aggregate subscriber
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acquisition costs (subscriber promotion subsidies and acquisition marketing
expenses) approximated $260 per new subscriber activation. The Company expects
that its future subscriber acquisition costs will increase as a result of the
DISH Network One-Rate Plan. Under that plan, consumers are eligible to receive a
rebate on the purchase of certain EchoStar receiver systems. Consequently,
subscribers who qualify to participate in the DISH Network One-Rate Plan have a
materially higher acquisition cost than other DISH Network subscribers. Although
there can be no assurance as to the ultimate duration of the DISH Network
One-Rate Plan, it will continue through at least March 1999.
FUTURE CAPITAL REQUIREMENTS
As of September 30, 1998, the Company had approximately $1.5 billion of
outstanding long-term debt substantially all of which will be retired upon
consummation of the Tender Offers. The Notes will have semi-annual cash interest
requirements aggregating approximately $94 million. There will be no scheduled
principal payment or sinking fund requirements prior to maturity of the Notes.
The Company utilized $91 million of satellite vendor financing for the Company's
first four satellites. As of September 30, 1998, approximately $63 million of
such satellite vendor financing was outstanding. The satellite vendor financing
bears interest at 8.25% and is payable in equal monthly installments over five
years following launch of the respective satellites. Satellite vendor financing
of $13 million was used for EchoStar IV. The terms of the EchoStar IV satellite
vendor financing are similar to that associated with the other satellite vendor
financing.
As a result of the 110 Acquisition, the Company expects to incur
approximately $125 million during 1999 and 2000 in one-time expenses associated
with repositioning subscriber satellite dishes (toward the 110DEG. WL orbital
slot). In addition, the Company expects to expend approximately $35 million
during 1999 for capital expenditures related to digital encoders required by the
Cheyenne digital broadcast center to accommodate the expansion to approximately
500 video and audio channels.
As a result of the anomalies experienced by EchoStar III and EchoStar IV
(see "NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS"), and in order to
fully exploit certain of its remaining FCC-allocated DBS frequencies, the
Company intends to deploy one or more additional DBS satellites. If the 110
Acquisition is consummated, it would provide for the deployment of two
additional DBS satellites at 110 degrees WL. The deployment of an additional DBS
satellite to the 119 degrees WL orbital location would enable the Company to
re-deploy either EchoStar I or EchoStar II to the 61.5 degrees WL orbital
location or the 148 degrees WL orbital location in the event of further
significant deterioration in the operational capacity of either EchoStar III or
EchoStar IV. The Company is also evaluating other contingency plans. All of
these possible deployments are subject to several FCC approvals. There can be no
assurance that net insurance proceeds will be sufficient to fully cover the
costs to deploy replacement DBS satellites.
In addition to its DBS business plan, ECC has licenses, or applications
pending with the FCC, for a two satellite FSS Ku-band satellite system, a two
satellite FSS Ka-band satellite system, and a proposed modification thereof and
a Low Earth Orbit Mobile-Satellite Service G-satellite system. ECC would need to
raise additional capital for the foregoing purposes. Further, there may be a
number of factors, some of which are beyond ECC's control or ability to predict,
that could require ECC to raise additional capital. These factors include
unexpected increases in operating costs and expenses, a defect in or the loss of
any satellite, or an increase in the cost of acquiring subscribers due to
additional competition, among other things. There can be no assurance that
additional debt, equity or other financing, if required, will be available on
terms acceptable to the Company, or at all.
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If cash generated from the Company's operations is not sufficient to meet
the debt service requirements of the Notes, the Company would be required to
obtain cash from other financing sources. There can be no assurance that such
financing would be available on terms acceptable to the Company, or if
available, that the proceeds of such financing would be sufficient to enable the
Company to meet all of its obligations. In the event that less than 100% of the
1994 Notes, 1996 Notes or 1997 Notes are tendered and subsequently retired with
proceeds from the offering, the Company will be required to retire those Notes
when they mature, and the indentures governing the 1994, 1996 and 1997 Notes
will remain outstanding (although with substantially all of the restrictive
covenants having been eliminated) until such time. There can be no assurance
that the Company will have sufficient cash to retire those Notes.
YEAR 2000 READINESS DISCLOSURE
The Company has assessed and continues to assess the impact of the year
2000 issue on its computer systems and operations. The year 2000 issue exists
because many computer systems and applications currently use two-digit date
fields to designate a year. Thus, as the century date approaches, date sensitive
systems may recognize the year 2000 as 1900 or not at all. The inability to
recognize or properly treat the year 2000 may cause computer systems to process
critical financial and operational information incorrectly.
The Company is currently engaged in the remediation and testing of its
critical computer systems to ensure year 2000 compliance thereof. In connection
with this effort, the Company has segregated its computer systems and
corresponding year 2000 compliance risk into three categories: internal
financial and administrative systems, service-delivery systems, and third-party
systems. With respect to the Company's internal financial and administrative
systems, the Company has substantially completed the identification,
modification (as necessary) and testing of all such systems. Although there can
be no assurance, the Company currently believes that its internal financial and
administrative systems are year 2000 compliant. The Company currently is
completing a similar effort with respect to its service-delivery systems and
although there can be no assurance, the Company expects all such systems to be
fully year 2000 compliant by the middle of 1999. The Company also is currently
assessing its vulnerability to unexpected business interruptions due to the
failure of external third-parties to remediate their year 2000 compliance
issues. In connection with this assessment, the Company is in the process of
communicating with all of its significant third-party business partners,
suppliers and vendors to determine the extent to which the Company is vulnerable
to those third parties' failure to remediate their own year 2000 issues. The
Company is not aware of any material non-compliance with respect to year 2000
compliance by its significant third-party business partners, suppliers and
vendors.
Although there can be no assurance, the Company believes its costs to
successfully mitigate the year 2000 issue will not be material to its
operations. If the Company's plan is not successful or is not completed in a
timely manner, the year 2000 issue could significantly disrupt the Company's
ability to transact business with its customers and suppliers, and could have a
material impact on its operations. There can be no assurance that the systems of
other companies with which the Company's systems interact also will be timely
converted, or that any such failure to convert by another company would not have
an adverse effect on the Company's business or its operations.
BUSINESS
GENERAL
The Company is a wholly owned subsidiary of ECC. ECC's common stock is
publicly traded on the Nasdaq National Market. Substantially all of the
Company's operations are conducted by its
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subsidiaries. The Company operates three business units:
- - THE DISH NETWORK -- a DBS subscription television service in the United
States. As of December 31, 1998, ECC had approximately 1.9 million DISH
Network subscribers.
- - ETC -- engaged in the design, distribution and sale of DBS set-top boxes,
antennas and other digital EQUIPMENT for the DISH Network (EchoStar
receiver systems), and the design and distribution of similar equipment for
DTH projects of others internationally, together with the provision of
uplink center design, construction oversight, and other project integration
services for international DTH ventures.
- - SATELLITE SERVICES -- engaged in the turn-key delivery of video, audio and
data services to business television customers and other satellite users.
These services may include satellite uplink services, satellite transponder
space usage billing, customer service, and other services.
BUSINESS OVERVIEW AND STRATEGY
Since 1994, the Company has deployed substantial resources to develop the
EchoStar DBS system and the DISH Network. The EchoStar DBS system consists of
the Company's FCC-allocated DBS orbital spectrum, four operational DBS
satellites, digital satellite receivers, a digital broadcast operations center,
customer service facilities, and other assets utilized in its operations. Our
primary objective is to continue to expand our DISH Network subscriber base, as
well as to develop as an integrated, full-service satellite company.
The Company's future success in the subscription television industry is
dependent upon its ability to acquire and retain DISH Network subscribers, among
other factors. Beginning in 1996, the Company made a strategic decision to
reduce the price charged to consumers for EchoStar receiver systems in order to
stimulate subscriber growth. Accordingly, since August 1996, the Company has
been selling its EchoStar receiver systems to DISH Network subscribers below its
manufactured cost. The Company's marketing programs and pricing strategies have
significantly increased the affordability of EchoStar receiver systems for
consumers. The primary purposes of these marketing promotions are to rapidly
build a subscriber base, to expand retail distribution of the Company's
products, and to build consumer awareness of the DISH Network brand. These
programs are consistent with and emphasize the Company's long-term business
strategy which focuses on generating the majority of its future revenue through
the sale of DISH Network programming to a large subscriber base. These programs,
however, have resulted in, and will continue to result in, the Company incurring
significant costs to acquire subscribers. The Company believes such costs will
be fully recouped from future programming revenues expected to be generated from
customers obtained as a result of these programs.
The Company also employs a "value-based" strategy with respect to
programming packages available on the DISH Network. For example, the DISH
Network's entry level "America's Top 40" programming package is priced at $19.99
per month, compared to, on average, over $30 per month for comparable cable
television service (typically consisting of 54 analog channels). The DISH
Network's "America's Top 100 CD" programming package (priced at $28.99 per
month) also compares favorably to similar cable television programming. The rate
for a similar cable television system offering, consisting of an expanded basic
cable package and a digital music service, typically exceeds $40 per month.
Similarly, the DISH Network offers up to seven premium movie channels, for only
$10.99 per month or about the same amount that cable subscribers typically pay
for one or two movie channels.
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The Company is also seeking to broaden its product offering to include
services such as Internet and high-speed data services. For example, the Company
has entered into an agreement with WebTV, which is wholly owned by Microsoft
Corporation, to provide Internet TV via satellite. The service will integrate
the DISH Network's digital satellite television programming with the Internet TV
services from WebTV Networks, including digital video recording, advanced
electronic program guide, broadband data delivery and video games. The Company
believes that broadening its product offering will allow it to increase both its
subscriber base and average revenue per subscriber.
On November 30, 1998, ECC, News Corporation and MCI announced the 110
Acquisition, which provides for: the assignment to ECC of the license held by
MCI to operate a high-powered DBS business at the 110 degrees WL full CONUS
orbital location consisting of 28 frequencies; in-orbit delivery of two Space
Systems/Loral-built satellites, currently expected to be launched in 1999; a
recently-constructed digital broadcast operations center located in Gilbert,
Arizona; a worldwide license agreement to manufacture and distribute set-top
boxes internationally using NDS Limited encryption/decoding technology; a
commitment by an affiliated entity of News Corporation to purchase from ETC a
minimum of 500,000 of its set-top boxes; and a three-year retransmission consent
agreement for DISH Network to rebroadcast FOX Network owned-and-operated local
station signals to their respective markets. News Corporation will bear the
costs of the construction, launch and insurance of the two Space
Systems/Loral-built satellites, including launch insurance and one year of
in-orbit insurance. ECC and MCI also agreed that MCI will have the non-exclusive
right to bundle DISH Network service with MCI's telephony service offerings on
mutually agreeable terms. In addition, the FOX News Channel is now carried on
the DISH Network. We received standard program launch support payments in
exchange for carrying the programming.
By combining the capacity of the newly acquired satellites at the 110
degrees WL orbital slot and ECC's current satellites at 119 degrees WL (which is
subject to FCC approval which has been applied for), we expect that our DISH
Network will have the capacity to provide more than 500 channels of programming,
Internet and high-speed data services and HDTV nationwide through a single 18
inch dish, and would be positioned to become a one-dish solution for
satellite-delivered local programming channels in major markets across the
country. We also expect to be able to serve Alaska, Hawaii, Puerto Rico and the
United States territories in the Caribbean.
DISH NETWORK
Since commencing operation in March 1996, the DISH Network has grown to
more than 1.9 million subscribers, including 330,000 new subscribers in the
fourth quarter of 1998, and has become a leading provider of DBS programming
services in the United States. DBS, as used herein, describes a high power
satellite broadcast service in a portion of the Ku frequency band that, by
international agreement, contemplates wide orbital spacing among satellites,
generally permitting higher powered transmissions than other satellite services
and allowing reception with a small, pizza-sized satellite dish. Although the
concept of DBS was introduced in 1982, it did not become commercially viable
until a few years ago because available technology did not allow for the power
required to transmit to small dishes and digital compression technology had not
been adequately developed. Today, the Company believes that DBS provides the
most cost-efficient national point to multi-point transport of video, audio and
data services.
The Company has four operational DBS satellites (EchoStar I, EchoStar II,
EchoStar III and EchoStar IV) that operate in geostationary orbit. Orbital
positions, or "slots," are designated by their longitude and comprise both a
physical location and an assignment of spectrum in the applicable
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frequency band, divided into 32 frequency channels, each with a useable
bandwidth of 24 MHz. Using digital compression technology, each frequency
channel can be converted into eight or more digital channels of programming. The
Company is currently using approximately 50 frequencies, including 21 frequency
channels at an orbital slot capable of providing nationwide DBS service. See "--
Government Regulation--DBS Rules."
DBS AND RELATED COMPONENTS
As an operator of a digital satellite television service, the Company
enters into agreements with programmers, who deliver their programming content
to the Company's digital broadcast operations center via commercial satellite,
fiber optics or microwave transmissions. The Company generally monitors such
signals for quality, and may add promotional messages, public service
programming or other system-specific content. The signals are then digitized,
compressed, encrypted and combined with other programming sharing a given
transponder and other necessary data streams (such as conditional access
information). Each signal is then uplinked, or transmitted, to one of the
Company's DBS satellites, which receives and transmits the signal to consumers.
In order to receive DISH Network programming, a subscriber must be equipped
with: (i) a dish; (ii) a low noise block converter ("LNB") and related
equipment; (iii) an integrated receiver/decoder ("IRD," sometimes referred to
herein as the "satellite receiver" or "set-top box"), which receives the data
stream from each broadcasting transponder, separates it into separate digital
programming signals, decrypts and decompresses those signals that the subscriber
is authorized to receive, and converts such digital signals into analog radio
frequency signals; and (iv) a television set, to view and listen to the
programming contained in the analog signals. A subscriber's IRD is generally
connected to the DISH Network's authorization center by telephone to report the
purchase of pay-per-view movies and events.
The EchoStar DBS system integrates digital video and audio compression.
Authorization information for subscription programming is stored on microchips
placed on a credit card-sized access, or "smart card." The smart card, which can
easily be updated or replaced periodically at low cost, provides a simple and
effective method to adjust a subscriber's level of programming services. If the
receiver's smart card is authorized for a particular channel, the data is
decrypted and passed on for video and audio decompression.
PROGRAMMING. The Company currently provides more than 200 channels of
digital television programming and CD-quality audio programming to the entire
continental United States. The Company also has in-orbit capacity through
EchoStar III and EchoStar IV to provide more than 200 channels from its United
States-licensed orbital slots that are not capable of providing full CONUS
service. Assuming consummation of the 110 Acquisition and successful deployment
of two new DBS satellites (EchoStar V and EchoStar VI), the Company expects to
have the ability to provide more than 500 channels of digital video and audio
programming broadcast nationwide, which subscribers could receive through a
single dish. To attract subscribers, the Company has sought to exploit the cost
advantage that DBS has over cable operators by offering the most popular
programming (including "basic" channels such as ESPN, CNN, USA Network,
Discovery, MTV and two channels each of Nickelodeon and The Disney Channel) at
affordable prices, by emphasizing a strong commitment to customer service, and
by emphasizing the quality difference between a digital and analog signal. As
part of the 110 Acquisition, on January 7, 1999, DISH Network commenced
broadcasting the FOX News Channel, enhancing the Company's popular programming
line-up. The DISH Network also offers multichannel premium services for separate
purchase (such as HBO, STARZ!, Encore, Cinemax, Showtime and The Movie Channel),
at prices that vary depending upon the number and selection of services
purchased. The DISH Network also offers 12
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channels of pay-per-view programming.
LOCAL STRATEGY. The Company believes that in order for the DISH Network to
be a competitive alternative to cable television service, it must, among other
things, develop a method to seamlessly provide local broadcast network channels
to consumers. Subject to eligibility conditions, the Company currently offers
satellite delivery of local network affiliates to certain of the largest markets
in the continental United States. The Company is presently retransmitting the
network affiliates' signals from Atlanta, Boston, Chicago, Dallas/Ft. Worth,
Denver, Los Angeles, Miami, New York, Phoenix, Pittsburgh, Salt Lake City, San
Francisco and Washington, D.C., to "unserved households" (as defined by
applicable laws and regulations) in the local areas from which those channels
originate. See "--Government Regulation." A second 18-inch satellite dish is
presently necessary to receive the Company's network affiliates programming in
most markets. Thus, the Company's ability to successfully implement its local
strategy is dependent, among other things, upon consumer acceptance of the
installation of a second satellite dish in order to receive local programming.
The Company's ability to successfully implement a one-dish solution to local
programming would be enhanced by the 110 Acquisition (subject to FCC approval)
and changes to existing legislation covering the retransmission of local
signals, among other factors.
ECHOSTAR RECEIVER SYSTEMS. DISH Network programming is available to
consumers in the continental United States who purchase or lease an EchoStar
receiver system. A typical EchoStar receiver system includes an 18-inch
satellite dish, an EchoStar digital satellite receiver (which processes and
descrambles signals for television viewing), a user-friendly remote control, and
related components. Subscribers can receive local broadcast signals, either
through a standard television antenna (a traditional rooftop or set-top
antenna), by subscribing to basic cable or, in certain areas of the United
States, directly from the DISH Network. EchoStar receiver systems are available
in a variety of models. The standard EchoStar receiver system incorporates
infrared remote control technology, an on-screen program guide, and the ability
to switch between DISH Network and local programming signals using the remote
control. In addition to the standard model features, the mid-level model
features UHF remote control technology (which allows subscribers to control
their EchoStar receiver system from up to 150 feet away through walls), and a
high-speed data port. The Company's latest premium model includes enhanced
features such as on-screen caller identification capability, event timers to
automatically tune into or record selected programming and one-touch VCR
recording using EchoStar's IR Blaster technology.
Although EchoStar receiver systems are internally designed and engineered,
ETC does not manufacture EchoStar receiver systems. Rather, the Company has
contracted for the manufacture of EchoStar receiver systems with a high-volume
contract electronics manufacturer. SCI currently is the Company's primary
manufacturer of EchoStar receiver systems. During 1998, VTech also began
manufacturing the Company's digital set-top boxes. JVC also manufactures limited
quantities of other consumer electronics products that incorporate EchoStar
receiver system technology. The Company also has a contract for the manufacture
of EchoStar receiver systems with Phillips.
INSTALLATION. Currently, a majority of EchoStar receiver system
installations are performed by third parties. A wholly owned subsidiary of the
Company offers installation services from its 18 offices located throughout the
continental United States.
CUSTOMER SERVICE CENTER. The Company currently maintains customer service
centers in Thornton, Colorado, Littleton, Colorado and McKeesport, Pennsylvania.
The Company outsource handling of customer service calls on an overflow basis,
but presently expects that it will be able to field 100% of its customer service
calls through its owned and operated facilities by April 1999. Potential and
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existing subscribers can call a single telephone number to receive assistance
for hardware, programming, installation and technical support. The Company
intends to expand its customer service operations as its DISH Network subscriber
base demands.
DIGITAL BROADCAST OPERATIONS CENTER. The Company's digital broadcast
operations center is located in Cheyenne, Wyoming. Assuming consummation of the
110 Acquisition, ECC will acquire a second digital broadcast operations center
located in Gilbert, Arizona, which the Company plans to operate when needed at a
later date. The digital broadcast operations center uses fiber optic lines and
downlink antennas to receive programming and other data at the center. The
digital broadcast operations center uplinks programming content to the Company's
DBS satellites via large uplink antennas. The digital broadcast operations
center also maintains a number of large uplink antennas and other equipment
necessary to modulate and demodulate the programming and data signals. All
compression and encryption of the DISH Network's programming signals are
performed by equipment at the Company's digital broadcast operations center.
CONDITIONAL ACCESS SYSTEM. The Company has contracted with NagraStar LLC,
a 50% owned joint venture (NagraStar). NagraStar has contracted with its other
50% owner for the provision of access control systems, including "smart cards"
used with each EchoStar receiver system. The smart cards contain the
authorization codes necessary to receive DISH Network programming. The access
control system is central to the security network that prevents unauthorized
viewing of programming. Access control systems of other DBS providers have been
commercially pirated. The Company recently received data that suggests that a
portion of its access control system has been compromised. The Company is
presently evaluating the data to determine the corrective measures that are
necessary. Though there can be no assurance, the Company does not believe that
the compromise will materially affect its results of operations.
SUBSCRIBER MANAGEMENT. The Company presently uses third-party software to
perform subscriber management and billing functions related to its DISH Network
business. The Company is developing a new proprietary subscriber management
system that, when operational, will replace the system presently in use. The
Company expects to migrate all of its DISH Network Subscribers to the new
subscriber management and billing system beginning in July 1999. The proprietary
system is designed specifically to manage DBS subscribers as compared to the
Company's existing, third party developed-and-operated subscriber management
system, which is oriented toward cable television subscribers. If the Company is
successful in developing such a proprietary subscriber management system, the
Company believes that this will potentially represent a source of revenue for
the Company in the future. See "Risk Factors -- Subscriber Management."
DBS SALES AND MARKETING
The Company presently utilizes approximately 18,000 independent
distributors, retail stores and consumer electronics retailers to market and
distribute EchoStar receiver systems and DISH Network programming services to
its target markets. The majority of our subscriber activations have come from
our independent dealer network, which consists of local retailers who specialize
in TV and home entertainment systems. The Company intends to enhance consumer
awareness of its product relative to other providers of DTH services by forming
alliances with nationally recognized distributors of other consumer electronics
products. The Company entered into a strategic alliance with JVC pursuant to
which JVC distributes EchoStar receiver systems under the JVC label through
certain of its nationwide retailers. During February 1998, the Company also
executed agreements with Philips and VTech pursuant to which those entities will
distribute privately labeled receiver systems, incorporating the Company's
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proprietary technology, through certain of their nationwide retailers. The
Company believes, but can give no assurance, that these additional distribution
channels will further enhance the Company's ability to attract subscribers to
the DISH Network.
Through the Company's direct sales efforts, customers can call a single
telephone number (1-800-333-DISH) 24 hours a day, seven days a week, to order
EchoStar receiver systems, activate programming services, schedule installation
and obtain technical support. The Company believes it is the only DBS provider
to offer a comprehensive single-point customer service function. The Company
also is expanding into other less-traditional means of distribution such as
alliances with electric and other utilities, multi-level marketing firms, and
other non-consumer electronic retail businesses.
The Company offers a residual (commission) program that it believes is
competitive with that offered by other DBS operators. The program pays qualified
distributors and retailers an activation allowance, along with a monthly fixed
residual for programming services provided over the period that the respective
DISH Network subscriber remains active. Thus, residuals may be earned by
distributors and retailers over an extended period.
The Company's marketing strategy includes national and regional broadcast
and print advertising promoting the benefits of the DISH Network. The Company
has comprehensive dealer guides describing all aspects of the DISH Network and
its integrated product lines (programming, hardware and installation), which are
provided to distributors at nationwide educational seminars. The Company expects
to continue to offer a high level of retail support and to provide comprehensive
point-of-sale literature, product displays, demonstration kiosks and signage for
retail outlets. The Company also provides a promotional channel as well as a
programming subscription for in-store viewing. The Company's mobile sales and
marketing team visits retail outlets on a regular basis to reinforce training
and ensure point-of-sale needs are quickly fulfilled. The Company also provides
retailers and distributors with a DISH Network merchandise catalog so that they
may add to their promotional materials. Additionally, one channel of programming
on the DISH Network provides information about additional services and
promotions periodically offered by the DISH Network. That channel is geared
towards educating retailers, satellite dealers, and current and potential
subscribers.
The Company's marketing programs and pricing strategies have significantly
increased the affordability of EchoStar receiver systems for consumers. In
August 1996, the Company lowered the suggested retail price for a standard
EchoStar receiver system to $199 (as compared to an average retail price in
March 1996 of $499), conditioned upon the consumer's one-year prepaid
subscription to the DISH Network's America's Top 50 CD programming package for
$300. During 1997, the Company further reduced the "up-front" costs to consumers
by maintaining the suggested retail price for a standard EchoStar receiver
system at $199 and eliminating any related prepaid subscription commitments. In
October 1998, the Company introduced the DISH Network One-Rate Plan pursuant to
which consumers are eligible to receive a $249 rebate on the purchase of certain
EchoStar receiver systems. This rebate is contingent upon the subscriber's
one-year commitment to subscribe to the America's Top 100 CD programming package
and two premium channel packages, committing the subscriber to a monthly
programming payment of approximately $49.
The primary purposes of these promotions are to rapidly build a subscriber
base, to expand retail distribution of the Company's products, and to build
consumer awareness of the DISH Network brand. These promotions are consistent
with and emphasize the Company's long-term business strategy that focuses on
generating the majority of its future revenue through the sale of DISH Network
programming to a large subscriber base.
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These promotions have resulted in, and will continue to result in, the
Company incurring significant costs to acquire subscribers. However, the
Company believes that these costs will be fully recouped, provided that churn
rates (currently less than 1.25% per month, on average) remain under control.
The Company believes that several factors contribute to low customer attrition.
DISH Network reception equipment cannot be utilized with competitors' systems.
Consequently, subscribers cannot seamlessly migrate to alternative DBS
providers. Further, based on high DBS industry consumer satisfaction ratings,
feedback from consumers and dealers, and low DISH Network subscriber turnover
rates, the Company anticipates high customer retention rates leading to an
expected average minimum subscriber life of at least five years. Further, a
majority of DISH Network subscribers purchase premium and pay-per-view
programming in addition to their America's Top 40 or America's Top 100 CD
subscription. These incremental revenues reduce the length of time necessary to
recoup the average cost of acquiring new subscribers.
The Company's present marketing strategy is based on current competitive
conditions; those conditions may change and any such changes could adversely
affect the Company. Future changes in marketing strategy may include additional
promotions geared toward further increasing the affordability of EchoStar
receiver systems and related accessories which, among other things, could
increase the Company's cost of acquiring new subscribers.
SATELLITES
EchoStar I and EchoStar II each are Lockheed Martin Series 7000 satellites
equipped with 16 Ku-band transponders. Each transponder operates at 130 watts of
power. EchoStar III and EchoStar IV are Lockheed Martin Series A2100AX
satellites equipped with 32 transponders that operate at approximately 120 watts
per channel (switchable to 16 transponders operating at over 230 watts per
channel). Each transponder is capable of transmitting multiple digital video,
audio and data channels. The Company's satellites have a minimum design life of
12 years.
During October 1998, Lockheed Martin advised the Company that EchoStar III
had experienced an anomaly that has resulted in the failure of three TWTAs and
the loss of use of a total of six TWTAs. The satellite is equipped with a total
of 44 TWTAs. Only 11 TWTAs are necessary to fully utilize DBSC's 11 frequencies
at 61.5 degrees WL, where the satellite is located. Although there has been no
interruption of service for our customers and no interruption of service is
expected, we are presently working with Lockheed Martin to investigate the cause
and potential implications of the anomalies. Lockheed Martin has informally
advised us that it is possible the anomaly may result in the loss of additional
TWTAs in the future.
As a result of the anomaly related to the TWTAs, we have instructed our
broker to notify our insurance carriers of an occurrence under the terms of the
EchoStar III launch insurance policy. The EchoStar III launch insurance policy
provides for insurance of $219.3 million covering the period from launch of the
satellite (October 5, 1997) plus 365 days. Under that policy, we have until
March 1999 to file a claim for either a constructive total or partial loss. It
may be several weeks before all of the data required in connection with the
filing of a claim can be accumulated. Pending completion of the anomaly
investigation, we have transitioned to a 60-day, $200 million in-orbit insurance
policy on EchoStar III at standard industry rates which was renewed through
February 2, 1999 and which we expect to renew on an interim basis. However, the
policy contains an exclusion for future TWTA losses based on similar anomalies.
As a result of the exclusion, and in the event that comprehensive coverage for
the TWTA anomalies is ultimately denied under the launch insurance policy, we
could potentially experience uninsured losses of capacity on EchoStar III in the
future, up to and including a total loss of capacity.
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Although there can be no assurance, we expect that in-orbit insurance can be
procured on more traditional terms in the future if the anomaly investigation is
satisfactorily concluded and no further failures occur in the interim.
EchoStar IV is currently able to use a maximum of only 20 transponders as a
result of a solar array anomaly. The number of available transponders will
decrease over time. EchoStar IV has also experienced the failure of three TWTAs
and the loss of use of a total of six TWTAs comparable to those that occurred to
EchoStar III. Based on existing data, we expect that approximately 16
transponders will probably be available over the entire 12 year design life of
the satellite, absent significant additional TWTA anomalies or other failures.
In September 1998, we filed a $219.3 million insurance claim for a total loss
(as defined in the launch insurance policy) related to EchoStar IV. However, if
we were to receive $219.3 million for a 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 in accordance with that definition in the
launch insurance policy, we presently intend to negotiate a settlement with the
insurers that will compensate us for the reduced satellite transmission capacity
and allow us to retain title to the asset.
The Company will acquire two additional DBS satellites if the 110
Acquisition is consummated. EchoStar V and EchoStar VI each are high power Space
Systems/Loral Series FS-1300 satellites. EchoStar V is equipped with 32 Ku-band
transponders that will operate at approximately 110 watts per channel
(switchable to 16 transponders operating at approximately 220 watts per
channel). EchoStar VI is also equipped with 32 Ku-band transponders that will
operate at approximately 120 watts per channel (switchable to 16 transponders
operating at approximately 240 watts per channel). Each transponder is capable
of transmitting multiple digital video, audio and data channels. EchoStar V and
EchoStar VI each have a minimum design life of 12 years.
The satellite purchase agreement for EchoStar V and EchoStar VI, the cost
of which is borne by News Corporation and the rights to which will be assigned
to the Company, requires Space Systems/Loral to deliver the satellites in orbit
for a purchase price of approximately $165 million and $175 million,
respectively. Such purchase price will be payable by MCI. Subject to certain
exceptions, the satellite purchase agreement with Space systems/Loral requires
delivery of EchoStar V by August 31, 1999 and EchoStar VI in the fourth quarter
of 1999. The satellite purchase agreement requires Space Systems/Loral to pay
for liquidated damages of $500,000 for the first day and $100,000 per day
thereafter, capped at $2,000,000, if EchoStar V is not delivered on time. The
agreement provides that no damages will be payable by Space Systems/Loral for
late delivery of EchoStar VI. In addition, the 110 Acquisition agreement
provides for launch insurance and one year of in-orbit insurance protection for
EchoStar V and EchoStar VI, respectively.
SATELLITE LAUNCHES
EchoStar V is expected to be launched during the third quarter of 1999 on
an Atlas IIAS launch vehicle. EchoStar VI is expected to be launched during the
fourth quarter of 1999 on a Proton K/Block DM four stage launch vehicle.
Although there can be no assurance, the Company is trying to obtain earlier
launch dates for both satellites.
MARKET FOR DIGITAL SATELLITE SERVICES
THE MARKET. The introduction of DBS receivers is widely regarded as the
most successful introduction of a consumer electronics product in United States
history. As of December 31, 1998,
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approximately 9 million United States households subscribed to DBS and other
digital DTH satellite services. This installed base represents a greater than
300% increase from the approximately 2 million DBS subscribers as of the end of
1995. Independent market research projects that the market for DBS and other
digital DTH satellite services will grow to more than 18 million subscribers in
2003, representing an annual cumulative growth rate of approximately 15%. The
Company believes that the market for digital satellite products and services
will continue to grow because there is significant unsatisfied demand for high
quality, reasonably priced television programming. The FCC estimates that
approximately 66% of all new subscribers to multi-channel television services
choose DBS over other alternatives. Of the approximately 98 million television
households in the United States, it is estimated that more than 60 million
subscribers pay an average of $40 per month for multi-channel programming
services.
The Company targets potential subscribers who are likely to be attracted by
specific DISH Network programming services. Potential subscribers include:
(i) existing cable subscribers who desire a greater variety of programming,
improved video and audio quality, better customer service and fewer transmission
interruptions; (ii) households not passed by cable or that are currently
underserved by cable; (iii) households headed by persons of foreign nationality
living in the United States who demand international, cultural and niche
programming typically not provided by cable television; (iv) the mobile,
commercial and institutional markets; (v) businesses; and (vi) C-band
subscribers who may desire to migrate to digital services.
The Company has procured in-orbit insurance for EchoStar I and EchoStar II
through June 25, 1999 and for EchoStar III through February 2, 1999. The
in-orbit insurance policy for EchoStar I, EchoStar II and EchoStar III and the
launch insurance policy for EchoStar IV include 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. Such
notification permits 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 health status of an insured satellite or any loss occurring after risk has
attached does not entitle the insurers to renegotiate the policy terms. The
in-orbit insurance policy for EchoStar I and EchoStar II has a one-year policy
period with a one-year extension provision. The policy period will continue
until June 25, 1999. The in-orbit coverage for EchoStar III is for sixty days
and will continue until February 2, 1999. There can be no assurance that such
renewals will be possible or can be at rates or on terms favorable to us. For
example, if EchoStar I, EchoStar II, EchoStar III or other similar satellites
experience anomalies while in orbit, the cost to renew in-orbit insurance could
increase significantly or coverage exclusions for similar anomalies could be
required. Further, although the Company has in-orbit coverage for 365 days after
launch of EchoStar IV, there can be no assurance that the Company will be able
to obtain in-orbit insurance for EchoStar IV thereafter.
The satellite insurance policies for EchoStar I, EchoStar II, EchoStar III
and EchoStar IV contain customary exclusions, including: (i) acts of war or
similar actions; (ii) loss or damage caused by anti-satellite devices;
(iii) insurrection and similar acts; (iv) governmental confiscation; (v) nuclear
reaction or radioactive contamination; (vi) willful or intentional acts of the
Company or its contractors designed to cause loss or failure of a satellite;
(vii) claims for lost revenue and incidental and consequential damages; and
(viii) third-party claims against the Company.
If, following launch, any Company satellite does not perform to
specifications, there may be circumstances in which insurance will not fully
reimburse the Company for any loss. In addition, satellite insurance will not
reimburse the Company for business interruption, loss of business and similar
losses
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that might arise from delay in the launch of any Company satellite.
COMPETITION
Each of the businesses in which the Company operates is highly competitive.
The Company 's existing and potential competitors include a wide range of
companies offering video, audio, data, programming and entertainment services.
The Company also faces competition from companies offering products and services
that perform similar functions, including companies that offer cable television
products and services, wireless cable products and services, DTH products and
services, as well as DBS and other satellite programming, and companies
developing new technologies. Many of the Company's competitors have
substantially greater financial and marketing resources than the Company. The
Company expects that quality and variety of programming, quality of picture and
service, and cost will be the key bases of competition.
Advances in communications technology, as well as changes in the
marketplace and the regulatory and legislative environment, are constantly
occurring. Moreover, mergers, joint ventures, and alliances among franchise,
wireless or SMATV/private cable television operators, RBOCs and others may
result in providers capable of offering bundled cable television and
telecommunications services in competition with the Company. The Company cannot
predict the effect that ongoing or future developments might have on the video
programming distribution industry generally or the Company specifically.
CABLE TELEVISION. Cable television service is currently available to the
vast majority of United States television households. The United States cable
television industry currently serves over 65 million subscribers. As an
established provider of subscription television services, cable television is a
formidable competitor in the overall market for television households. Cable
television systems generally offer 30 to 80 analog channels of video
programming. Cable television operators currently have an advantage relative to
the Company with regard to the provision of local programming as well as the
provision of service to multiple television sets within the same household. Many
cable television operators are in the process of upgrading their distribution
systems to expand their existing channel capacity for purposes of providing
digital product offerings similar to those offered by DBS providers. In
addition, such expanded capacity may be used to provide interactive and other
new services.
Many of the largest cable systems in the United States have announced plans
to offer access to telephony services through their existing cable equipment,
and have entered into agreements with major telephony providers to further these
efforts. In some cases, certain cable systems have actually commenced commercial
offerings of such services, the expansion of which could have a negative impact
on the demand for DBS services. If such trials are successful, many consumers
may find cable service to be more attractive than DBS for the reception of
programming.
Because reception of DBS signals requires line of sight to the satellite,
it may not be possible for some households served by cable to receive DBS
signals. Additionally, the initial cost required to receive DISH Network
programming may reduce the demand for EchoStar receiver systems, because
EchoStar receiver systems must be purchased, whereas cable and certain of the
Company's satellite competitors lease their equipment to the consumer with
little if any initial hardware payment required. The compulsory copyright
license granted to satellite providers by the Satellite Home Viewer Act is
narrower in scope than the compulsory license granted to cable operators, thus
creating another competitive advantage for cable operators. Further, cable
operators pay substantially lower royalty rates for the retransmission of
distant network and superstation signals than the rates paid by satellite
companies,
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thereby enjoying a competitive advantage.
In addition, PrimeStar has announced that, subject to FCC approval of its
pending application to acquire TSAT, which controls a DBS license to operate
over 11 frequencies at 119 degrees WL, it currently intends to provide digital
programming from Tempo's DBS satellite launched to that location in March 1997.
TSAT's DBS satellite would allow PrimeStar to provide at least 65 digital video
channels to subscribers, possibly complementing the offering of local cable
systems. PrimeStar's complementary DBS service could make cable an even more
powerful competitor to the DISH Network. Although ECC has opposed PrimeStar's
FCC application on the grounds that it is anti-competitive, ECC cannot be sure
that this application will not soon be granted.
OTHER DBS AND DTH SATELLITE SYSTEM OPERATORS. In addition to the Company,
several other companies have DBS authorizations and are positioned to compete
with the Company for home satellite subscribers. For example, DIRECTV operates
three DBS satellites and has 27 channel assignments at a full CONUS orbital
slot. USSB owns and operates an additional five transponders on DIRECTV's first
satellite and offers a programming service separate from, and complementary to,
DIRECTV's service. DIRECTV and USSB together offer more than 200 channels of
combined DBS video programming. The Company currently offers more than 150
channels of digital video programming. As of November 30, 1998, DIRECTV had
approximately 4.3 million subscribers, approximately one-half of whom also
subscribed to USSB programming. In December 1998, DIRECTV's parent executed a
definitive merger agreement to acquire the business and assets of USSB in a
transaction expected to be completed in mid-1999, subject to obtaining
regulatory and shareholder approvals. In addition to the five USSB frequencies
at 101 degrees WL, this transaction would give DIRECTV access to the three
frequencies that USSB controls at 110 degrees WL, which DIRECTV might use to
provide popular Hispanic programming.
We also face competition from PrimeStar, which (apart from its proposed
acquisition of TSAT) currently leases an FSS satellite at 85 degrees WL and, as
of November 30, 1998, had approximately 2.3 million subscribers. In January
1999, DIRECTV's parent announced an agreement to purchase the satellite
television business of PrimeStar. In addition, two other satellite companies,
including a subsidiary of Loral, have conditional permits for a comparatively
small number of DBS assignments that can be used to provide service to portions
of the United States.
There are a number of additional frequencies over which programming can be
delivered via geostationary satellite, including medium and high powered
Ka-band, Ku-band, and extended Ku-band, as well as proposed non-geostationary
satellite systems that would operate over these frequencies. These satellite
frequency bands and systems can be used to provide us with additional
competition.
TELEPHONE COMPANIES. Certain telecommunications carriers, including long
distance telephone companies, could become significant competitors in the
future, as they have expressed an interest in, and in some instances made
substantial investments to become, subscription television and information
providers. For instance, AT&T is in the process of acquiring cable operator TCI.
Other telephone companies are also actively engaged in the video programming
distribution business.
VHF/UHF BROADCASTERS. Most areas of the United States are covered by
traditional terrestrial VHF/UHF television broadcasts that typically include
three to ten channels. These broadcasters are often low to medium power
operators with a limited coverage area and provide local, network and syndicated
programming. The local content nature of the programming may be important to the
consumer, and VHF/UHF programming is typically free of charge. The FCC has
allocated additional digital spectrum to licensed broadcasters. At least during
a transition period, each existing television station will be able to
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retain its present analog frequencies and also transmit programming on a digital
channel that may permit multiple programming services per channel.
GOVERNMENT REGULATION
The following summary of regulatory developments and legislation does not
purport to describe all present and proposed government regulation and
legislation affecting the video programming distribution industry. Other
existing government regulations are currently the subject of judicial or
administrative proceedings, legislative hearings or administrative proposals
that could change, in varying degrees, the manner in which this industry
operates. Neither the outcome of these proceedings nor their impact upon the
industry or the Company can be predicted at this time. This section sets forth a
brief description of regulatory issues pertaining to operations of the Company.
Authorizations and permits issued by the FCC and foreign or international
regulatory agencies performing similar functions are required for the
construction, launch and operation of satellites and other components of the
EchoStar DBS system, and the sale of satellite receivers and other products of
the Company in certain countries. In addition, as the operator of a privately
owned United States satellite system, the Company is subject to the regulatory
authority of the FCC and the Radio Regulations promulgated by the ITU. The
Company also requires import and general destination export licenses issued by
the United States Department of Commerce for the delivery of its manufactured
products to overseas destinations. Finally, United States export control
regulations and prior approval requirements apply to the delivery of satellites
to be launched by non-United States launch providers and to providing related
technical information to such providers.
FCC PERMITS AND LICENSES. As the operator of a DBS system, ECC is subject
to FCC jurisdiction and review primarily for: (i) assignment of frequencies and
orbital slots; (ii) compliance with the terms and conditions of such assignments
and authorizations, including required timetables for construction and operation
of satellites; (iii) authorization of individual satellites (I.E., meeting
minimum financial, legal and technical standards) and earth stations;
(iv) avoiding interference with other radio frequency emitters; (v) compliance
with rules the FCC has established specifically for holders of DBS, other
satellite and earth station authorizations, including construction milestones
and due diligence requirements; and (vi) compliance with applicable provisions
of the Communications Act.
ECC's FCC authorizations are conditioned on satisfaction of ongoing due
diligence, construction, reporting and related obligations. ECC cannot be sure
that it will be able to comply with the FCC's due diligence obligations or that
the FCC will determine that it has complied with such due diligence obligations,
and the FCC also has declared that it will carefully monitor the reports
required to be filed by DBS and FSS permitees. Failure of ECC to file adequate
reports or to demonstrate timely progress in the construction of its DBS or FSS
systems may result in the cancellation of its authorizations. ECC has not filed,
or not timely filed, all required reports or filings with the FCC, and there is
a risk that the filed reports may be found by the FCC not to comply fully with
its due diligence requirements.
ECC's permits and extension requests have been and may continue to be
contested in FCC proceedings and in court by several companies with interests
adverse to ECC's, including Dominion, PrimeStar, Tempo, DIRECTV, GE American
Communications, Inc. and others.
The licenses that the FCC issues for an operational DBS system to use
frequencies at a specified orbital location are for a term of ten years (less
than the useful life of a healthy DBS satellite). At the expiration of the
initial license term, the FCC may renew the satellite operator's license or
authorize the
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operator to operate for a period of time on special temporary authority, but
there can be no assurance that the FCC will take such actions. In the event the
FCC declines to renew the operator's license, the operator would be required to
cease operations and the frequencies would revert to the FCC. STAs granted by
the FCC are for a period of 180 days or less, and are subject to several other
conditions. ECC also requires FCC authority to operate earth stations, including
the earth stations necessary to uplink programming to its satellites.
ECC has licenses to operate EchoStar I and EchoStar II at 119 degrees WL,
both set to expire in 2006; a license to operate EchoStar III at 61.5 degrees
WL, set to expire in 2008 (and an STA to operate certain additional frequencies
on that satellite, currently set to expire on March 15, 1999 or earlier); and an
authorization for 24 frequencies at 148 degrees WL. Under that authorization,
ECC must, among other things, have its entire system at 148 degrees WL
operational by December 20, 2002. EchoStar IV cannot operate over all of these
24 authorized frequencies, and ECC cannot be sure that it will meet this
milestone.
ECC has also filed with the FCC a modification application to operate
EchoStar IV at 148 degrees WL. The state of Hawaii has requested conditions to
that authorization and ECC has opposed several of those requested conditions.
The FCC has not yet acted on ECC's application, and ECC currently operates
EchoStar IV at 148 degrees WL under STA, currently set to expire February 21,
1999.
ECC has requested FCC approval for the assignment to ECC of all FCC
authorizations involved in the 110 Acquisition, where ECC proposes to operate
EchoStar V and EchoStar VI. The FCC has placed these applications on public
notice. Petitions to deny or comments were due January 14, 1999, ECC's
opposition was due January 25, 1999, and replies are due February 1, 1999. The
U.S. Department of Justice has filed comments in support of the 110 Acquisition
application. Several parties have opposed the application on various grounds or
have requested conditions, including, without limitation, arguing that alien
ownership limitations and other broadcast qualification requirements apply,
requesting program access conditions with respect to News Corporation's
programming, and requesting conditions in connection with service to Alaska and
Hawaii, including requesting service to Hawaii from 110 degrees WL as well as
from the 148 degrees WL orbital location, with respect to which ECC has filed a
still pending request for a waiver of the obligation to serve Alaska and Hawaii.
We cannot be sure how the FCC would rule on any of these oppositions or
requests. Although ECC has requested expedited action on the applications, ECC
cannot be sure that the FCC will grant them and/or that it will grant them
expeditiously. We note that, in a 1995 rulemaking, the FCC had imposed a
one-time rule, applicable only to the January 1996 DBS auction, which
effectively prevented DBS operators from using channels at more than one full
CONUS location. If the FCC were to reimpose this rule, ECC would not be able to
preserve both its requested authorization at 110 degrees WL and its existing
licenses at 119 degrees WL. Although ECC has vigorously argued in its
application that the FCC need not and should not reimpose that rule, we cannot
be sure how the FCC will rule in that regard. Furthermore, MCI's authorization
is subject to still pending challenges before the full FCC, and we cannot be
sure how the FCC will rule on these challenges. Moreover, our plan to use our
authorized frequencies at 119 degrees WL and our requested frequencies at 110
degrees WL in conjunction with a single consumer dish may be subject to
additional regulatory requirements, and may require a modification of the ITU
Region 2 Plan for the Broadcasting- Satellite Service ("BSS Plan") (see below).
Furthermore, still pending before the FCC is a May 1997 application for minor
modifications to MCI's authorization. These and possibly other modifications
must be approved prior to the deployment of satellites at that location, and we
cannot be sure that the FCC will approve them or that it will do so timely.
Moreover, MCI has not yet received FCC authorization in connection with certain
types of TT&C operations of its proposed system.
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The two satellites being manufactured for MCI (EchoStar V and EchoStar VI)
for use at the 110 degrees WL orbital slot are equipped with spot beams to
provide service to Alaska and Hawaii. The State of Hawaii has requested service
using 18-24 inch dishes. The satellites probably will not be capable of
providing service to substantial portions of Hawaii and Alaska with a dish that
small, particularly areas with heavy and consistent precipitation. The State of
Hawaii has requested the FCC to condition the transfer of control of the
licenses to EchoStar on provision of service to 18-24 inch dishes.
EchoStar I uses the C-Band frequencies for its TT&C operations. The FCC
granted ECC conditional authority to use these frequencies, stating that the
required coordination process with Canada and Mexico had been completed. In
January 1996, however, the FCC received a communication from an official of the
Ministry of Communications and Transportation of Mexico stating that EchoStar
I's TT&C operations could cause unacceptable interference to Mexican satellites.
Although ECC believes that it is unlikely that the FCC will subsequently require
ECC to relinquish the use of such C-band frequencies for TT&C purposes, such
relinquishment could result in the inability to control EchoStar I and the total
loss of the satellite unless the satellite could be moved to another orbital
slot with FCC approval. EchoStar II has its TT&C operations in the "extended"
C-Band. In 1996, the International Bureau granted DirectSat conditional
authority to use these frequencies subject to the condition of no harmful
interference until January 1, 1999, at which time the FCC indicated it would
review the suitability of those frequencies for TT&C operations. ECC has timely
filed a request to extend the authorization to November 2006. There can be no
assurance that the FCC will extend that authorization. The FCC's refusal to
extend such authorization could result in the inability to control EchoStar II
and a total loss of the satellite. Moreover, the FCC has recently released a
Notice of Proposed Rulemaking proposing uses of those frequencies that may
inhibit future satellite operations, and has frozen the acceptance of earth
station applications in that band, which may inhibit DirectSat's future TT&C
operations.
On June 8, 1998, the FCC fined ECC in the total amount of $40,000 for
operating EchoStar I and EchoStar II outside of their authorized
locations--119.2 degrees WL and 118.8 degrees WL, respectively. The FCC also
directed that ECC relocate EchoStar I and EchoStar II to 119.2 degrees WL and
119.05 degrees WL, respectively. ECC has paid the fine, has relocated the
satellites in accordance with the FCCs' direction, and has timely notified the
FCC of such relocation. Also pending before the FCC is a request for an STA to
operate EchoStar II at 119.05 degrees WL. The FCC, although it has directed ECC
to move EchoStar II to that location, has not yet acted on this request.
Although ECC had also previously requested an STA to operate EchoStar I and
EchoStar II at slightly different orbital locations, which would improve signal
quality and facilitate better customer service, that request has raised
objections, and the FCC staff has notified ECC of its concern that the requested
STA may cause interference to the Tempo satellite at 118.8 degrees WL.
Certain subsidiaries of ECC have entered into the Dominion Agreement with
Dominion, an unaffiliated company, that holds a conditional construction permit
and related rights to eight frequencies at 61.5 degrees WL, the same orbital
location where EchoStar III is located. Pursuant to the Dominion Agreement,
Dominion, subject to appropriate FCC approvals, has the right to use eight
transponders on EchoStar III to exploit the Dominion frequencies. Additionally,
the Dominion Agreement provides that until EchoStar III is operational, Dominion
can use an entire transponder on an EchoStar satellite located at 119 degrees WL
by paying EchoStar $1 million per month. From December 1996 through April 1997,
in consideration of the use of such transponder for a period of five months,
Dominion issued five $1 million promissory notes to EchoStar, each due May 10,
1997. When Dominion did not repay these notes, ECC exercised its right under the
Dominion Agreement, subject to obtaining any necessary FCC approvals, to use and
program, for the expected life of the satellite, six of the eight transponders
on EchoStar III that Dominion has the right to use and that would operate on
frequency channels assigned to
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Dominion. Dominion has pending FCC applications to modify its permit to rely on
the Dominion Agreement to satisfy its due diligence and to extend its permit.
These applications have not yet been approved. The Dominion Agreement may also
require further FCC approval. Assuming the necessary FCC approvals are obtained
and any further required approvals (including any required transfer of control
approvals) are obtained, ECC would have the right to use a total of up to 17
transponders on EchoStar III. However, ECC's ability to use a total of up to 17
transponders depends on obtaining all necessary FCC approvals, and we cannot be
sure that these approvals will be obtained.
Among other regulatory requirements, all of ECC's DBS systems are required
to conform to the ITU BSS Plan. Any operations that are not consistent with the
BSS Plan (including, among other things, ECC's digital transmissions) can only
be authorized on a non-interference basis pending successful modification of the
BSS Plan or the agreement of all affected administrations to the non-conforming
operations. Accordingly, unless and until the BSS Plan is modified to include
the technical parameters of a DBS applicant's operations, non-standard
satellites must not cause harmful electrical interference to, and are not
entitled to any protection from, interference caused by other assignments that
are in conformance with the BSS Plan. To ECC's knowledge, the U.S. Government
has filed with the ITU modification requests with respect to EchoStar I, II and
III. The ITU has requested certain technical information in order to process the
requested modifications and ECC has cooperated, and continues to cooperate, with
the FCC in the preparation of its responses to any ITU requests. ECC cannot
predict when the ITU will act upon these requests for modification or if they
will be granted.
ECC also has conditional authorizations for several other DBS and FSS
satellites that are not operational. ESC has a conditional permit for 10
unspecified western frequencies. That permit was set to expire on August 15,
1995. Although ESC filed a timely extension request, the FCC has deferred a
decision on that request pending the FCC's analysis of ESC's due diligence for
that permit. Further, the FCC has not yet assigned frequencies to ESC with
respect to that permit because in 1992 it held that ESC had not completed
contracting for its western assignments--the first prong of the required
diligence--and asked ESC to submit amended contract documentation. Although ESC
has submitted such documentation, the FCC has not yet ruled on this matter, and
we cannot be sure that the FCC will rule in our favor.
DirectSat has a conditional permit for 1 frequency at 110 degrees WL and 11
frequencies at 175 degrees WL, which is set to expire on August 15, 1999. That
expiration date is pursuant to an extension granted by the FCC's International
Bureau in 1996. That extension was subject to the condition that DirectSat make
significant progress toward construction and operation of its DBS system
substantially in compliance with the timetable submitted pursuant to Amendment
No. 7 of its satellite construction contract, dated June 17, 1995, or with a
more expedited timetable. The International Bureau also urged DirectSat to
expedite construction and launch of additional satellites for its DBS system.
PrimeStar has filed a still pending application for review requesting that the
FCC reverse the International Bureau's grant of an extension.
DBSC has a conditional permit for 11 frequencies at 175 degrees WL, which
was set to expire on November 30, 1998. That expiration date was pursuant to an
extension granted by the FCC's International Bureau in 1995, which was subject
to the condition that the FCC may cancel the permit if DBSC fails to progress
toward operation of its system in accordance with the timetable DBSC has
submitted to the FCC. That extension also is subject to a still pending
challenge by PrimeStar.
All of ESC, DirectSat and DBSC have timely filed requests for extension of
these permits with respect to their western assignments to December 2002, but we
cannot be sure how the FCC will act with
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respect to these requests.
In 1997 ECC was granted a license for a two-satellite FSS Ka-band system at
83 degrees WL and 121 degrees WL. That license was based on an orbital plan
agreed upon by applicants in ECC's processing round, which is subject to a
challenge. In October 1997, the FCC released service rules applicable to Ka-band
licensees. Among other things, the rules impose various technical requirements
and restrictions, including the obligation to protect or coordinate with certain
types of services and power control requirements. The FCC also imposed
implementation milestones, including, for licensees without intersatellite
links, commencement of construction within one year of grant, commencement of
construction of a second satellite within two years of grant, launch of first
satellite within five years of grant, and launch of all satellites by the dates
required by the ITU--generally six years from filing of the ITU "Appendix 4"
information (which was filed in November 1995), with the possibility of a
three-year extension. Although ECC has proposed a system that uses
intersatellite links, ECC is considering a modification of that proposed system
(subject to FCC approval) that would not include intersatellite links. ECC
cannot be sure whether such a modification request, if it were to be filed,
would be granted or what milestones the FCC would deem applicable to such a
modified proposed system. Further, the FCC prohibited trafficking in "bare"
Ka-band licenses. The FCC also imposed the same annual reporting requirements
that also apply to Ku-band FSS licensees. ECC cannot be sure that these new
rules will not adversely affect ECC's plans with respect to its licensed Ka-band
system.
In November 1996, ECC was granted conditional authorization for two Ku-band
FSS satellites to be located at 83 degrees WL and 121 degrees WL, subject, among
other things, to submitting additional proof of its financial qualifications
(the "ESC License"). ECC also has applied for authority to modify this system to
add C-band capabilities to one satellite. In December 1996, PrimeStar and GE
Americom separately filed petitions for reconsideration of the ESC License,
seeking the reassignment of one satellite to a different orbital slot on the
grounds that the satellite in dispute will interfere with the GE Americom
satellite used by PrimeStar for its medium-power Ku-band service. If the FCC
were to grant these petitions or entertain any future request to locate another
satellite at 83 degrees WL in lieu of ECC's authorized satellite, the satellite
in dispute may be reassigned to another orbital location; also, it may become
subject to significant limitations on its power. Although ESC, an indirect,
wholly owned subsidiary of ECC, has submitted proof of its financial
qualifications, PrimeStar and GE Americom have challenged it, and in March 1997
separately filed petitions to cancel the ESC license on the grounds that the
supplemental financial information provided by ESC is not adequate. If the FCC
were to grant these petitions, ESC would lose the ESC License. Finally,
PrimeStar and GE Americom have opposed ESC's C-band modification application by
separately filing petitions (in March 1997) to deny ESC's application on similar
grounds set forth in their petitions outlined above, and PanAmSat is seeking to
use the location assigned to that satellite for its own conflicting C-band
operations. If the FCC were to grant these petitions, ESC would not obtain the
requested authorization to add C-band capabilities to one of its satellites. ECC
cannot be sure as to how the FCC will rule with respect to any of these
challenges. Although ECC has not finalized a business plan that incorporates use
of this spectrum and is not relying on this spectrum for the generation of
future revenues, if the FCC were to rule against ECC, a potential future
business opportunity would be lost.
An 80% owned subsidiary of ECC, E-Sat, Inc. (E-Sat) has received
conditional authority to construct, launch and operate a six-satellite, Little
Low Earth Orbit Mobile-Satellite Service (MSS) system. Although primary
applications for the system are unrelated to DBS, it is possible that the system
could serve as a path for wireless communication with ECC's DBS customers,
particularly for periodic polling of units for pay-per-view purchases and
relatively rapid feedback on viewer pay-per-view buy rates and preferences. This
project is in an early stage of development and ECC cannot be sure that it will
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be able to successfully capitalize on any resulting business opportunity. ECC
has entered into an agreement with the 20% owner of E-Sat that, among other
things, gives that party an option to increase its ownership, subject to FCC
approval. ECC notes that E-Sat and its assets are not part of or subject to any
guaranty granted in connection with this offering.
If ECC successfully constructs and launches Ku-band, extended Ku-band,
Ka-band and/or Low Earth Orbit MSS satellites, those satellites might be used to
complement the DISH Network, or for a variety of other uses. It is possible that
the FSS Ku-band and Ka-band orbital locations requested by ECC and others could
permit construction of satellites with sufficient power to allow reception of
satellite signals by relatively small dishes. As these projects are in the early
stages of development and are currently being challenged by several companies
with interests adverse to those of ECC, there can be no assurance that the FCC
will sustain these licenses, or grant the pending applications, and/or that ECC
will be able to successfully capitalize on any resulting business opportunities.
DBS RULES. Once the FCC grants a conditional construction permit, the
permittee must proceed with due diligence in constructing the system. The FCC
has adopted specific milestones that must be met in order to retain the permit,
unless the FCC determines that an extension or waiver is appropriate, and
permittees must file semi-annual reports on the status of their due diligence
efforts. The due diligence milestones require holders of conditional permits to
complete contracting for construction of their systems within one year of grant
of the permit (with no unresolved contingencies that could preclude substantial
construction of the satellites), and to place all satellites in operation within
six years of grant. In addition, holders of permits received after January 19,
1996 must complete construction of the first satellite in their system within
four years of grant of the permit. The FCC also may impose other conditions on
the grant of the permit. The holders of new DBS authorizations issued on or
after January 19, 1996 must also provide DBS service to Alaska and Hawaii where
the service is technically feasible from the acquired orbital locations, which
includes 148 degrees WL. EchoStar IV cannot satisfy this requirement from 148
degrees WL, and accordingly ECC requested a waiver of the requirement. The state
of Hawaii has requested many conditions to such a waiver, and ECC has opposed
several of these conditions. Those holding DBS permits as of January 1996 must
either provide DBS service to Hawaii or Alaska from at least one of their
orbital locations or relinquish their western assignments. Subject to applicable
regulations governing non-DBS operations, a licensee may make unrestricted use
of its assigned frequencies for non-DBS purposes during the first five years of
the ten-year license term. After the first five years, the licensee may continue
to provide non-DBS service so long as at least half of its total capacity at a
given orbital location is used each day to provide DBS service. Further, the FCC
has commenced a rulemaking that seeks to streamline and revise its rules
governing DBS. This rulemaking concerns many new possible DBS rules. ECC cannot
be sure about the content and effect of any new DBS rules ultimately promulgated
by the FCC.
Failure to comply with applicable Communications Act requirements and FCC
rules, regulations, policies, and orders may result in the FCC's revoking,
conditioning, or declining to review or extend an authorization.
CERTAIN OTHER COMMUNICATIONS ACT PROVISIONS. As a distributor of
television programming, ECC is also affected by numerous laws and regulations,
including the Communications Act.
ECC believes that it remains free to set prices and serve customers
according to its business judgment, without rate regulation or the statutory
obligation under Title II of the Communications Act to avoid undue
discrimination among customers. Even if, under a future interpretation of the
1996 Act, ECC were to be classified as a telecommunications carrier subject to
Title II, ECC believes that such
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reclassification would not likely increase substantially the regulatory burdens
imposed on ECC or have an adverse impact on EchoStar's DBS operations, although
there can be no assurance in this regard.
ECC believes that, because it is engaged in a subscription programming
service, it is not subject to many of the regulatory obligations imposed upon
broadcast licensees. However, there can be no assurances that the FCC will not
find in the future that ECC should be treated as a broadcast licensee with
respect to its current and future operations and certain parties have requested
such treatment. If the FCC were to determine that ECC is, in fact, a broadcast
licensee, ECC could be required to comply with all regulatory obligations
imposed upon broadcast licensees.
The Communications Act, and the FCC's implementing regulations, provide
that, where subsidiaries of a holding company hold certain types of FCC
licenses, foreign nationals or their representatives may not own in excess of
25% of the total equity of the holding company, considered on a fully-diluted
basis, except upon an FCC public interest determination. Although the FCC's
International Bureau has ruled that these limitations do not apply to
subscription DBS authorizations, the ruling has been challenged and the question
remains open. Furthermore, the limitations will apply to ECC's FSS
authorizations if ECC holds itself out as a common carrier or if the FCC decides
to treat it as such a carrier. The FCC has noted that ECC proposes to operate
one of its proposed FSS systems on a common carrier as well as a non-common
carrier basis.
A recent survey of ECC's equity owners discloses that ECC's foreign
ownership was under 5%, well below these limitations, if they were to apply.
However, the 110 Acquisition would result in the issuance to an Australian
corporation of stock in excess of the alien ownership limitations if they were
to apply. ECC filed a petition for a declaratory ruling that it is in the public
interest to waive any applicable limitations to allow this issuance. Under
currently effective precedent, such a waiver is only needed to the extent ECC
proposes to conduct common carrier operations with its authorized Ka-band
system. After coordination with the FCC staff and in the interest of expediting
consideration of the MCI/News Corp. Application before the full FCC, ECC
withdrew the petition. EchoStar may need to refile that petition for
consideration by the FCC's International Bureau under delegated authority, and
there is no assurance that such a petition, to the extent necessary, will be
granted, and/or that it will be granted expeditiously, or that conditions would
not be imposed on such a grant, which conditions may not be favorable to
EchoStar.
The Communications Act requires prior FCC approval of transfers of control
over, or assignment of Title III licenses. ECC plans to implement a
reorganization. Pursuant to the reorganization, and subject to FCC approval
where required, ECC will place ownership of all of ECC's DBS satellites and
related FCC authorizations and licenses into ESC. DirectSat and DBSC, the
current owners of EchoStar II and EchoStar III, will both be merged into ESC.
Dish, Ltd. and EchoStar Satellite Broadcasting Corporation will be merged into
EchoStar DBS Corporation. EchoStar DBS Corporation currently owns EchoStar IV,
which, like the other DBS satellites and related FCC authorizations for
frequencies, will be transferred to ESC. ECC's subsidiaries that currently hold
FCC DBS authorizations have filed applications with the FCC to effect these "pro
forma" assignment of their licenses to ESC.
THE TELECOM ACT OF 1996. The 1996 Act clarifies that the FCC has exclusive
jurisdiction over DTH satellite services and that criminal penalties may be
imposed for piracy of DTH satellite services. The 1996 Act also offers DBS
operators relief from private and local government-imposed restrictions on the
placement of receiving antennae. In some instances, DBS operators have been
unable to serve areas due to laws, zoning ordinances, homeowner association
rules, or restrictive property covenants banning the installation of antennae on
or near homes. The FCC recently promulgated rules designed to implement
Congress' intent by prohibiting any restriction, including zoning, land use or
building
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regulation, or any private covenant, homeowners' association rule or similar
restriction on property within the exclusive use or control of the antenna user
where the user has a direct or indirect ownership interest in the property, to
the extent it impairs the installation, maintenance or use of a DBS receiving
antenna that is one meter or less in diameter or diagonal measurement, except
where such restriction is necessary to accomplish a clearly defined safety
objective or to preserve a recognized historic district. Local governments and
associations may apply to the FCC for a waiver of this rule based on local
concerns of a highly specialized or unusual nature. In November 1998, the FCC
extended these rules to allow renters to install antennas within their
leaseholds, I.E., homes, gardens, patios, terraces and balconies. The FCC
declined to extend the rules to permit the installation of antennas on common
property or on property to which a viewer was not permitted access, such as the
locked roof of an apartment building. This November order is being appealed by
several groups, including those representing building owners. The 1996 Act also
preempted local (but not state) governments from imposing taxes or fees on DTH
services, including DBS. Finally, the 1996 Act required that multichannel video
programming distributors such as DBS operators fully scramble or block channels
providing indecent or sexually explicit adult programming. If a multi-channel
video programming distributor cannot fully scramble or block such programming,
it must restrict transmission to those hours of the day when children are
unlikely to view the programming (as determined by the FCC), although this
"hours of the day" restriction was recently declared unlawful by a federal
court. On March 24, 1997, the United States Supreme Court let stand a lower
court ruling that allows enforcement of this provision pending a constitutional
challenge. In response to this ruling, the FCC declared that its rules
implementing the scrambling provision would become effective on May 18, 1997.
THE CABLE ACT. In addition to regulating pricing practices and competition
within the franchise cable television industry, the Cable Act was intended to
establish and support existing and new multi-channel video services, such as
wireless cable and DBS, to provide subscription television services. ECC has
benefited from the programming access provisions of the Cable Act and
implementing rules, in that it has been able to gain access to previously
unavailable programming services and, in some circumstances, has obtained
certain programming services at reduced cost. Any amendment to, or
interpretation of, the Cable Act or the FCC's rules that would permit cable
companies or entities affiliated with cable companies to discriminate against
competitors such as ECC in making programming available (or to discriminate in
the terms and conditions of such availability) could adversely affect ECC's
ability to acquire programming on a cost-effective basis. Certain of the
restrictions on cable-affiliated programmers will expire in 2002 unless the FCC
extends such restrictions.
On May 19, 1998, ECC also filed a complaint against Comcast seeking access
to the sports programming controlled by Comcast in the Philadelphia area. The
FCC has denied a separate complaint filed by DIRECTV requesting access to the
same programming, partly on the basis, that the exclusive programming is
delivered terrestrially and therefore is not subject to at least some program
access prohibitions, and EchoStar cannot be sure as to how the FCC will act on
EchoStar's complaint against Comcast. We cannot be sure that other vertically
integrated vendors will not seek to rely on the FCC's denial of DIRECTV's
complaint to deny us their programming and/or discriminate against us by
switching to terrestrial transmission of the programming, or that they will not
seek to acquire additional sports franchises and distribute the corresponding
programming exclusively, rendering our service comparatively less attractive.
On January 14, 1999, ECC filed a program access complaint with the FCC
against Speedvision and Outdoor Life Network seeking access to the programming
controlled by these two networks. ECC's program access complaint alleges that
the conduct of Speedvision and Outdoor Life Network in cutting off ECC's access
to programming after five days of carriage constitutes an unreasonable refusal
to deal
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and a prohibited unfair practice under the Communications Act and the FCC's
rules. ECC cannot be sure how the FCC will act on ECC's complaint against
Speedvision and Outdoor Life Network. Speedvision has cut off the service
allegedly based on its view that ECC has breached a November 1998 contract
between the parties. Speedvision and Outdoor Life Network have sued ECC in
federal district court in Connecticut requesting several remedies. We cannot be
sure how the court will rule on this complaint.
Pursuant to the Cable Act, the FCC recently imposed public interest
requirements upon DBS licensees that include the obligation to set aside four
percent of the licensee's channel capacity exclusively for non-commercial
programming of an educational or informational nature provided by national
educational programming suppliers. Among other constraints, the FCC defined
relatively narrowly the type of suppliers for which this capacity must be
reserved and required that the capacity be made available at substantially below
cost rates. The FCC also applied to DBS providers the requirement of providing
reasonable access to time at favored low rates, and equal opportunity, for
certain qualified candidates for office.
Although DBS operators like ECC currently are not subject to the "must
carry" requirements of the Cable Act, the cable industry and broadcast interests
have argued that DBS operators should be subject to these requirements, and the
broadcasters also argue that satellite companies should not be allowed to
provide local-into-local network service unless they also become subject to
these requirements. In the event the "must carry" requirements of the Cable Act
are revised to include DBS operators, or to the extent that new legislation of a
similar nature is enacted, ECC's future plans to provide local programming will
be adversely affected, and such must-carry requirements could cause the
displacement of possibly more attractive programming.
CERTAIN OTHER RULEMAKINGS. The FCC recently proposed to allocate
additional "expansion" spectrum for DBS operators starting in 2007. DIRECTV has
filed an application for a satellite system utilizing those expansion
frequencies.
Foreign satellite systems also are potential providers of DBS within the
U.S. In May 1996, in its DISCO II proceeding, the FCC proposed permitting
non-U.S. satellite systems to serve the U.S. if the home country of the
foreign-licensed satellite offers open "effective competitive opportunities"
(ECO) in the same satellite service to U.S. licensed satellites. In the February
1997 World Trade Organization Agreement, the U.S. offer contained an exemption
from market opening commitments for, among other things, DBS and DTH services.
In November 1997, the FCC released new rules whereby it maintained the ECO test
with respect to foreign-licensed satellites seeking to provide DBS and DTH
service in the United States; the FCC also established a strong presumption in
favor of authorizing foreign-licensed satellites to provide services other than
DBS and DTH in the United States.
The FCC has proposed allowing non-geostationary orbit (NGSO) FSS to operate
on a co-primary basis in the Ku-band. If the proposal is adopted, the NGSO
satellite operations could provide global high-speed data services, thereby
facilitating additional competition to satellite and other services. The FCC has
also requested comment on a request to allow a terrestrial service proposed by
Northpoint to retransmit local television signals and provide data services to
DBS subscribers. Both of these proposed operations, if authorized and
implemented, may cause interference in the DBS spectrum.
LOCAL NETWORK SIGNALS. ECC's ability to transmit local programming via
satellite into the markets from which the programming is generated may attract
incremental subscribers who would not otherwise be willing to purchase satellite
systems. Although ECC has commenced providing local network service to eligible
subscribers in various metropolitan centers, subject to certain conditions,
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ECC's ability to provide such a service is limited as detailed below.
SATELLITE HOME VIEWER ACT AND RETRANSMISSION CONSENT. In order to
retransmit network station programming, satellite companies must obtain the
retransmission consent of the station concerned, except for direct to home
retransmissions to "unserved households," as this term is defined in the SHVA,
and must also have a copyright license. Although ECC has entered into an
agreement with FOX Network providing for consent to certain retransmissions of
all FOX Network-owned and operated stations as part of the 110 Acquisition,
there can be no assurance that this transaction will close or that ECC will
obtain the retransmission consents to the extent necessary of any other network
station.
The SHVA establishes a "statutory" (or compulsory) copyright license that
generally allows a DBS operator, for a statutorily-established fee, to
retransmit local network signals to subscribers for private home viewing so long
as that retransmission is limited to those persons in "unserved households." An
"unserved household," with respect to a particular television network, is
defined as one that cannot receive an over-the-air network signal of "grade B"
intensity (a standard of signal intensity as defined by the FCC) of a primary
network station affiliated with that network through the use of a conventional
outdoor rooftop antenna and has not, within the 90 days prior to subscribing to
the DBS service, subscribed to a cable service that provides the signal of an
affiliate of that network. Although management believes the SHVA could be read
to allow ECC to retransmit this programming to certain local markets via DBS
satellite (a view opposed by several parties), management also believes that the
compulsory copyright license under the SHVA may not be sufficient to permit ECC
to implement its strategy to retransmit such programming in the most efficient
and comprehensive manner. On August 28, 1997, a Copyright Arbitration Royalty
Panel (CARP), appointed to recommend royalties for satellite retransmission of
network-affiliated television and superstation signals pursuant to the
compulsory license of Section 119 of the Copyright Act, delivered its Report to
the Librarian of Congress. In the CARP's recommendation, the CARP held it has no
jurisdiction to set royalties for local satellite retransmissions of the signals
of network television stations, on the ground that the compulsory license of the
Copyright Act does not extend to such retransmissions. ECC petitioned the
Librarian to modify the CARP report. The CARP also recommended setting at zero
the royalty rate for local retransmissions of superstation signals.
The final ruling of the Librarian of Congress, reviewing the Panel's
recommendation, was published in the Federal Register on October 28, 1997. With
respect to "local-into-local" retransmissions, the Librarian affirmed the zero
rate recommended by the Panel for satellite retransmission of a superstation
signal within the station's local market--a recommendation that ECC had
supported. The Librarian modified the Panel's recommendation, by also
establishing a zero rate for secondary transmissions of a network station's
signal to "unserved households" within the station's local market. The Librarian
also reviewed the Panel's recommendation on the meaning of "unserved households"
(i.e., whether the statutory license covers retransmissions to a household in a
network station's local market receiving a signal of Grade B intensity from that
station but not from any other affiliate of the same network and satisfying all
other elements of the "unserved household" definition). The Panel had determined
that the statutory license does not cover such retransmissions and the Panel did
not have jurisdiction to recommend a rate for them. The Librarian decided that
the law is silent on the issue, and accordingly, he cannot unequivocally say
that the Panel's decision is arbitrary or contrary to law. Nonetheless, the
Librarian determined that the Copyright Office retains the authority to conduct
a rulemaking proceeding despite the Panel's determination, on the permissibility
of secondary transmissions of a network station's signal to households within
that station's local market that are served by that station but unserved by any
other station affiliated with the same network under the "unserved household"
provisions of the satellite compulsory license.
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On December 23, 1997, ECC petitioned the Copyright Office to issue a rule
confirming that a satellite carrier's local retransmission of network signals of
the respective local network affiliates is permissible under the statutory
license provided by the SVHA and related copyright law. On January 26, 1998, the
Copyright Office initiated a rulemaking proceeding to determine whether the
copyright law permits such "local-into-local" retransmissions. ECC's petition
and subsequent comments have been opposed by, among others, certain sports
leagues, representatives of the cable industry, several television networks and
their broadcast affiliates, and the Motion Picture Association of America. ECC's
position was supported by the staffs of the San Francisco Regional Office and
the Bureau of Economics of the Federal Trade Commission. There can be no
assurance that the rulemaking will result in an outcome favorable to ECC.
Further, although ECC is continuing its effort to secure passage of legislation
that will clarify and extend the scope of the compulsory license with respect to
local network signals, to protect against the possibility the Copyright Office
will not conduct a rulemaking proceeding or that any such rulemaking may not
provide a favorable result to ECC, there can be no assurance that ECC will be
successful in this effort. If a court or administrative agency were to reject
the interpretation of "unserved household" supported by ECC, and legislation
does not pass which clarifies and extends the scope of the compulsory license,
ECC may have to engage in the relatively cumbersome process of obtaining
copyright licenses from all individual copyright holders instead. In the absence
of the legislation sought by ECC and/or a favorable outcome in the rulemaking,
and failing successful negotiation of individual copyright licenses and
retransmission consent agreements to the extent necessary, there can be no
assurance that ECC would be successful in any copyright infringement or FCC
litigation with copyright owners and/or broadcasters regarding the legality of
certain local-into-local network retransmissions.
DISTANT SIGNALS The national networks and local affiliate stations have
recently sued PrimeTime 24, a satellite company whose programming feeds ECC had
until recently delivered, challenging PrimeTime 24's methods of selling network
programming to consumers based upon infringement of copyright. The U.S. District
Court for the Southern District of Florida entered a nationwide injunction
preventing PrimeTime 24 from selling its programming to consumers unless the
programming was sold according to certain stipulations in the injunction. The
injunction covers PrimeTime 24's "distributors" as well. The Plaintiff in the
Florida litigation informed EchoStar that it considered ECC a "distributor" for
purposes of that injunction. A federal district court in North Carolina has also
issued an injunction against PrimeTime 24 prohibiting certain distant signal
retransmission to homes delineated by a contour in the Raleigh area. Other
copyright litigation against PrimeTime 24 is pending.
As a result of: (a) these rulings; (b) ECC's determination to sell local
network channels back into the area from which they originate; (c) 1997
adjustments to copyright royalties payable in connection with delivery of
network signals by satellite; and (d) a number of other regulatory, political,
legal, contractual and business factors, during July 1998, ECC ceased delivering
PrimeTime 24 programming, and began uplinking and distributing network signals
directly. ECC has also implemented Section 119 compliance procedures which will
materially restrict the market for the sale of network signals by ECC. CBS and
other broadcast networks have informed EchoStar that they believe ECC's method
of providing distant network programming violates the SHVA and hence infringes
their copyright.
On October 19, 1998, EchoStar filed a declaratory judgment action in the
United States District Court for the District of Colorado against the four major
networks. In the future, ECC may attempt to certify a class including the
networks as well as any and all owned and operated stations and any independent
affiliates. ECC has asked the court to enter a judgment declaring that ECC's
method of providing distant network programming does not violate the SHVA and
hence does not infringe the networks' copyrights.
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Certain national television broadcast networks (and their local affiliates)
have threatened to file counter-claims or separate lawsuits against ECC for both
the retransmission of local-into-local and distant-into-local signals. On
November 5, 1998, the CBS, ABC, NBC and FOX networks and their affiliate groups,
acting on prior threats, filed a complaint alleging, among other things,
copyright infringement against ECC in the federal district court in Miami. The
plaintiffs in that action have also requested the issuance of a preliminary
injunction against ECC. In the event of a decision adverse to ECC in any such
litigation, significant damage awards and additional material restrictions on
the sale of network signals by ECC could result. Among other things, ECC could
be required to terminate delivery of distant network signals to a material
portion of its subscriber base. Further restrictions on the sale of network
channels imposed in the future could result in decreases in subscriber
activations and subscription television services revenue and an increase in
subscriber churn.
On November 17, 1998, in response to petitions for rulemaking filed by ECC
and the National Rural Telecommunications Cooperative (NRTC), the FCC released a
NPRM concerning the term "Grade B intensity" as used in the SHVA. The NPRM
requested comment and/or made tentative proposals, on among other things:
(1) the extent of the FCC's authority in connection with the definition,
prediction, and measurement of Grade B intensity; (2) changing the definition of
Grade B intensity so that truly unserved households can be better identified;
(3) endorsing or developing a methodology for accurately predicting whether an
individual household is able to receive a signal of Grade B intensity; and
(4) developing an easy-to-use and inexpensive method for testing the strength of
a broadcast network signal at an individual household. The FCC also noted that
it does not "appear to have the statutory authority to prevent most of PrimeTime
24's subscribers from losing their network service under the Miami injunction.
The evidence in the Miami and Raleigh court cases strongly suggests that many,
if not most, of those subscribers do not live in "unserved households" under any
interpretation of that term." The NPRM was the subject of extensive comments by,
among others, the satellite industry (including ECC), the networks and broadcast
affiliates, and several sports leagues. ECC cannot be sure that the FCC will
accept ECC's position concerning the FCC's authority to promulgate a model
predicting the incidence of Grade B intensity and a method for measuring it, nor
can there be any assurance that any predictive model and/or measurement method
developed by the FCC would be favorable to ECC.
In addition, in its August 28, 1997 report, the CARP recommended that the
royalty rate for satellite retransmissions of distant network-affiliated station
and distant superstation signals be set at 27 cents per subscriber per month--a
substantial increase compared to the previously applicable rates, which ranged
from 6 to 17.5 cents. The Satellite Broadcasting & Communications Association,
of which ECC is a member, requested modifications to the CARP report.
The final ruling of the Librarian of Congress, reviewing the Panel's
recommendation, was published in the FEDERAL REGISTER on October 28, 1997. The
Librarian, among other things, affirmed the Panel's recommendation of a 27 cent
per subscriber per month royalty rate for retransmissions of distant
superstation and network station signals. While judicial review of this ruling
is pending, the new rate became effective on January 1, 1998.
Export Regulation. From time to time, the Company requires import licenses
and general destination export licenses to receive and deliver components of DTH
systems. In addition, the delivery of satellites and related technical
information for the purpose of launch by a non-U.S. launch provider is subject
to strict export control and prior approval requirements. ECC has contemplated
the possibility of satellite launches by such non-U.S. providers, and cannot be
sure that the requisite approvals will be received.
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TECHNOLOGY
The Company's Technology business principally consists of the design,
engineering, manufacturing and sale of digital DTH equipment (such as digital
set-top boxes, antennae and other related accessories). The Company's Technology
business also provides uplink center design, construction oversight and other
integration services to other DTH providers.
The Company's Technology business resulted from the development of the DISH
Network, and the Company's revenues are, and are expected to continue to be,
derived principally from subscription fees for DISH Network programming.
Although there can be no assurance, the Company believes that revenue from its
Technology business may increase in the future. Further, the Technology business
is expected to continue to support and create revenue opportunities for the DISH
Network. For example, the design of digital set-top boxes for international DTH
customers is performed by the same employees who design EchoStar receiver
systems. Consequently, international Technology projects may result in
improvements in design and economies of scale in the production of EchoStar
receiver systems for the DISH Network.
Currently, the Company has two agreements with international DTH providers
(one in Canada and one in Spain) for the provision of digital set-top boxes. A
substantial portion of the Company's Technology revenue in 1997 and 1998
resulted from sales to these two DTH providers. As a result, the Company's
Technology business currently is economically dependent upon these two DTH
providers. As part of the 110 Acquisition, ETC received a minimum order from a
subsidiary of News Corporation for 500,000 set-top boxes. Although the Company
continues to actively pursue other similar distribution and integration service
opportunities, no assurance can be given that any such additional negotiations
will be successful. The Company's future revenue from the sale of DTH equipment
and integration services in international markets depends largely on the success
of the DTH operator in that country, which, in turn, depends on other factors,
such as the level of consumer acceptance of DTH products and the intensity of
competition for international subscription television subscribers. No assurance
can be given regarding the level of expected future revenues that may be
generated from the Company's alliances with foreign DTH operators.
COMPETITION
The Company's Technology products and services compete with those of a
substantial number of foreign and domestic companies, many with greater
resources, financial or otherwise, than the Company. The rapid technological
changes occurring in these markets are expected to lead to the entry of new
competitors. ETC's ability to anticipate these technological changes and to
introduce enhanced products on a timely basis will be a significant factor in
its ability to expand and remain competitive. Existing competitors' actions and
new entrants may have a material adverse impact on ETC's sales. The Company
believes that its competitive position in its Technology business results from
its knowledge and experience in the DBS and DTH industries, its technological
leadership and new product development capabilities, and the likely need for
compatibility of new technologies with currently installed systems. There can be
no assurance, however, that competitors will not be able to develop systems
compatible with ETC's proprietary technology or that ETC will be able to
introduce new products and technologies on a timely basis.
SATELLITE SERVICES
Satellite Services primarily consist of the turn-key delivery of video,
audio and data, primarily
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from the Company's satellites, to customers for business television, educational
and other applications. Satellite Services was initially established to address
the markets that fall outside of the typical DISH Network residential market.
Included within Satellite Services are the following functions: (i) BTV
services; (ii) broadcast and interactive data services; (iii) educational
services; and (iv) satellite transmission and other services. The Company's BTV
services include the uplink and delivery of organizationally specific
programming content to EchoStar receiver systems that are specifically
authorized for reception of those services. The Company bills for these services
based on the amount of satellite transmission time used by its BTV customers.
The Company currently delivers broadcast and interactive data services and
expects to expand such services during 1999. These services focus on the
delivery of data signals to authorized subscribers. The Company presently offers
certain agricultural and financial data services and expects to expand both the
number and variety of data services it offers. Transmission and other satellite
services consists of the uplink and transmission of services for corporate and
international customers, including the lease of excess DBS satellite broadcast
capacity to third-parties.
COMPETITION
EchoStar's Satellite Services business faces competition from a number of
other companies and technologies. Many of these competitors have substantially
greater financial and other resources than the Company. Satellite Services
competitors include, among others, other satellite system operators, cable
television system operators, Internet service providers, and telephone
companies. The Company believes that the ability of its Satellite Services
business to compete will be based on its knowledge and experience in the DTH and
DBS industry, its technological leadership and new product capabilities, the
quality of its video, audio and data transmissions, the quality of service
provided, and cost. There can be no assurance that EchoStar's Satellite Services
business will be able to successfully compete with existing and new providers of
similar services.
PATENTS AND TRADEMARKS
The Company uses a number of trademarks for its products and services,
including "--EchoStar," "DISH Network--," "DISH Network," "America's Top 40,"
"America's Top 50 CD," and others. Certain of these trademarks are registered by
the Company, and those trademarks that are not registered are generally
protected by common law and state unfair competition laws. Although the Company
believes that these trademarks are not essential to the Company's business, the
Company has taken affirmative legal steps to protect its trademarks in the past
and intends to actively protect these trademarks in the future.
The Company is the assignee of certain patents for products and product
components manufactured and sold by the Company, none of which the Company
considers to be significant to its continuing operations. In addition, the
Company has obtained and, although no assurances can be given, expects to
obtain, licenses for certain patents necessary to the manufacture and sale by
the Company and others of DBS receivers and related components. The Company has
been notified that certain features of the EchoStar receiver system allegedly
infringe on patents held by others, and that royalties are therefore required to
be paid. The Company is investigating allegations of infringement and, if
appropriate, intends to vigorously defend against any suit filed by the parties.
There can be no assurance that the Company will be able to successfully defend
any suit, if brought, or that the Company will be able to obtain a license for
any patent that might be required. See "Business--Legal Proceedings."
EMPLOYEES
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The Company had 3,815 employees at December 31, 1998, of which 3,750 worked
in the Company's domestic operations and 65 of which worked in the Company's
international operations. The Company is not a party to any collective
bargaining agreement and considers its relations with its employees to be good.
PROPERTIES
The following table sets forth certain information concerning the Company's
material properties:
<TABLE>
<CAPTION>
DESCRIPTION/USE LOCATION APPROXIMATE OWNED OR
- --------------- -------- SQUARE FOOTAGE LEASED
-------------- ------
<S> <C> <C> <C>
Corporate headquarters Littleton, Colorado 156,000 Owned
EchoStar Technologies Corporation office Englewood, Colorado 155,000 Owned
and distribution center
Office and distribution center Sacramento, California 78,500 Owned
Digital Broadcast Operations Center Cheyenne, Wyoming 55,000 Owned
Customer Service Center Thornton, Colorado 55,000 Owned
Customer Service Center McKeesport, Pennsylvania 100,000 Leased
European headquarters and warehouse Almelo, The Netherlands 53,800 Owned
Warehouse and distribution center Denver, Colorado 132,800 Leased
</TABLE>
LEGAL PROCEEDINGS
THE NEWS CORPORATION LIMITED
During February 1997, ECC and News Corporation announced an agreement (the
"News Agreement") pursuant to which, among other things, News Corporation agreed
to acquire approximately 50% of the outstanding capital stock of ECC. News
Corporation also agreed to make available for use by ECC the DBS permit for 28
frequencies at 110 degrees WL purchased by MCI for more than $682 million
following a 1996 FCC auction. During late April 1997, substantial disagreements
arose between the parties regarding their obligations under the News Agreement.
Those substantial disagreements led the parties to litigation.
In mid-1997, ECC filed a complaint seeking specific performance of the News
Agreement and damages, including lost profits. News Corporation filed an answer
and counterclaims seeking unspecified damages, denying all of the material
allegations and asserting numerous defenses. Discovery commenced in July 1997,
and the case was set for trial commencing March 1999.
In connection with the pending 110 Acquisition, the litigation between ECC
and News Corporation will be stayed and will be dismissed with prejudice upon
closing or if the transaction is terminated for reasons other than the breach
by, or failure to fill a condition within the control of, News Corporation or
MCI.
WIC PREMIUM TELEVISION LTD.
On July 28, 1998, a lawsuit was filed by WIC Premium Television Ltd. (WIC),
an Alberta corporation, in the Federal Court of Canada Trial Division, against
certain defendants which include: General Instrument Corporation, HBO, Warner
Communications, Inc., John Doe, Showtime, USSB, the Company and two of the
Company's wholly owned subsidiaries, Dish, Ltd. (Dish) and Echosphere
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<PAGE>
Corporation (Echosphere). The lawsuit seeks, among other things, an interim and
permanent injunction prohibiting the defendants from activating receivers in
Canada and from infringing any copyrights held by WIC. It is too early to
determine whether or when any other lawsuits and/or claims will be filed. It is
also too early to make an assessment of the probable outcome of the litigation
or to determine the extent of any potential liability or damages.
On September 28, 1998, WIC filed another lawsuit in the Court of Queen's
Bench of Alberta Judicial District of Edmonton against certain defendants, which
also include the Company, Dish, and Echosphere. WIC is a company authorized to
broadcast certain copyrighted work, such as movies and concerts, to residents of
Canada. WIC alleges that the defendants engaged in, promoted, and/or allowed
satellite dish equipment from the United States to be sold in Canada and to
Canadian residents and that some of the defendants allowed and profited from
Canadian residents purchasing and viewing subscription television programming
that is only authorized for viewing in the United States. The lawsuit seeks,
among other things, interim and permanent injunction prohibiting the defendants
from importing hardware into Canada and from activating receivers in Canada and
damages in excess of the equivalent of US $175 million. It is too early to
determine whether or when any other lawsuits and/or claims will be filed. It is
also too early to make an assessment of the probable outcome of the litigation
or to determine the extent of any potential liability or damages. The Company
intends to vigorously defend itself in these lawsuits.
BROADCAST NETWORK PROGRAMMING
Section 119 of the Satellite Home Viewer Act ("SHVA") authorizes the
Company to substitute satellite-delivered network signals to the Company
subscribers, but only if those subscribers qualify as "unserved" households,
defined in the SHVA, those that, among other things, "cannot receive, through
the use of a conventional outdoor rooftop receiving antenna, an over-the-air
signal of grade B intensity (as defined by the FCC) of a primary network station
affiliated with that network." Historically, the Company obtained distant
broadcast network signals for distribution to its subscribers through PrimeTime
24, Joint Venture ("PrimeTime 24"). PrimeTime 24 also distributes network
signals to certain of the Company's competitors in the satellite industry.
The national networks and local affiliate stations have recently challenged
PrimeTime 24's methods of selling network programming (national and local) to
consumers based upon infringement of copyright. The United States District Court
for the Southern District of Florida entered a nationwide injunction preventing
PrimeTime 24 from selling its programming to consumers unless the programming
was sold according to certain stipulations in the injunction. The injunction
covers "distributors" as well. The Plaintiff in the Florida litigation informed
ECC that it considered the ECC a "distributor" for purposes of that injunction.
A federal district court in North Carolina has also issued an injunction against
PrimeTime 24 prohibiting certain distant signal retransmissions to homes
delineated by a contour in the Raleigh area. Other copyright litigation against
PrimeTime 24 is pending.
As a result of: (a) these rulings; (b) ECC's determination to sell local
network channels back into the area from which they originate; (c) 1997
adjustments to copyright royalties payable in connection with delivery of
network signals by satellite; and (d) a number of other regulatory, political,
legal, contractual and business factors, during July 1998, ECC ceased delivering
PrimeTime 24 programming, and began uplinking and distributing network signals
directly. ECC has also implemented Section 119 compliance procedures which will
materially restrict the market for the sale of network signals by ECC. CBS and
other broadcast networks have informed ECC that they believe ECC's method of
providing distant network programming violates the SHVA and hence infringes
their copyright.
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On October 19, 1998, ECC filed a declaratory judgment action in the United
States District Court for the District of Colorado against the four major
networks. In the future, ECC may attempt to certify a class including the
networks as well as any and all owned and operated stations and any independent
affiliates. ECC has asked the court to enter a judgment declaring that ECC's
method of providing distant network programming does not violate the SHVA and
hence does not infringe the networks' copyrights.
Certain national television broadcast networks (and their local affiliates)
have threatened to file counter-claims or separate lawsuits against ECC for both
the retransmission of local-into-local and distant-into-local signals. On
November 5, 1998, several broadcast parties, acting on prior threats filed a
complaint alleging, among other things, copyright infringement against ECC in
federal district court in Miami. The plaintiffs in that action have also
requested the issuance of a preliminary injunction against ECC. In the event of
a decision adverse to ECC in any such litigation, significant damage awards and
additional material restrictions on the sale of network signals by ECC could
result. Among other things, ECC could be required to terminate delivery of
network signals to a material portion of its subscriber base. Further
restrictions on the sale of network channels imposed in the future could result
in decreases in subscriber activations and subscription television services
revenue and an increase in subscriber churn.
The determination of whether a household qualifies as "unserved" for the
purpose of being eligible to receive a distant network signal by satellite under
the SHVA depends, among other things, on whether that household can receive a
signal of "Grade B intensity" as defined by the FCC.
The Company is subject to various other legal proceedings and claims which
arise in the ordinary course of its business. In the opinion of management, the
amount of ultimate liability with respect to those actions will not materially
affect the financial position or results of operations of the Company.
MANAGEMENT
DIRECTORS AND OFFICERS
The Company is a wholly owned subsidiary of ECC. The following table sets
forth information concerning certain officers and directors of ECC and the
Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Charles W. Ergen 45 Chairman, Chief Executive Officer, President and
Director of ECC and the Company
O. Nolan Daines 39 Director of ECC
Raymond L. Friedlob 54 Director of ECC
James DeFranco 45 Executive Vice President and Director of ECC and
the Company
David K. Moskowitz 40 Senior Vice President, General Counsel, Secretary
and Director of ECC and the Company
Michael T. Dugan 49 President, EchoStar Technologies Corporation
Steven B. Schaver 44 Chief Financial Officer and Chief Operating
Officer of ECC and Chief Financial Officer of the
Company
</TABLE>
CHARLES W. ERGEN. Mr. Ergen has been Chairman of the Board of Directors,
President and Chief Executive Officer of ECC since its formation and, during the
past five years, has held various executive officer and director positions with
ECC's subsidiaries. Mr. Ergen, along with his spouse and James DeFranco, was a
co-founder of ECC in 1980.
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<PAGE>
O. NOLAN DAINES. In 1993, Mr. Daines founded DiviCom, Inc. (DiviCom).
DiviCom is a global provider of standards-based MPEG-II encoding product systems
for digital video broadcasting. DiviCom's product lines include audio/video/data
encoding and networking systems, as well as integration consulting and
implementation services. Prior to founding DiviCom, Mr. Daines served as
Executive Director of Engineering and System Architecture at Compression
Labs Inc., where he led the development of digital video products and
communications systems. In March 1998, Mr. Daines was appointed to ECC's Board
of Directors.
RAYMOND L. FRIEDLOB. Mr. Friedlob has been a director of ECC and a member
of its Audit and Executive Compensation Committees since October 1995.
Mr. Friedlob is presently a member of the law firm of Friedlob Sanderson Raskin
Paulson & Tourtillott, LLC. Prior to 1995, Mr. Friedlob was a partner of
Raskin & Friedlob, where he had practiced since 1970. Mr. Friedlob specializes
in federal securities law, corporate law, leveraged acquisitions, mergers and
taxation.
JAMES DEFRANCO. Mr. DeFranco, currently the Executive Vice President of
ECC, has been a Vice President and a Director of ECC since its formation and,
during the past five years, has held various executive officer and director
positions with ECC's subsidiaries. Mr. DeFranco, along with Mr. Ergen and
Mr. Ergen's spouse, was a co-founder of ECC in 1980.
DAVID K. MOSKOWITZ. Mr. Moskowitz is the Senior Vice President, Secretary
and General Counsel of ECC. In March 1998, Mr. Moskowitz was appointed to ECC's
Board of Directors to fill the vacancy created by the resignation of Mr. R.
Scott Zimmer. During the past five years, Mr. Moskowitz also has held various
executive officer and director positions with ECC's subsidiaries. Mr. Moskowitz
joined ECC in March 1990 and is responsible for all legal and regulatory affairs
of ECC and its subsidiaries.
MICHAEL T. DUGAN. Mr. Dugan is the President of the Consumer Products
Division of ECC. In that capacity, Mr. Dugan is responsible for all engineering
and manufacturing operations at ECC. Mr. Dugan has been with ECC since 1990.
STEVEN B. SCHAVER. Mr. Schaver was named the Chief Financial Officer of
ECC in February 1996. In November 1996, Mr. Schaver also was named Chief
Operating Officer. From November 1993 to February 1996, Mr. Schaver was the Vice
President of ECC's European and African operations. From July 1992 to
November 1993, Mr. Schaver was the Director of Sales and Marketing for ECC's
largest Spanish customer, Internacional de Telecomunicaciones, S.A. in Madrid,
Spain. Prior to July 1992 and since joining ECC in 1984, he has held various
positions with subsidiaries of ECC, including Vice President of European
operations. Prior to joining ECC Mr. Schaver was a Banking Officer with
Continental Illinois National Bank.
The Board of Directors of ECC currently has an Audit Committee and an
Executive Compensation Committee, both of which were established in
October 1995. The present members of the Audit and Executive Compensation
Committees are Messrs. Daines and Friedlob. The principal functions of the Audit
Committee are: (i) to recommend to the Board of Directors the selection of
independent public accountants; (ii) review management's plan for engaging ECC's
independent public accountants during the year to perform non-audit services and
consider what effect these services will have on the independence of the
accountants; (iii) review the annual financial statements and other financial
reports which require approval by the Board of Directors; (iv) review the
adequacy of ECC's system of internal accounting controls; and (v) review the
scope of the independent public accountants' audit plans and the results of the
audit. The principal function of the Executive Compensation Committee is to
award grants
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<PAGE>
under and administer ECC's Stock Incentive Plan.
EXECUTIVE COMPENSATION
Executive Officers are compensated by certain subsidiaries of ECC. The
following table sets forth the cash and non-cash compensation for the fiscal
years ended December 31, 1998, 1997 and 1996 for the Named Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
YEAR SALARY BONUS OTHER ANNUAL SECURITIES ALL OTHER
---- ------ ----- COMPENSATION(1) UNDERLYING COMPENSATION(2)
--------------- OPTIONS ---------------
(#)
<S> <C> <C> <C> <C> <C> <C>
Charles W. Ergen 1998 $ 248,082 $ -- $ -- $ 30,000 $ 8,545
Chairman, President and Chief
Executive Officer
1997 190,000 -- -- 30,000 13,044
1996 190,000 -- -- 17,300 140,680
James DeFranco 1998 $ 178,860 $ -- $ -- $ 30,000 $ 3,030
Executive Vice President and
Director
1997 160,000 -- -- 30,000 13,094
1996 160,000 -- -- -- 48,990
Michael T. Dugan 1998 $ 209,231 $ -- $ -- $ 15,000 $ 1,270
President, EchoStar Technologies
Corporation
1997 160,000 -- -- 138,820 13,094
1996 149,615 -- -- 18,735 12,882
David K. Moskowitz 1998 $ 187,311 $ -- $ -- $ 30,000 $ 1,270
Senior Vice President,
Secretary, General Counsel and
Director
1997 157,692 -- -- 30,000 12,918
1996 142,692 10,000 -- 7,495 12,994
Steven B. Schaver 1998 $ 183,081 $ -- $ 15,074 $ 39,090 $ 800
Chief Operating Officer and
Chief Financial Officer
1997 158,462 -- 15,416 59,410 11,984
1996 142,498 11,787 14,340 -- 12,516
</TABLE>
(1) With respect to Mr. Schaver, "Other Annual Compensation" includes
housing and car allowances related to his overseas assignments.
Although each Named Executive Officer enjoys certain other perquisites,
such perquisites do not exceed the lesser of $50,000 or 10% of each
Officer's salary and bonus.
(2) "All Other Compensation" consists of amounts contributed to the
Corporation's 401(k) Plan on behalf of the Named Executive Officers.
With respect to Mr. Ergen and Mr. DeFranco for 1996, "All Other
Compensation" also includes payments made in connection with a tax
indemnification agreement between ECC and such individuals.
The following table provides information concerning grants of options
to purchase shares of Class A common stock of ECC made in 1998 to the Named
Executive Officers:
95
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
NAME NUMBER OF PERCENT OF EXERCISE EXPIRATION DATE GRANT DATE
SECURITIES TOTAL OPTIONS PRICE PER PRESENT
UNDERLYING GRANTED TO SHARE ($/SH) VALUE(3)
OPTIONS GRANTED EMPLOYEES
(#) IN 1998
<S> <C> <C> <C> <C> <C>
Charles W. Ergen 30,000(1) 4.33% $18.29 April 15, 2006 $318,198
James DeFranco 30,000(1) 4.33% $17.00 April 15, 2006 325,251
Michael T. Dugan 15,000(1) 2.17% $17.00 April 15, 2006 162,625
David K. Moskowitz 30,000(1) 4.33% $17.00 April 15, 2006 325,251
Steven B. Schaver 30,000(1) 4.33% $17.00 April 15, 2006 325,251
Steven B. Schaver 9,090(2) 1.31% $22.00 March 31, 2008 131,268
</TABLE>
- -----------
(1) In February 1998, ECC adopted an incentive plan (the 1998 Executive
Incentive Plan) that provided, among other things, the Named Executive
Officers with options to purchase up to 30,000 shares of Class A common
stock, depending upon ECC's achievement of certain financial and other
goals. These options are subject to cancellation to the extent ECC does
not achieve these financial and other goals. Assuming ECC achieves
these financial and other goals, 33 1/3% of these options will vest on
April 15, 1999, and the remainder will vest 33 1/3% in each year
thereafter. All options expire five years from the date on which each
portion of the option first becomes exercisable, subject to early
termination in certain circumstances.
(2) In March 1998, ECC granted options to Mr. Schaver and other key
employees to purchase shares of Class A common stock. These options
will vest 20% one year following the date of the grant and continue to
vest 20% each year thereafter through 2003. These options expire five
years from the date on which each portion of the option first becomes
exercisable, subject to early termination in certain circumstances.
(3) Option values reflect Black-Scholes model output for options. The
Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, because option
valuation models require the input of highly subjective assumptions
(including the expected stock price characteristics) significantly
different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
stock- based compensation awards. The assumptions used in the model
were expected volatility of 67%, risk free rate of return of 5.64%,
dividend yield of 0%, and time to exercise of six years.
The following table provides information as of December 31, 1998,
concerning unexercised options to purchase shares of Class A Common Stock:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ON EXERCISE VALUE OPTIONS AT DECEMBER 31, 1998 ($)(1)
(#) RECEIVED ($) DECEMBER 31, 1998 (#)
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles W. Ergen -- $ -- 64,489 80,814 $2,344,164 $2,548,098
James DeFranco -- -- 47,340 67,279 1,748,148 2,176,592
Michael T. Dugan 17,000 496,163 64,361 137,180 2,074,513 4,361,525
David K. Moskowitz -- -- 68,679 80,432 2,483,365 2,605,698
Steven B. Schaver -- -- 34,395 98,058 1,170,798 3,064,854
</TABLE>
- -----------
(1) The dollar value of each exercisable and unexercisable option was
calculated by multiplying the number of shares of
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<PAGE>
Class A Common Stock underlying the option by the difference between
the exercise price of the option and the closing price (as quoted in
the Nasdaq National Market) of a share of Class A Common Stock on
December 31, 1998.
EXECUTIVE COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
Prior to October 1995, ECC did not have an Executive Compensation Committee, and
its Board of Directors determined all matters concerning executive compensation.
During 1998, the Executive Compensation Committee consisted of Messrs. Daines
and Friedlob. Mr. Friedlob is a partner in the law firm of Friedlob, Sanderson,
Raskin, Paulson & Tourtillot, LLC, which billed ECC approximately $210,000 in
fees related to securities offerings in 1997.
DIRECTOR COMPENSATION. Directors of ECC who are not also Executive
Officers of ECC receive $500 for each meeting of the Board of Directors attended
and are reimbursed for reasonable travel expenses related to attendance at Board
meetings. Directors of ECC who are employees are not compensated for their
services as Directors. Directors of ECC are elected annually by the shareholders
of ECC. Directors who are not also employees of ECC are granted options under
the 1995 Non-employee Director Stock Option Plan (the Director Plan) to acquire
1,000 Class A Shares of ECC upon election to the Board. Mr. Friedlob was granted
an option to acquire 1,000 Class A Shares of ECC on December 22, 1995, pursuant
to the Director Plan. These options were 100% vested upon issuance and had an
exercise price of $20.25 per share and a term of five years. These options were
repriced to $17.00 per share during July 1997. Additionally, in February 1997,
Mr. Friedlob was granted an option to acquire 5,000 shares of Class A Common
Stock. These options were 100% vested upon issuance and have an exercise price
of $17.00 and a term of five years. In March 1998, upon appointment to ECC's
Board of Directors, Mr. Daines was granted an option to acquire 1,000 shares of
ECC's Class A common stock. These options were 100% vested upon issuance, have
an exercise price of $22.00, and a term of five years.
STOCK INCENTIVE PLAN. ECC adopted the Incentive Plan to provide incentives
to attract and retain Executive Officers and other key employees. ECC's
Executive Compensation Committee administers the Incentive Plan. Key employees
are eligible to receive awards under the Incentive Plan, at the Committee's
discretion.
Awards available under the Incentive Plan include: (i) common stock
purchase options; (ii) stock appreciation rights; (iii) restricted stock and
restricted stock units; (iv) performance awards; (v) dividend equivalents; and
(vi) other stock-based awards. ECC has reserved up to 10 million Class A shares
for granting awards under the Incentive Plan. Under the terms of the Incentive
Plan, the Executive Compensation Committee retains discretion, subject to plan
limits, to modify the terms of outstanding awards and to reprice awards.
Pursuant to the Incentive Plan, ECC has granted options to its Executive
Officers and other key employees for the purchase of a total of 3,136,042 shares
of Class A common stock. Options to purchase 1,871,442 shares of Class A common
stock were outstanding as of December 31, 1998. These options generally vest at
the rate of 20% per year, commencing one year from the date of grant and 20%
thereafter on each anniversary of the date of the grant. The exercise prices of
these options, which have always been equal to or greater than the fair market
value at the date of grant, have ranged from $9.33 to $29.36 per share of ECC's
Class A common stock. Certain of these stock options were repriced as described
below.
Effective July 1, 1997, the Executive Compensation Committee voted to
reprice all outstanding options with an exercise price greater than $17.00 per
Class A share to $17.00 per Class A share. The price to which the options were
repriced exceeded the fair market value of a Class A share of the date of
repricing. The market value of Class A shares on the date of repricing was
$15.25 per Class A share. The
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<PAGE>
Executive Compensation Committee and the Board of Directors indicated that they
would not typically consider reducing the exercise price of previously granted
options. However, the Executive Compensation Committee and the Board of
Directors recognized that certain events beyond the reasonable control of the
employees of ECC (including particularly the failed transaction with The News
Corporation Limited in 1997) had significantly reduced the incentive those
options were intended to create. It is the expectation of the Executive
Compensation Committee and the Board of Directors that by reducing the exercise
price of these options to $17.00, the intended incentive will be restored in
part.
LAUNCH BONUS PLAN. Effective May 8, 1998, in connection with the launch of
EchoStar IV, ECC granted a performance award of ten shares of Class A common
stock to all full-time employees with more than 90 days of service. The total
number of shares granted relative to the performance award approximated 16,600
shares.
401(k) PLAN. In 1983, ECC adopted a defined-contribution tax-qualified
401(k) Plan. ECC's employees become eligible for participation in the 401(k)
Plan upon completing six months of service with ECC and reaching age 21.
Participants in the 401(k) Plan may contribute between 1% and 15% of their
compensation in each contribution period. ECC may make a 50% matching
contribution up to a maximum of $1,000 per participant per calendar year. ECC
may also make an annual discretionary profit sharing or employer stock
contribution to the 401(k) Plan with the approval of the Board of Directors.
Participants in the 401(k) Plan are immediately vested in their voluntary
contributions, plus actual earnings thereon. The balance of the vesting in
401(k) Plan participants' accounts is based on years of service. A participant
becomes 10% vested after one year of service, 20% vested after two years of
service, 30% vested after three years of service, 40% vested after four years of
service, 60% vested after five years of service, 80% vested after six years of
service, and 100% vested after seven years of service.
In March 1998, ECC contributed 80,000 shares of its Class A common stock to
the 401(k) Plan as a discretionary employer stock contribution. These shares,
which were allocated to individual participant 401(k) Plan accounts in
proportion to their 1997 eligible compensation, are subject to the seven-year
vesting schedule previously described. Shares of Class A common stock allocated
to the 401(k) Plan accounts of the Named Executive Officers pursuant to the 1997
discretionary employer stock contribution were as follows: (i) Charles W. Ergen,
539 shares; (ii) Michael T. Dugan, 539 shares (iii) James DeFranco, 539 shares;
(iv) Steven B. Schaver, 534 shares; (v) David K. Moskowitz, 531 shares and
(vi) all Officers and Directors as a group, 4,247 shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of December 31, 1998, accrued dividends on the Series A Preferred Stock
payable to Messrs. Ergen and DeFranco aggregated approximately $5.5 million and
$288,000, respectively.
During 1997, the law firm of Friedlob, Sanderson, Raskin, Paulson &
Tourtillott, LLC billed ECC approximately $210,000 in fees related to certain of
the Company's 1997 securities offerings. Mr. Friedlob, a member of ECC's Board
of Directors, is a partner of that law firm.
O. Nolan Daines, who was recently appointed to ECC's Board of Directors,
also is the founder of DiviCom. During 1998, ECC purchased approximately
$15 million of equipment for its Digital Broadcast Operations Center and for
certain of its other project integration services for international DTH ventures
from DiviCom.
The Company will distribute approximately $269.7 million of the net
proceeds of the offering OF
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<PAGE>
Old Notes to ECC to repurchase the Senior Preferred Exchange Notes pursuant to
the Tender Offers. In addition, ECC contributed cash or cash equivalents of $200
million to the Company as common equity. See "Use of Proceeds."
In addition, the Company repaid a $12 million demand note payable to ECC in
October 1997. Also, during 1995 and 1996, ECC advanced the Company $46 million
in the form of notes payable to enable the Company to make required payments
under its EchoStar III construction contract. The notes payable bear interest at
11.25%, which has been added to principal. The Company will use approximately
$60.2 million of the net proceeds of the Old Notes to repay such notes payable
together with accrued interest.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, to the best knowledge of EchoStar, the
beneficial ownership of EchoStar's voting securities as of December 31, 1998
(giving effect to the February , 1999 retirement of all outstanding shares of
EchoStar's Series A preferred stock) by: (i) each person known by EchoStar to be
the beneficial owner of more than five percent of any class of EchoStar's voting
shares; (ii) each Director of EchoStar; (iii) the five highest compensated
persons acting as an Executive Officer of EchoStar (the "Named Executive
Officers"); and (iv) all Directors and Executive Officers as a group. Unless
otherwise indicated, each person listed in the following table (alone or with
family members) has sole voting and dispositive power over the shares listed
opposite such person's name.
<TABLE>
<CAPTION>
NAME(1) NUMBER OF PERCENTAGE PRO FORMA PRO FORMA
SHARES OF NUMBER OF PERCENTAGE
CLASS SHARES (2) OF CLASS (2)
- ---------------------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A COMMON STOCK (3):
Charles W. Ergen (4), (5), (17), (18), (19) 30,052,731 62.1% 30,052,731 41.4%
The News Corporation Limited (6) - - 19,431,267 26.8%
MCI WorldCom, Inc. (6) - - 4,827,493 6.7%
FMR Corp. (7) 2,337,034 4.8% 2,337,034 3.2%
Wellington Management Company, LLP (8) 1,837,100 3.8% 1,837,100 2.5%
AMVESCAP, PLC (9) 1,760,750 3.6% 1,760,750 2.4%
James DeFranco (10), (17),(18) 1,156,345 2.4% 1,156,345 1.6%
David K. Moskowitz (11), (17), (18) 84,140 84,140
Michael T. Dugan (12),(17),(18) 73,979 73,979
Steven B. Schaver (13), (17), (18) 49,677 49,677
0. Nolan Daines (14), (18) 5,000 5,000
Raymond L. Friedlob (15), (18) 6,000 6,000
All Directors and Executive Officers as a Group
(11 persons) (16), (17), (18) 31,458,347 65.0% 31,458,347 43.3%
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
SHARES OF CLASS
<S> <C> <C>
CLASS B COMMON STOCK:
Charles W. Ergen 29,804,401 100.0%
All Directors and Executive Officers as a Group (11 persons) 29,804,401 100.0%
</TABLE>
* Less than 1%.
(1) Except as otherwise noted, the address of each such person is 5701
Santa Fe Drive, Littleton, Colorado 80120.
(2) Gives effect to the 110 Acquisition. Also include shares of Class A
Common Stock (Class A Shares) issuable upon conversion of Mr. Ergen's
shares of Class B Common Stock (Class B Shares).
(3) The following table sets forth to the best knowledge of EchoStar, the
actual ownership of
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EchoStar's Class A Shares (including options exercisable within 60
days) as of December 31, 1998 by each person known by EchoStar to be
the beneficial owner of more than five percent of any class of
EchoStar's voting shares; (ii) each Director or nominee of EchoStar;
(iii) each Named Executive Officer; and (iv) all Directors and
Executive Officers as a group:
<TABLE>
<CAPTION>
NAME NUMBER OF PERCENTAGE OF
SHARES CLASS
<S> <C> <C>
- ------------------------------------------------------------------
CLASS A COMMON STOCK
FMR Corp 2,337,034 14.4%
Wellington Management Company, LLP 1,837,100 11.3%
AMVESCAP, PLC 1,760,750 10.8%
James DeFranco 1,156,345 7.1%
Charles W. Ergen 248,329 1.5%
David K. Moskowitz 84,140 *
Michael T. Dugan 73,979 *
Steven B. Schaver 49,677 *
O. Nolan Daines 5,000 *
Raymond L. Friedlob 6,000 *
All Directors and Executive Officers as a Group (11 persons) 1,653,946 10.2%
</TABLE>
(4) Includes: (i) 1,915 Class A Shares held in EchoStar's 401(k) Employee
Savings Plan (the 401(k) Plan); (ii) the right to acquire 70,489 Class
A Shares within 60 days upon the exercise of employee stock options;
and (iii) 29,804,401 Class A Shares issuable upon conversion of Mr.
Ergen's Class B Shares;
(5) The percentage of total voting power held by Mr. Ergen is 93.5%, after
giving effect to the exercise of the employee stock options and would
be approximately 85.5% after also giving effect to the 110
Acquisition.
(6) The exact number of Class A Shares issuable to News Corporation and
MCI in connection with the 110 Acquisition will not be determinable
until consummation of that transaction. The number of Class A Shares
that will be issued is subject to adjustment if the 20 day average
closing price of EchoStar's Class A Shares is less than $15.00 or
greater than $39.00. The 20 day average closing price of EchoStar's
Class A Shares as of January 21, 1999 was $48.23. The following table
illustrates, at various prices, the number of Class A Shares issuable
to News Corporation and MCI.
<TABLE>
<CAPTION>
NEWS CORPORATION MCI
AVERAGE SHARE SHARES PERCENTAGE SHARES PERCENTAGE
PRICE OF CLASS (2) OF CLASS (2)
<S> <C> <C> <C> <C>
$10.00 36,045,000 38.6% 8,955,006 9.6%
$15.00 24,030,000 30.7% 5,970,000 7.6%
$39.00 24,030,000 30.7% 5,970,000 7.6%
$40.00 23,429,250 30.2% 5,820,750 7.5%
$45.00 20,826,000 28.0% 5,174,000 7.0%
$50.00 18,743,400 26.1% 4,656,600 6.5%
$55.00 17,039,455 24.5% 4,233,273 6.1%
$60.00 15,619,500 23.0% 3,880,500 5.7%
</TABLE>
(7) The address of FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02109.
(8) The address of Wellington Management Company, LLP is 75 State Street,
Boston, Massachusetts 02109.
(9) The address of AMVESCAP, PLC is 1315 Peachtree Street, N.W., Atlanta,
Georgia 30309.
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(10) Includes: (i) 1,915 Class A Shares held in the 401(k) Plan; (ii) the
right to acquire 53,340 Class A Shares within 60 days upon the
exercise of employee stock options; (iii) 751 Class A Shares held as
custodian for his minor children; and (iv) 375,000 Class A Shares
controlled by Mr. DeFranco as general partner of a partnership.
(11) Includes: (i) 1,813 Class A Shares held in the 401(k) Plan; (ii) the
right to acquire 74,679 Class A Shares within 60 days upon the
exercise of employee stock options; (iii) 166 Class A Shares held as
custodian for his minor children; (iv) 3,000 Class A Shares owned by
Mr. Moskowitz's spouse; and (v) 1,023 Class A Shares held as trustee
for Mr. Ergen's children.
(12) Includes: (i) 1,853 Class A Shares held in the 401(k) Plan and (ii)
the right to acquire 72,125 Class A Shares within 60 days upon the
exercise of employee stock options.
(13) Includes: (i) 1,684 Class A Shares held in the 401 (k) Plan and (ii)
the right to acquire 47,962 Class A Shares within 60 days upon the
exercise of employee stock options.
(14) Includes the right to acquire 1,000 Class A Shares within 60 days upon
the exercise of employee stock options.
(15) Includes the right to acquire 6,000 Class A Shares within 60 days upon
the exercise of employee stock options.
(16) Includes: (i) 14,486 Class A Shares held in the 401 (k) Plan; (ii) the
right to acquire 351,395 Class A Shares within 60 days upon the
exercise of employee stock options; 375,000 Class A Shares held in a
partnership; (iv) 29,804,401 Class A Shares issuable upon conversion
of Class B Shares; (v) 101,023 Class A Shares held in the name of, or
in trust for, minor children and other family members; and (vi) 3,947
Class A Shares owned by or jointly with family members.
(17) Includes 164,508 Class A Shares over which Mr. Ergen has voting power
as trustee for the 401(k) Plan. These shares also are beneficially
owned through investment power by each individual 401(k) Plan
participant. The Class A Shares individually owned by each of the
Named Executives through their participation in the 401(k) Plan are
included in each respective Named Executive's information above.
(18) Beneficial ownership percentage was calculated assuming exercise or
conversion of all Class B Shares, warrants and employee stock options
exercisable within 60 days (collectively, the "Derivative Securities")
into Class A Shares by all holders of such Derivative Securities.
Assuming exercise or conversion of Derivative Securities by such
person, and only by such person, the beneficial ownership of Class A
Shares would be as follows: Mr. Ergen, 66.5%; Mr. DeFranco, 7.4%;
less than one percent for Mr. Moskowitz, Mr. Dugan, Mr. Schaver, Mr.
Daines and Mr. Friedlob; and all Officers and Directors as a group,
67.3%.
(19) In connection with the 110 Acquisition, Mr. Ergen entered into a
voting agreement with News Corporation and MCI pursuant to which News
Corporation and MCI have agreed to vote their shares of EchoStar stock
in the manner recommended by the Board of Directors of EchoStar. Mr.
Ergen disclaims beneficial ownership of the shares of Class A Shares
to be issued to News Corporation and MCI.
DESCRIPTION OF THE NOTES
The Seven Year Notes and the Ten Year Notes (collectively, the Notes) will
each be issued pursuant to an Indenture by and among the Company, the Guarantors
and U.S. Bank Trust National Association, as Trustee (the Trustee). The terms
of the Exchange Notes are substantially identical to the terms of the Old Notes.
However, the Exchange Notes are not subject to transfer restrictions or
registration rights unless held by certain broker-dealers, affiliates of the
Company or certain other persons.
The following summary of certain provisions of: (i) the Indenture; and
(ii) the Registration Rights Agreements (the Registration Rights Agreements), by
and among the Company, the Guarantors and the
101
<PAGE>
Initial Purchasers relating to each series of Notes, does not purport to be
complete and is qualified in its entirety by reference to the Indenture and the
Registration Rights Agreements.
You can find the definitions of certain capitalized terms used in this
section under the subheading "--Certain Definitions." For purposes of this
section, references to the "Company" include only EchoStar DBS Corporation and
not its Subsidiaries, and references to "ECC" shall mean ECC together with each
Wholly Owned Subsidiary of ECC that beneficially owns 100% of the Equity
Interests of the Company, but only so long as ECC beneficially owns 100% of the
Equity Interests of such Subsidiary.
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the TIA). The Notes are subject to all such terms, and holders of Notes
are referred to the Indenture and the Trust Indenture Act for a statement
thereof. A copy of the Indenture may be obtained from the Company or the Initial
Purchasers.
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 because it, and not this description, defines your rights as
a holder of the Notes.
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
The following summary of certain provisions of: (i) the Indenture; and (ii)
the Registration Rights Agreements (the Registration Rights Agreements), by and
among the Company, the Guarantor and the Initial Purchasers, does not purport to
be complete and is qualified in its entirety by reference to the Indentures and
the Registration Rights Agreements. All material elements of the Indenture and
the Registration Rights Agreements are set forth below. The definitions of
certain terms used in the following summary are set forth below under "--Certain
Definitions." In the following summary, "EchoStar" refers solely to EchoStar
Communications Corporation and does not include any direct or indirect
subsidiaries of EchoStar. Unless the context otherwise requires, all references
herein to the "Notes" shall include the Old Notes and the Exchange Notes.
THE NOTES
The Notes are:
- - general unsecured obligations of the Company;
- - ranked equally in right of payment to each other;
- - ranked equally in right of payment with all existing and future senior debt
of the Company;
- - ranked senior in right of payment to all other existing and future
subordinated debt of the Company;
- - effectively junior to (i) all liabilities (including trade payables) of the
Company's Subsidiaries (if any) that are Unrestricted Subsidiaries (and
thus not Guarantors) or that are otherwise not Guarantors and of ETC or any
Subsidiary of the Company which constitutes a Non-Core Asset in the event
ETC or such Subsidiary is released from its Guarantee pursuant to the
covenant entitled "Certain Covenants--Dispositions of ETC and Non-Core
Assets," (ii) all liabilities (including trade payables) of any Subsidiary
Guarantor if such Guarantor's Guarantee is subordinated or avoided by a
court of competent jurisdiction (see "Risk Factors--Fraudulent Conveyance")
and (iii) all secured obligations, to the extent of the collateral securing
such obligations, including any borrowings under any future secured credit
facilities of the Company; and
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<PAGE>
- - unconditionally guaranteed by the Guarantors.
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Any Ten Year Notes that
remain outstanding after the completion of the Ten Year Note Exchange Offer,
together with the Ten Year Exchange Notes issued in connection with the Ten Year
Note Exchange Offer, will be treated as a single class of securities for all
purposes under the Ten Year Note Indenture, including, without limitation,
waivers, amendments, redemptions, Change of Control Offers and Excess Proceeds
Offers. Any Seven Year Notes that remain outstanding after completion of the
Seven Year Note Exchange Offer, together with the Seven Year Exchange Notes
(together with the Ten Year Exchange Notes, the Exchange Notes) issued in
connection with the Seven Year Note Exchange Offer, will be treated as a single
class of securities for all purposes under the Seven Year Note Indenture,
including without limitation, waivers, amendments, redemptions, Change of
Control Offers and Excess Proceeds Offers. All references in this section to
"Notes" shall be deemed to refer collectively to the Notes and any Exchange
Notes, unless the context otherwise requires.
THE GUARANTEES
The Notes are guaranteed by the Guarantors, which currently include DBSC
and substantially all of the Company's direct and indirect Wholly Owned
Restricted Subsidiaries. The Guarantees of the Notes are:
- - general unsecured obligations of each Guarantor;
- - ranked equally in right of payment to all other Guarantees;
- - ranked equally in right of payment with any existing and future senior debt
of the Guarantor;
- - effectively junior to secured obligations, to the extent of the collateral
securing such obligations, including any secured guarantees of the
Company's obligations under any future credit facilities of the Company;
and
- - ranked senior in right of payment to all other existing and future
subordinated debt of such Guarantor.
Assuming we had completed the offering and applied the proceeds as
intended, as of September 30, 1998, on a pro forma basis after giving effect to
the Tender Offers (assuming that all of the 1994 Notes, the 1996 Notes, the 1997
Notes were tendered in the Tender Offers) and to the Reorganization, there would
have been (i) no outstanding debt ranking ahead of the Notes or the Guarantees,
as the case may be, (ii) $70.6 million of outstanding debt ranking equally with
the Notes and the Guarantees, as the case may be, $45.4 million of which is
secured and (iii) no outstanding debt ranking behind the Notes or the
Guarantees, as the case may be. The Indentures will permit us and the Guarantors
to incur additional Indebtedness, including secured and unsecured Indebtedness
that ranks PARI PASSU with the Notes. Any secured Indebtedness will, as to the
collateral securing such Indebtedness, be effectively senior to the Notes to the
extent of such collateral.
As of the date of the Indentures, all of the Company's Subsidiaries are
"Restricted Subsidiaries" other than E-Sat, Inc., EchoStar Real Estate
Corporation, EchoStar International (Mauritius) Ltd., EchoStar Manufacturing and
Distribution Private Ltd. and Satrec Mauritius Ltd., which are "Unrestricted
Subsidiaries." Under certain circumstances, we will be permitted to designate
certain of our Subsidiaries as additional "Unrestricted Subsidiaries."
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants in the Indenture. Unrestricted Subsidiaries will not guarantee the
Notes.
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<PAGE>
ECC and its Subsidiaries (other than DBSC, which is expected to be merged
into a Subsidiary of the Company upon approval by the FCC, and other than the
Company and substantially all of its Subsidiaries) will not guarantee or
otherwise be obligated in respect of the Notes.
GENERAL
The Notes will rank PARI PASSU in right of payment to each other, and with
all senior indebtedness of the Company, except to the extent of any collateral
securing such senior indebtedness, which is effectively senior to the Notes to
the extent of such collateral. Each Guarantee will rank PARI PASSU in right of
payment with the other Guarantees, and with all senior indebtedness of the
Guarantor issuing such Guarantee, except to the extent of any collateral
securing such senior indebtedness, which is effectively senior to the Guarantees
to the extent of such collateral. Although the Notes are titled "Senior,"
neither the Company nor any Guarantor has issued, and neither has any plans to
issue, any indebtedness to which the Notes or the Guarantees, as the case may
be, would be senior. On a pro forma basis, after giving effect to the offering
of the Notes and to the application of the net proceeds therefrom as intended
(assuming that all of the 1994 Notes, the 1996 Notes, the 1997 Notes and the
Senior Preferred Exchange Notes were tendered in the Tender Offers), and to the
Reorganization, the Company's aggregate consolidated Indebtedness as of
September 30, 1998, for purposes of the Indenture, would have been approximately
$2.07 billion.
PRINCIPAL, MATURITY AND INTEREST
The Ten Year Notes will be issued in an aggregate principal amount of
$1.625 billion. The Ten Year Notes will mature on February 1, 2009. The Seven
Year Notes will be issued in an aggregate principal amount of $375.0 million.
The Seven Year Notes will mature on February 1, 2006.
Interest on the Notes will accrue at the rate per annum set forth on the
cover page of this prospectus and will be payable semiannually in cash on each
February 1 and August 1, commencing August 1, 1999 to holders of record on the
immediately preceding January 15 and July 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 the date of issuance. Interest on the Notes
will be computed on the basis of a 360-day year of twelve 30-day months.
The Notes will be payable both as to principal and interest at the office
or agency of the Company maintained for such purpose or, at the option of the
Company, payment of interest may be made by check mailed to the holders of the
Notes at their respective addresses set forth in the register of holders of
Notes. Until otherwise designated by the Company, the Company's office or agency
will be the office of the Trustee maintained for such purpose.
GUARANTEES
Each Guarantor will jointly and severally guarantee the Company's
obligations under the Ten Year Notes and the Seven Year Notes, respectively. The
obligations of each Guarantor under its Guarantee will be limited as necessary
to prevent such Guarantee from constituting a fraudulent conveyance or
fraudulent transfer under applicable law. See "Risk Factors--Fraudulent
Conveyance." Each Guarantor that makes a payment or distribution under a
Guarantee shall be entitled to a pro rata contribution from each other Guarantor
based on the net assets of each other Guarantor.
Each Guarantor may consolidate with or merge into or sell its assets to the
Company or another
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<PAGE>
Guarantor that is a Restricted Subsidiary of the Company, or with or to other
persons upon the terms and conditions set forth in the Indentures. A Guarantor
may not sell or otherwise dispose of all or substantially all of its assets, or
consolidate with or merge with or into another person (whether or not such
Guarantor is the surviving person) unless certain conditions are met. See
"--Certain Covenants--Merger, Consolidation, or Sale of Assets."
The Guarantee of a Guarantor will be deemed automatically discharged and
released in accordance with the terms of the Indenture:
(1) in connection with any direct or indirect sale, conveyance or other
disposition of all of the capital stock or all or substantially all of the
assets of that Guarantor (including by way of merger or consolidation), if such
sale or disposition is made in compliance with the applicable provisions of the
Indenture (See "--Certain Covenants--Asset Sales");
(2) if a Guarantor is dissolved or liquidated in accordance with the
provisions of the Indenture;
(3) if the Company designates any such Guarantor as an Unrestricted
Subsidiary in compliance with the terms of the Indentures; or
(4) without limiting the generality of the foregoing, in the case of ETC
or any Guarantor which constitutes a Non-Core Asset, upon the sale or other
disposition of any Equity Interest of ETC or such Guarantor which constitutes a
Non-Core Asset, respectively. See "--Certain Covenants--Dispositions of ETC and
Non-Core Assets".
OPTIONAL REDEMPTION
THE TEN YEAR NOTES
Except as provided in the next paragraph, the Ten Year Notes will not be
redeemable at the Company's option prior to February 1, 2004. Thereafter, the
Ten Year 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) set forth
below, together with accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the 12-month period beginning on February 1
of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2004 104.688%
2005 103.516
2006 102.344
2007 101.172
2008 100.000
</TABLE>
Notwithstanding the foregoing, at any time prior to February 1, 2002, the
Company may redeem up to 35% of the aggregate principal amount of the Ten Year
Notes outstanding at a redemption price equal to 109.375% of the principal
amount thereof on the repurchase date, together with accrued and unpaid interest
to such repurchase date, with the net cash proceeds of one or more public or
private sales (including sales to ECC, regardless of whether ECC obtained such
funds from an offering of Equity
105
<PAGE>
Interests or Indebtedness of ECC or otherwise) of Equity Interests (other than
Disqualified Stock) of the Company (other than proceeds from a sale to any
Subsidiary of the Company or any employee benefit plan in which the Company or
any of its Subsidiaries participates); PROVIDED that: (a) at least 65% in
aggregate principal amount of the Ten Year Notes originally issued remain
outstanding immediately after the occurrence of such redemption; (b) such
redemption occurs within 120 days of the date of the closing of any such sale;
and (c) the sale of such Equity Interests is made in compliance with the terms
of the Indenture.
THE SEVEN YEAR NOTES
Except as provided in the next paragraph, the Seven Year Notes will not be
redeemable at the Company's option prior to February 1, 2003. Thereafter, the
Seven Year 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) set forth
below, together with accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the 12-month period beginning on February 1
of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2003 104.625%
2004 102.313
2005 100.000
</TABLE>
Notwithstanding the foregoing, at any time prior to February 1, 2002, the
Company may redeem up to 35% of the aggregate principal amount of the Seven Year
Notes outstanding at a redemption price equal to 109.250% of the principal
amount thereof on the repurchase date, together with accrued and unpaid interest
to such repurchase date, with the net cash proceeds of one or more public or
private sales (including sales to ECC, regardless of whether ECC obtained such
funds from an offering of Equity Interests or Indebtedness of ECC or otherwise)
of Equity Interests (other than Disqualified Stock) of the Company (other than
proceeds from a sale to any Subsidiary of the Company or any employee benefit
plan in which the Company or any of its Subsidiaries participates); PROVIDED
that: (a) at least 65% in aggregate principal amount of the Seven Year Notes
originally issued remain outstanding immediately after the occurrence of such
redemption; (b) such redemption occurs within 120 days of the date of the
closing of any such sale; and (c) the sale of such Equity Interests is made in
compliance with the terms of the Indenture.
SELECTION AND NOTICE
If less than all of a series of Notes are to be redeemed at any time,
selection of Notes of the applicable series for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which such Notes are listed or, if such Notes are not so
listed, on a pro rata basis, by lot or by such other method as the Trustee deems
fair and appropriate, PROVIDED that no Notes with a principal amount of $1,000
or less shall be redeemed in part. Notice of redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each holder of Notes to be redeemed at its registered address. If any Note is to
be redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed. A new
Note of the same series in principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon cancellation of
the original Note. On
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<PAGE>
and after the redemption date, if the Company does not default in the payment of
the redemption price, interest will cease to accrue on Notes or portions thereof
called for redemption.
OFFER TO PURCHASE UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
make an offer (a "Change of Control Offer") to each holder of Notes to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such holder's Notes at a purchase price equal to 101% of the aggregate principal
amount thereof, together with accrued and unpaid interest thereon to the date of
repurchase (in either case, the "Change of Control Payment"). Within 15 days
following any Change of Control, the Company shall mail a notice to each holder
stating:
(a) that the Change of Control Offer is being made pursuant to the
covenant entitled "Change of Control";
(b) the purchase price and the purchase date, which shall be no earlier
than 30 days nor later than 40 days after the date such notice is mailed (the
"Change of Control Payment Date");
(c) that any Notes not tendered will continue to accrue interest in
accordance with the terms of the Indenture;
(d) that, unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control Payment
Date;
(e) 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 setting forth the name of the holder, the principal
amount of Notes delivered for purchase, and a statement that such holder is
withdrawing his election to have such Notes purchased;
(f) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof; and
(g) any other information material to such holder's decision to tender
Notes.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes in connection with a Change of Control. Due to the
highly leveraged structure of the Company and the terms of other indebtedness to
which the Company and its Subsidiaries are or may in the future be subject, the
Company may not be able to repurchase all of the Notes tendered for purchase
upon the occurrence of a Change of Control. If the Company fails to repurchase
all of the Notes tendered for purchase upon the occurrence of a Change of
Control, such failure will constitute an Event of Default. In addition, the
terms of other indebtedness to which the Company may be subject may prohibit the
Company from purchasing the Notes or offering to purchase the Notes, and a
Change of Control Offer or a Change of Control Payment could trigger a default
or event of default under the terms of such indebtedness. In the event that the
Company were unable to obtain the consent of the holders of any such other
indebtedness to make a Change of Control Offer or make the Change of Control
Payment or to repay such indebtedness, a Default or Event of Default may occur.
See
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<PAGE>
"--Events of Default and Remedies."
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
CERTAIN COVENANTS
RESTRICTED PAYMENTS. The Indenture will provide that neither the Company
nor any of its Restricted Subsidiaries may, directly or indirectly:
(a) declare or pay any dividend or make any distribution on account of any
Equity Interests of the Company other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company;
(b) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of ECC, the Company or any of their respective Subsidiaries or
Affiliates, other than any such Equity Interests owned by the Company or any
Wholly Owned Restricted Subsidiary;
(c) purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is expressly subordinated in right of payment to the Notes or
the Guarantees, except in accordance with the scheduled mandatory redemption,
sinking fund or repayment provisions set forth in the original documentation
governing such Indebtedness;
(d) declare or pay any dividend or make any distribution on account of any
Equity Interests of any Restricted Subsidiary, other than (x) to the Company or
any Wholly Owned Restricted Subsidiary or (y) to all holders of any class or
series of Equity Interests of such Restricted Subsidiary on a PRO RATA basis;
PROVIDED that in the case of this clause (y), such dividends or distributions
may not be in the form of Indebtedness or Disqualified Stock; or
(e) make any Restricted Investment (all such prohibited payments and other
actions set forth in clauses (a) through (e) being collectively referred to as
"Restricted Payments"), unless, at the time of such Restricted Payment:
(i) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(ii) after giving effect to such Restricted Payment and the incurrence of
any Indebtedness the net proceeds of which are used to finance such Restricted
Payment, the Indebtedness to Cash Flow Ratio of the Company would not have
exceeded 8.0 to 1; and
(iii) such Restricted Payment, together with the aggregate of all other
Restricted Payments after the date of the Indenture, is less than the sum of
(A) the difference of (x) cumulative Consolidated Cash Flow of the Company
determined at the time of such Restricted Payment (or, in case such Consolidated
Cash Flow shall be a deficit, minus 100% of such deficit) minus (y) 120% of
Consolidated Interest Expense of the Company, each as determined for the period
(taken as one accounting period) from April 1, 1999 to the end of the Company's
most recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment; plus (B) an amount equal to
100% of the aggregate net cash proceeds and, in the case of proceeds consisting
of assets used in or constituting a business permitted under the covenant
described under "--Activities of the Company,"
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<PAGE>
100% of the fair market value of the aggregate net proceeds other than cash
received by the Company either from capital contributions from ECC, or from the
issue or sale (including an issue or sale to ECC) of Equity Interests (other
than Disqualified Stock) of the Company (other than Equity Interests sold to any
Subsidiary of the Company), since the date of the Indenture, but, in the case of
any net cash proceeds, only to the extent such net cash proceeds are not used to
redeem Notes pursuant to the provision described in the second paragraph under
"--Optional Redemption"; PROVIDED that the proceeds calculated for purposes of
this clause (B) shall exclude cash and non-cash property and assets received by
the Company pursuant to the covenants described under "--The 110 Acquisition"
and "--The ECC Equity Contribution;" plus (C) in the event that any Unrestricted
Subsidiary is designated by the Company as a Restricted Subsidiary, an amount
equal to the fair market value of the net Investment of the Company or a
Restricted Subsidiary in such Subsidiary at the time of such designation
PROVIDED, HOWEVER, that the foregoing sum shall not exceed the amount of the
Investments made by the Company or any Restricted Subsidiary in any such
Unrestricted Subsidiary since the date of the Indenture, plus (D) 100% of any
cash dividends and other cash distributions received by the Company and its
Wholly Owned Restricted Subsidiaries from an Unrestricted Subsidiary to the
extent not included in Cumulative Consolidated Cash Flow plus (E), to the extent
not included in clauses (A) through (D) above, an amount equal to the net
reduction in Investments of the Company and its Restricted Subsidiaries since
the Issue Date resulting from payments in cash of interest on Indebtedness,
dividends, or repayment of loans or advances, or other transfers of property, in
each case, to the Company or to a Wholly Owned Restricted Subsidiary or from the
net cash proceeds from the sale, conveyance or other disposition of any such
Investment; PROVIDED, HOWEVER, that the foregoing sum shall not exceed, with
respect to any person in whom such Investment was made, the amount of
Investments previously made by the Company or any Restricted Subsidiary in such
person which were included in computations made pursuant to this clause (iii).
The foregoing provisions will not prohibit the following (provided that
with respect to clauses (2), (3), (5), (6), (7), (8), (9), (12), (13) and
(14) below, no Default or Event of Default shall have occurred and be continuing
therein):
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment would have
complied with the provisions of the Indenture;
(2) the redemption, repurchase, retirement or other acquisition of any
Equity Interests of the Company in exchange for, or out of the net proceeds of
the substantially concurrent capital contribution from ECC or from the
substantially concurrent issue or sale (including to ECC) of Equity Interests
(other than Disqualified Stock) of the Company (other than Equity Interests
issued or sold to any Subsidiary of the Company);
(3) Investments in an aggregate amount not to exceed $75 million plus, to
the extent not included in Consolidated Cash Flow, an amount equal to the net
reduction in such Investments resulting from payments in cash of interest on
Indebtedness, dividends or repayment of loans or advances, or other transfers
of property, in each case, to the Company or to a Wholly Owned Restricted
Subsidiary or from the net cash proceeds from the sale, conveyance or other
disposition of any such Investment; PROVIDED, HOWEVER, that the foregoing sum
shall not exceed, with respect to any person in whom such Investment was made,
the amount of Investments previously made by the Company or any Restricted
Subsidiary in such person pursuant to this clause (3);
(4) Investments to fund the financing activity of DNCC in the ordinary
course of its business in an amount not to exceed, as of the date of
determination, the sum of (A) $35 million plus (B) 40% of
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the aggregate cost to DNCC for each Satellite Receiver purchased by DNCC and
leased by DNCC to a retail consumer in excess of 100,000 units;
(5) cash dividends or distributions to ECC to the extent required for the
purchase of employee stock options to purchase Capital Stock of ECC, or Capital
Stock of ECC issued pursuant to the exercise of employee stock options to
purchase Capital Stock of ECC, in an aggregate amount not to exceed $2 million
in any calendar year and in an aggregate amount not to exceed $10 million since
the date of the Indenture;
(6) a Permitted Refinancing (as defined below in "--Incurrence of
Indebtedness");
(7) Investments in an amount equal to 100% of the aggregate net proceeds
(whether or not in cash) received by the Company from capital contributions from
ECC or from the issue and sale (including a sale to ECC) of Equity Interests
(other than Disqualified Stock) of the Company (other than Equity Interests
issued or sold to a Subsidiary of the Company), on or after the date of the
Indenture; PROVIDED that such proceeds shall include only $300 million in the
case of assets contributed pursuant to the covenant described under "--The 110
Acquisition" and shall include all of the cash contributed pursuant to the
covenant described under "--The ECC Equity Contribution;" plus, to the extent
not included in Consolidated Cash Flow, an amount equal to the net reduction in
such Investments resulting from payments in cash of interest on Indebtedness,
dividends, or repayment of loans or advances, or other transfers of property, in
each case, to the Company or to a Wholly Owned Restricted Subsidiary or from the
net cash proceeds from the sale, conveyance, or other disposition of any such
Investment; PROVIDED, HOWEVER, that the foregoing sum shall not exceed, with
respect to any person in whom such Investment was made, the amount of
Investments previously made by the Company or any Restricted Subsidiary in such
person pursuant to this clause (7) in each case, PROVIDED that such Investments
are in businesses of the type described under "--Activities of the Company;"
(8) Investments in any Restricted Subsidiary which is a Guarantor but
which is not a Wholly Owned Restricted Subsidiary;
(9) Investments in NagraStar in an aggregate amount not to exceed
$25 million and in SkyVista in an aggregate amount not to exceed $10 million;
(10) cash dividends or other cash distributions to ECC in an amount
sufficient to enable ECC to (A) repurchase its 12 1/8% Senior Exchange Notes,
(B) pay interest on any of its 12 1/8% Senior Exchange Notes which remain
outstanding following consummation of the Tender Offers and (C) either
(x) redeem such 12 1/8% Senior Exchange Notes that remain outstanding at the
prices set forth in the indenture governing such notes; or (y) repurchase or
defease such notes at any time prior to such redemption; PROVIDED in each case,
that ECC has irrevocably agreed, for the benefit of the Holders of the Notes, to
apply such cash pursuant to the clause above under which such dividend or other
distribution was made;
(11) cash dividends or distributions to ECC to the extent required for the
purchase of odd-lots of Equity Interests of ECC, in an amount not to exceed
$5 million in the aggregate;
(12) the making of any Restricted Payment (including the receipt of any
Investment) permitted under or resulting from any transaction permitted under
the covenant described under "--Dispositions of ETC and Non-Core Assets";
PROVIDED that all conditions to any such Restricted Payment set forth in such
covenant are satisfied; or
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(13) Investments made as a result of the receipt of non-cash proceeds from
Asset Sales made in compliance with the covenant described under "--Asset
Sales."
Restricted Payments made pursuant to clauses (1), (2), (4), (7) (but only
to the extent that net proceeds received by the Company as set forth in such
clause (7) were included in the computations made in clause (iii)(B) of the
first paragraph of this covenant), (11) and (13) (but only to the extent such
Investments pursuant to clause (13) (a) were made as a result of the receipt of
non-cash proceeds from Asset Sales as set forth in the provision described in
clause (y) of the last paragraph under "--Asset Sales" and (b) are not
designated as Investments made pursuant to an applicable provision of the
immediately preceding paragraph of this covenant (other than clause (13)
thereof)) shall be included as Restricted Payments in any computation made
pursuant to clause (iii) of the first paragraph of this covenant. Restricted
Payments made pursuant to clauses (3), (5), (6), (7) (but only to the extent
that net proceeds received by the Company as set forth in such clause (7) were
not included in the computations made in clause (iii)(B) of the first paragraph
of this covenant), (8), (9), (10), (12) and (13) (but only to the extent such
Investments pursuant to clause (13) (a) were not made as a result of the receipt
of non-cash proceeds from Asset Sales as set forth in the provision described in
clause (y) of the last paragraph of "--Asset Sales" or (b) if made pursuant to
such clause (y), were designated as Investments made pursuant to an applicable
provision of the immediately preceding paragraph of this covenant (other than
clause (13) thereof)) shall not be included as Restricted Payments in any
computation made pursuant to clause (iii) of the first paragraph of this
covenant.
If the Company or any Restricted Subsidiary makes an Investment which was
included in computations made pursuant to this covenant and the person in which
such Investment was made subsequently becomes a Restricted Subsidiary that is a
Guarantor, to the extent such Investment resulted in a reduction in the amounts
calculated under clause (iii) of the first paragraph of or under any other
provision of this covenant, then such amount shall be increased by the amount of
such reduction.
Not later than five business days after January 1 and July 1 of each year
and ten days following a request from the Trustee, the Company shall deliver to
the Trustee an Officers' Certificate stating that each Restricted Payment made
in the six months preceding such January 1, July 1 or date of request, as the
case may be, is permitted and setting forth the basis upon which the
calculations required by the covenant "Restricted Payments" were computed, which
calculations shall be based upon the Company's latest available financial
statements.
INCURRENCE OF INDEBTEDNESS. The Indentures provide that the Company shall
not, and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guarantee or otherwise become directly
or indirectly liable with respect to (collectively, "incur") any Indebtedness
(including Acquired Debt); PROVIDED, HOWEVER, that, notwithstanding the
foregoing the Company and any Guarantor may incur Indebtedness (including
Acquired Debt), if, after giving effect to the incurrence of such Indebtedness
and the application of the net proceeds thereof on a pro forma basis, the
Indebtedness to Cash Flow Ratio of the Company would not have exceeded 8.0 to 1.
The foregoing limitation will not apply to any of the following incurrences
of Indebtedness:
(i) Indebtedness represented by the Notes, the Guarantees and the
Indenture;
(ii) the incurrence by the Company or any Guarantor of Acquired Subscriber
Debt not to exceed $1,250 per Acquired Subscriber;
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(iii) the incurrence by the Company or any Guarantor of Deferred Payments
and letters of credit with respect thereto;
(iv) Indebtedness of the Company or any Guarantor that ranks PARI PASSU
with or is subordinated to the Notes and the Guarantees in an aggregate
principal amount not to exceed $700 million at any one time outstanding, which
Indebtedness may be secured to the extent permitted under the covenant described
under "--Liens"; PROVIDED that up to $75 million at any one time outstanding of
such Indebtedness may be incurred by Restricted Subsidiaries that are not
Guarantors; PROVIDED further that any Indebtedness incurred pursuant to this
clause (iv) that is incurred pursuant to a Credit Agreement shall be incurred
pursuant to a Credit Agreement under which the Company is the sole primary
obligor (and under which the Guarantors (and no other Restricted Subsidiary) may
guarantee the primary obligations of the Company);
(v) Indebtedness between and among the Company and each of the Guarantors;
(vi) Acquired Debt of a person incurred prior to the date upon which such
person was acquired by the Company or any Guarantor (excluding Indebtedness
incurred by such entity other than in the ordinary course of its business in
connection with, or in contemplation of, such entity being so acquired) in an
amount not to exceed (A) $30 million in the aggregate for all such persons other
than those described in the immediately following clause (B); and (B) $5 million
acquired in connection with the acquisition of Media4;
(vii) Existing Indebtedness;
(viii) the incurrence of Purchase Money Indebtedness by the Company or any
Guarantor in an amount not to exceed the cost of construction, acquisition or
improvement of assets used in any business permitted under the covenant
"--Activities of the Company," being constructed, acquired or improved as well
as any launch costs and insurance premiums related to such assets;
(ix) Hedging Obligations of the Company or any of its Restricted
Subsidiaries covering Indebtedness of the Company or such Restricted Subsidiary
to the extent the notional principal amount of such Hedging Obligation does not
exceed the principal amount of the Indebtedness to which such Hedging Obligation
relates; PROVIDED, HOWEVER, that such Hedging Obligations are entered into to
protect the Company and its Restricted Subsidiaries from fluctuation in interest
rates on Indebtedness incurred in accordance with the Indenture;
(x) Indebtedness of the Company or any Restricted Subsidiary in respect of
performance bonds or letters of credit of the Company or any Restricted
Subsidiary or surety bonds provided by the Company or any Restricted Subsidiary
incurred in the ordinary course of business and on ordinary business terms in
connection with the businesses permitted under the covenant "--Activities of the
Company";
(xi) Indebtedness of the Company or any Guarantor the proceeds of which are
used solely to finance the construction and development of a call center owned
by the Company or a Guarantor in McKeesport, Pennsylvania or any refinancing
thereof; PROVIDED that the aggregate of all Indebtedness incurred pursuant to
this clause (xi) shall in no event exceed $10 million at any one time
outstanding;
(xii) the incurrence by the Company or any Guarantor of Indebtedness issued
in exchange for, or the proceeds of which are used to extend, refinance, renew,
replace, substitute or refund in whole or in
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part Indebtedness referred to in the first paragraph of this covenant or in
clauses (i), (ii), (iii), (vi), (vii) above ("Refinancing Indebtedness");
PROVIDED, HOWEVER, that: (A) the principal amount of such Refinancing
Indebtedness shall not exceed the principal amount and accrued interest of the
Indebtedness so extended, refinanced, renewed, replaced, substituted or refunded
and any premiums payable and reasonable fees, expenses, commissions and costs in
connection therewith; (B) the Refinancing Indebtedness shall have a final
maturity later than, and a Weighted Average Life to Maturity equal to or greater
than, the final maturity and Weighted Average Life to Maturity, respectively, of
the Indebtedness being extended, refinanced, renewed, replaced or refunded; and
(C) the Refinancing Indebtedness shall be subordinated in right of payment to
the Notes and the Guarantees, if at all, on terms at least as favorable to the
holders of Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced or refunded (a
"Permitted Refinancing");
(xiii) the guarantee by the Company or any Guarantor of Indebtedness of the
Company or a Restricted Subsidiary that was permitted to be incurred by another
provision of this covenant; or
(xiv) Indebtedness under Capital Lease Obligations of the Company or any
Guarantor with respect to no more than two direct broadcast satellites at any
time.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories described in clauses (i) through (xiv) above or is permitted to be
incurred pursuant to the first paragraph of this covenant and also meets the
criteria of one or more of the categories described in clauses (i) through
(xiv) above, the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this covenant and may from time to
time reclassify such item of Indebtedness in any manner in which such item could
be incurred at the time of such reclassification. Accrual of interest and the
accretion of accreted value will not be deemed to be an incurrence of
Indebtedness for purposes of this covenant.
ASSET SALES. If the Company or any Restricted Subsidiary, in a single
transaction or a series of related transactions:
(a) sells, leases (in a manner that has the effect of a disposition),
conveys or otherwise disposes of any of its assets (including by way of a
sale-and-leaseback transaction), other than: (i) sales or other dispositions of
inventory in the ordinary course of business; (ii) sales or other dispositions
to the Company or a Wholly Owned Restricted Subsidiary of the Company by the
Company or any Restricted Subsidiary; (iii) sales or other dispositions of
accounts receivable to DNCC for cash in an amount at least equal to the fair
market value of such accounts receivable; (iv) sales or other dispositions of
rights to construct or launch satellites; and (v) sales or other dispositions
permitted under "--Disposition of ETC and Non-Core Assets" (PROVIDED that the
sale, lease, conveyance or other disposition of all or substantially all of the
assets of the Company shall be governed by the provisions of the Indenture
described below under the caption "--Merger, Consolidation, or Sale of Assets");
(b) issues or sells Equity Interests of any Restricted Subsidiary (other
than any issue or sale of Equity Interests of ETC or a Subsidiary which
constitutes a Non-Core Asset permitted under "--Disposition of ETC and Non-Core
Assets"),
in either case, which assets or Equity Interests: (i) have a fair market
value in excess of $35 million (as determined in good faith by the Board of
Directors of the Company evidenced by a resolution of the Board of Directors of
the Company and set forth in an Officers' Certificate delivered to the Trustee);
or (ii) are sold or otherwise disposed of for net proceeds in excess of
$35 million (each of
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the foregoing, an "Asset Sale"), then:
(A) the Company or such Restricted Subsidiary, as the case may be, must
receive consideration at the time of such Asset Sale at least equal to the fair
market value (as determined in good faith by the Board of Directors of the
Company evidenced by a resolution of the Board of Directors of the Company and
set forth in an Officers' Certificate delivered to the Trustee not later than
the fifth business day following January 1 and July 1 of each year and ten days
following a request from the Trustee which certificate shall cover each Asset
Sale made in the six months preceding January 1, July 1 or date of request, as
the case may be) of the assets sold or otherwise disposed of; and
(B) at least 75% of the consideration therefor received by the Company or
such Restricted Subsidiary, as the case may be, must be in the form of (x) cash,
Cash Equivalents or Marketable Securities, (y) any asset which is promptly (and
in no event later than 90 days after the date of transfer to the Company or a
Restricted Subsidiary) converted into cash; PROVIDED that to the extent that
such conversion is at a price that is less than the fair market value (as
determined above) of such asset at the time of the Asset Sale in which such
asset was acquired, the Company shall be deemed to have made a Restricted
Payment in the amount by which such fair market value exceeds the cash received
upon conversion; or (z) properties and capital assets (excluding Equity
Interests) to be used by the Company or any of its Restricted Subsidiaries in a
business permitted under the covenant described under "--Activities of the
Company"; PROVIDED, HOWEVER, that up to $20 million of assets in addition to
assets specified in clauses (x), (y) or (z) above at any one time may be
considered to be cash for purposes of this clause (B), PROVIDED that the
provisions of the next paragraph are complied with as such non-cash assets are
converted to cash. The amount of any liabilities of the Company or any
Restricted Subsidiary that are assumed by or on behalf of the transferee in
connection with an Asset Sale (and from which the Company or such Restricted
Subsidiary are unconditionally released) shall be deemed to be cash for the
purpose of this clause (B).
The Indentures also provide that the Net Proceeds from such Asset Sale
shall be used only: (i) to acquire assets used in, or stock or other ownership
interests in a person that upon the consummation of such Asset Sale becomes a
Restricted Subsidiary and will be engaged primarily in, the business of the
Company as described under "--Activities of the Company," to repurchase Notes or
if the Company sells any of its satellites after launch such that the Company or
its Restricted Subsidiaries own less than three in-orbit satellites, only to
purchase a replacement satellite; or (ii) as set forth in the next sentence. Any
Net Proceeds from any Asset Sale that are not applied or invested as provided in
the preceding sentence within 365 days after such Asset Sale shall constitute
"Excess Proceeds" and shall be applied to an offer to purchase Notes and other
senior Indebtedness of the Company if and when required under "--Excess Proceeds
Offer."
Clause (B) of the second preceding paragraph shall not apply to all or such
portion of the consideration (i) as is designated by the Company in an Asset
Sale as being subject to this paragraph; and (ii) with respect to which the
aggregate fair market value at the time of receipt of all consideration received
by the Company or any Restricted Subsidiary in all such Asset Sales so
designated does not exceed the amount contributed to the Company under the
covenant described under "--ECC Equity Contribution" plus, to the extent any
such consideration did not satisfy clauses (B)(x) or B(z) above, upon the
exchange or repayment of such consideration for or with assets which satisfy
such clauses, an amount equal to the fair market value of such consideration
(evidenced by a resolution of the Board of Directors of the Company and set
forth in an Officers' Certificate delivered to the Trustee as set forth in
clause (A) above).
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In addition, clause (B) above shall not apply to any Asset Sale (x) where
assets not related to the direct broadcast satellite business are contributed to
a joint venture between the Company or one of its Restricted Subsidiaries and a
third party that is not an Affiliate of ECC or any of its Subsidiaries; PROVIDED
that following the sale, lease, conveyance or other disposition the Company or
one of its Wholly Owned Restricted Subsidiaries owns at least 50% of the voting
and equity interest in such joint venture, (y) to the extent the consideration
therefor received by the Company or a Restricted Subsidiary would constitute
Indebtedness or Equity Interests of a person that is not an Affiliate of ECC,
the Company or one of their respective Subsidiaries; PROVIDED that the
acquisition of such Indebtedness or Equity Interests is permitted under the
provisions of the covenant described under "--Restricted Payments" and (z) where
assets sold are satellites, uplink centers or call centers, PROVIDED that, in
the case of clause (z) the Company and its Restricted Subsidiaries continue to
own at least three satellites, one uplink center and one call center.
LIENS. The Indentures provide that the Company shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, create, incur,
assume or suffer to exist any Lien on any asset now owned or hereafter acquired,
or on any income or profits therefrom or assign or convey any right to receive
income therefrom, except Permitted Liens.
MAINTENANCE OF INSURANCE. The Indentures provide that at all times, the
Company or a Wholly Owned Restricted Subsidiary which is a Guarantor will
maintain and be the named beneficiary under Satellite Insurance with respect to
at least one-half of the satellites owned or leased by the Company or its
Subsidiaries (insured in an amount at least equal to the depreciated cost of
such satellites).
In the event that the Company or its Restricted Subsidiaries receive
proceeds from any Satellite Insurance covering any satellite owned by the
Company or any of its Restricted Subsidiaries, or in the event that the Company
or any of its Subsidiaries receives proceeds from any insurance maintained by
any satellite manufacturer or any launch provider covering any of such
satellites, all such proceeds (including any cash, Cash Equivalents or
Marketable Securities deemed to be proceeds of Satellite Insurance pursuant to
the respective definition thereof) shall be used only: (i) to purchase a
replacement satellite if at such time the Company or a Restricted Subsidiary
then owns less than three satellites, PROVIDED that if such replacement
satellite is of lesser value compared to the insured satellite, any insurance
proceeds remaining after purchase of such replacement satellite must be applied
to the construction, launch and insurance of a satellite of equal or greater
value as compared to the insured satellite (or in accordance with clause (iii)
below); (ii) for purposes permitted under the covenant entitled "--Activities of
the Company" if at such time the Company or a Restricted Subsidiary owns three
or more satellites (or in accordance with clause (iii) below); or (iii) to the
extent that such proceeds are not applied or contractually committed to be
applied as described in (i) or (ii) above within 365 days of the receipt of such
proceeds as "Excess Proceeds" to be applied to an offer to purchase Notes as set
forth under "--Excess Proceeds Offer."
ACTIVITIES OF THE COMPANY. The Indentures provide that neither the Company
nor any of its Restricted Subsidiaries may engage in any business other than
developing, owning, engaging in and dealing with all or any part of the business
of domestic and international media, entertainment, electronics or
communications, and reasonably related extensions thereof, including but not
limited to the purchase, ownership, operation, leasing and selling of, and
generally dealing in or with, one or more communications satellites and the
transponders thereon, and communications uplink centers, the acquisition,
transmission, broadcast, production and other provision of programming relating
thereto and the manufacturing, distribution and financing of equipment
(including consumer electronic equipment) relating thereto.
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DISPOSITIONS OF ETC AND NON-CORE ASSETS. Notwithstanding the provisions of
the covenants described under "--Restricted Payments" and "--Asset Sales," in
the event that the 110 Acquisition has been consummated, the requirements set
forth under "--The 110 Acquisition" have been satisfied and the Indebtedness to
Cash Flow Ratio of the Company would not have exceeded 6.0 to 1 on a pro forma
basis after giving effect to the sale of all of the Company's Equity Interests
in or assets of ETC, then (1) the payment of any dividend or distribution
consisting of Equity Interests or assets of ETC or the proceeds of a sale,
conveyance or other disposition of such Equity Interests or assets or the sale,
conveyance or other disposition of Equity Interests or assets of ETC or the
proceeds of a sale, conveyance or other disposition of such Equity Interests or
assets shall not constitute a Restricted Payment and (2) the sale, conveyance or
other disposition of the Equity Interests or assets of ETC or the proceeds of a
sale, conveyance or other disposition of such Equity Interests or assets shall
not constitute an Asset Sale and (3) upon delivery of an Officers' Certificate
to the Trustee evidencing satisfaction of the conditions to such release and a
written request to the Trustee requesting such a release, ETC shall be
discharged and released from its Guarantee and, PROVIDED that the Company
designates ETC as an Unrestricted Subsidiary, from all covenants and
restrictions contained in the Indenture; PROVIDED that no such payment,
dividend, distribution, sale, conveyance or other disposition of any kind
(collectively, a "Payout") described in clauses (1) and (2) above shall be
permitted if at the time of such Payout (1) after giving pro forma effect to
such Payout, the Company would not have been permitted under the covenant
described under "--Restricted Payments" to make a Restricted Payment in an
amount equal to the total (the "ETC Amount Due") of (x) the amount of all
Investments (other than the contribution of (i) title to the headquarters
building of ETC in Inverness, Colorado and the tangible assets therein to the
extent used by ETC as of the date of the Indenture and (ii) patents, trademarks
and copyrights applied for or granted as of the date of the Indenture to the
extent used by ETC or result from the business of ETC, in each case, to ETC)
made in ETC by the Company or its Restricted Subsidiaries since the date of the
Indenture (which, in the case of Investments in exchange for assets, shall be
valued at the fair market value of each such asset at the time each such
Investment was made) minus (y) the amount of the after-tax value of all cash
returns on such Investments paid to the Company or its Wholly Owned Restricted
Subsidiaries (or, in the case of a non-Wholly Owned Restricted Subsidiary, the
pro rata portion thereof attributable to the Company) minus (z) $25 million and
(2) any contract, agreement or understanding between ETC and the Company or any
Restricted Subsidiary of the Company and any loan or advance to or guarantee
with, or for the benefit of, ETC issued or made by the Company or one of its
Restricted Subsidiaries, is on terms that are less favorable to the Company or
its Restricted Subsidiaries than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiaries with an
unrelated person, all as evidenced by a resolution of the Board of Directors of
the Company set forth in an Officers' Certificate delivered to the Trustee
certifying that each such contract, agreement, understanding, loan, advance and
guarantee has been approved by a majority of the members of such Board. In the
event that at the time of such Payout, the condition set forth in clause (1) of
the proviso of the preceding sentence cannot be satisfied, ETC may seek to have
a person other than the Company or one of its Restricted Subsidiaries pay in
cash an amount to the Company or its Restricted Subsidiaries such that after
taxes, such amount is greater than or equal to the ETC Amount Due or the portion
of the ETC Amount Due which would not have been permitted to be made as a
Restricted Payment by the Company; PROVIDED that such payment shall be treated
for purposes of this covenant as a cash return on the Investments made in ETC
and provided further that for all purposes under the Indenture, such payment
shall not be included in any calculation under clauses (iii)(A) through (iii)(E)
of the first paragraph of the covenant described under "--Restricted Payments."
To the extent that the ETC Amount Due or any portion thereof would have been
permitted to be made as a Restricted Payment by the Company and was not paid by
another person as permitted by the preceding sentence, the Company shall be
deemed to have made a Restricted Payment in the amount of such ETC Amount Due or
portion thereof, as the case may be. It shall be a condition to any Payout
pursuant to the first paragraph of this covenant that, commencing with the
quarter
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commencing July 1, 1999, the Company shall have caused ETC to maintain, in
accordance with GAAP, consolidated financial statements for ETC and its
Subsidiaries on a "stand-alone" basis.
Notwithstanding the provisions of the covenants described under
"--Restricted Payments" and "--Asset Sales," (1) the payment of any dividend or
distribution consisting of Equity Interests or assets of any Non-Core Asset or
the proceeds of a sale, conveyance or other disposition of such Equity Interests
or assets or the sale, conveyance or other disposition of Equity Interests in or
assets of any Non-Core Asset or the proceeds of a sale, conveyance or other
disposition of such Equity Interests or assets shall not constitute a Restricted
Payment and (2) the sale, conveyance or other disposition of the Equity
Interests or assets of any Non-Core Asset or the proceeds of a sale, conveyance
or other disposition of such Equity Interests or assets shall not constitute an
Asset Sale; and (3) upon delivery of an Officers' Certificate to the Trustee
evidencing satisfaction of the conditions to such release and a written request
to the Trustee requesting such a release, any such Non-Core Asset that is a
Guarantor shall be discharged and released from its Guarantee and, provided the
Company designates such Non-Core Asset as an Unrestricted Subsidiary, from all
covenants and restrictions contained in the Indenture; PROVIDED that no Payout
of any Non-Core Asset shall be permitted such as described in clauses (1) and
(2) above if at the time of such Payout (1) after giving pro forma effect to
such Payout, the Company would not have been permitted under the covenant
described under "--Restricted Payments" to make a Restricted Payment in an
amount equal to the total (the "Non-Core Asset Amount Due") of (x) the amount of
all Investments made in such Non-Core Asset by the Company or its Restricted
Subsidiaries since the date of the Indenture (which, in the case of Investments
in exchange for assets, shall be valued at the fair market value of each such
asset at the time each such Investment was made) minus (y) the amount of the
after-tax value of all cash returns on such Investments paid to the Company or
its Wholly Owned Restricted Subsidiaries (or, in the case of a non-Wholly Owned
Restricted Subsidiary, the pro rata portion thereof attributable to the Company)
minus (z) $25 million in the aggregate for all such Payouts and $5 million for
any single such Payout and (2) any contract, agreement or understanding between
or relating to a Non-Core Asset and the Company or a Restricted Subsidiary of
the Company and any loan or advance to or guarantee with, or for the benefit of,
a Restricted Subsidiary which is a Non-Core Asset issued or made by the Company
or one of its Restricted Subsidiaries, is on terms that are less favorable to
the Company or its Restricted Subsidiaries than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiaries with an unrelated person, all as evidenced by a resolution of the
Board of Directors of the Company set forth in an Officers' Certificate
delivered to the Trustee certifying that each such contract, agreement,
understanding, loan, advance and guarantee has been approved by a majority of
such Board. In the event that at the time of such Payout, the condition set
forth in clause (1) of the proviso of the preceding sentence cannot be
satisfied, such Restricted Subsidiary which is a Non-Core Asset may seek to have
a person other than the Company or one of its Restricted Subsidiaries pay in
cash an amount to the Company such that after taxes, such amount, is greater
than or equal to the Amount Due or the portion of the Non-Core Asset Amount Due
which would not have been permitted to be made as a Restricted Payment by the
Company; PROVIDED that such payment shall be treated for purposes of this
covenant as a cash return on the Investments made in a Non-Core Asset and
provided further that for all purposes under the Indenture, such payment shall
not be included in any calculation under clauses (iii)(A) through (iii)(E) of
the first paragraph of the covenant described under " --Restricted Payments." To
the extent that the Non-Core Asset Amount Due or any portion thereof would have
been permitted to be made as a Restricted Payment by the Company and was not
paid by another person as permitted by the preceding sentence, the Company shall
be deemed to have made a Restricted Payment in the amount of such Non-Core Asset
Amount Due or portion thereof, as the case may be.
Promptly after any Payout pursuant to the terms of this covenant, the
Company shall deliver an Officers' Certificate to the Trustee setting forth the
Investments made by the Company or its Restricted
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Subsidiaries in ETC or a Non-Core Asset, as the case may be, and certifying that
the requirements of this covenant have been satisfied in connection with the
making of such Payout.
ECC EQUITY CONTRIBUTION. Concurrently with or within five business days of
the consummation of the Offering, ECC shall make a capital contribution to the
common equity of the Company in the form of cash, Cash Equivalents or Marketable
Securities in an aggregate amount no less than $200 million.
THE 110 ACQUISITION. The Indentures provide that upon consummation of the
110 Acquisition, all property and assets acquired in such transaction or the
right to receive such property and assets will be contributed as capital
contributions to the Company or one or more of the Guarantors that is a Wholly
Owned Restricted Subsidiary.
ADDITIONAL SUBSIDIARY GUARANTEES. The Indentures provide that if the
Company or any Guarantor transfers or causes to be transferred, in one or a
series of related transactions, property or assets (including, without
limitation, businesses, divisions, real property, assets or equipment) having a
fair market value (as determined in good faith by the Board of Directors of the
Company evidenced by a resolution of the Board of Directors of the Company and
set forth in an Officers' Certificate delivered to the Trustee no later than
five business days following January 1 and July 1 of each year or ten days
following a request from the Trustee, which certificate shall cover the six
months preceding January 1, July 1 or date of request, as the case may be)
exceeding the sum of $20 million in the aggregate for all such transfers after
the date of the Indentures minus the fair market value of Restricted
Subsidiaries acquired or created after the date of the Indentures that are not
Guarantors (fair market value being determined as of the time of such
acquisition) to Restricted Subsidiaries that are not Guarantors of the Notes,
the Company, shall, or shall cause each of such Subsidiaries to which any amount
exceeding such $20 million (less such fair market value) is transferred to:
(i) execute and deliver to the Trustee a supplemental indenture in form and
substance reasonably satisfactory to the Trustee pursuant to which such
Subsidiary shall unconditionally guarantee all of the Company's obligations
under the Notes on the terms set forth in the Indenture; and (ii) deliver to the
Trustee an Opinion of Counsel reasonably satisfactory to the Trustee that such
supplemental indenture and Guarantee have been duly authorized, executed and
delivered by and are valid and binding obligations of such Subsidiary or such
owner, as the case may be; PROVIDED, HOWEVER, that the foregoing provisions
shall not apply to transfers of property or assets (other than cash) by the
Company or any Guarantor in exchange for cash, Cash Equivalents or Marketable
Securities in an amount equal to the fair market value (as determined in good
faith by the Board of Directors of the Company evidenced by a resolution of the
Board of Directors of the Company and set forth in an Officers' Certificate
delivered to the Trustee no later than five business days following January 1
and July 1 of each year or ten days following a request from the Trustee, which
certificate shall cover the six months preceding January 1, July 1 or date of
request, as the case may be) of such property or assets. In addition, if (i) the
Company or any of its Restricted Subsidiaries acquires or creates another
Restricted Subsidiary or (ii) an Unrestricted Subsidiary of the Company is
redesignated as a Restricted Subsidiary or otherwise ceases to be an
Unrestricted Subsidiary, such Subsidiary shall execute a supplemental indenture
and deliver an opinion, each as required in the preceding sentence; PROVIDED
that no supplemental indenture or opinion shall be required if the fair market
value (as determined in good faith by the Board of Directors of the Company and
set forth in an Officers' Certificate delivered to the Trustee no later than
five business days following January 1 and July 1 of each year or ten days
following a request from the Trustee, which certificate shall cover the six
months preceding such January 1, July 1 or date of request, as the case may be)
of all such Restricted Subsidiaries created, acquired or designated since the
date of the Indenture (fair market value being determined as of the time of
creation, acquisition or designation) does not exceed the sum of $20 million in
the aggregate minus the fair market value of the assets transferred to any
Subsidiaries of the Company which do not execute supplemental indentures
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pursuant to the preceding sentences; PROVIDED FURTHER that to the extent a
Restricted Subsidiary is subject to the terms of any instrument governing
Acquired Debt, as in effect at the time of acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition) which instrument or restriction prohibits such Restricted
Subsidiary from issuing a guarantee of the Notes, such Restricted Subsidiary
shall not be required to execute such a supplemental indenture until it is
permitted to issue such guarantee pursuant to the terms of such Acquired Debt.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. Each
Indenture provides that the Company shall not, and shall not permit any
Restricted Subsidiary of the Company to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to:
(a) pay dividends or make any other distribution to the Company or any of
its Restricted Subsidiaries on its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits, or pay any
Indebtedness owed to the Company or any of its Restricted Subsidiaries;
(b) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(c) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries;
except for such encumbrances or restrictions existing under or by reasons
of:
(i) Existing Indebtedness and existing agreements as in effect on the date
of the Indenture;
(ii) applicable law or regulation;
(iii) any instrument governing Acquired Debt as in effect at the time of
acquisition (except to the extent such Indebtedness was incurred in connection
with, or in contemplation of, such acquisition), which encumbrance or
restriction is not applicable to any person, or the properties or assets of any
person, other than the person, or the property or assets of the person, so
acquired, provided that the Consolidated Cash Flow of such person shall not be
taken into account in determining whether such acquisition was permitted by the
terms of the Indenture; except to the extent that dividends or other
distributions are permitted notwithstanding such encumbrance or restriction and
could have been distributed;
(iv) by reason of customary non-assignment provisions in leases entered
into in the ordinary course of business and consistent with past practices;
(v) Refinancing Indebtedness (as defined in "--Incurrence of
Indebtedness"), PROVIDED that the restrictions contained in the agreements
governing such Refinancing Indebtedness are no more restrictive than those
contained in the agreements governing the Indebtedness being refinanced;
(vi) the Indenture and the Notes;
(vii) Permitted Liens; or
(viii) any agreement for the sale of any Subsidiary or its assets that
restricts distributions by that Subsidiary pending its sale; provided that
during the entire period in which such encumbrance or restriction is effective,
such sale (together with any other sales pending) would be permitted under the
terms of the Indenture.
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ACCOUNTS RECEIVABLE SUBSIDIARY. Each Indenture provides that the Company:
(a) may, and may permit any of its Subsidiaries to, notwithstanding the
provisions of the covenant entitled "Restricted Payments," make Investments in
an Accounts Receivable Subsidiary: (i) the proceeds of which are applied within
five Business Days of the making thereof solely to finance: (A) the purchase of
accounts receivable of the Company and its Subsidiaries or (B) payments required
in connection with the termination of all then existing arrangements relating to
the sale of accounts receivable or participation interests therein by an
Accounts Receivable Subsidiary (provided that the Accounts Receivable Subsidiary
shall receive cash, Cash Equivalents and accounts receivable having an aggregate
fair market value not less than the amount of such payments in exchange
therefor) and (ii) in the form of Accounts Receivable Subsidiary Notes to the
extent permitted by clause (b) below;
(b) shall not, and shall not permit any of its Subsidiaries to, sell
accounts receivable to an Accounts Receivable Subsidiary except for
consideration in an amount not less than that which would be obtained in an
arm's length transaction and solely in the form of cash or Cash Equivalents;
provided that an Accounts Receivable Subsidiary may pay the purchase price for
any such accounts receivable in the form of Accounts Receivable Subsidiary Notes
so long as, after giving effect to the issuance of any such Accounts Receivable
Subsidiary Notes, the aggregate principal amount of all Accounts Receivable
Subsidiary Notes outstanding shall not exceed 20% of the aggregate purchase
price paid for all outstanding accounts receivable purchased by an Accounts
Receivable Subsidiary since the date of the Indenture (and not written off or
required to be written off in accordance with the normal business practice of an
Accounts Receivable Subsidiary);
(c) shall not permit an Accounts Receivable Subsidiary to sell any accounts
receivable purchased from the Company or its Subsidiaries or participation
interests therein to any other person except on an arm's length basis and solely
for consideration in the form of cash or Cash Equivalents or certificates
representing undivided interests of a Receivables Trust; provided an Accounts
Receivable Subsidiary may not sell such certificates to any other person except
on an arm's length basis and solely for consideration in the form of cash or
Cash Equivalents;
(d) shall not, and shall not permit any of its Subsidiaries to, enter into
any guarantee, subject any of their respective properties or assets (other than
the accounts receivable sold by them to an Accounts Receivable Subsidiary) to
the satisfaction of any liability or obligation or otherwise incur any liability
or obligation (contingent or otherwise), in each case, on behalf of an Accounts
Receivable Subsidiary or in connection with any sale of accounts receivable or
participation interests therein by or to an Accounts Receivable Subsidiary,
other than obligations relating to breaches of representations, warranties,
covenants and other agreements of the Company or any of its Subsidiaries with
respect to the accounts receivable sold by the Company or any of its
Subsidiaries to an Accounts Receivable Subsidiary or with respect to the
servicing thereof; PROVIDED that neither the Company nor any of its Subsidiaries
shall at any time guarantee or be otherwise liable for the collectibility of
accounts receivable sold by them;
(e) shall not permit an Accounts Receivable Subsidiary to engage in any
business or transaction other than the purchase and sale of accounts receivable
or participation interests therein of the Company and its Subsidiaries and
activities incidental thereto;
(f) shall not permit an Accounts Receivable Subsidiary to incur any
Indebtedness other than the Accounts Receivable Subsidiary Notes, Indebtedness
owed to the Company and Non-Recourse Indebtedness; PROVIDED that the aggregate
principal amount of all such Indebtedness of an Accounts Receivable Subsidiary
shall not exceed the book value of its total assets as determined in accordance
with
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GAAP;
(g) shall cause any Accounts Receivable Subsidiary to remit to the Company
or a Restricted Subsidiary of the Company on a monthly basis as a distribution
all available cash and Cash Equivalents not held in a collection account pledged
to acquirors of accounts receivable or participation interests therein, to the
extent not applied to (i) pay interest or principal on the Accounts Receivable
Subsidiary Notes or any Indebtedness of such Accounts Receivable Subsidiary owed
to the Company, (ii) pay or maintain reserves for reasonable operating expenses
of such Accounts Receivable Subsidiary or to satisfy reasonable minimum
operating capital requirements or (iii) to finance the purchase of additional
accounts receivable of the Company and its Subsidiaries; and
(h) shall not, and shall not permit any of its Subsidiaries to, sell
accounts receivable to, or enter into any other transaction with or for the
benefit of, an Accounts Receivable Subsidiary (i) if such Accounts Receivable
Subsidiary pursuant to or within the meaning of any Bankruptcy Law (A) commences
a voluntary case, (B) consents to the entry of an order for relief against it in
an involuntary case, (C) consents to the appointment of a Custodian of it or for
all or substantially all of its property, (D) makes a general assignment for the
benefit of its creditors, or (E) generally is not paying its debts as they
become due; or (ii) if a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (A) is for relief against such Accounts
Receivable Subsidiary in an involuntary case, (B) appoints a Custodian of such
Accounts Receivable Subsidiary or for all or substantially all of the property
of such Accounts Receivable Subsidiary, or (C) orders the liquidation of such
Accounts Receivable Subsidiary, and, with respect to clause (ii) hereof, the
order or decree remains unstayed and in effect for 60 consecutive days.
MERGER, CONSOLIDATION, OR SALE OF ASSETS. Each Indenture provides that the
Company may not consolidate or merge with or into (whether or not the Company is
the surviving entity), or 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 person unless:
(a) the Company is the surviving person or the person formed by or
surviving any such consolidation or merger (if other than the Company) or 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 person formed by or surviving any such consolidation or merger (if
other than the Company) or the 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 form
reasonably satisfactory to the Trustee, under the Notes and the Indenture;
(c) immediately after such transaction, no Default or Event of Default
exists; and
(d) the Company or the person formed by or surviving any such consolidation
or merger (if other than the Company) or to which such sale, assignment,
transfer, lease, conveyance or other disposition will have been made (i) will
have Consolidated Net Worth immediately after the transaction (but prior to any
purchase accounting adjustments or accrual of deferred tax liabilities resulting
from the transaction) not less than the Consolidated Net Worth of the Company
immediately preceding the transaction; and (ii) would, at the time of such
transaction after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Indebtedness to
Cash Flow Ratio test set forth in the covenant
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described under "--Incurrence of Indebtedness."
Notwithstanding the foregoing, the Company may merge with another person
if:
(a) the Company is the surviving person;
(b) the consideration issued or paid by the Company in such merger consists
solely of Equity Interests (other than Disqualified Stock) of the Company or
Equity Interests of ECC; and
(c) immediately after giving effect to such merger, the Company's
Indebtedness to Cash Flow Ratio does not exceed the Company's Indebtedness to
Cash Flow Ratio immediately prior to such merger.
Each Guarantor (other than any Guarantor whose Guarantee is to be released
in accordance with the terms of the Guarantee and the Indenture and other than
ETC and any Non-Core Asset in connection with any transaction permitted under
"--Dispositions of ETC and Non-Core Assets") will not, and the Company will not
cause or permit any Guarantor to, consolidate or merge with or into (whether or
not such Guarantor is the surviving entity), or 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, any person other than the Company
or a Guarantor unless:
(a) the Guarantor is the surviving person or the person formed by or
surviving any such consolidation or merger (if other than the Guarantor) or the
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 person formed by or surviving any such consolidation or merger (if
other than the Guarantor) or the person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of the Guarantor, pursuant to a supplemental indenture in
form reasonably satisfactory to the Trustee, under the Notes and the Indenture;
(c) immediately after such transaction, no Default or Event of Default
exists; and
(d) the Company will have Consolidated Net Worth immediately after the
transaction (after any purchase accounting adjustments or accrual of deferred
tax liabilities resulting from the transaction) not less than the Consolidated
Net Worth of the Company immediately preceding the transaction.
TRANSACTIONS WITH AFFILIATES. Each Indenture provides that the Company
shall not and shall not permit any Restricted Subsidiary to, sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (including any Unrestricted Subsidiary) (each of the foregoing, an
"Affiliate Transaction"), unless:
(a) such Affiliate Transaction is on terms that are no less favorable to
the Company or its Restricted Subsidiaries than those that would have been
obtained in a comparable transaction by the Company or such Subsidiaries with an
unrelated person; and
(b) if such Affiliate Transaction involves aggregate payments in excess of
$15 million such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors of the Company, and the Company
delivers to the Trustee no later than five business days
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following January 1 or July 1 of each year or ten days following a request from
the Trustee a resolution of the Board of Directors of the Company set forth in
an Officers' Certificate certifying that such Affiliate Transaction has been so
approved and complies with clause (a) above;
PROVIDED, HOWEVER, that (i) the payment of compensation to directors and
management of ECC and its Subsidiaries; (ii) transactions between or among the
Company and its Wholly Owned Subsidiaries (other than Unrestricted Subsidiaries
of the Company); (iii) any dividend, distribution, sale, conveyance or other
disposition of any assets of, or Equity Interests in, any Non-Core Assets or ETC
or the proceeds of a sale, conveyance or other disposition thereof, in
accordance with the provisions of the Indenture; (iv) transactions permitted by
the provisions of the Indenture described above under clauses (1), (2), (5),
(6), (8), (9), (10), (11) and (12) of the second paragraph of the covenant
described under "--Restricted Payments"; (v) so long as it complies with clause
(a) above, the provision of backhaul, uplink, transmission, billing, customer
service, programming acquisition and other ordinary course services by the
Company or any of its Restricted Subsidiaries to Satellite Communications
Operating Corporation and to Transponder Encryption Services Corporation on a
basis consistent with past practice; and (vi) any transactions between the
Company or any Restricted Subsidiary of the Company and any Affiliate of the
Company the Equity Interests of which Affiliate are owned solely by the Company
or one of its Restricted Subsidiaries, on the one hand, and by persons who are
not Affiliates of the Company or Restricted Subsidiaries of the Company, on the
other hand, shall, in each case, not be deemed Affiliate Transactions.
REPORTS. Whether or not required by the rules and regulations of the SEC,
so long as any Notes are outstanding, the Company will file with the SEC and
furnish to the holders of Notes all quarterly and annual financial information
that would be required to be contained in a filing with the SEC on Forms 10-Q
and 10-K if the Company were required to file such forms, 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 public accountants.
PAYMENTS FOR CONSENT. The Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any holder of a
Note for or as an inducement to any consent, waiver or amendment of any of the
terms or provisions of the Indenture or the Notes unless such consideration is
offered to be paid or agreed to be paid to all holders of the Notes that
consent, waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
EXCESS PROCEEDS OFFER. When the cumulative amount of Excess Proceeds that
have not been applied in accordance with the covenants entitled "Asset Sales"
and "Maintenance of Insurance" or this paragraph exceeds $17.5 million, the
Company will be obligated to make an offer to all holders of the Notes (an
"Excess Proceeds Offer") to purchase the maximum principal amount of Notes that
may be purchased out of such Excess Proceeds at an offer price in cash in an
amount equal to 101% of the principal amount thereof, together with accrued and
unpaid interest to the date fixed for the closing of such offer in accordance
with the procedures set forth in the Indenture. To the extent the Company or a
Restricted Subsidiary is required under the terms of Indebtedness of the Company
or such Restricted Subsidiary which is PARI PASSU with, or (in the case of any
secured Indebtedness) senior with respect to such collateral to, the Notes with
any proceeds which constitute Excess Proceeds under the Indentures, the Company
shall make a pro rata offer to the holders of all other pari passu Indebtedness
(including the Notes) with such proceeds. If the aggregate principal amount of
Notes and other pari passu Indebtedness surrendered by holders thereof exceeds
the amount of such Excess Proceeds, the Trustee shall select the Notes and other
pari passu Indebtedness to be purchased on a pro rata basis. To the extent that
the
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principal amount of Notes tendered pursuant to an Excess Proceeds Offer is less
than the amount of such Excess Proceeds, the Company may use any remaining
Excess Proceeds for general corporate purposes. Upon completion of an Excess
Proceeds Offer, the amount of Excess Proceeds shall be reset at zero.
EVENTS OF DEFAULT AND REMEDIES
Each Indenture provides that each of the following constitutes an Event of
Default:
(a) default for 30 days in the payment when due of interest on the
Notes issued thereunder;
(b) default in payment when due of principal of the Notes issued
thereunder at maturity, upon repurchase, redemption or otherwise;
(c) failure to comply with the provisions described under "--Offer to
Purchase upon Change of Control," "--Certain Covenants--Maintenance of
Insurance," "--Certain Covenants--Transactions with Affiliates," or
"--Certain Covenants--Asset Sales";
(d) default under the provisions described under "--Certain
Covenants--Restricted Payments" or "--Certain Covenants--Incurrence of
Indebtedness" which default remains uncured for 30 days, or the breach of
any representation or warranty, or the making of any untrue statement, in
any certificate delivered by the Company pursuant to the Indenture;
(e) failure by the Company for 60 days after notice from the Trustee
or the holders of at least 25% in principal amount then outstanding of any
issue of Notes to comply with any of its other agreements in the Indenture
or the Notes of such issue;
(f) 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 Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Restricted Subsidiaries), which default is caused by a failure to
pay when due principal or interest on such Indebtedness within the grace
period provided in such Indebtedness (a "Payment Default"), and 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, aggregates $20 million or more;
(g) 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 Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Restricted Subsidiaries), which default results in the acceleration
of such Indebtedness prior to its express maturity and 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 $20 million or more;
provided that any acceleration (other than an acceleration which is the
result of a Payment Default under clause (f) above) of Indebtedness under
the Outstanding Deferred Payments in aggregate principal amount not to
exceed $50 million shall be deemed not to constitute an acceleration
pursuant to this clause (g);
(h) failure by the Company or any of its Restricted Subsidiaries to
pay final judgments (other than any judgment as to which a reputable
insurance company has accepted full
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liability) aggregating in excess of $20 million, which judgments are not
stayed within 60 days after their entry;
(i) certain events of bankruptcy or insolvency with respect to ECC,
the Company or certain of the Company's Subsidiaries (including the filing
of a voluntary case, the consent to an order of relief in an involuntary
case, the consent to the appointment of a custodian, a general assignment
for the benefit of creditors or an order of a court for relief in an
involuntary case, appointing a custodian or ordering liquidation, which
order remains unstayed for 60 days); and
(j) any Guarantee of the Notes shall be held in a judicial proceeding
to be unenforceable or invalid or shall cease for any reason to be in full
force and effect, or any Guarantors, or any person acting on behalf of any
Guarantor, shall deny or disaffirm its obligations under its Guarantee of
any Notes.
If any Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount then outstanding of any series of
Notes may declare all the Notes of such series to be due and payable immediately
(plus, in the case of an Event of Default that is the result of an action by the
Company or any of its Subsidiaries intended to avoid restrictions on or premiums
related to redemptions of the Notes contained in the Indenture or the Notes, an
amount of premium that would have been applicable pursuant to the Notes or as
set forth in the Indenture). Notwithstanding the foregoing, in the case of an
Event of Default arising from the events of bankruptcy or insolvency with
respect to the Company or any of its Subsidiaries described in (i) above, all
outstanding Notes will become due and payable without further action or notice.
Holders of the Notes 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 may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from holders of the
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 such holders' interest.
The holders of a majority in aggregate principal amount then outstanding of
each series of Notes, by notice to the Trustee, may on behalf of the holders of
all of the Notes of such series waive any existing Default or Event of Default
and its consequences under its respective Indentures, except a continuing
Default or Event of Default in the payment of interest or premium on, or
principal of, such series of Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indentures, and the Company is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
All powers of the Trustee under the Indentures will be subject to
applicable provisions of the Communications Act, including without limitation,
the requirements of prior approval for DE FACTO or DE JURE transfer of control
or assignment of Title III licenses.
NO PERSONAL LIABILITY OF DIRECTORS, OWNERS, EMPLOYEES, INCORPORATOR AND
STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any of its Affiliates, as such, shall have any liability for any obligations
of the Company or any of its Affiliates 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 Notes by accepting a Note waives and releases all such
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liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the SEC that such a waiver is
against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Each Indenture will provide that with respect to the Notes issued
thereunder, the Company may, at its option and at any time, elect to have all
obligations discharged with respect to the outstanding Notes of such issue
("Legal Defeasance"). Such Legal Defeasance means that the Company will be
deemed to have paid and discharged the entire indebtedness represented by the
outstanding Notes of such issue, except for: (a) the rights of holders of
outstanding Notes of such issue to receive payments in respect of the principal
of, premium, if any, and interest on the Notes of such issue when such payments
are due, or on the redemption date, as the case may be; (b) the Company's
obligations with respect to the Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes of such issue
and the maintenance of an office or agency for payment and money for security
payments held in trust; (c) the rights, powers, trust, duties and immunities of
the Trustee, and the Company's obligations in connection therewith; and (d) the
Legal Defeasance provisions of the Indenture. In addition, the Indenture will
provide that with respect to each issue of Notes, the Company may, at its option
and at any time, elect to have all obligations released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes of such issue. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"--Events of Default and Remedies" will no longer constitute an Event of Default
with respect to the Notes of such issue.
In order to exercise either Legal Defeasance or Covenant Defeasance: each
Indenture will provide that with respect to the Notes issued thereunder, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the Notes of such issue, cash in U.S. dollars, non-callable U.S.
government obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants selected by the Trustee, to pay the principal of, premium, if any,
and interest on the outstanding Notes of such issue on the stated maturity or on
the applicable optional redemption date, as the case may be; (ii) in the case of
Legal Defeasance, the Company shall have delivered to the Trustee an Opinion of
Counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable Federal income tax law, in each case to the
effect that, and based thereon such opinion of counsel shall confirm that, the
holders of the Notes of such issue will not recognize income, gain or loss for
Federal income tax purposes as a result of such Legal Defeasance, and will be
subject to Federal income tax in the same amount, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel reasonably acceptable to such
Trustee confirming that the holders of the Notes of such issue will not
recognize income, gain or loss for Federal income tax purposes as a result of
such Covenant Defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit or insofar as
Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit; (v) such
Legal Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under, the Indenture or any other material
agreement or instrument to which the
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Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee
an Officers' Certificate stating that the deposit was not made by the Company
with the intent of preferring the holders of the Notes of such series over any
other creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or others; and
(vii) the Company shall have delivered to the Trustee an Officers' Certificate
stating that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance relating to such series of Notes have been
complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next paragraph, each Indenture and the Notes
issued thereunder may be amended or supplemented with the consent of the holders
of at least a majority in principal amount of the Notes of such series then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for Notes of such series), and any existing default or compliance
with any provision of the Indenture or the Notes of such series may be waived
with the consent of the holders of a majority in principal amount of the then
outstanding Notes of such series (including consents obtained in connection with
a tender offer or exchange offer for Notes of such series).
Without the consent of each holder affected, however, an amendment or
waiver may not (with respect to any Note held by a non-consenting holder):
(a) reduce the aggregate 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 with respect to the redemption of the Notes;
(c) reduce the rate of or change the time for payment of interest on
any Notes;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes of a series by the holders of at least a majority
in aggregate principal amount of the Notes of such series 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
Notes;
(f) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of holders of Notes to receive
payments of principal of or interest on the Notes;
(g) waive a redemption payment with respect to any Note; or
(h) make any change in the foregoing amendment and waiver provisions.
In addition, without the consent of at least 66 2/3% of the Notes of a
series then outstanding, an amendment or a waiver may not make any change to the
covenants in the Indenture entitled "Asset Sales," "Offer to Purchase Upon a
Change of Control" and "Excess Proceeds Offer" (including, in each case, the
related definitions) as such covenants apply to such series of Notes.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company, the
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Guarantors and the Trustee may amend or supplement each Indenture, the Notes or
the Guarantees to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes or Guarantees in addition to or in place of certificated
Notes or the Guarantees, to provide for the assumption of the Company's or a
Guarantor's obligations to holders of the Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the holders of the Notes or the Guarantees 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 effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should the Trustee become a creditor of the Company, 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 will be permitted to engage in
other transactions with the Company; however, if the Trustee acquires any
conflicting interest, it must eliminate such conflict within 90 days, apply to
the SEC for permission to continue as Trustee or resign.
With respect to such series of Notes, the holders of a majority in
principal amount of the then outstanding Notes of such series will have the
right to direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee, subject to certain exceptions.
Each Indenture provides that in case an Event of Default shall occur (which
shall not be cured), the Trustee will be required, in the exercise of its power,
to use the degree of care of a prudent man in the conduct of his own affairs.
The Trustee will not be relieved from liabilities for its own negligent action,
its own negligent failure to act or its own willful misconduct, except that:
(i) this sentence shall not limit the preceding sentence of this paragraph;
(ii) the Trustee shall not be liable for any error of judgment made in good
faith, 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 the first sentence of this paragraph. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any holder of Notes,
unless such holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
BOOK-ENTRY, DELIVERY AND FORM
The Exchange Notes of each series will be represented by one or more
registered global notes without interest coupons (collectively, the "Global
Exchange Notes"). Upon issuance, the Global Exchange Notes will be deposited
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 for credit to
the accounts of DTC's Direct and Indirect Participants (as defined below).
The Global Exchange 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 in
certain limited circumstances. Beneficial interests in the Global Exchange Notes
may be exchanged for Notes in certificated form in certain limited
circumstances. See "--Transfer of Interests in Global Notes for Certificated
Notes." Such Certificated Notes may, unless the Global Exchange Note has
previously been exchanged for Certificated Notes, be exchanged for an interest
in the Global Exchange Note representing the principal amount of Exchange Notes
being transferred. In addition, transfer of beneficial interests in any Global
Exchange 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.
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DEPOSITARY PROCEDURES. DTC has advised the Company that DTC is a
limited-purpose trust company created to hold securities for its participating
organizations (collectively, the Direct Participants) and to facilitate the
clearance and settlement of transactions in those securities between Direct
Participants through electronic book-entry changes in accounts of Participants.
The Direct Participants include securities brokers and dealers (including the
Initial Purchasers), banks, trust companies, clearing corporations and certain
other organizations, including Euroclear and CEDEL. Access to DTC's system is
also available to other entities that clear through or maintain a direct or
indirect, custodial relationship with a Direct Participant (collectively, the
"Indirect Participants").
DTC has also advised the Company that, pursuant to DTC procedures, (i) upon
deposit of the Global Exchange Notes, DTC will credit the accounts of Direct
Participants with portions of the principal amount of Global Exchange Notes that
have been allocated to them by the Initial Purchasers, and (ii) DTC will
maintain records of the ownership interests of such Direct Participants in the
Global Exchange Notes and the transfer of ownership interests by and between
Direct Participants. DTC will not maintain records of the ownership interests
of, or the transfer of ownership interests by and between, Indirect Participants
or other owners of beneficial interests in the Global Exchange Notes. Direct
Participants and Indirect Participants must maintain their own records of the
ownership interests of, and the transfer of ownership interests by and between,
Indirect Participants and other owners of beneficial interests in the Global
Exchange Notes. The Company expects that payments by Direct Participants to
owners of beneficial interests in such Global Exchange Notes held through such
Direct Participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of customers
registered in the name of nominees for such customers. Such payments will be the
responsibility of such Direct Participants.
Investors in the Global Exchange Notes may hold their interests therein
directly through DTC if they are Direct Participants in DTC or indirectly
through organizations (including Euroclear and CEDEL) which are Direct
Participants in DTC. Euroclear and CEDEL will hold interests in the Global
Exchange Notes on behalf of their participants through customers' securities
accounts in their respective names on the books of their respective
depositaries, which are Morgan Guaranty Trust Company of New York, Brussels
office, as operator or Euroclear and Citibank, N.A., as depositary of CEDEL.
The depositaries, in turn, will hold such interests in the Global Exchange Notes
in customers' securities accounts in the depositaries' names on the books of
DTC. All ownership interests in any Global Exchange Notes, including those of
customers' securities accounts held through Euroclear or CEDEL, may be subject
to the procedures and requirements of DTC. Those interests held through
Euroclear and CEDEL in at also be subject to the procedures and requirements of
such systems.
The laws of some states require that certain persons take physical delivery
in definitive, certificated form, of securities that they own. This may limit or
curtail the ability to transfer beneficial interests in a Global Exchange Note
to such persons. Because DTC can act only on behalf of Direct Participants,
which in turn act on behalf of Indirect Participants and others, the ability of
a person having a beneficial interest in a Global Exchange Note to pledge such
interest to persons or entities that are not Direct Participants in DTC, or to
otherwise take actions in respect of such interests, may be affected by the lack
of physical certificates evidencing such interests. For certain other
restrictions on the transferability of the Notes see "--Transfers of Interests
in Global Notes for Certificated Notes."
Except as described in "--Transfers of Interests in Global Notes for
Certificated Notes", owners of beneficial interests in the Global Exchange Notes
will not have Notes registered in their names, will not receive physical
delivery of Notes in certificated form and will not be considered the registered
owners or holders thereof under the Indentures for any purpose.
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Under the terms of each Indenture, the Company, the Guarantors and the
Trustee will treat the persons in whose names the Notes are registered
(including Notes represented by Global Exchange Notes) as the owners thereof for
the purpose of receiving payments and for any and all other purposes whatsoever.
Payments in respect of the principal, premium, Liquidated Damages, if any, and
interest on Global Exchange Notes registered in the name of DTC or its nominee
will be payable by the Trustee to DTC or its nominee as the registered holder
under each Indenture. Consequently, neither the Company, the Trustee nor any
agent of the Company or the Trustee has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Direct Participant's or
Indirect Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Exchange Notes or for maintaining,
supervising or reviewing any of DTC's records or any Direct Participant's or
Indirect Participant's records relating to the beneficial ownership interests in
any Global Exchange Note or (ii) any other matter relating to the actions and
practices of DTC or any of its Direct Participants or Indirect Participants.
DTC has advised the Company that its current payment practice (for payments
of principal, interest and the like) with respect to securities such as the
Notes is to credit the accounts of the relevant Direct Participants with such
payment on the payment date in amounts proportionate to such Direct
Participant's respective ownership interests in the Global Exchange Notes as
shown on DTC's records. Payments by Direct Participants and Indirect
Participants to the beneficial owners of the Notes will be governed by standing
instructions and customary practices between them and will not be the
responsibility of DTC, the Trustee, the Company or the Guarantors. Neither the
Company, the Guarantors nor the Trustee will be liable for any delay by DTC or
its Direct Participants or Indirect Participants in identifying the beneficial
owners of the Notes, and the Company and the Trustee may conclusively rely on
and will be protected in relying on instructions from DTC or its nominee as the
registered owner of the Notes for all purposes.
The Global Exchange Notes will trade in DTC's Same-Day Funds Settlement
System and, therefore, transfers between Direct Participants in DTC will be
effected in accordance with DTC's procedures, and will be settled in immediately
available funds. Transfers between Indirect Participants (other than Indirect
Participants who hold an interest in the Notes through Euroclear or CEDEL) who
hold an interest through a Direct Participant will be effected in accordance
with the procedures of such Direct Participant but generally will settle in
immediately available funds. Transfers between and among Indirect Participants
who hold interests in the Notes through Euroclear and CEDEL will be effected in
the ordinary way in accordance with their respective rules and operating
procedures.
Subject to compliance with the transfer restrictions applicable to the
Notes described herein, cross-market transfers between Direct Participants in
DTC, on the one hand, and Indirect Participants who hold interests in the
Exchange Notes through Euroclear or CEDEL, on the other hand, will be effected
by Euroclear's or CEDEL's respective Nominee through DTC in accordance with
DTC's rules on behalf of Euroclear or CEDEL; HOWEVER, delivery of instructions
relating to crossmarket transactions must be made directly to Euroclear or
CEDEL, as the case may be, by the counterparty in accordance with the rules and
procedures of Euroclear or CEDEL and within their established deadlines
(Brussels time for Euroclear and UK time for CEDEL). Indirect Participants who
hold interest in the Exchange Notes through Euroclear and CEDEL may not deliver
instructions directly to Euroclear's or CEDEL's Nominee. Euroclear or CEDEL
will, if the transaction meets its settlement requirements, deliver instructions
to its respective Nominee to deliver or receive interests on Euroclear's or
CEDEL's behalf in the relevant Global Exchange Note in DTC, and make or receive
payment in accordance with normal procedures for same-day fund settlement
applicable to DTC.
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Because of time zone differences, the securities accounts of an Indirect
Participant who holds an interest in the Exchange Notes through Euroclear or
CEDEL purchasing an interest in a Global Exchange Note from a Direct Participant
in DTC will be credited, and any such crediting will be reported to Euroclear or
CEDEL during the European business day immediately following the settlement date
of DTC in New York. Although recorded in DTC's accounting records as of DTC's
settlement date in New York, Euroclear and CEDEL customers will not have access
to the cash amount credited to their accounts as a result of a sale of an
interest in a Global Exchange Note to a DTC Participant until the European
business day for Euroclear or CEDEL immediately following DTC's settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Direct
Participants to whose account interests in the Global Exchange Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Notes of a series as to which such Direct Participant or Direct
Participants has or have given direction.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
to facilitate transfers of interests in the Global Exchange Notes among Direct
Participants, including Euroclear and CEDEL, they are under no obligation to
perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. None of the Company, the Guarantors, the Initial
Purchasers or the Trustee shall have any responsibility for the performance by
DTC, Euroclear or CEDEL or their respective Direct and Indirect Participants of
their respective obligations under the rules and procedures governing any of
their operations.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
TRANSFER OF INTERESTS IN GLOBAL EXCHANGE NOTES FOR CERTIFICATED NOTES
An entire Global Exchange Note may be exchanged for definitive Notes of a
series in registered, certificated form without interest coupons (Certificated
Notes) if (i) DTC (x) notifies the Company that it is unwilling or unable to
continue as depositary for the Global Exchange Notes and the Company thereupon
fails to appoint a successor depositary within 90 days or (y) has ceased to be a
clearing agency registered under the Exchange Act, (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
Certificated Notes or (iii) there shall have occurred and be continuing to occur
a Default or an Event of Default with respect to the Notes of such series. In
any such case, the Company will notify the Trustee in writing that, upon
surrender by the Direct and Indirect Participants of their interest in such
Global Note, Certificated Notes will be issued to each person that such Direct
and Indirect Participants and DTC identify as being the beneficial owner of the
related Notes.
Beneficial interests in Global Notes held by any Direct or Indirect
Participant may be exchanged for Certificated Notes upon request to DTC, on
behalf of such Direct Participant (for itself or on behalf of an Indirect
Participant), to the Trustee in accordance with customary DTC procedures.
Certificated Notes delivered in exchange for any beneficial interest in any
Global Note will be registered in the names, and issued in any approved
denominations, requested by DTC on behalf of such Direct or Indirect
Participants (in accordance with DTC's customary procedures).
Neither the Company, the Guarantors nor the Trustee will be liable for any
delay by the holder of the Global Notes or DTC in identifying the beneficial
owners of Notes, and the Company and the Trustee may conclusively rely on, and
will be protected in relying on, instructions from the holder of the Global
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Note or DTC for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
Each Indenture will require that payments in respect of the Notes
represented by the Global Exchange Notes (including principal, premium, if any,
interest and Liquidated Damages, if any) be made by wire transfer of immediately
available same day funds to the accounts specified by the holder of interests in
such Global Exchange Notes. With respect to Certificated Notes, the Company will
make all payments of principal, premium, if any, interest and Liquidated
Damages, if any, by wire transfer of immediately available same day funds to the
accounts specified by the holders thereof or, if no such account is specified,
by mailing a check to each such holder's registered address. The Company expects
that secondary trading in the Certificated Notes will also be settled in
immediately available funds.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
the Series Supplements without charge by writing to the Company, 5701 South
Sante Fe Drive, Littleton, Colorado 80120, attention David K. Moskowitz,
facsimile (303) 723-1699.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
THE COMPANY AND THE GUARANTORS ARE MAKING THE EXCHANGE OFFER TO COMPLY WITH
THEIR OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENTS TO REGISTER THE
EXCHANGE OF EXCHANGE NOTES FOR THE OLD NOTES. IN THE REGISTRATION RIGHTS
AGREEMENTS, THE COMPANY AND THE GUARANTORS ALSO AGREED UNDER CERTAIN
CIRCUMSTANCES TO FILE A SHELF REGISTRATION STATEMENT TO REGISTER THE RESALE OF
CERTAIN OLD NOTES AND EXCHANGE NOTES.
The Company, the Guarantors and the Initial Purchasers entered into the
Registration Rights Agreements on January 25, 1999. In the Registration Rights
Agreement relating to each series of Notes, the Company and Guarantors agreed to
file the Exchange Offer Registration Statement relating to such issue with the
SEC within 90 days of the Closing Date, and use their respective best efforts to
have it then declared effective at the earliest possible time. The Company and
the Guarantors also agreed to use their best efforts to cause such Exchange
Offer Registration Statement to be effective continuously, to keep each Exchange
Offer open for a period of not less than 20 business days and cause each
Exchange Offer to be consummated no later than the 210th day after the Closing
Date. Pursuant to the Exchange Offer, certain holders of Notes which constitute
Transfer Restricted Securities will be allowed to exchange their Transfer
Restricted Securities for registered Exchange Notes. To participate in an
Exchange Offer, each holder must represent that it is not an affiliate of the
Company, it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a distribution
of the Exchange Notes that are issued in the Exchange Offer, and that it is
acquiring the Exchange Notes in such Exchange Offer in its ordinary course of
business.
If: (i) the Company is not permitted to file the Exchange Offer
Registration Statement or permitted to consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or SEC policy or (ii) any
holder of Transfer Restricted Notes notifies the Company within the specified
time period that: (A) it is prohibited by law or SEC policy from participating
in the Exchange Offer; (B) it may not resell the Exchange Notes acquired by it
in the Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales; or (C) that it is a broker-dealer and
owns Old Notes acquired
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directly from the Company or an affiliate of the Company, the Company and the
Guarantors will file with the SEC a Shelf Registration Statement to cover
resales of the Old Notes by the holders thereof who satisfy certain conditions
relating to the provisions of information in connection with the Shelf
Registration Statement. The Company and the Guarantors will use their best
efforts to cause the applicable registration statement to be declared effective
as promptly as possible by the SEC. For purposes of the foregoing, "Transfer
Restricted Notes" means each Note until the earliest of: (i) the date on which
such Note has been exchanged in the Exchange Offer and is entitled to be resold
to the public by the holder thereof without complying with the prospectus
delivery requirements of the Securities Act; (ii) the date on which such
Exchange Note is sold by a broker-dealer pursuant to the "Plan of Distribution"
herein (including delivery of this Prospectus); (iii) the date on which such Old
Note has been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement; or (iv) the date on which such
Old Note may be distributed to the public pursuant to Rule 144(k) under the
Securities Act.
The Registration Rights Agreement provides that (i) if the Company or the
Guarantors fail to file an Exchange Offer Registration Statement with the SEC on
or prior to the 90th day after the Closing Date, (ii) if the Exchange Offer
Registration Statement is not declared effective by the SEC on or prior to the
180th day after the Closing Date, (iii) if the Exchange Offer is not consummated
on or before the 210th day after the Closing Date, (iv) if obligated to file the
Shelf Registration Statement and the Company and the Guarantors fail to file the
Shelf Registration Statement with the SEC on or prior to the 90th day after the
Closing Date or the 30th day after such filing obligation arises, (v) if
obligated to file a Shelf Registration Statement and the Shelf Registration
Statement is not declared effective on or prior to the 90th day after the
obligation to file a Shelf Registration Statement arises, or (vi) if the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
the case may be, is declared effective but thereafter ceases to be effective or
useable in connection with resales of the Transfer Restricted Securities, for
such time of non-effectiveness or non-usability (each, a Registration Default),
the Company and the Guarantors agree to pay to each holder of Transfer
Restricted Securities affected thereby liquidated damages (Liquidated Damages)
in an amount equal to $0.05 per week per $1,000 in principal amount of Transfer
Restricted Securities held by such holder for each week or portion thereof that
the Registration Default continues for the first 90- day period immediately
following the occurrence of such Registration Default. The amount of the
Liquidated Damages shall increase by an additional $0.05 per week per $1,000 in
principal amount of Transfer Restricted Securities with respect to each
subsequent 90 day period until all Registration Defaults have been cured or
until the Transfer Restricted Securities become freely tradeable without
registration under the Securities Act, up to a maximum amount of Liquidated
Damages of $0.30 per week per $1,000 in principal amount of Transfer Restricted
Securities. The Company and the Guarantors shall not be required to pay
Liquidated Damages for more than one Registration Default at any given time.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease.
All accrued Liquidated Damages are to be paid by the Company or the
Guarantors to holders entitled thereto by wire transfer to the accounts
specified by them or by mailing checks to their registered address if no such
accounts have been specified.
Holders of Notes are required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and are required to deliver information to be
used in connection with the Shelf Registration Statement and to provide comments
on the Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Notes included in the Shelf
Registration Statement and benefit from the provisions regarding Liquidated
Damages set forth above.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACCOUNTS RECEIVABLE SUBSIDIARY" means one Unrestricted Subsidiary of the
Company specifically designated as an Accounts Receivable Subsidiary for the
purpose of financing the accounts receivable of the Company, and provided that
any such designation shall not be deemed to prohibit the Company from financing
accounts receivable through any other entity, including, without limitation, any
other Unrestricted Subsidiary.
"ACCOUNTS RECEIVABLE SUBSIDIARY NOTES" means the notes to be issued by the
Accounts Receivable Subsidiary for the purchase of accounts receivable.
"ACQUIRED DEBT" means, with respect to any specified person, Indebtedness
of any other person existing at the time such other person merges with or into
or becomes a Subsidiary of such specified person, or Indebtedness incurred by
such person in connection with the acquisition of assets, including Indebtedness
incurred in connection with, or in contemplation of, such other person merging
with or into or becoming a Subsidiary of such specified person or the
acquisition of such assets, as the case may be.
"ACQUIRED SUBSCRIBER" means a subscriber to a pay television service
provided by a pay television provider that is not an Affiliate of the Company at
the time the Company or one of its Restricted Subsidiaries purchases the right
to provide pay television service to such subscriber from such pay television
provider, whether directly or through the acquisition of the entity providing
pay television service to such subscriber.
"ACQUIRED SUBSCRIBER DEBT" means (i) Indebtedness the proceeds of which are
used to pay the purchase price for Acquired Subscribers or to acquire the entity
which has the right to provide pay television service to such Acquired
Subscribers or to acquire from such entity or an Affiliate of such entity assets
used or to be used in connection with such pay television business; PROVIDED
that such Indebtedness is incurred within three years after the date of the
acquisition of such Acquired Subscriber and (ii) Acquired Debt of any such
entity being acquired; PROVIDED that in no event shall the amount of such
Indebtedness and Acquired Debt for any Acquired Subscriber exceed the sum of the
actual purchase price (inclusive of such Acquired Debt) for such Acquired
Subscriber, such entity and such assets plus the cost of converting such
Acquired Subscriber to usage of a delivery format for pay television service
made available by the Company or any of its Restricted Subsidiaries.
"AFFILIATE" of any specified person means any other person directly or
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; PROVIDED FURTHER that no individual, other than a
director of ECC or the Company or an officer of ECC or the Company with a policy
making function, shall be deemed an Affiliate of the Company or any of its
Subsidiaries solely by reason of such individual's employment, position or
responsibilities by or with respect to ECC, the Company or any of their
respective Subsidiaries.
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"CAPITAL LEASE OBLIGATION" means, as to any person, the obligations of such
person under a lease that are required to be classified and accounted for as
capital lease obligations under GAAP and, for purposes of this definition, the
amount of such obligations at the time any determination thereof is to be made
shall be the amount of the liability in respect of a capital lease that would at
such time be so required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock or partnership or
membership interests, whether common or preferred.
"CASH EQUIVALENTS" means: (a) United States dollars; (b) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition; (c) certificates of deposit and eurodollar
time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million; (d) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clauses (b) and (c) entered into with any financial institution
meeting the qualifications specified in clause (c) above; (e) commercial paper
rated P-1, A-1 or the equivalent thereof by Moody's or S&P, respectively, and in
each case maturing within six months after the date of acquisition and (f) money
market funds offered by any domestic commercial or investment bank having
capital and surplus in excess of $500 million at least 95% of the assets of
which constitute Cash Equivalents of the kinds described in clauses (a) through
(e) of this definition.
"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 ECC
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), after giving effect to the
repurchase of the Series A Preferred Stock on or about the date of the
Indenture, or (ii) do not have the voting power to elect at least a majority of
the Board of Directors of ECC; (b) the first day on which a majority of the
members of the Board of Directors of ECC are not Continuing Directors; or
(c) any time that ECC shall cease to beneficially own 100% of the Equity
Interests of the Company.
"CONSOLIDATED CASH FLOW" means, with respect to any person for any period,
the Consolidated Net Income of such person for such period, plus, to the extent
deducted in computing Consolidated Net Income: (a) provision for taxes based on
income or profits; (b) Consolidated Interest Expense; (c) depreciation and
amortization (including amortization of goodwill and other intangibles) of such
person for such period; and (d) any extraordinary loss and any net loss realized
in connection with any Asset Sale, in each case, on a consolidated basis
determined in accordance with GAAP, provided that Consolidated Cash Flow shall
not include interest income derived from the net proceeds of the Offering.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any person for any
period, consolidated interest expense of such person for such period, whether
paid or accrued (including amortization of original issue discount and deferred
financing costs, non-cash interest payments and the interest component of
Capital Lease Obligations), on a consolidated basis determined in accordance
with GAAP;
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PROVIDED HOWEVER that with respect to the calculation of the consolidated
interest expense of the Company, the interest expense of Unrestricted
Subsidiaries shall be excluded.
"CONSOLIDATED NET INCOME" means, with respect to any person for any period,
the aggregate of the Net Income of such person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; PROVIDED,
HOWEVER, that: (a) the Net Income of any person that is not a Subsidiary or that
is accounted for by the equity method of accounting shall be included only to
the extent of the amount of dividends or distributions paid in cash to the
referent person, in the case of a gain, or to the extent of any contributions or
other payments by the referent person, in the case of a loss; (b) the Net Income
of any person that is a Subsidiary that is not a Wholly Owned Subsidiary (or,
with respect to the calculation of the Consolidated Net Income of the Company, a
Wholly Owned Restricted Subsidiary) shall be included only to the extent of the
amount of dividends or distributions paid in cash to the referent person;
(c) the Net Income of any person acquired in a pooling of interests transaction
for any period prior to the date of such acquisition shall be excluded; (d) the
Net Income of any Subsidiary of such person shall be excluded to the extent that
the declaration or payment of dividends or similar distributions is not at the
time permitted by operation of the terms of its charter or bylaws or any other
agreement, instrument, judgment, decree, order, statute, rule or government
regulation to which it is subject; and (e) the cumulative effect of a change in
accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any person, the sum of:
(a) the stockholders' equity of such person; plus (b) the amount reported on
such person's most recent balance sheet with respect to any series of preferred
stock (other than Disqualified Stock) that by its terms is not entitled to the
payment of dividends unless such dividends may be declared and paid only out of
net earnings in respect of the year of such declaration and payment, but only to
the extent of any cash received by such person upon issuance of such preferred
stock, less: (i) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the date of the Indenture in the book value of any asset owned by
such person or a consolidated Subsidiary of such person; and (ii) all
unamortized debt discount and expense and unamortized deferred charges, all of
the foregoing determined in accordance with GAAP.
"CONTINUING DIRECTOR" means, as of any date of determination, any member of
the Board of Directors of ECC 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.
"CREDIT AGREEMENT" means any one or more credit agreements (which may
include or consist of revolving credits) between the Company and one or more
banks or other financial institutions providing financing for the business of
the Company and the Company's Restricted Subsidiaries, provided that the lenders
party to the Credit Agreement may not be Affiliates of ECC, the Company or their
respective Subsidiaries and provided further that the Guarantors may be
guarantors under such agreements.
"DBSC" means Direct Broadcasting Satellite Corporation, a Colorado
corporation.
"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.
"DEFERRED PAYMENTS" means Indebtedness to satellite construction or launch
contractors incurred
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after the date of the Indenture in connection with the construction or launch of
one or more satellites of the Company or its Restricted Subsidiaries used by it
in the businesses described in the covenant "--Certain Covenants--Activities of
the Company" in an amount not to exceed at any one time outstanding in the
aggregate $135 million.
"DNCC" means Dish Network Credit Corporation, a Colorado corporation.
"DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to date on
which the Notes mature; PROVIDED, HOWEVER, that any such Capital Stock may
require the Company of such Capital Stock to make an offer to purchase such
Capital Stock upon the occurrence of certain events if the terms of such Capital
Stock provide that such an offer may not be satisfied and the purchase of such
Capital Stock may not be consummated until the 91st day after the Notes have
been paid in full.
"ELIGIBLE INSTITUTION" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated Investment Grade at the time as of which
any investment or rollover therein is made.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ETC" means EchoStar Technologies Corporation, a Texas corporation.
"EXISTING INDEBTEDNESS" means the Notes and any other Indebtedness of the
Company and its Subsidiaries in existence on the date of the Indentures until
such amounts are repaid.
"GAAP" means United States 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 may be approved by a significant segment of
the accounting profession of the U.S., which are applicable as of the date of
determination; PROVIDED that, except as otherwise specifically provided, all
calculations made for purposes of determining compliance with the terms of the
provisions of the Indenture shall utilize GAAP as in effect on the date of the
Indentures.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"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.
"HEDGING OBLIGATIONS" means, with respect to any person, the obligations of
such person pursuant to any arrangement with any other person, whereby, directly
or indirectly, such person is entitled to receive from time to time periodic
payments calculated by applying either floating or a fixed rate of interest on a
stated notional amount in exchange for periodic payments made by such other
person calculated by applying a fixed or a floating rte of interest on the same
notional amount and shall include,
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without limitation, interest rate swaps, caps, floors, collars and similar
agreements designed to protect such person against fluctuations in interest
rates.
"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 (including pursuant to
capital leases) or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or trade payable, if and to the extent any
of the foregoing (other than Hedging Obligations) 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 amount of all obligations of
such person with respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Subsidiary of such person, the
liquidation preference with respect to, any Preferred Equity Interests (but
excluding, in each case, any accrued dividends) as well as the guarantee of
items that would be included within this definition.
"INDEBTEDNESS TO CASH FLOW RATIO" means, with respect to any person, the
ratio of: (a) the Indebtedness of such person and its Subsidiaries (or, if such
person is the Company, of the Company and its Restricted Subsidiaries) as of the
end of the most recently ended fiscal quarter, plus the amount of any
Indebtedness incurred subsequent to the end of such fiscal quarter; to (b) such
person's Consolidated Cash Flow for the most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such event for which such calculation is being made
shall occur (the "Measurement Period"), PROVIDED, HOWEVER; that: (i) in making
such computation, Indebtedness shall include the total amount of funds
outstanding and available under any revolving credit facilities; and (ii) in the
event that such person or any of its Subsidiaries (or, if such person is the
Company, any of its Restricted Subsidiaries) consummates a material acquisition
or an Asset Sale or other disposition of assets subsequent to the commencement
of the Measurement Period but prior to the event for which the calculation of
the Indebtedness to Cash Flow Ratio is made, then the Indebtedness to Cash Flow
Ratio shall be calculated giving pro forma effect to such material acquisition
or Asset Sale or other disposition of assets, as if the same had occurred at the
beginning of the applicable period.
"INVESTMENT GRADE" means with respect to a security, that such security is
rated, by at least two nationally recognized statistical rating organizations,
in one of each such organization's four highest generic rating categories.
"INVESTMENTS" means, with respect to any person, all investments by such
person in other persons (including Affiliates) in the forms of loans (including
guarantees), advances or capital contributions (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent status) of any jurisdiction).
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"MARKETABLE SECURITIES" means: (a) Government Securities; (b) any
certificate of deposit maturing not more than 365 days after the date of
acquisition issued by, or time deposit of, an Eligible Institution;
(c) commercial paper maturing not more than 365 days after the date of
acquisition issued by a corporation (other than an Affiliate of the Company)
with an Investment Grade rating, at the time as of which any investment therein
is made, issued or offered by an Eligible Institution; (d) any bankers
acceptances or money market deposit accounts issued or offered by an Eligible
Institution; and (e) any fund investing exclusively in investments of the types
described in clauses (a) through (d) above.
"MAXIMUM SECURED AMOUNT" means at any time (i) in the event the Company at
such time has a rating or has received in writing an indicative rating on all
outstanding Notes of both "Ba3" from Moody's and "BB-" from S&P, an amount equal
to the greater of (x) the product of 1.25 times the Trailing Cash Flow Amount
and (y) $500 million and (ii) in the event the Company does not have both of
such ratings or indicative ratings at such time, $500 million.
"MEDIA 4" means Media4, Inc., a Georgia corporation.
"MOODY'S" means Moody's Investors Service, Inc.
"NAGRASTAR" means NagraStar LLC, a Colorado limited liability corporation.
"NET INCOME" means, with respect to any person, the net income (loss) of
such person, determined in accordance with GAAP, excluding, however, any gain
(but not loss), together with any related provision for taxes on such gain (but
not loss), realized in connection with any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions), and
excluding any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss) and excluding any
unusual gain (but not loss) relating to recovery of insurance proceeds on
satellites, together with any related provision for taxes on such extraordinary
gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries, as the case may be, in respect of any Asset
Sale, net of the direct costs relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof, taxes
paid or payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements), amounts required to be
applied to the repayment of Indebtedness secured by a Lien on the asset or
assets that are the subject of such Asset Sale and any reserve for adjustment in
respect of the sale price of such asset or assets. Net Proceeds shall exclude
any non-cash proceeds received from any Asset Sale, but shall include such
proceeds when and as converted by the Company or any Restricted Subsidiary to
cash.
"NON-CORE ASSETS" means: (1) all intangible authorizations, rights,
interests and other intangible assets related to all "western" DBS orbital
locations other than 148 degrees WL (as the term "western" is used by the FCC)
held by the Company and/or any of its Subsidiaries at any time, including
without limitation the authorizations for 22 DBS frequencies at 175 degrees WL
and ESC's permit for 11 unspecified western assignments; (2) all intangible
authorizations, rights, interests and other intangible assets related to the FSS
in the Ku-band, Ka-band and C-band held by the Company and/or any of its
Subsidiaries at any time, including without limitation the license of ESC for a
two satellite Ku-band system at 83 degrees and 121 degrees WL, the license of
ESC for a two satellite Ka-band system at 83 degrees WL and 121 degrees WL, and
the application of ESC to add C-band capabilities to a Ku-band
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satellite authorized at 83 degrees WL; (3) all intangible authorizations,
rights, interests and other intangible assets related to the Mobile-Satellite
Service held by the Company and/or any of its Subsidiaries at any time,
including without limitation the license of E-SAT, Inc. for a low-earth orbit
MSS system, (4) all intangible authorizations, rights, interests and other
intangible assets related to local multi-point distribution service and (5) any
Subsidiary of the Company the assets of which consist solely of (i) any
combination of the foregoing and (ii) other assets to the extent permitted under
the provision described under the second paragraph of "--Certain
Covenants--Dispositions of ETC and Non-Core Assets."
"NON-RECOURSE INDEBTEDNESS" of any person means Indebtedness of such person
that: (i) is not guaranteed by any other person (except a Wholly Owned
Subsidiary of the referent person); (ii) is not recourse to and does not
obligate any other person (except a Wholly Owned Subsidiary of the referent
person) in any way; (iii) does not subject any property or assets of any other
person (except a Wholly Owned Subsidiary of the referent person), directly or
indirectly, contingently or otherwise, to the satisfaction thereof, and (iv) is
not required by GAAP to be reflected on the financial statements of any other
person (other than a Subsidiary of the referent person) prepared in accordance
with GAAP.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PERMITTED INVESTMENTS" means: (a) Investments in the Company or in a
Wholly Owned Restricted Subsidiary of the Company that is a Guarantor,
(b) Investments in Cash Equivalents and Marketable Securities; and
(c) Investments by the Company or any Subsidiary of the Company in a person if,
as a result of such Investment: (i) such person becomes a Wholly Owned
Restricted Subsidiary of the Company and becomes a Guarantor, or (ii) such
person is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the Company
or a Wholly Owned Restricted Subsidiary of the Company that is a Guarantor;
PROVIDED that if at any time a Restricted Subsidiary of the Company shall cease
to be a Subsidiary of the Company, the Company shall be deemed to have made a
Restricted Investment in the amount of its remaining investment, if any, in such
former Subsidiary.
"PERMITTED LIENS" means: (a) Liens securing the Notes and Liens securing
any Guarantee; (b) Liens securing the Deferred Payments; (c) Liens securing any
Indebtedness permitted under the covenant described under "--Certain
Covenants--Incurrence of Indebtedness"; PROVIDED that such Liens under this
clause (c) shall not secure Indebtedness in an amount exceeding the Maximum
Secured Amount at the time that such Lien is incurred; (d) Liens securing
Purchase Money Indebtedness, PROVIDED that such Indebtedness was permitted to be
incurred by the terms of the Indenture and such Liens do not extend to any
assets of the Company or its Restricted Subsidiaries other than the assets so
acquired; (e) Liens securing Indebtedness the proceeds of which are used to
develop, construct, launch or insure any satellites other than EchoStar I,
EchoStar II, EchoStar III, EchoStar IV or any permitted replacements of any such
satellites, PROVIDED that such Indebtedness was permitted to be incurred by the
terms of the Indenture and such Liens do not extend to any assets of the Company
or its Restricted Subsidiaries other than such satellites being developed,
constructed, launched or insured, and to the related licenses, permits and
construction, launch and TT&C contracts; (f) Liens on orbital slots, licenses
and other assets and rights of the Company, PROVIDED that such orbital slots,
licenses and other assets and rights relate solely to the satellites referred to
in clause (e) of this definition; (g) Liens on property of a person existing at
the time such person is merged into or consolidated with the Company or any
Restricted Subsidiary of the Company, PROVIDED, that such Liens were not
incurred in connection with, or in contemplation of, such merger or
consolidation, other than in the ordinary course of business; (h) Liens
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on property of an Unrestricted Subsidiary at the time that it is designated as a
Restricted Subsidiary pursuant to the definition of "Unrestricted Subsidiary,"
PROVIDED that such Liens were not incurred in connection with, or contemplation
of, such designation; (i) Liens on property existing at the time of acquisition
thereof by the Company or any Restricted Subsidiary of the Company; PROVIDED
that such Liens were not incurred in connection with, or in contemplation of,
such acquisition and do not extend to any assets of the Company or any of its
Restricted Subsidiaries other than the property so acquired; (j) Liens to secure
the performance of statutory obligations, surety or appeal bonds or performance
bonds, or landlords', carriers', warehousemen's, mechanics', suppliers',
materialmen's or other like Liens, in any case incurred in the ordinary course
of business and with respect to amounts not yet delinquent or being contested in
good faith by appropriate process of law, if a reserve or other appropriate
provision, if any, as is required by GAAP shall have been made therefore;
(k) Liens existing on the date of the Indentures; (l) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; PROVIDED that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (m) Liens incurred in the ordinary course of business of the
Company or any Restricted Subsidiary of the Company (including, without
limitation, Liens securing Purchase Money Indebtedness) with respect to
obligations that do not exceed $10 million in principal amount in the aggregate
at any one time outstanding; (n) Liens securing Indebtedness in an amount not to
exceed $10 million incurred pursuant to clause (xi) of the second paragraph of
the covenant described under "Incurrence of Indebtedness;" (o) Liens on any
asset of the Company or a Guarantor securing Indebtedness in an amount not to
exceed $10 million; (p) Liens securing Indebtedness permitted under clause (xii)
of the second paragraph of the provision described under "--Certain
Covenants--Incurrence of Indebtedness"; provided that such Liens shall not
extend to assets other than the assets that secure such Indebtedness being
refinanced; (q) any interest or title of a lessor under any Capital Lease
Obligation; PROVIDED that such Capital Lease Obligation is permitted under the
other provisions of the Indenture; (r) Liens not provided for in clauses
(a) through (q) above, securing Indebtedness incurred in compliance with the
terms of the Indentures provided that the Notes are secured by the assets
subject to such Liens on an equal and ratable basis or on a basis prior to such
Liens; PROVIDED that to the extent that such Lien secured Indebtedness that is
subordinated to the Notes, such Lien shall be subordinated to and be later in
priority than the Notes on the same basis and (s) extensions, renewals or
refundings of any Liens referred to in clauses (a) through (q) above, PROVIDED
that (i) any such extension, renewal or refunding does not extend to any assets
or secure any Indebtedness not securing or secured by the Liens being extended,
renewed or refinanced and (ii) any extension, renewal or refunding of a Lien
originally incurred pursuant to clause (c) above shall not secure Indebtedness
in an amount greater than the Maximum Secured Amount at the time of such
extension, renewal or refunding.
"PREFERRED EQUITY INTEREST", in any person, means an Equity Interest of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such person, over Equity
Interests of any other class in such person.
"PRINCIPAL" means Charles W. Ergen.
"PURCHASE MONEY INDEBTEDNESS" means (i) indebtedness of the Company or any
Guarantor (including indebtedness that otherwise satisfies this clause (i) which
was incurred prior to the date the obligor thereunder became a Guarantor)
incurred (within 365 days of such purchase) to finance the purchase of any
assets (including the purchase of Equity Interests of persons that are not
Affiliates of the Company) of the Company or any Guarantor: (a) to the extent
the amount of Indebtedness thereunder does not exceed 100% of the purchase cost
of such assets; and (b) to the extent that no more than
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$20 million of such Indebtedness at any one time outstanding is recourse to the
Company or any of its Restricted Subsidiaries or any of their respective assets,
other than the assets so purchased; or (ii) indebtedness of the Company or any
Guarantor which refinances indebtedness referred to in clause (i) of this
definition, PROVIDED that such refinancing satisfies subclauses (a) and (b) of
such clause (i).
"RECEIVABLES TRUST" means a trust organized solely for the purpose of
securitizing the accounts receivable held by the Accounts Receivable Subsidiary
that (a) shall not engage in any business other than (i) the purchase of
accounts receivable or participation interests therein from the Accounts
Receivable Subsidiary and the servicing thereof, (ii) the issuance of and
distribution of payments with respect to the securities permitted to be issued
under clause (b) below and (iii) other activities incidental to the foregoing,
(b) shall not at any time incur Indebtedness or issue any securities, except
(i) certificates representing undivided interests in the trust issued to the
Accounts Receivable Subsidiary and (ii) debt securities issued in an arm's
length transaction for consideration solely in the form of cash and Cash
Equivalents, all of which (net of any issuance fees and expenses) shall promptly
be paid to the Accounts Receivable Subsidiary, and (c) shall distribute to the
Accounts Receivable Subsidiary as a distribution on the Accounts Receivable
Subsidiary's beneficial interest in the trust no less frequently than once every
six months all available cash and Cash Equivalents held by it, to the extent not
required for reasonable operating expenses or reserves therefor or to service
any securities issued pursuant to clause (b) above that are not held by the
Accounts Receivable Subsidiary.
"RECEIVER SUBSIDY" means a subsidy, rebate or other similar payment by
EchoStar or any of its Subsidiaries, in the ordinary course of business, to
subscribers, vendors or distributors, relating to an EchoStar Receiver System,
not to exceed the retail price of such EchoStar Receiver System, together with
the retail price of installation of such EchoStar Receiver System.
"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.
"RESTRICTED INVESTMENT" means an Investment other than Permitted
Investments.
"RESTRICTED 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 the Company or one or more
Subsidiaries of the Company or a combination thereof, other than Unrestricted
Subsidiaries.
"S&P" means Standard & Poor's Rating Services.
"SATELLITE INSURANCE" means insurance providing coverage for a satellite in
an amount which is, together with cash, Cash Equivalents and Marketable
Securities segregated and reserved on the balance sheet of the Company, for the
duration of the insured period or until applied in accordance with the covenant
entitled "Maintenance of Insurance." For purposes of the Indenture, the proceeds
of any Satellite Insurance shall be deemed to include the amount of cash, Cash
Equivalents and Marketable Securities segregated and reserved by the Company for
purposes of the preceding sentence.
"SATELLITE RECEIVER" means any satellite receiver capable of receiving
programming from the EchoStar Dish Network.-SM-
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"SERIES A CUMULATIVE PREFERRED STOCK" means the Series A Cumulative
Preferred Stock of ECC outstanding on the date of the Indentures.
"SKYVISTA" means SkyVista Corporation, a Colorado corporation.
"SUBSIDIARY" means, with respect to any person, 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 such
person or one or more of the other Subsidiaries of such person or a combination
thereof. Notwithstanding the foregoing, for purposes of the Indentures, until
the consummation of the Reorganization, DBSC shall be deemed to be a Subsidiary
of the Company.
"TRAILING CASH FLOW AMOUNT" means the Consolidated Cash Flow of the Company
during the most recent four fiscal quarters of the Company for which financial
statements are available.
"UNRESTRICTED SUBSIDIARY" means; (A) E-Sat, Inc., EchoStar Real Estate
Corporation, EchoStar International (Mauritius) Ltd., EchoStar Manufacturing and
Distribution Pvt. Ltd. and Satrec Mauritius Ltd.; and (B) any Subsidiary of the
Company designated as an Unrestricted Subsidiary in a resolution of the Board of
Directors of the Company (a) no portion of the Indebtedness or any other
obligation (contingent or otherwise) of which, immediately after such
designation: (i) is guaranteed by the Company or any other Subsidiary of the
Company (other than another Unrestricted Subsidiary); (ii) is recourse to or
obligates the Company or any other Subsidiary of the Company (other than another
Unrestricted Subsidiary) in any way; or (iii) subjects any property or asset of
the Company or any other Subsidiary of the Company (other than another
Unrestricted Subsidiary), directly or indirectly, contingently or otherwise, to
satisfaction thereof; (b) with which neither the Company nor any other
Subsidiary of the Company (other than another Unrestricted Subsidiary) has any
contract, agreement, arrangement, understanding or is subject to an obligation
of any kind, written or oral, other than on terms no less favorable to the
Company or such other Subsidiary than those that might be obtained at the time
from persons who are not Affiliates of the Company; and (c) with which neither
the Company nor any other Subsidiary of the Company (other than another
Unrestricted Subsidiary) has any obligation: (i) to subscribe for additional
shares of Capital Stock or other equity interests therein; or (ii) to maintain
or preserve such Subsidiary's financial condition or to cause such Subsidiary to
achieve certain levels of operating results; PROVIDED, HOWEVER, that none of the
Company, ESC and Echosphere Corporation may be designated as Unrestricted
Subsidiaries. At any time after the date of the Indentures that the Company
designates an additional Subsidiary (other than ETC or a Subsidiary that
constitutes a Non-Core Asset) as an Unrestricted Subsidiary, the Company will be
deemed to have made a Restricted Investment in an amount equal to the fair
market value (as determined in good faith by the Board of Directors of the
Company evidenced by a resolution of the Board of Directors of the Company and
set forth in an Officers' Certificate delivered to the Trustee no later than
five business days following January 1 and July 1 of each year and ten days
following a request from the Trustee, which certificate shall cover the six
months preceding such January 1, July 1 or date of request, as the case may be)
of such Subsidiary and to have incurred all Indebtedness of such Unrestricted
Subsidiary. An Unrestricted Subsidiary may be designated as a Restricted
Subsidiary of the Company if, at the time of such designation after giving pro
forma effect thereto, no Default or Event of Default shall have occurred or be
continuing.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
principal amount of such Indebtedness into (b) the total of the product obtained
by multiplying (i) the amount of each then remaining installment,
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sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (ii) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" means a Wholly Owned Subsidiary of the
Company that is a Restricted Subsidiary.
"WHOLLY OWNED SUBSIDIARY" means, with respect to any person, any Subsidiary
all of the outstanding voting stock (other than directors' qualifying shares) of
which is owned by such person, directly or indirectly.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
In this section we discuss the material United States federal income tax
consequences of participating in the Exchange Offer and owning and disposing of
Exchange Notes.
In this section we discuss only United States federal income tax
consequences to United States Holders (as defined below) that participate in the
Exchange Offer, and that hold Notes, and that will hold Exchange Notes, as
capital assets within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended (the "Code"). We generally do not address any tax
considerations relevant to holders other than United States Holders or to United
States Holders that may be subject to special tax rules, such as banks,
insurance companies, dealers in securities, holders of 10% or more of the voting
stock of the Company, persons who "mark to market" their securities, persons who
have a "functional currency" other than the United States dollar, or persons
that will hold notes as a position in a "straddle" for tax purposes or as part
of a "synthetic security" or a "conversion transaction" or other integrated
investment consisting of Notes and one or more other investments.
The term "United States Holder" means a beneficial owner of a Note or an
Exchange Note that is:
- a citizen or resident of the United States;
- a corporation, partnership or other entity created or organized
under the laws of the United States, any state thereof or the District
of Columbia;
- a trust the administration of which is subject to the primary
supervision of a United States court and with respect to which one or
more United States persons have the authority to control all
substantial decisions; or
- an estate the income of which is subject to United States federal
income tax regardless of its source.
This section is based upon the Code, Treasury regulations promulgated
thereunder and rulings and judicial decisions now in effect. Those authorities
could change at any time, and any such change could be retroactive. If that
were to occur, the tax consequences of participating in the Exchange Offer and
owning and disposing of Exchange Notes could differ from the consequences
described below.
THE EXCHANGE OFFER
If you exchange a Note for an Exchange Note in the Exchange Offer, the
exchange will not be a taxable transaction for United States federal income tax
purposes. Accordingly, you will not recognize
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<PAGE>
any gain or loss when you receive the Exchange Note, and you will be required to
continue to include interest on the Exchange Note in gross income as described
below. Your holding period for the Exchange Note will include your holding
period for the Note exchanged therefor, and your adjusted tax basis in the
Exchange Note will be the same as your adjusted tax basis in such Note, in each
case immediately before the exchange.
If the Internal Revenue Service ("IRS") were to disagree and treat the
exchange of a Note for an Exchange Note in the Exchange Offer as a taxable
transaction, the United States federal income tax consequences to you generally
would be as described below under "Dispositions of Notes."
INTEREST ON THE NOTES
Interest on the Notes generally will be taxable to a holder as ordinary
income at the time it is received or accrued in accordance with the holder's
method of accounting for United States federal income tax purposes.
We are obligated to pay Liquidated Damages in the form of additional
interest in certain circumstances, as described under "Description of the
Notes--Registration Rights; Liquidated Damages." We believe, and intend to take
the position, that the possibility of payment of Liquidated Damages should not
cause the Notes to be issued with original issue discount. You should consult
your own tax advisor regarding the possible payment of Liquidated Damages.
MARKET DISCOUNT
If a holder purchased a Note for less than its stated redemption price at
maturity, the difference is treated as "market discount" for United States
federal income tax purposes if it exceeds a specified DE MINIMIS amount. Under
the market discount rules, when the holder disposes of the Exchange Note
received in exchange for such Note, the holder will have to treat any gain as
ordinary income to the extent that market discount has accrued on the Note and
the Exchange Note and the holder has not included the market discount in income.
In addition, if the holder incurred or continued any indebtedness to purchase or
carry the Note or Exchange Note, the holder may have to defer the deduction of
all or a portion of the related interest expense until the Exchange Note matures
or the holder disposes of the Exchange Note.
Market discount will accrue ratably from the date the holder acquired the
Note to the date that the Exchange Note matures, unless the holder elects to
accrue it under a constant-yield method. A holder may elect to include market
discount in income currently as it accrues, either ratably or under a
constant-yield method. If the holder elects to do so, the rule described above
regarding deferral of interest deductions will not apply. The election to
include market discount in income currently applies to all market discount
obligations that the holder holds or acquires on or after the first day of the
first taxable year to which the election applies. The holder may not revoke the
election without the consent of the IRS.
AMORTIZABLE BOND PREMIUM
If a holder purchased a Note for more than its stated redemption price at
maturity, the holder will be treated as having purchased the Note at a "premium"
and may elect to amortize the premium over the remaining term of the Note and
the Exchange Note under a constant-yield method. The amount amortized in any
year will be treated as a reduction of the holder's interest income from the
Exchange Note. Premium on a Note and an Exchange Note held by a United States
Holder that does not make such
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<PAGE>
an election will decrease the gain or increase the loss otherwise recognized on
a disposition of the Exchange Note. The election to amortize premium under a
constant-yield method applies to all debt obligations that the holder holds or
acquires on or after the first day of the first taxable year to which the
election applies. The holder may not revoke the election without the consent of
the IRS.
DISPOSITIONS OF NOTES
Gain or loss recognized by a holder on a disposition (including a sale,
exchange or redemption) of an Exchange Note will generally equal the difference
between the amount realized by the holder on the disposition (except to the
extent that such amount realized is attributable to accrued but unpaid interest
not previously included in income, which will be taxable as ordinary income) and
the holder's adjusted tax basis in the Exchange Note. A holder's adjusted tax
basis in an Exchange Note generally will equal the holder's cost of the Note
exchanged therefor, increased by any market discount that the holder previously
included in income. Except as described above with respect to market discount,
gain or loss recognized on a disposition of an Exchange Note generally will be
long-term capital gain or loss if, at the time of the disposition, the Exchange
Note has been held for more than one year. In general, long-term capital gains
of individuals are eligible for reduced rates of United States federal income
taxation. The deductibility of losses is subject to limitations.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, payments of interest on, and the proceeds from the sale,
redemption or other disposition of Exchange Notes (other than Exchange Notes
held by certain exempt persons, including most corporations and other persons
who, when required, demonstrate their exempt status) will be subject to
information reporting requirements. "Backup withholding" at a rate of 31% may
apply to such payments if the holder fails to furnish a correct taxpayer
identification number or otherwise fails to comply with all backup withholding
requirements.
The backup withholding tax is not an additional tax and may be credited
against a holder's regular United States federal income tax liability or
refunded by the IRS.
The payment of proceeds from the disposition of Exchange Notes to or
through the United States office of a broker will be subject to information
reporting and backup withholding rules unless the owner establishes an
exemption. Special rules may apply with respect to the payment of the proceeds
from the disposition of Exchange Notes to or through foreign offices of certain
brokers.
Treasury regulations that are generally effective for payments made after
December 31, 1999, subject to certain transition rules, modify in certain
respects the backup withholding and information reporting rules. In general,
these regulations do not significantly alter the substantive requirements of
these rules, but unify current procedures and forms and clarify reliance
standards. You should consult your own tax advisor regarding these regulations.
THE FOREGOING DISCUSSION DOES NOT PURPORT TO BE COMPLETE, IS FOR GENERAL
INFORMATION PURPOSES ONLY, AND IS NOT TAX ADVICE. ACCORDINGLY, YOU SHOULD
CONSULT YOUR OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO YOU
RESULTING FROM PARTICIPATING IN THE EXCHANGE OFFER AND OWNING AND DISPOSING OF
EXCHANGE NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR
FOREIGN INCOME TAX LAWS, AND ANY ESTATE, GIFT OR OTHER TAX LAWS, AND ANY RECENT
OR PROSPECTIVE CHANGES IN APPLICABLE TAX LAWS, AS WELL AS THE TAX CONSEQUENCES
OF NOT PARTICIPATING IN THE EXCHANGE OFFER.
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UNITED STATES ERISA CONSIDERATIONS
ANY UNITED STATES EMPLOYEE BENEFIT PLAN THAT PROPOSES TO PURCHASE THE NOTES
SHOULD CONSULT WITH ITS COUNSEL WITH RESPECT TO THE POTENTIAL CONSEQUENCES OF
SUCH INVESTMENT UNDER THE FIDUCIARY RESPONSIBILITY PROVISIONS OF THE UNITED
STATES EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") AND
THE PROHIBITED TRANSACTION PROVISIONS OF ERISA AND THE CODE.
ERISA and the Code impose certain requirements on employee benefit plans
and certain other retirement plans and arrangements, including individual
retirement accounts and annuities, that are subject to ERISA and/or the Code
(all of which are hereinafter referred to as "ERISA Plans") and on persons who
are fiduciaries with respect to such ERISA Plans. A person who exercises
discretionary authority or control with respect to the management or assets of
an ERISA Plan will be considered a fiduciary of the ERISA Plan under ERISA. In
accordance with ERISA's general fiduciary standards, before investing in the
Notes, an ERISA Plan fiduciary should determine whether such an investment is
permitted under the governing ERISA Plan instruments and is appropriate for the
ERISA Plan in view of its overall investment policy and the composition and
diversification of its portfolio. Other provisions of ERISA and the Code
prohibit certain transactions involving the assets of an ERISA Plan and persons
who have certain specified relationships to the ERISA Plan ("parties in
interest" within the meaning of ERISA or "disqualified persons" within the
meaning of the Code). Thus, an ERISA Plan fiduciary considering an investment in
the Notes should also consider whether such an investment may constitute or give
rise to a prohibited transaction under ERISA or the Code and whether an
administrative exemption may be applicable to such investment.
The acquisition of the Notes by an ERISA Plan could be a prohibited
transaction if either ECC, an Initial Purchaser or any of their respective
affiliates (each, an "Offering Participant") are parties in interest or
disqualified persons with respect to the ERISA Plan. Any prohibited transaction
could be treated as exempt under ERISA and the Code if the Notes were acquired
pursuant to and in accordance with one or more "class exemptions" issued by the
United States Department of Labor ("DOL"), such as Prohibited Transaction Class
Exemption ("PTCE") 84-14 (an exemption for certain transactions determined by an
independent qualified professional asset manager), PTCE 91-38 (an exemption for
certain transactions involving bank collective investment funds) or PTCE 90-1
(an exemption for certain transactions involving insurance company pooled
separate accounts). Prior to acquiring the Notes in this offering, an ERISA Plan
or fiduciary should determine either that none of the Offering Participants is a
party in interest or disqualified person with respect to the ERISA Plan or that
an exemption from the prohibited transaction rules is available for such
acquisition.
An ERISA Plan fiduciary considering the purchase of the Notes should
consult its tax and/or legal advisors regarding ECC, the availability, if any,
of exemptive relief from any potential prohibited transaction and other
fiduciary issues and their potential consequences. Each purchaser acquiring the
Notes with the assets of an ERISA Plan with respect to which any Offering
Participant is a party in interest or a disqualified person shall be deemed to
have represented that a statutory or an administrative exemption from the
prohibited transaction rules under Section 406 of ERISA and Section 4975 of the
Code is applicable to such purchaser's acquisition of the Notes.
PLAN OF DISTRIBUTION
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Company believes that Exchange Notes issued pursuant to
the Exchange Offer in exchange for the Old Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder which
is (i) an affiliate of the Company, (ii) a broker-dealer who acquired Old Notes
directly from
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the Company or an affiliate thereof or (iii) a broker-dealer who acquired Old
Notes as a result of market-making or other trading activities) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holders' business, and such holders are not engaged in, and do
not intend to engage in, and have no arrangement or understanding with any
person to participate in, a distribution of such Exchange Notes and that
broker-dealers (Participating Broker-Dealers) receiving Exchange Notes in the
Exchange Offer will be subject to a prospectus delivery requirement with respect
to resales of such Exchange Notes. To date, the Staff has taken the position
that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to transactions involving an exchange of securities
such as the exchange pursuant to the Exchange Offer (other than a resale of an
unsold allotment from the sale of the Old Notes to the Initial Purchasers) with
the prospectus contained in the registration statement relating to the exchange
offer. Pursuant to the Registration Rights Agreements, the Company has agreed
to permit Participating Broker-Dealers and other persons, if any, subject to
similar prospectus delivery requirements to use this Prospectus in connection
with the resale of such Exchange Notes. The Company has agreed that, for a
period of one year after the consummation of the Exchange Offer, it will make
this Prospectus, and any amendment or supplement to this Prospectus, available
to any broker-dealer that requests such documents in the Letter of Transmittal.
Each holder of the Old Notes who wishes to exchange its Old Notes for Exchange
Notes in the Exchange Offer will be required to make certain representations to
the Company as set forth in "The Exchange Offer." In addition, each holder who
is a broker-dealer and who receives Exchange Notes for its own account in
exchange for Old Notes that were acquired by it as a result of market-making
activities or other trading activities will be required to acknowledge that it
will deliver a Prospectus in connection with any resale by it of such Exchange
Notes.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in the
Registration Rights Agreements.
Following consummation of the Exchange Offer, we may, in our sole
discretion, commence one or more additional exchange offers to holders of Old
Notes who did not exchange their Old Notes for Exchange Notes in the Exchange
Offer, or terms which may differ from those contained in the Registration
Statement. This Prospectus, as it may be amended or supplemented from time to
time, may be used by us in connection with any such additional exchange offers.
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Such additional exchange offers will take place from time to time until all
outstanding Old Notes have been exchanged for Exchange Notes pursuant to the
terms and conditions herein.
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for us by Winthrop,
Stimson, Putnam & Roberts, New York, New York, as to matters of New York law,
and Friedlob Sanderson Raskin Paulson & Tourtillott, LLC, Denver, Colorado, as
to matters of Colorado law.
EXPERTS
The audited financial statements of the Company included 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 such reports.
WHERE YOU CAN FIND MORE INFORMATION
ECC and the Company are subject to the informational requirements of the
Exchange Act and each of ECC, the Company, Dish and ESBC files reports, proxy
statements and other information with the SEC. The reports, proxy statements and
other information filed by the foregoing companies may be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W. Washington D.C. 20549, and at the Commission's regional
offices located at 7 World Trade Center, New York, New York 10048, and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. ECC's Class A
common stock is traded on the Nasdaq National Market and reports and other
information concerning ECC can also be inspected at the Nasdaq National Market
Exchange, 1735 K Street, N.W., Washington, D.C. 20546. Such material may also be
accessed electronically by means of the EDGAR database at the SEC's home page on
the Internet at http://www.sec.gov.
We have filed with the SEC a Registration Statement on Form S-4 (the
"Registration Statement") with respect to our 9 1/4% Senior Notes due 2006 and
our 9?% Senior Notes due 2009. This Prospectus, which is part of the
Registration Statement, omits certain information included in the Registration
Statement. Statements made in the Prospectus as to the contents of any
contract, agreement or other document are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, we refer you to such exhibit for a more complete
description of the matter involved.
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INDEX TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Combined and Consolidated Financial Statements:
Report of Independent Public Accountants................................................................. F-2
Combined and Consolidated Balance Sheets at December 31, 1996 and 1997 and September 30, 1998............ F-3
Combined and Consolidated Statements of Operations for the years ended December 31, 1995, 1996 and 1997,
and for the nine months ended September 30, 1997 and 1998.............................................. F-4
Combined and Consolidated Statements of Stockholder's Equity for the years ended December 31, 1995, 1996
and 1997, and for the nine months ended September 30, 1998............................................. F-5
Combined and Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1996 and 1997,
and for the nine months ended September 30, 1997 and 1998.............................................. F-6
Notes to Combined and Consolidated Financial Statements.................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To EchoStar DBS Corporation:
We have audited the accompanying combined and consolidated balance sheets of
EchoStar DBS Corporation (a Colorado corporation) and affiliates and
subsidiaries, as described in Note 1, as of December 31, 1996 and 1997, and the
related combined and consolidated statements of operations, changes in
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Companies' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined and consolidated financial position of
EchoStar DBS Corporation and affiliates and subsidiaries as of December 31, 1996
and 1997, and the combined and consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
February 27, 1998.
F-2
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
ECHOSTAR COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
COMBINED AND CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1996 1997 1998
--------- --------- -------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents................................................ $ 38,440 $ 62,059 $ 42,301
Marketable investment securities......................................... 18,807 3,906 1,999
Trade accounts receivable, net of allowance for uncollectible accounts of
$1,494, $1,347 and $3,530, respectively................................ 13,483 66,045 83,893
Inventories.............................................................. 72,767 22,993 81,974
Subscriber acquisition costs, net........................................ 68,129 18,819 --
Other current assets..................................................... 19,861 9,445 19,470
--------- --------- -------------
Total current assets....................................................... 231,487 183,267 229,637
Restricted Assets:
Insurance receivable (Note 4)............................................ -- -- 106,000
Satellite escrow......................................................... -- 73,233 8,410
Interest escrow.......................................................... -- 112,284 68,173
1996 Notes escrow........................................................ 47,491 -- --
Other restricted cash and marketable investment securities............... 31,450 2,245 --
--------- --------- -------------
Total restricted cash and marketable investment securities................. 78,941 187,762 182,583
Property and equipment, net................................................ 585,533 859,284 857,965
FCC authorizations, net.................................................... 72,500 99,220 103,937
Advances to affiliates, net................................................ 11,651 2,021 --
Deferred tax assets........................................................ 79,663 64,409 62,972
Other noncurrent assets.................................................... 25,770 35,811 30,328
--------- --------- -------------
Total assets......................................................... $1,085,545 $1,431,774 $ 1,467,422
--------- --------- -------------
--------- --------- -------------
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current Liabilities:
Trade accounts payable................................................... $ 41,228 $ 69,036 $ 91,685
Deferred revenue......................................................... 104,095 122,215 113,048
Accrued expenses......................................................... 41,804 97,090 131,255
Advances from affiliates, net............................................ -- -- 29,352
Current portion of long-term debt........................................ 11,334 17,885 21,064
--------- --------- -------------
Total current liabilities.................................................. 198,461 306,226 386,404
Long-term obligations, net of current portion:
1994 Notes............................................................... 437,127 499,863 552,776
1996 Notes............................................................... 386,165 438,512 481,966
1997 Notes............................................................... -- 375,000 375,000
Mortgages and other notes payable, net of current portion................ 51,428 51,846 49,547
Notes payable to ECC, including accumulated interest..................... 12,000 54,597 58,497
Long-term deferred satellite services revenue and other long-term
liabilities............................................................ 7,037 19,500 27,954
--------- --------- -------------
Total long-term obligations, net of current portion........................ 893,757 1,439,318 1,545,740
--------- --------- -------------
Total liabilities.................................................... 1,092,218 1,745,544 1,932,144
Commitments and Contingencies (Note 10)
Stockholder's Equity (Deficit):
Common Stock, $.01 par value, 3,000 shares authorized, issued and
outstanding............................................................ -- -- --
Additional paid-in capital............................................... 108,841 125,164 145,164
Unrealized holding losses on available-for-sale securities, net of
deferred taxes......................................................... (12) (8) --
Accumulated deficit...................................................... (115,502) (438,926) (609,886)
--------- --------- -------------
Total stockholder's equity (deficit)....................................... (6,673) (313,770) (464,722)
--------- --------- -------------
Total liabilities and stockholder's equity (deficit)................. $1,085,545 $1,431,774 $ 1,467,422
--------- --------- -------------
--------- --------- -------------
</TABLE>
See accompanying Notes to Combined and Consolidated Financial Statements.
F-3
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES
OF ECHOSTAR COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ ------------------------
1995 1996 1997 1997 1998
---------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE:
DISH Network:
Subscription television services..................... $ -- $ 49,650 $ 298,883 $ 192,986 $ 459,540
Other................................................ -- 8,238 42,925 32,942 11,096
---------- ----------- ----------- ----------- -----------
Total DISH Network..................................... -- 57,888 341,808 225,928 470,636
DTH equipment sales and integration services........... 35,816 77,390 90,263 37,410 190,787
Satellite services..................................... -- 5,822 11,135 7,879 15,805
C-band and other....................................... 112,704 56,003 32,696 25,243 19,716
---------- ----------- ----------- ----------- -----------
Total revenue............................................ 148,520 197,103 475,902 296,460 696,944
COSTS AND EXPENSES:
DISH Network Operating Expenses:
Subscriber-related expenses.......................... -- 22,840 143,529 97,262 210,717
Customer service center and other.................... -- 12,996 35,078 23,140 45,641
Satellite and transmission........................... -- 6,573 14,563 9,676 17,725
---------- ----------- ----------- ----------- -----------
Total DISH Network operating expenses.................. -- 42,409 193,170 130,078 274,083
Cost of sales--DTH equipment and integration
services............................................. 30,404 75,984 60,918 25,998 131,050
Cost of sales--C-band and other........................ 84,846 42,345 23,909 16,337 12,555
Marketing:
Subscriber promotion subsidies....................... -- 35,239 148,502 98,556 165,123
Advertising and other................................ 1,786 17,929 34,843 24,096 25,694
---------- ----------- ----------- ----------- -----------
Total marketing expenses............................... 1,786 53,168 183,345 122,652 190,817
General and administrative............................. 36,376 48,693 66,060 45,883 66,836
Amortization of subscriber acquisition costs........... -- 16,073 121,428 95,325 18,819
Depreciation and amortization.......................... 3,114 27,296 51,408 38,220 58,778
---------- ----------- ----------- ----------- -----------
Total costs and expenses................................. 156,526 305,968 700,238 474,493 752,938
---------- ----------- ----------- ----------- -----------
Operating loss........................................... (8,006) (108,865) (224,336) (178,033) (55,994)
Other Income (Expense):
Interest income........................................ 12,545 15,111 12,512 8,569 8,172
Interest expense, net of amounts capitalized........... (23,985) (62,430) (110,003) (79,056) (122,219)
Other.................................................. 894 (345) (1,451) (353) (699)
---------- ----------- ----------- ----------- -----------
Total other income (expense)............................. (10,546) (47,664) (98,942) (70,840) (114,746)
---------- ----------- ----------- ----------- -----------
Loss before income taxes................................. (18,552) (156,529) (323,278) (248,873) (170,740)
Income tax benefit (provision), net...................... 6,191 54,853 (146) (64) (220)
---------- ----------- ----------- ----------- -----------
Net loss................................................. $ (12,361) $ (101,676) $ (323,424) $ (248,937) $ (170,960)
---------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- -----------
</TABLE>
See accompanying Notes to Combined and Consolidated Financial Statements.
F-4
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
ECHOSTAR COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
COMBINED AND CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ACCUMULATED
DEFICIT AND
UNREALIZED
COMMON STOCK COMMON ADDITIONAL HOLDING
---------------------- PREFERRED STOCK PAID-IN GAINS
SHARES AMOUNT STOCK WARRANTS CAPITAL (LOSSES) TOTAL
--------- ----------- ----------- --------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(NOTES 1
AND 2)
Balance, December 31, 1994................ 33,544 $ 336 $ 15,991 $ 26,133 $ 62,197 $ (849) $ 103,808
Issuance of Common Stock................ 2 -- -- -- 2 -- 2
8% Series A Cumulative Preferred Stock
dividends (at $0.38 per share)........ -- -- 616 -- -- (616) --
Exercise of Common Stock Warrants....... 2,731 26 -- (25,419) 25,393 -- --
Common Stock Warrants exchanged for ECC
Warrants.............................. -- -- -- (714) 714 -- --
Launch bonuses funded by issuance of
ECC's Class A Common Stock............ -- -- -- -- 1,192 -- 1,192
Unrealized holding gains on
available-for-sale securities, net.... -- -- -- -- -- 251 251
Net loss................................ -- -- -- -- -- (12,361) (12,361)
--------- ----- ----------- --------- ---------- ------------ -----------
Balance, December 31, 1995................ 36,277 362 16,607 -- 89,498 (13,575) 92,892
Issuance of Common Stock (Note 1)....... 1 -- -- -- 2 -- 2
Reorganization of entities under common
control (Note 1)...................... (36,275) (362) (16,607) -- 16,969 -- --
Income tax benefit of deduction for
income tax purposes on exercise of
Class A Common Stock options.......... -- -- -- -- 2,372 -- 2,372
Unrealized holding losses on
available-for-sale securities, net.... -- -- -- -- -- (263) (263)
Net loss................................ -- -- -- -- -- (101,676) (101,676)
--------- ----- ----------- --------- ---------- ------------ -----------
Balance, December 31, 1996................ 3 -- -- -- 108,841 (115,514) (6,673)
Purchase price "pushed-down" to DBSC by
ECC (Note 1).......................... -- -- -- -- 16,323 -- 16,323
Unrealized holding gains on
available-for-sale securities, net.... -- -- -- -- -- 4 4
Net loss................................ -- -- -- -- -- (323,424) (323,424)
--------- ----- ----------- --------- ---------- ------------ -----------
Balance, December 31, 1997................ 3 -- -- -- 125,164 (438,934) (313,770)
Contribution of satellite asset
(unaudited) (Note 4).................. -- -- -- -- 20,000 -- 20,000
Unrealized holding gains on
available-for-sale securities, net
(unaudited)........................... -- -- -- -- -- 8 8
Net loss (unaudited).................... -- -- -- -- -- (170,960) (170,960)
--------- ----- ----------- --------- ---------- ------------ -----------
Balance, September 30, 1998 (unaudited)... 3 $ -- $ -- $ -- $ 145,164 $ (609,886) $ (464,722)
--------- ----- ----------- --------- ---------- ------------ -----------
--------- ----- ----------- --------- ---------- ------------ -----------
</TABLE>
See accompanying Notes to Combined and Consolidated Financial Statements.
F-5
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
ECHOSTAR COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................... $ (12,361) $(101,676) $(323,424) $(248,937) $(170,960)
Adjustments to reconcile net loss to net cash flows from
operating activities:
Depreciation and amortization.......................... 3,114 27,296 51,408 38,220 58,778
Amortization of subscriber acquisition costs........... -- 16,073 121,428 95,325 18,819
Interest on notes payable to ECC added to principal.... -- -- 5,215 4,868 3,900
Deferred income tax benefit............................ (4,825) (50,515) (361) (365) --
Amortization of debt discount and deferred financing
costs................................................ 23,528 61,695 83,221 60,650 89,455
Change in reserve for excess and obsolete inventory.... 1,212 2,866 (1,823) 2,230 374
Change in long-term deferred satellite services revenue
and other long-term liabilities...................... -- 5,949 12,056 9,284 8,454
Other, net............................................. 608 536 403 -- --
Changes in current assets and current liabilities:
Trade accounts receivable, net....................... (1,536) (4,368) (52,562) (40,975) (17,848)
Inventories.......................................... (19,654) (36,864) 51,597 47,487 (59,355)
Subscriber acquisition costs......................... -- (84,202) (72,118) (70,395) --
Other current assets................................. (14,088) (3,118) 13,359 10,888 (8,592)
Trade accounts payable............................... 4,111 22,165 27,808 (4,501) 22,649
Deferred revenue..................................... (1,009) 103,511 18,120 1,650 (9,167)
Accrued expenses..................................... (988) 17,816 58,124 46,604 23,425
--------- --------- --------- --------- ---------
Net cash flows from operating activities................... (21,888) (22,836) (7,549) (47,967) (40,068)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable investment securities.............. (3,004) (138,328) (36,586) (33,006) (3,969)
Sales of marketable investment securities.................. 33,816 119,730 51,513 20,573 5,868
Purchases of restricted marketable investment securities... (15,000) (21,100) (1,495) (1,495) --
Funds released from escrow and restricted cash and
marketable investment securities......................... 122,149 235,402 120,215 100,445 116,468
Offering proceeds and investment earnings placed in
escrow................................................... (9,589) (193,972) (227,561) (224,858) (5,269)
(Advances to) repayments from affiliates, net.............. -- (33,105) 9,976 7,231 --
Purchases of property and equipment........................ (133,555) (214,614) (221,750) (174,741) (133,807)
Payments received on convertible subordinated debentures
from SSET................................................ -- 6,445 834 -- 1,521
Proceeds from sale of investment in DBSC to ECC............ 4,210 -- -- -- --
Expenditures for FCC authorizations........................ (458) (55,420) -- -- --
Other...................................................... -- -- (1,225) (1,730) (121)
--------- --------- --------- --------- ---------
Net cash flows from investing activities................... (1,431) (294,962) (306,079) (307,581) (19,309)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock..................... 2 2 -- -- --
Proceeds from (repayment of) note payable to ECC........... -- 12,000 (12,000) -- --
Net proceeds from issuance of 1996 Notes................... -- 336,916 -- -- --
Net proceeds from issuance of 1997 Notes................... -- -- 362,500 362,500 --
Advances from affiliates................................... 20,000 -- -- -- 51,689
Repayments of mortgage indebtedness and notes payable...... (238) (6,631) (13,253) (15,613) (12,070)
--------- --------- --------- --------- ---------
Net cash flows from financing activities................... 19,764 342,287 337,247 346,887 39,619
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents....... (3,555) 24,489 23,619 (8,661) (19,758)
Cash and cash equivalents, beginning of year............... 17,506 13,951 38,440 38,440 62,059
--------- --------- --------- --------- ---------
Cash and cash equivalents, end of year..................... $ 13,951 $ 38,440 $ 62,059 $ 29,779 $ 42,301
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See accompanying Notes to Combined and Consolidated Financial Statements.
F-6
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF SEPTEMBER 30, 1998 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1998 IS UNAUDITED)
1. ORGANIZATION AND BUSINESS ACTIVITIES
BASIS OF PRESENTATION
The accompanying combined and consolidated financial statements form
part of the Prospectus to exchange (the "Exchange Offer") the 9 1/4% Senior
Notes due 2006 (the "Old Seven Year Notes") and the 9 3/8% Senior Notes due
2009 (the "Old Ten Year Notes") that were issued in a transaction exempt from
registration under the Securities Act of 1933, as amended (collectively, the
"Old Notes") for publicly registered new 9 1/4% Senior Notes due 2006 (the
"Exchange Seven Year Notes") and the 9 3/8% Senior Notes due 2009 (the
"Exchange Ten Year Notes") with substantially identical terms (collectively
the "Exchange Notes" and together with the Old Notes, the "Notes"). The Old
Notes were issued by EchoStar DBS Corporation, a wholly-owned subsidiary of
EchoStar Communications Corporation ("ECC"), on January 25, 1999. Pending
approval from the Federal Communications Commission ("FCC") and successful
completion of the Tender Offers (as defined herein), ECC intends to merge two
of its direct wholly-owned subsidiaries, EchoStar Space Corporation ("Space")
and Direct Broadcasting Satellite Corporation ("DBSC"), into a subsidiary of
DBS Corp. The accompanying financial statements retroactively reflect the
consolidated historical results of DBS Corp combined with the historical
results of Space and DBSC. Substantially all of EchoStar's operating
activities are conducted by subsidiaries of DBS Corp. DBSC and Space's assets
consist principally of certain satellite and FCC authorization assets. There
are no significant operating activities conducted by either DBSC or Space.
(See Organizational History and Legal Structure below).
ECC is a publicly traded company on the Nasdaq National Market. As used
herein, "EchoStar" refers to ECC and its subsidiaries. For purposes of this
Prospectus, the "Company" refers to the consolidation of DBS Corp and its
subsidiaries and the combination with Space and DBSC.
DBS Corp was formed under Colorado law in January 1996 for the initial
purpose of participating in an FCC auction. On January 26, 1996, DBS Corp
submitted the winning bid of $52.3 million for 24 direct broadcast satellite
("DBS") frequencies at 148 DEG. West Longitude ("WL"). In June 1997, DBS Corp
completed an offering of 12 1/2% Senior Secured Notes due 2002 (the "1997
Notes"). Substantially all of the 1997 Notes were retired upon completion of
the Tender Offers (as defined herein). Prior to consummation of the 1997
Notes Offering, ECC contributed all of the outstanding capital stock (the
"Contribution") of EchoStar Satellite Broadcasting Corporation ("ESBC") to
DBS Corp. As a result of the Contribution, ESBC is a wholly-owned subsidiary
of DBS Corp. This transaction was accounted for as a reorganization of
entities under common control in which ESBC is treated as the predecessor of
DBS Corp. The accompanying financial statements retroactively reflect the
resulting structure and historical results of DBS Corp and its predecessors.
During 1994, EchoStar acquired approximately 40% of the outstanding common
stock of Direct Broadcasting Satellite Corporation ("Old DBSC"). Old DBSC's
principal assets included an FCC conditional satellite permit and specific
orbital slot assignments for a total of 22 DBS frequencies. Through December
1996, EchoStar advanced Old DBSC a total of $46 million in the form of notes
receivable to enable Old DBSC to make required payments under its satellite
(EchoStar III) construction contract. As of December 31, 1996, these notes
receivable totaled $49 million, including accrued interest of $3 million. On
January 8, 1997, EchoStar consummated the merger of Old DBSC with a wholly-owned
subsidiary of EchoStar, DBSC, as defined above. EchoStar issued approximately
650,000 shares of its Class A Common Stock to acquire the remaining 60% of Old
DBSC that it did not previously own. This transaction was accounted for as a
purchase and the excess of the purchase price over the fair value of Old DBSC's
tangible assets was allocated to Old DBSC's FCC authorizations (approximately
$16 million). Upon consummation of the merger, Old DBSC ceased to exist.
F-7
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND BUSINESS ACTIVITIES (CONTINUED)
On December 23, 1998, EchoStar announced that it has commenced cash
tender offers (the "Tender Offers") to purchase any and all of the following
debt securities issued by its direct and indirect subsidiaries: the 1997
Notes; the 13 1/8% Senior Secured Discount Notes due 2004 (the "1996 Notes"),
issued by ESBC, and the 12 7/8% Senior Secured Discount Notes due 2004 (the
"1994 Notes"), issued by Dish, Ltd. The issues of notes described above are
referred to as "the Notes". The Tender Offers are part of a plan to refinance
existing indebtedness at more favorable interest rates and terms. The Tender
Offers expired at 12:00 midnight, Eastern Time on Friday, January 22, 1999,
unless extended.
EchoStar also has sent to all holders of ECC's issued and outstanding
12 1/8% Series B Senior Redeemable Exchangeable Preferred Stock due 2004 (the
"Series B Preferred") a notice to exchange all of the outstanding shares of
Series B Preferred into 12 1/8% Senior Exchange Notes (the "Exchange Notes") on
the terms and conditions set forth in the certificate of designation relating to
the Series B Preferred. The Exchange Notes were issued on January 4, 1999 and
EchoStar immediately commenced an offer to purchase any and all outstanding
Exchange Notes and solicited consents from the registered holders to amendments
to the indenture governing the Exchange Notes.
PRINCIPAL BUSINESS
The operations of EchoStar include three interrelated business units:
- THE DISH NETWORK--a direct broadcast satellite ("DBS") subscription
television service in the United States. As of September 30, 1998,
EchoStar had approximately 1.6 million DISH Network subscribers.
- ECHOSTAR TECHNOLOGIES CORPORATION ("TECHNOLOGY")--engaged in the design,
manufacture, distribution and sale of DBS set-top boxes, antennae and
other digital equipment for the DISH Network ("EchoStar Receiver
Systems"), and the design, manufacture and distribution of similar
equipment for direct-to-home ("DTH") projects of others internationally,
together with the provision of uplink center design, construction
oversight and other project integration services for international DTH
ventures.
- SATELLITE SERVICES--engaged in the turn-key delivery of video, audio and
data services to business television customers and other satellite users.
These services may include satellite uplink services, satellite
transponder space usage, billing, customer service and other services.
Since 1994, EchoStar has deployed substantial resources to develop the
"EchoStar DBS System." The EchoStar DBS System consists of EchoStar's
FCC-allocated DBS spectrum, DBS satellites ("EchoStar I," "EchoStar II,"
"EchoStar III," and "EchoStar IV"), digital satellite receivers, digital
broadcast operations center, customer service facilities, and other assets
utilized in its operations.
F-8
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND BUSINESS ACTIVITIES (CONTINUED)
EchoStar's principal business strategy is to continue developing its
subscription television service in the U.S. to provide consumers with a fully
competitive alternative to cable television service.
ORGANIZATION AND LEGAL STRUCTURE
Certain companies principally owned and controlled by Mr. Charles W. Ergen
were reorganized in 1993 into Dish, Ltd. (together with its subsidiaries, "Dish,
Ltd."). In April 1995, ECC was formed to complete an initial public offering
(the "IPO") of its Class A Common Stock. Concurrently, Mr. Ergen exchanged all
of his then outstanding shares of Class B Common Stock and 8% Series A
Cumulative Preferred Stock of Dish, Ltd. for like shares of ECC (the
"Exchange"). In December 1995, ECC merged Dish, Ltd. with a wholly-owned
subsidiary of ECC (the "Merger").
The following table summarizes the organizational structure of EchoStar and
its principle subsidiaries as of December 31, 1997 and September 30, 1998:
<TABLE>
<CAPTION>
REFERRED TO
LEGAL ENTITY HEREIN AS PARENT
- ------------------------------------------------------------------------------- ------------- -----------------
<S> <C> <C>
EchoStar Communications Corporation............................................ ECC Publicly owned
EchoStar DBS Corporation....................................................... DBS Corp ECC
EchoStar Space Corporation..................................................... Space ECC
Direct Broadcasting Satellite Corporation...................................... DBSC ECC
EchoStar Satellite Broadcasting Corporation.................................... ESBC DBS Corp
Dish, Ltd...................................................................... Dish, Ltd. ESBC
EchoStar Satellite Corporation................................................. ESC Dish, Ltd.
Echosphere Corporation......................................................... Echosphere Dish, Ltd.
Houston Tracker Systems, Inc., a Colorado Corporation formed in 1998........... HTS Dish, Ltd.
EchoStar Technologies Corporation (formerly HTS, a Texas Corporation).......... ETC Dish, Ltd.
DirectSat Corporation.......................................................... DirectSat Dish Ltd.
EchoStar International Corporation............................................. EIC Dish, Ltd.
</TABLE>
SIGNIFICANT RISKS AND UNCERTAINTIES
COMPETITION. The subscription television industry is highly competitive.
EchoStar faces competition from companies offering video, audio, data,
programming and entertainment services. Many of these competitors have
substantially greater financial and marketing resources than EchoStar.
EchoStar's ability to effectively compete in the subscription television market
will depend on a number of factors, including competitive factors (such as the
introduction of new technologies or the entry of additional strong competitors),
the level of consumer demand for such services, the availability of EchoStar
Receiver Systems, and EchoStar's ability to obtain necessary regulatory changes
and approvals.
DEPENDENCE ON SINGLE RECEIVER MANUFACTURER. During 1997, EchoStar Receiver
Systems were manufactured exclusively by SCI Systems, Inc. ("SCI"), a
high-volume contract electronics
F-9
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND BUSINESS ACTIVITIES (CONTINUED)
manufacturer. During February 1998, EchoStar executed two separate agreements
for the manufacture of digital set-top boxes in accordance with EchoStar's
specifications. There can be no assurance that either or both of Phillips
Electronics of North America Corporation or Vtech Communications Ltd. will be
able to successfully manufacture and deliver digital set-top boxes. EchoStar
currently is negotiating with additional brand-name consumer electronics
manufacturers to produce receivers for use with the DISH Network. No assurance
can be provided regarding the ultimate success of those negotiations. In the
event that EchoStar's manufacturers of digital set-top boxes are unable for any
reason to produce receivers in a quantity sufficient to meet its requirements,
EchoStar's ability to add additional subscribers, or its ability to satisfy
delivery obligations for receiver sales to international DTH providers, may be
materially impaired and its results of operations would be adversely affected.
TRANSACTIONS WITH MAJOR CUSTOMERS. Export sales to two customers,
ExpressVu, Inc. and Distribuidora de Television Digital S.A., together accounted
for approximately 16% and 24% of the Company's total revenue, during the year
ended December 31, 1997 and the nine months ended September 30, 1998,
respectively. Complete or partial loss of one or both of these customers could
have a material adverse effect on the Company's results of operations.
SUBSTANTIAL LEVERAGE. EchoStar is highly leveraged, which makes it
vulnerable to changes in general economic conditions. As of December 31, 1997,
EchoStar had outstanding long-term debt (including both the current and
long-term portion thereof) totaling approximately $1.4 billion. In addition,
EchoStar's long-term debt will increase by at least $266 million through March
2000, as interest on certain of its long-term debt accrues and is not payable in
cash. Substantially all of the assets of EchoStar and its subsidiaries are
pledged as collateral on its long-term debt. Further, the indentures associated
with EchoStar's long-term debt severely restrict its ability to incur additional
indebtedness. Thus, it may be difficult for EchoStar and its subsidiaries to
obtain additional debt financing if required or desired in order to implement
EchoStar's business strategy. Certain of EchoStar's subsidiaries also are
parties to other agreements which severely restrict their ability to obtain
additional debt financing for working capital, capital expenditures and general
corporate purposes.
EXPECTED OPERATING LOSSES. Due to the substantial expenditures required to
develop the EchoStar DBS System and introduce DISH Network service to consumers,
the Company has sustained significant losses in recent periods. The Company's
operating losses were $8 million, $109 million and $224 million for the years
ended December 31, 1995, 1996 and 1997, respectively. The Company had net losses
of $12 million, $102 million and $323 million during those same periods.
Improvement in the Company's results of operations is largely dependent upon the
Company's ability to expand its DISH Network subscription base, control
subscriber churn (i.e., the rate at which subscribers terminate service), and
effectively manage its operating and overhead costs. No assurance can be given
that the Company will be effective with regard to these matters. In addition,
the Company incurs significant costs to acquire DISH Network subscribers. The
high cost of obtaining new subscribers magnifies the negative effects of
subscriber churn. The Company anticipates that it will continue to experience
operating losses through at least 1999. There can be no assurance that such
operating losses will not continue beyond 1999 or
F-10
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND BUSINESS ACTIVITIES (CONTINUED)
that the Company's operations will generate sufficient cash flows to pay its
obligations, including its obligations on its long-term debt, or to pay cash
dividends on its common stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION AND CONSOLIDATION
The accompanying financial statements present the combination of DBS Corp,
Space and DBSC, each direct wholly-owned subsidiaries of ECC. All significant
intercompany transactions between DBS Corp, Space and DBSC (consisting primarily
of capital advanced by DBS Corp to Space and DBSC) and between DBS Corp and its
subsidiaries have been eliminated. Advances to affiliates are recorded at cost
and represent the net amount of funds advanced to, or received from,
unconsolidated affiliates of DBS Corp.
The financial statements for 1995 present the consolidation of Dish, Ltd.
and its subsidiaries through the date of the Exchange and the consolidation of
ECC and its subsidiaries, thereafter. The Exchange and Merger was accounted for
as a reorganization of entities under common control and the historical cost
basis of assets and liabilities was not affected by the transaction. Effective
March 1994, the stockholders approved measures necessary to increase the
authorized capital stock of Dish, Ltd. to include 200 million shares of Class A
Common Stock, 100 million shares of Class B Common Stock, and 20 million shares
of Series A Convertible Preferred Stock and determined to split all outstanding
shares of common stock on the basis of approximately 4,296 to 1.
The Company accounts for investments in 50% or less owned entities using the
equity method. At December 31, 1996 and 1997, these investments were not
material to the Company's consolidated financial statements.
INTERIM FINANCIAL INFORMATION
The accompanying unaudited combined and consolidated financial statements as
of September 30, 1998 and for the nine months ended September 30, 1997 and 1998
have been prepared in accordance with generally accepted accounting principles
and with Article 10 of Regulation S-X for interim financial information. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included in
the interim financial statements. All significant intercompany accounts and
transactions have been eliminated in consolidation. Operating results for the
nine months ended September 30, 1998 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses for each reporting
period. Actual results could differ from those estimates.
F-11
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSACTION GAINS AND LOSSES
The functional currency of the Company's foreign subsidiaries is the U.S.
dollar because their sales and purchases are predominantly denominated in that
currency. Transactions denominated in currencies other than U.S. dollars are
recorded based on exchange rates at the time such transactions arise. Subsequent
changes in exchange rates result in transaction gains and losses which are
reflected in income as unrealized (based on period-end translation) or realized
(upon settlement of the transaction). Net transaction gains (losses) during
1995, 1996 and 1997 were not material to the Company's results of operations.
CASH AND CASH EQUIVALENTS
The Company considers all liquid investments purchased with an original
maturity of 90 days or less to be cash equivalents. Cash equivalents as of
December 31, 1996 and 1997 consist of money market funds, corporate notes and
commercial paper; such balances are stated at cost which equates to market
value.
F-12
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STATEMENTS OF CASH FLOWS DATA
The following presents the Company's supplemental cash flow statement
disclosure (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- ---------------------
1995 1996 1997 1997 1998
--------- --------- ---------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash paid for interest................................... $ 461 $ 3,007 $ 5,953 $ 3,529 $ 28,116
Cash paid for income taxes............................... 3,203 383 209 -- --
Capitalized interest..................................... 25,763 31,818 43,169 27,861 21,619
8% Series A Cumulative Preferred Stock
dividends.............................................. 617 -- -- -- --
Accrued capital expenditures............................. 15,000 -- -- 1,000 --
Satellite launch payment for EchoStar II applied to
EchoStar I launch...................................... -- 15,000 -- -- --
Satellite vendor financing............................... 32,833 31,167 14,400 -- 12,950
Other notes payable...................................... -- -- 5,322 -- --
Contribution of satellite asset (Note 4)................. -- -- -- -- 20,000
The purchase price of DBSC was "pushed-down" by ECC to
DBSC as follows in the related purchase accounting:
Echo III satellite construction costs.................. -- -- 51,241 51,241 --
FCC authorizations..................................... -- -- 16,243 16,651 --
Notes payable to ECC, including accrued interest of
$3,382............................................... -- -- (49,382) (49,382) --
Trade accounts payable and accrued expenses............ -- -- (1,279) (1,687) --
Other notes payable.................................... -- -- (500) (500) --
Additional paid-in capital............................. -- -- (16,323) (16,323) --
</TABLE>
MARKETABLE INVESTMENT SECURITIES AND RESTRICTED CASH AND MARKETABLE INVESTMENT
SECURITIES
As of December 31, 1996 and 1997, the Company has classified all marketable
investment securities as available-for-sale. Accordingly, these investments are
reflected at market value based on quoted market prices. Related unrealized
gains and losses are reported as a separate component of stockholder's equity,
net of related deferred income taxes. The specific identification method is used
to
F-13
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
determine cost in computing realized gains and losses. The major components of
marketable investment securities as of December 31, 1996 and 1997 are as follows
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997
------------------------------------- -------------------------------------
UNREALIZED UNREALIZED
AMORTIZED HOLDING MARKET AMORTIZED HOLDING MARKET
COST LOSS VALUE COST GAIN VALUE
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Commercial paper...................................... $ 16,065 $ -- $ 16,065 $ 3,898 $ 8 $ 3,906
Government bonds...................................... 2,540 -- 2,540 -- -- --
Mutual funds.......................................... 219 (17) 202 -- -- --
----------- ----- --------- ----------- ----- ---------
$ 18,824 $ (17) $ 18,807 $ 3,898 $ 8 $ 3,906
----------- ----- --------- ----------- ----- ---------
----------- ----- --------- ----------- ----- ---------
</TABLE>
Restricted cash and marketable investment securities held in escrow
accounts, as reflected in the accompanying combined and consolidated balance
sheets, include cash restricted by the various indentures associated with
certain of the Company's debt financing transactions (see Note 5), plus
investment earnings thereon. Restricted cash and marketable investment
securities are invested in certain permitted debt and other marketable
investment securities until disbursed for the express purposes identified in the
applicable indenture.
As of December 31, 1996, other restricted cash included a total of $25
million held in two escrow accounts for the benefit of EchoStar Receiver System
manufacturers. These deposits were released from their respective escrow
accounts during May 1997. In addition, $6 million at December 31, 1996 was
restricted by an indenture to satisfy certain covenants pertaining to launch
insurance for EchoStar II. This covenant was satisfied during September 1997.
The major components of Restricted Cash and Marketable Investment Securities
are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997
------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
UNREALIZED UNREALIZED
AMORTIZED HOLDING MARKET AMORTIZED HOLDING MARKET
COST GAIN VALUE COST LOSS VALUE
----------- ------------- --------- ---------- ------------- ----------
Commercial paper................................... $ 77,569 $ -- $ 77,569 $ 128,743 $ (9) $ 128,734
Corporate notes.................................... -- -- -- 38,093 -- 38,093
Government bonds................................... 368 -- 368 16,706 (11) 16,695
Certificates of deposit............................ 750 -- 750 2,245 -- 2,245
Accrued interest................................... 254 -- 254 1,995 -- 1,995
----------- ----- --------- ---------- ----- ----------
$ 78,941 $ -- $ 78,941 $ 187,782 $ (20) $ 187,762
----------- ----- --------- ---------- ----- ----------
----------- ----- --------- ---------- ----- ----------
</TABLE>
Marketable investment securities and restricted cash and marketable
investment securities include debt securities of $176 million with contractual
maturities of one year or less and $11 million with contractual maturities of
between one and five years. Actual maturities may differ from contractual
maturities as a result of the Company's ability to sell these securities prior
to maturity.
F-14
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair values for the Company's 1994 Notes, 1996 Notes, and 1997 Notes (as
defined, see Note 5) are based on quoted market prices. The fair values of the
Company's mortgages and other notes payable are estimated using discounted cash
flow analyses. The interest rates assumed in such discounted cash flow analyses
reflect interest rates currently being offered for loans with similar terms to
borrowers of similar credit quality. The following table summarizes the book and
fair values of the Company's debt facilities at December 31, 1997 (in
thousands):
<TABLE>
<CAPTION>
BOOK VALUE FAIR VALUE
----------- ----------
<S> <C> <C>
1994 Notes........................................................... $ 499,863 $ 570,960
1996 Notes........................................................... 438,512 488,650
1997 Notes........................................................... 375,000 406,875
Mortgages and other notes payable.................................... 69,731 69,127
</TABLE>
INVENTORIES
Inventories are stated at the lower of cost or market value. Cost is
determined using the first-in, first-out method. Proprietary products are
manufactured by outside suppliers to the Company's specifications. Manufactured
inventories include materials, labor and manufacturing overhead. Cost of other
inventories includes parts, contract manufacturers' delivered price, assembly
and testing labor, and related overhead, including handling and storage costs.
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31, SEPTEMBER 30,
-------------------- 1998
1996 1997 (UNAUDITED)
--------- --------- -------------
<S> <C> <C> <C>
DBS receiver components.................................. $ 15,736 $ 12,506 $ 34,107
EchoStar Receiver Systems................................ 32,799 7,649 45,880
Consigned DBS receiver components........................ 23,525 3,122 2,749
Finished goods--analog DTH equipment..................... 4,091 2,116 2,505
Spare parts and other.................................... 2,279 1,440 947
Reserve for excess and obsolete inventory................ (5,663) (3,840) (4,214)
--------- --------- -------------
$ 72,767 $ 22,993 $ 81,974
--------- --------- -------------
--------- --------- -------------
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Cost includes interest
capitalized of $25 million, $26 million and $32 million during the years ended
December 31, 1995, 1996 and 1997, respectively, and $20 million and $16 million
during the nine-month periods ended September 30, 1997 and 1998, respectively.
The costs of satellites under construction are capitalized during the
construction phase, assuming the eventual successful launch and in-orbit
operation of the satellite. If a satellite were to fail
F-15
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
during launch or while in-orbit, the resultant loss would be charged to expense
in the period such loss was incurred. The amount of any such loss would be
reduced to the extent of insurance proceeds received as a result of the launch
or in-orbit failure. Depreciation is recorded on a straight-line basis for
financial reporting purposes. Repair and maintenance costs are charged to
expense when incurred. Renewals and betterments are capitalized.
The Company reviews its long-lived assets and identifiable assets to be held
and used for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. For assets which
are held and used in operations, the asset would be impaired if the book value
of the asset exceeded the undiscounted future cash flows related to the asset.
For those assets which are to be disposed of, the assets would be impaired to
the extent the fair value does not exceed the book value. The Company considers
relevant cash flow, estimated future operating results, trends and other
available information including the fair value of frequency rights owned, in
assessing whether the carrying value of assets can be recovered.
FCC AUTHORIZATIONS
FCC authorizations are recorded at cost and amortized using the
straight-line method over a period of 40 years. Such amortization commences at
the time the related satellite becomes operational; capitalized costs are
written off at the time efforts to provide services are abandoned. FCC
authorizations include interest capitalized of $1 million, $6 million and $11
million during the years ended December 31, 1995, 1996 and 1997, respectively
and $8 million and $6 million during the nine-month periods ended September 30,
1997 and 1998, respectively.
REVENUE RECOGNITION
Revenue from the provision of DISH Network subscription television services
and satellite services is recognized as revenue in the period such services are
provided. Revenue from sales of digital set-top boxes and related accessories is
recognized upon shipment to customers. Revenue from the provision of integration
services is recognized as revenue in the period the services are performed.
SUBSCRIBER PROMOTION SUBSIDIES AND SUBSCRIBER ACQUISITION COSTS
During 1996, in order to stimulate subscriber growth, EchoStar made a
strategic decision to reduce the price charged to consumers for EchoStar
Receiver Systems. Accordingly, beginning in August 1996, EchoStar began selling
its EchoStar Receiver Systems below its manufactured cost (the "1996
Promotion"). The 1996 Promotion lowered the suggested retail price charged by
independent retailers for a standard EchoStar Receiver System to $199 (as
compared to the original average retail price prior to August 1996 of
approximately $499), conditioned upon the consumer's one-year prepaid
subscription to the DISH Network's America's Top 50 CD programming package for
approximately $300. The excess of EchoStar's aggregate costs (equipment,
programming and other) over proceeds received pursuant to the 1996 Promotion was
expensed ("subscriber promotion subsidies") upon shipment of the equipment.
Remaining costs were deferred ("subscriber acquisition costs") and amortized
over the term of the prepaid subscription (normally one year). Excluding
expected incremental subscriber revenues,
F-16
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
such as from premium and Pay-Per-View services, this accounting treatment
results in revenue recognition over the initial prepaid period of service equal
to the sum of programming costs (which are recognized as service is provided)
and amortization of subscriber acquisition costs. During the period from August
1996 through May 1997, substantially all new subscriber activations resulted
from the 1996 Promotion.
The caption "DISH Network--Subscription Television Services" in the
accompanying statements of operations includes revenues from the 1996 Promotion
equal to the advertised subscription rates for related DISH Network services.
Incremental revenues realized from the 1996 Promotion are included in the
caption "DISH Network--Other" and amounted to approximately $5 million during
1996 and $39 million during 1997.
During June 1997, EchoStar introduced the "1997 Promotion." The 1997
Promotion maintained the suggested retail price for a standard EchoStar Receiver
System at $199, but eliminated the extended subscription commitment. Net
transaction costs associated with the 1997 Promotion are expensed as incurred
(reported as a component of subscriber promotion subsidies) in the accompanying
statements of operations. While some sales continue to be made under the terms
of the 1996 Promotion, the majority of new subscriber activations have resulted
from the 1997 Promotion since its introduction. As a result, beginning in
October 1997, net transaction costs resulting from the sale of EchoStar Receiver
Systems pursuant to the 1996 Promotion also are expensed as incurred.
Consequently, no additional subscriber acquisition costs will be deferred. The
unamortized balance of such costs ($19 million at December 31, 1997) was fully
amortized by September 1998.
DEFERRED DEBT ISSUANCE COSTS AND DEBT DISCOUNT
Costs of completing the 1994 Notes Offering, the 1996 Notes Offering and the
1997 Notes Offering (as defined, see Note 5) were deferred and are being
amortized to interest expense over their respective terms. The original issue
discounts related to the 1994 Notes and the 1996 Notes are being accreted to
interest expense so as to reflect a constant rate of interest on the accreted
balance of the 1994 Notes and the 1996 Notes.
DEFERRED REVENUE
Deferred revenue principally consists of prepayments received from
subscribers for DISH Network programming. Such amounts are recognized as revenue
in the period the programming is provided to the subscriber.
LONG-TERM DEFERRED SATELLITE SERVICES REVENUE
Long-term deferred satellite services revenue consists of advance payments
from certain content providers for carriage of their signal on the DISH Network.
Such amounts are deferred and recognized as revenue on a straight-line basis
over the related contract terms (up to ten years).
F-17
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1996 1997 1998
--------- --------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Accrued expenses......................................... $ 10,866 $ 34,940 $ 45,741
Accrued interest......................................... 1,108 24,385 12,239
Accrued programming...................................... 9,463 20,018 30,965
Accrued royalties........................................ 7,693 17,747 42,310
Deferred tax liabilities................................. 12,674 -- --
--------- --------- -------------
$ 41,804 $ 97,090 $ 131,255
--------- --------- -------------
--------- --------- -------------
</TABLE>
ADVERTISING COSTS
Advertising costs, exclusive of subscriber promotion subsidies, are expensed
as incurred and totaled $2 million, $18 million and $35 million for the years
ended December 31, 1995, 1996 and 1997, respectively.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued FAS No. 130, "Reporting Comprehensive Income"
("FAS No. 130"), which establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. The Company adopted FAS
No. 130 effective as of the first quarter of 1998. FAS No. 130 establishes new
rules for the reporting and display of comprehensive income and its components,
however it has no impact on the Company's net income or stockholder's equity.
The change in unrealized gain (loss) on available for sales securities is the
Company's only component of other comprehensive income and such amounts were
immaterial for the years ended December 31, 1995, 1996 and 1997. The components
of comprehensive loss, net of tax, are as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1997 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
Net loss............................................................ $ (248,937) $ (170,960)
Change in unrealized gain (loss) on available-for-sale securities... 12 8
----------- -----------
Comprehensive loss.................................................. $ (248,925) $ (170,952)
----------- -----------
----------- -----------
</TABLE>
In June 1997, the FASB issued FAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information" ("FAS No. 131") which establishes standards
for reporting information about
F-18
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
operating segments in annual financial statements of public business enterprises
and requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders and for related
disclosures about products and services, geographic areas, and major customers.
FAS No. 131 is effective for financial statements for periods beginning after
December 15, 1997. The adoption of FAS No. 131 may require additional disclosure
in the Company's financial statements.
RECLASSIFICATIONS
Certain amounts from the prior years combined and consolidated financial
statements have been reclassified to conform with the current year presentation.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
LIFE ---------------------- SEPTEMBER 30,
(IN YEARS) 1996 1997 1998
------------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
EchoStar I..................................................... 12 $ 201,607 $ 201,607 $ 201,607
EchoStar II.................................................... 12 228,694 228,694 228,694
EchoStar III................................................... 12 -- -- 234,083
EchoStar IV (Note 4)........................................... 12 -- -- 104,636
Furniture, fixtures and equipment.............................. 2-12 72,932 92,170 155,208
Buildings and improvements..................................... 7-40 21,649 22,114 48,465
Tooling and other.............................................. 2 3,253 4,336 5,579
Land........................................................... -- 1,613 1,636 1,638
Vehicles....................................................... 7 1,323 1,321 1,288
Construction in progress....................................... -- 89,681 393,189 20,396
---------- ---------- -------------
Total property and equipment................................. 620,752 945,067 1,001,594
Accumulated depreciation....................................... (35,219) (85,783) (143,629)
---------- ---------- -------------
Property and equipment, net.................................. $ 585,533 $ 859,284 $ 857,965
---------- ---------- -------------
---------- ---------- -------------
</TABLE>
F-19
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY AND EQUIPMENT (CONTINUED)
Construction in progress consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1996 1997 1998
--------- ---------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Progress amounts for satellite construction and capitalized interest:
EchoStar III.............................................................. $ 29,123 $ 234,083 $ --
EchoStar IV............................................................... 56,320 119,853 --
Other....................................................................... 4,238 39,253 20,396
--------- ---------- -------------
$ 89,681 $ 393,189 $ 20,396
--------- ---------- -------------
--------- ---------- -------------
</TABLE>
EchoStar III, which was launched in October 1997, commenced commercial
operation in January 1998. EchoStar IV, which was launched in May 1998,
commenced commercial operation in August 1998.
4. ECHOSTAR IV DEVELOPMENTS (UNAUDITED)
As previously announced, the south solar array on EchoStar IV did not
properly deploy subsequent to the launch of the satellite on May 8, 1998. This
anomaly resulted in a reduction of power available to operate the satellite. In
addition, an unrelated anomaly discovered during the third quarter of 1998 has
resulted in the failure of six traveling-wave-tube amplifiers ("TWTAs"). The
satellite is equipped with a total of 44 TWTAs. Only 24 TWTAs are necessary to
fully utilize EchoStar's 24 frequencies at 148 DEG. West Longitude ("WL"), where
the satellite is located.
EchoStar is currently able to use a maximum of only 20 transponders as a
result of the solar array anomaly described above. The number of available
transponders will decrease over time, but based on existing data, EchoStar
expects that approximately 16 transponders will probably be available over the
entire expected 12 year life of the satellite, absent significant additional
TWTA failures. In September 1998, EchoStar filed a $219.3 million insurance
claim for a total constructive loss (as defined in the launch insurance policy)
related to EchoStar IV. However, if EchoStar were to receive $219.3 million for
a total constructive 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. While EchoStar believes it has suffered a total constructive
loss of EchoStar IV in accordance with that definition in the launch insurance
policy, EchoStar presently intends to negotiate a settlement with the insurers
that will compensate EchoStar for the reduced satellite transmission capacity
and allow EchoStar to retain title to the asset.
Space originally contracted for the launch of EchoStar IV. Accordingly, all
costs associated with the launch of EchoStar IV were recognized by Space. Funds
necessary to pay for the launch of EchoStar IV were advanced to Space by ECC
($20 million) and DBS Corp ($64 million). However, because DBS Corp is the named
insured under the terms of the EchoStar IV launch insurance policy, it will be
entitled to all proceeds from any insurance settlement. Consequently, in
September 1998, Space transferred its cost-basis in EchoStar IV to DBS Corp and
ECC in settlement of prior advances. ECC then made a $20 million capital
contribution of its basis in EchoStar IV to DBS Corp. As a result of
F-20
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ECHOSTAR IV DEVELOPMENTS (UNAUDITED) (CONTINUED)
these transactions (and prior to the impairment provision described below), all
costs associated with the construction, launch and insurance of EchoStar IV are
reflected on DBS Corp's balance sheet.
During the third quarter of 1998, EchoStar recorded a $106 million provision
for loss in connection with the estimated reduced operational capacity of
EchoStar IV. This loss provision represents EchoStar's present estimate of its
asset impairment attributable to lost transmission capacity on EchoStar IV
resulting from the anomalies described above. EchoStar also recorded a $106
million gain attributable to an anticipated insurance claim receivable. While
there can be no assurance as to the amount of the final insurance settlement,
EchoStar believes that it will receive insurance proceeds related to EchoStar IV
that will be sufficient to at least fully offset its asset impairment
attributable to the reduction in capacity sustained by EchoStar IV. While
EchoStar believes it has sustained a total constructive loss, insurers have
requested additional information and may contest the claim. To the extent that
it appears highly probable that EchoStar will receive insurance proceeds in
excess of the $106 million currently recorded and that no further provision for
loss is necessary, a gain will be recognized for the incremental amount in the
period that the amount of the final settlement can be reasonably estimated.
Likewise, if the satellite insurers obtain the right to salvage from EchoStar IV
by payment to EchoStar of the $219.3 million insured amount, EchoStar will
record an additional loss for the remaining carrying value of EchoStar IV.
Pursuant to the terms of one of its indentures, EchoStar is required to reinvest
all insurance proceeds received related to EchoStar IV in a replacement
satellite or, at EchoStar's option, offer to repurchase outstanding 12 1/2%
Senior Secured Notes due 2002 (the "1997 Notes"). EchoStar intends to procure a
replacement satellite on an accelerated basis.
5. LONG-TERM DEBT
1994 NOTES
In June 1994, Dish, Ltd. completed an offering of 12 7/8% Senior Secured
Discount Notes due June 1, 2004 (the "1994 Notes") and Common Stock Warrants
(the "Warrants") (collectively, the "1994 Notes Offering"). The 1994 Notes
Offering resulted in net proceeds to Dish, Ltd. of $323 million (including
amounts attributable to the issuance of the Warrants and after payment of
underwriting discounts and other issuance costs aggregating approximately $13
million).
The 1994 Notes bear interest at a rate of 12 7/8% computed on a semi-annual
bond equivalent basis. Interest on the 1994 Notes will not be payable in cash
prior to June 1, 1999, with the 1994 Notes accreting to a principal value at
stated maturity of $624 million by that date. Commencing December 1, 1999,
interest on the 1994 Notes will be payable in cash on December 1 and June 1 of
each year.
The 1994 Notes rank senior in right of payment to all subordinated
indebtedness of Dish, Ltd. and PARI PASSU in right of payment with all other
senior indebtedness of Dish, Ltd. The 1994 Notes are secured by liens on certain
assets of Dish, Ltd., including EchoStar I, EchoStar II and all other components
of the EchoStar DBS System owned by Dish, Ltd. and its subsidiaries. The 1994
Notes are further guaranteed by each material, direct subsidiary of Dish, Ltd.
Although the 1994 Notes are titled "Senior," Dish, Ltd. has not issued, and does
not have any current arrangements to issue, any significant indebtedness to
which the 1994 Notes would be senior. The 1996 Notes and the 1997 Notes are
effectively subordinated to the 1994 Notes and all other liabilities of Dish,
Ltd. and its subsidiaries.
F-21
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT (CONTINUED)
Furthermore, at December 31, 1997, the 1994 Notes were effectively subordinated
to approximately $9 million of mortgage indebtedness with respect to certain
assets of Dish, Ltd.'s subsidiaries, not including the EchoStar DBS System, and
rank PARI PASSU with the security interest of approximately $30 million of
satellite vendor financing.
Except under certain circumstances requiring prepayment premiums, and in
other limited circumstances, the 1994 Notes are not redeemable at Dish, Ltd.'s
option prior to June 1, 1999. Thereafter, the 1994 Notes will be subject to
redemption, at the option of Dish, Ltd., in whole or in part, at redemption
prices ranging from 104.828% during the year commencing June 1, 1999, to 100% of
principal value at stated maturity on or after June 1, 2002, together with
accrued and unpaid interest thereon to the redemption date. On each of June 1,
2002, and June 1, 2003, Dish, Ltd. will be required to redeem 25% of the
original aggregate principal amount of 1994 Notes at a redemption price equal to
100% of principal value at stated maturity thereof, together with accrued and
unpaid interest thereon to the redemption date. The remaining principal of the
1994 Notes matures on June 1, 2004.
In the event of a change of control and upon the occurrence of certain other
events, as described in the indenture related to the 1994 Notes (the "1994 Notes
Indenture"), Dish, Ltd. will be required to make an offer to each holder of 1994
Notes to repurchase all or any part of such holder's 1994 Notes at a purchase
price equal to 101% of the accreted value thereof on the date of purchase, if
prior to June 1, 1999, or 101% of the aggregate principal amount thereof,
together with accrued and unpaid interest thereon to the date of purchase, if on
or after June 1, 1999.
The 1994 Notes Indenture contains restrictive covenants that, among other
things, impose limitations on Dish, Ltd. and its subsidiaries with respect to
their ability to: (i) incur additional indebtedness; (ii) issue preferred stock;
(iii) apply the proceeds of certain asset sales; (iv) create, incur or assume
liens; (v) create dividend and other payment restrictions with respect to Dish,
Ltd.'s subsidiaries; (vi) merge, consolidate or sell assets; (vii) incur
subordinated or junior debt; and (viii) enter into transactions with affiliates.
In addition, Dish, Ltd., may pay dividends on its equity securities only if (1)
no default is continuing under the 1994 Notes Indenture; and (2) after giving
effect to such dividend, Dish, Ltd.'s ratio of total indebtedness to cash flow
(calculated in accordance with the 1994 Notes Indenture) would not exceed 4.0 to
1.0. Moreover, the aggregate amount of such dividends generally may not exceed
the sum of 50% of Dish, Ltd.'s consolidated net income (calculated in accordance
with the 1994 Notes Indenture) from April 1, 1994, plus 100% of the aggregate
net proceeds to Dish, Ltd. from the issuance and sale of certain equity
interests of Dish, Ltd. (including common stock).
1996 NOTES
In March 1996, ESBC, an indirect wholly-owned subsidiary of ECC, completed
an offering (the "1996 Notes Offering") of 13 1/8% Senior Secured Discount Notes
due 2004 (the "1996 Notes"). The 1996 Notes Offering resulted in net proceeds to
ESBC of approximately $337 million (after payment of underwriting discounts and
other issuance costs aggregating approximately $13 million). The 1996 Notes bear
interest at a rate of 13 1/8%, computed on a semi-annual bond equivalent basis.
Interest on the 1996 Notes will not be payable in cash prior to March 15, 2000,
with the 1996 Notes accreting to a
F-22
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT (CONTINUED)
principal amount at stated maturity of $580 million by that date. Commencing
September 15, 2000, interest on the 1996 Notes will be payable in cash on
September 15 and March 15 of each year. The 1996 Notes mature on March 15, 2004.
The 1996 Notes rank PARI PASSU in right of payment with all senior
indebtedness of ESBC. The 1996 Notes are guaranteed on a subordinated basis by
ECC, and are secured by liens on certain assets of ESBC, ECC and certain of
ECC's subsidiaries, including all of the outstanding capital stock of Dish,
Ltd., which currently owns substantially all of ECC's operating subsidiaries.
Although the 1996 Notes are titled "Senior:" (i) ESBC has not issued, and does
not have any current arrangements to issue, any significant indebtedness to
which the 1996 Notes would be senior; and (ii) the 1996 Notes are effectively
subordinated to all liabilities of ECC (except liabilities to general creditors)
and its other subsidiaries (except liabilities of ESBC and the 1997 Notes),
including liabilities to general creditors. As of December 31, 1997, EchoStar's
liabilities, exclusive of the 1996 Notes and the 1997 Notes, aggregated
approximately $882 million. Further, net cash flows generated by the assets and
operations of ESBC's subsidiaries will be available to satisfy the obligations
of the 1996 Notes only to the extent of allowable dividend payments by Dish,
Ltd. under the 1994 Notes Indenture.
Except under certain circumstances requiring prepayment premiums, and in
other limited circumstances, the 1996 Notes are not redeemable at ESBC's option
prior to March 15, 2000. Thereafter, the 1996 Notes will be subject to
redemption, at the option of ESBC, in whole or in part, at redemption prices
ranging from 106.5625% during the year commencing March 15, 2000, to 100% on or
after March 15, 2003 of principal amount at stated maturity, together with
accrued and unpaid interest thereon to the redemption date. The entire principal
balance of the 1996 Notes will mature on March 15, 2004.
The indenture related to the 1996 Notes (the "1996 Notes Indenture")
contains restrictive covenants that, among other things, impose limitations on
ESBC with respect to its ability to: (i) incur additional indebtedness; (ii)
issue preferred stock; (iii) sell assets and apply the proceeds thereof; (iv)
create, incur or assume liens; (v) create dividend and other payment
restrictions with respect to ESBC's subsidiaries; (vi) merge, consolidate or
sell substantially all of its assets; and (vii) enter into transactions with
affiliates. The 1996 Notes Indenture permits ESBC to pay dividends and make
other distributions to DBS Corp without restrictions.
In the event of a change of control, as described in the 1996 Notes
Indenture, ESBC will be required to make an offer to each holder of 1996 Notes
to repurchase all of such holder's 1996 Notes at a purchase price equal to 101%
of the accreted value thereof on the date of purchase, if prior to March 15,
2000, or 101% of the aggregate principal amount at stated maturity thereof,
together with accrued and unpaid interest thereon to the date of purchase, if on
or after March 15, 2000.
1997 NOTES
In June 1997, DBS Corp, consummated an offering (the "1997 Notes Offering")
of 12 1/2% Senior Secured Notes due 2002 (the "1997 Notes"). The 1997 Notes
Offering resulted in net proceeds to DBS Corp of approximately $363 million
(after payment of underwriting discounts and other issuance costs aggregating
approximately $12 million). Interest accrues on the 1997 Notes at a rate of
12 1/2% and is
F-23
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT (CONTINUED)
payable in cash semi-annually on January 1 and July 1 of each year, commencing
January 1, 1998. Approximately $109 million of the net proceeds of the 1997
Notes Offering were placed in the Interest Escrow to fund the first five
semi-annual interest payments (through January 1, 2000). Additionally,
approximately $112 million of the net proceeds of the 1997 Notes Offering were
placed in the Satellite Escrow to fund the construction, launch and insurance of
EchoStar IV. The 1997 Notes mature on July 1, 2002.
The 1997 Notes rank PARI PASSU in right of payment with all senior
indebtedness of DBS Corp. The 1997 Notes are guaranteed on a subordinated basis
by ECC (the "EchoStar Guarantee") and, contingent upon the occurrence of certain
events, will be guaranteed by ESBC, Dish, Ltd., and certain other subsidiaries
of DBS Corp and ECC. The 1997 Notes are secured by liens on the capital stock of
DBS Corp, EchoStar IV, and certain other assets of DBS Corp. Although the 1997
Notes are titled "Senior:" (i) DBS Corp has not issued, and does not have any
plans to issue, any indebtedness to which the 1997 Notes would be senior; and
(ii) the 1997 Notes are effectively subordinated to all liabilities of DBS
Corp's subsidiaries, including the 1994 Notes, the 1996 Notes, and liabilities
to general creditors (except to the extent that any subsidiary of DBS Corp may
guarantee the 1997 Notes) and the EchoStar Guarantee is subordinated to all
liabilities of ECC (except liabilities to general creditors). As of December 31,
1997, EchoStar's liabilities, exclusive of the 1997 Notes, aggregated
approximately $1.3 billion.
Except under certain circumstances requiring prepayment premiums, and in
other limited circumstances, the 1997 Notes are not redeemable at DBS Corp's
option prior to July 1, 2000. Thereafter, the 1997 Notes will be subject to
redemption, at the option of DBS Corp, in whole or in part, at redemption prices
decreasing from 106.25% during the year commencing July 1, 2000 to 100% on or
after July 1, 2002, together with accrued and unpaid interest thereon to the
redemption date.
The indenture related to the 1997 Notes (the "1997 Notes Indenture") and the
Certificate of Designation related to ECC's 12 1/8% Series B Senior Redeemable
Exchangeable Preferred Stock (the "Series B Preferred Stock") contain
restrictive covenants that, among other things, impose limitations on the
ability of DBS Corp to: (i) incur additional indebtedness; (ii) issue preferred
stock; (iii) apply the proceeds of certain asset sales; (iv) create, incur or
assume liens; (v) create dividend and other payment restrictions with respect to
DBS Corp's subsidiaries; (vi) merge, consolidate or sell assets; (vii) incur
subordinated or junior debt; and (viii) enter into transactions with affiliates.
In addition, DBS Corp may pay dividends on its equity securities only if: (1) no
default shall have occurred or is continuing under the 1997 Notes Indenture; and
(2) after giving effect to such dividend and the incurrence of any indebtedness
(the proceeds of which are used to finance the dividend), DBS Corps's ratio of
total indebtedness to cash flow (calculated in accordance with the 1997 Notes
Indenture) would not exceed 6.0 to 1.0. Moreover, the aggregate amount of such
dividends generally may not exceed the sum of the difference of cumulative
consolidated cash flow (calculated in accordance with the 1997 Notes Indenture)
minus 150% of consolidated interest expense of DBS Corp (calculated in
accordance with the 1997 Notes Indenture), in each case from July 1, 1997 plus
an amount equal to 100% of the aggregate net cash proceeds received by DBS Corp
and its subsidiaries from the issuance or sale of certain equity interests of
DBS Corp or EchoStar.
F-24
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT (CONTINUED)
In the event of a change of control, as defined in the 1997 Notes Indenture,
DBS Corp will be required to make an offer to repurchase all of the 1997 Notes
at a purchase price equal to 101% of the aggregate principal amount thereof,
together with accrued and unpaid interest thereon, to the date of repurchase.
MORTGAGES AND OTHER NOTES PAYABLE
Mortgages and other notes payable consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- SEPTEMBER 30,
1996 1997 1998
---------- ---------- -------------
<S> <C> <C> <C>
(UNAUDITED)
8.25% note payable for satellite vendor financing for EchoStar I due in
equal monthly installments of $722, including interest, through February
2001..................................................................... $ 30,463 $ 24,073 $ 18,925
8.25% note payable for satellite vendor financing for EchoStar II due in
equal monthly installments of $562, including interest, through November
2001..................................................................... 27,161 22,489 18,724
8.25% note payable for satellite vendor financing for EchoStar III due in
equal monthly installments of $294, including interest, through October
2002..................................................................... -- 13,812 12,183
8.25% note payable for satellite vendor financing for EchoStar IV due in
equal monthly installments of $264, including interest, through May
2003..................................................................... -- -- 12,950
Mortgages and other unsecured notes payable due in installments through
April 2009 with interest rates ranging from 8% to 10.5%.................. 5,138 9,357 7,829
---------- ---------- -------------
Total...................................................................... 62,762 69,731 70,611
Less current portion....................................................... (11,334) (17,885) (21,064)
---------- ---------- -------------
Mortgages and other notes payable, net of current portion.................. $ 51,428 $ 51,846 $ 49,547
---------- ---------- -------------
---------- ---------- -------------
</TABLE>
In addition to the above mortgages and other notes payable, as of December
31 1996, DBS Corp had a $12 million demand note payable to ECC. This note
payable was repaid in full during October 1997. Also, during 1995 and 1996, ECC
advanced DBSC $46 million in the form of notes payable to enable DBSC to make
required payments under its EchoStar III construction contract (Note 1). The
notes payable bear interest at 11.25%, which is being added to principal.
F-25
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT
Future maturities of amounts outstanding under the Company's long-term debt
facilities (excluding notes payable to ECC) as of December 31, 1997 are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
MORTGAGES
AND OTHER
1994 1996 1997 NOTES
NOTES NOTES NOTES PAYABLE TOTAL
----------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Year Ending December 31,
1998................................................... $ -- $ -- $ -- $ 17,885 $ 17,885
1999................................................... -- -- -- 17,791 17,791
2000................................................... -- -- -- 17,828 17,828
2001................................................... -- -- -- 10,861 10,861
2002................................................... 156,000 -- 375,000 2,927 533,927
Thereafter............................................. 468,000 580,000 -- 2,439 1,050,439
Unamortized discount................................... (124,137) (141,488) -- -- (265,625)
----------- ----------- ---------- ----------- ------------
Total.................................................... $ 499,863 $ 438,512 $ 375,000 $ 69,731 $ 1,383,106
----------- ----------- ---------- ----------- ------------
----------- ----------- ---------- ----------- ------------
</TABLE>
SATELLITE VENDOR FINANCING
The purchase price for satellites is required to be paid in progress
payments, some of which are non-contingent payments deferred until after the
respective satellites are in orbit (satellite vendor financing). EchoStar
utilized $36 million, $28 million and $14 million of satellite vendor financing
for EchoStar I, EchoStar II and EchoStar III, respectively. The satellite vendor
financing with respect to EchoStar I and EchoStar II is secured by substantially
all assets of Dish, Ltd. and its subsidiaries (subject to certain restrictions)
and a corporate guarantee of ECC. The satellite vendor financing for EchoStar
III is secured by an ECC corporate guarantee. EchoStar also utilized $13 million
of satellite vendor financing, at a rate of 8.25%, for EchoStar IV. The EchoStar
IV satellite vendor financing is due over a period of five years and is secured
by an ECC corporate guarantee.
F-26
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES
The components of the (provision for) benefit from income taxes are as
follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
Current (provision) benefit:
Federal................................................... $ 1,711 $ 4,596 $ (361)
State..................................................... (44) (49) (9)
Foreign................................................... (301) (209) (137)
--------- --------- -----------
1,366 4,338 (507)
Deferred benefit:
Federal................................................... 4,440 48,043 108,598
State..................................................... 385 2,472 8,082
Increase in valuation allowance........................... -- -- (116,319)
--------- --------- -----------
4,825 50,515 361
--------- --------- -----------
Total benefit (provision)............................... $ 6,191 $ 54,853 $ (146)
--------- --------- -----------
--------- --------- -----------
</TABLE>
As of December 31, 1997, the Company had net operating loss carryforwards
("NOLs") for Federal income tax purposes of approximately $334 million. The NOLs
expire beginning in the year 2011. The use of the NOLs is subject to statutory
and regulatory limitations regarding changes in ownership. FAS No. 109,
"Accounting for Income Taxes", ("FAS No. 109") requires that the potential
future tax benefit of NOLs be recorded as an asset. FAS No. 109 also requires
that deferred tax assets and liabilities be recorded for the estimated future
tax effects of temporary differences between the tax basis and book value of
assets and liabilities. Deferred tax assets are offset by a valuation allowance
if deemed necessary.
In 1997, the Company increased its valuation allowance sufficient to fully
offset net deferred tax assets arising during the year. Realization of net
deferred tax assets is not assured and is principally dependent on generating
future taxable income prior to expiration of the NOLs. Management believes
existing net deferred tax assets in excess of the valuation allowance will, more
likely than not, be realized. The Company continuously reviews the adequacy of
its valuation allowance. Future decreases to the valuation allowance will be
made only as changed circumstances indicate that it is more likely that not the
additional benefits will be realized. Any future adjustments to the valuation
allowance will be recognized as a separate component of the Company's provision
for income taxes.
F-27
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONTINUED)
The temporary differences which give rise to deferred tax assets and
liabilities as of December 31, 1996 and 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1997
---------- -----------
<S> <C> <C>
Current deferred tax assets:
Accrued royalties...................................................................... $ 3,029 $ 6,506
Inventory reserves and cost methods.................................................... 1,811 1,180
Accrued expenses....................................................................... 1,414 6,391
Allowance for doubtful accounts........................................................ 674 517
Reserve for warranty costs............................................................. 284 270
Unrealized holding loss on marketable investment securities............................ -- 4
Other.................................................................................. 57 --
---------- -----------
Total current deferred tax assets........................................................ 7,269 14,868
Current deferred tax liabilities:
Subscriber acquisition costs and other................................................. (19,943) (6,846)
---------- -----------
Total current deferred tax liabilities................................................... (19,943) (6,846)
---------- -----------
Gross current deferred tax assets (liabilities).......................................... (12,674) 8,022
Valuation allowance...................................................................... -- (5,081)
---------- -----------
Net current deferred tax assets (liabilities)............................................ (12,674) 2,941
Noncurrent deferred tax assets:
General business and foreign tax credits............................................... -- 2,224
Net operating loss carryforwards....................................................... 77,910 122,515
Amortization of original issue discount on 1994 Notes and 1996 Notes................... 34,912 60,831
Other.................................................................................. 3,451 7,571
---------- -----------
Total noncurrent deferred tax assets..................................................... 116,273 193,141
Noncurrent deferred tax liabilities:
Capitalized costs deducted for tax..................................................... (17,683) --
Depreciation........................................................................... (18,927) (17,264)
Other.................................................................................. -- (230)
---------- -----------
Total noncurrent deferred tax liabilities................................................ (36,610) (17,494)
---------- -----------
Gross deferred tax assets................................................................ 79,663 175,647
---------- -----------
Valuation allowance...................................................................... -- (111,238)
---------- -----------
Net noncurrent deferred tax assets....................................................... 79,663 64,409
---------- -----------
Net deferred tax assets.................................................................. $ 66,989 $ 67,350
---------- -----------
---------- -----------
</TABLE>
F-28
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONTINUED)
The actual tax benefit (provision) for 1995, 1996 and 1997 are reconciled to
the amounts computed by applying the statutory Federal tax rate to income before
taxes as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Statutory rate......................................................... 35.0% 35.0% 35.0%
State income taxes, net of Federal benefit............................. 1.2 1.8 1.6
Tax exempt interest income............................................. 0.1 -- --
Research and development and foreign tax credits....................... 0.2 -- 0.7
Non-deductible interest expense........................................ (1.7) (1.4) (0.5)
Other.................................................................. (1.4) (0.4) (0.8)
Increase in valuation allowance........................................ -- -- (36.0)
--- --- ---------
Total benefit from income taxes........................................ 33.4% 35.0% --%
--- --- ---------
--- --- ---------
</TABLE>
7. STOCK COMPENSATION PLANS
STOCK INCENTIVE PLAN
In April 1994, EchoStar adopted a stock incentive plan (the "Stock Incentive
Plan") to provide incentive to attract and retain officers, directors and key
employees. EchoStar has reserved up to 10 million shares of its Class A Common
Stock for granting awards under the Stock Incentive Plan. All stock options
granted through December 31, 1997 have included exercise prices not less than
the fair market value of EchoStar's Class A Common Stock at the date of grant,
and vest, as determined by EchoStar's Board of Directors, generally at the rate
of 20% per year.
A summary of EchoStar's incentive stock option activity for the years ended
December 31, 1995, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
----------------------- ----------------------- -----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
---------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding, beginning of year............ 744,872 $ 9.33 1,117,133 $ 12.23 1,025,273 $ 14.27
Granted........................................... 419,772 17.13 138,790 27.02 779,550 17.05
Repriced.......................................... -- -- -- -- 255,794 17.00
Exercised......................................... (4,284) 9.33 (103,766) 10.24 (98,158) 9.64
Forfeited......................................... (43,227) 10.55 (126,884) 13.27 (437,892) 19.46
---------- ----------- ---------- ----------- ---------- -----------
Options outstanding, end of year.................. 1,117,133 $ 12.23 1,025,273 $ 14.27 1,524,567 $ 14.99
---------- ----------- ---------- ----------- ---------- -----------
---------- ----------- ---------- ----------- ---------- -----------
Exercisable at end of year........................ 142,474 $ 9.33 258,368 $ 11.31 347,009 $ 12.15
---------- ----------- ---------- ----------- ---------- -----------
---------- ----------- ---------- ----------- ---------- -----------
</TABLE>
F-29
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. STOCK COMPENSATION PLANS (CONTINUED)
Exercise prices for options outstanding as of December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------ ---------------------------
NUMBER WEIGHTED- NUMBER
OUTSTANDING AVERAGE WEIGHTED- EXERCISABLE WEIGHTED-
AS OF REMAINING AVERAGE AS OF AVERAGE
RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICES 1997 LIFE PRICE 1997 PRICE
- ------------------ ------------ --------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
$9.333--$11.870... 429,644 4.60 $ 9.53 226,771 $ 9.48
17.000-- 17.000... 1,053,683 7.11 17.00 117,990 17.00
18.290-- 26.688... 41,240 4.79 20.58 2,248 26.69
------------ --- ----------- ------------ ------
$9.333--$26.688... 1,524,567 6.34 $ 14.99 347,009 $ 12.15
------------ --- ----------- ------------ ------
------------ --- ----------- ------------ ------
</TABLE>
On July 1, 1997, the Board of Directors approved a repricing of
substantially all outstanding options with an exercise price greater than $17.00
per share of Class A Common Stock to $17.00 per share. The Board of Directors
would not typically consider reducing the exercise price of previously granted
options. However, these options were repriced due to the occurrence of certain
events beyond the reasonable control of the employees of EchoStar which
significantly reduced the incentive these options were intended to create. The
fair market value of the Class A Common Stock was $15.25 on the date of the
repricing. Options to purchase approximately 256,000 shares of Class A Common
Stock were affected by this repricing.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," ("APB 25") and related
interpretations in accounting for its stock-based compensation plans. Under APB
25, because the exercise price of EchoStar's employee stock options is equal to
the market price of the underlying stock on the date of the grant, no
compensation expense is recognized. In October 1995, the FASB issued FAS No.
123, "Accounting and Disclosure of Stock-Based Compensation," ("FAS No. 123")
which established an alternative method of expense recognition for stock-based
compensation awards to employees based on fair values. The Company elected to
not adopt FAS No. 123 for expense recognition purposes.
Pro forma information regarding net income is required by FAS No. 123 and
has been determined as if the Company had accounted for its stock-based
compensation plans using the fair value method prescribed by that statement. For
purposes of pro forma disclosures, the estimated fair value of the options is
amortized to expense over the options' vesting period. All options are initially
assumed to vest. Compensation previously recognized is reversed to the extent
applicable to forfeitures of unvested
F-30
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. STOCK COMPENSATION PLANS (CONTINUED)
options. The fair value of each option grant was estimated at the date of the
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Risk-free interest rate..................................... 6.12% 6.80% 6.09%
Volatility factor........................................... 62% 62% 68%
Dividend yield.............................................. 0.00% 0.00% 0.00%
Expected term of options.................................... 6 years 6 years 6 years
Weighted-average fair value of options granted.............. $ 9.86 $ 16.96 $ 10.38
</TABLE>
The Company's pro forma net loss was $13 million, $103 million and $325
million for the years ended December 31, 1995, 1996 and 1997, respectively.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock-based compensation awards.
8. EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK PURCHASE PLAN
During 1997, the Board of Directors and shareholders of ECC approved an
employee stock purchase plan (the "ESPP"), effective beginning October 1, 1997.
Under the ESPP, EchoStar is authorized to issue a total of 100,000 shares of
ECC's Class A Common Stock. Substantially all full-time employees who have been
employed by EchoStar for at least one calendar quarter are eligible to
participate in the ESPP. Employee stock purchases are made through payroll
deductions. Under the terms of the ESPP, employees may not deduct an amount
which would permit such employee to purchase capital stock of EchoStar under all
stock purchase plans of EchoStar at a rate which would exceed $25,000 in fair
market value of capital stock in any one year. The purchase price of the stock
is 85% of the closing price of ECC's Class A Common Stock on the last business
day of each calendar quarter in which such shares of ECC's Class A Common Stock
are deemed sold to an employee under the ESPP. The ESPP shall terminate upon the
first to occur of (i) October 1, 2007 or (ii) the date on which the ESPP is
terminated by the Board of Directors. During the fourth quarter of 1997,
employees of the Company purchased 4,430 shares of ECC's Class A Common Stock
through the ESPP.
401(K) EMPLOYEE SAVINGS PLAN
EchoStar sponsors a 401(k) Employee Savings Plan (the "401(k) Plan") for
eligible employees. Voluntary employee contributions to the 401(k) Plan may be
matched 50% by EchoStar, subject to a maximum annual contribution by EchoStar of
$1,000 per employee. EchoStar also may make an annual
F-31
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
discretionary contribution to the plan with approval by EchoStar's Board of
Directors, subject to the maximum deductible limit provided by the Internal
Revenue Code of 1986, as amended. The Company's cash contributions to the 401(k)
Plan totaled $177,000, $226,000 and $329,000 during 1995, 1996 and 1997,
respectively. Additionally, the Company contributed 55,000 shares of EchoStar's
Class A Common Stock in 1995 and 1996, (fair value of $1 million and $935,000,
respectively) to the 401(k) Plan as discretionary contributions. During 1998,
the Company contributed 80,000 shares of EchoStar's Class A Common Stock (fair
value of approximately $2 million) to the 401(k) Plan related to its 1997
discretionary contribution.
9. C-BAND AND OTHER REVENUE
Effective January 1, 1998, the Company ceased operation of its C-band
programming business. Consequently, the net result of the Company's C-band
programming business is reported as "C-band and other revenue" in the
accompanying statements of operations. C-band and other revenue consists of the
following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1995 1996 1997
---------- ---------- ---------
<S> <C> <C> <C>
C-band equipment sales and other........................... $ 110,992 $ 54,592 $ 32,308
C-band programming sales................................... 15,232 11,921 7,100
C-band programming--cost of sales.......................... (13,520) (10,510) (6,712)
---------- ---------- ---------
C-band and other revenue, net............................ $ 112,704 $ 56,003 $ 32,696
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
10. OTHER COMMITMENTS AND CONTINGENCIES
As of December 31, 1997, Space had contracted with
Lockheed-Khrunichev-Energia-International, Inc. ("LKE") for the launch of
EchoStar IV from the Baikonur Cosmodrome in the Republic of Kazakhstan, a
territory of the former Soviet Union, utilizing a Proton launch vehicle (the
"LKE Contract"). EchoStar IV was launched in May 1998 and commenced commercial
operation in August 1998. As of December 31, 1997, the Company expected to
expend approximately $68 million during 1998 in connection with the construction
launch and insurance of EchoStar IV. Actual expenditures for these costs totaled
approximately $80 million through September 30, 1998. These expenditures have
been funded from the Satellite Escrow.
EchoStar has filed applications with the Federal Communications Commission
("FCC") for authorization to construct, launch and operate a two satellite FSS
(fixed satellite service) Ku-band system and a two satellite FSS Ka-band
satellite system. No assurance can be given that EchoStar's applications will be
approved by the FCC or that, if approved, EchoStar will be able to successfully
develop the FSS Ku-band or the Ka-band systems. EchoStar believes that
establishment of the FSS Ku-band system or the FSS Ka-band system would enhance
its competitive position in the DTH industry. In the event EchoStar's FSS
Ku-band or Ka-band system applications are approved by the FCC, additional debt
or equity financing would be required. No assurance can be given that such
financing will be available, or that it will be available on terms acceptable to
EchoStar.
F-32
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. OTHER COMMITMENTS AND CONTINGENCIES (CONTINUED)
PURCHASE COMMITMENTS
As of December 31, 1997, the Company's purchase commitments totaled
approximately $87 million. The majority of these commitments relate to EchoStar
Receiver Systems and related components. All of the purchases related to these
commitments are expected to be made during 1998. The Company expects to finance
these purchases from existing unrestricted cash balances and future cash flows
generated from operations, if any.
THE NEWS CORPORATION LIMITED
During February 1997, EchoStar and The News Corporation Limited ("News")
announced an agreement (the "News Agreement") pursuant to which, among other
things, News agreed to acquire approximately 50% of the outstanding capital
stock of EchoStar. News also agreed to make available for use by EchoStar the
DBS permit for 28 frequencies at 110 DEG. WL purchased by MCI Communications
Corporation for over $682 million following a 1996 FCC auction. During late
April 1997, substantial disagreements arose between the parties regarding their
obligations under the News Agreement.
In May 1997, EchoStar filed a Complaint requesting that the Court confirm
EchoStar's position and declare that News is obligated pursuant to the News
Agreement to lend $200 million to EchoStar without interest and upon such other
terms as the Court orders. EchoStar also filed a First Amended Complaint
significantly expanding the scope of the litigation to include breach of
contract, failure to act in good faith, and other causes of action. EchoStar
seeks specific performance of the News Agreement and damages, including lost
profits based on, among other things, a jointly prepared ten-year business plan
showing expected profits for EchoStar in excess of $10 billion based on
consummation of the transactions contemplated by the News Agreement.
In June 1997, News filed an answer and counterclaims seeking unspecified
damages. News' answer denies all of the material allegations in the First
Amended Complaint and asserts numerous defenses, including bad faith, misconduct
and failure to disclose material information on the part of EchoStar and its
Chairman and Chief Executive Officer, Charles W. Ergen. The counterclaims, in
which News is joined by its subsidiary American Sky Broadcasting, L.L.C., assert
that EchoStar and Ergen breached their agreements with News and failed to act
and negotiate with News in good faith. EchoStar has responded to News' answer
and denied the allegations in their counterclaims. EchoStar also has asserted
various affirmative defenses. EchoStar is vigorously defending against the
counterclaims. The case has been set for trial commencing March 1999, but that
date could be postponed.
In connection with the News and MCI/WorldCom Transaction (the "Pending 110
Acquisition") (Note 15), the litigation between EchoStar and News Corporation
will be stayed and will be dismissed with prejudice upon closing or if the
transaction is terminated for reasons other than the breach by, or failure to
fill a condition within the control of, News Corporation or MCI WorldCom Inc.
("MCI").
F-33
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. OTHER COMMITMENTS AND CONTINGENCIES (CONTINUED)
WIC PREMIUM TELEVISION LTD.
On July 28, 1998, a lawsuit was filed by WIC Premium Television Ltd.
("WIC"), an Alberta corporation, in the Federal Court of Canada Trial Division,
against certain defendants which include: General Instrument Corporation, HBO,
Warner Communications, Inc., John Doe, Showtime, U.S. Satellite Broadcasting
Corporation ("USSB"), ECC and two of ECC's wholly-owned subsidiaries, Dish, Ltd.
("Dish") and Echosphere Corporation ("Echosphere"). The lawsuit seeks, among
other things, an interim and permanent injunction prohibiting the defendants
from activating receivers in Canada and from infringing any copyrights held by
WIC. It is too early to determine whether or when any other lawsuits and/or
claims will be filed. It is also too early to make an assessment of the probable
outcome of the litigation or to determine the extent of any potential liability
or damages.
On September 28, 1998, WIC filed another lawsuit in the Court of Queen's
Bench of Alberta Judicial District of Edmonton against certain defendants, which
also include ECC, Dish, and Echosphere. WIC is a company authorized to broadcast
certain copyrighted work, such as movies and concerts, to residents of Canada.
WIC alleges that the defendants engaged in, promoted, and/or allowed satellite
dish equipment from the United States to be sold in Canada and to Canadian
residents and that some of the defendants allowed and profited from Canadian
residents purchasing and viewing subscription television programming that is
only authorized for viewing in the United States. The lawsuit seeks, among other
things, interim and permanent injunction prohibiting the defendants from
importing hardware into Canada and from activating receivers in Canada and
damages in excess of the equivalent of US $175 million. It is too early to
determine whether or when any other lawsuits and/or claims will be filed. It is
also too early to make an assessment of the probable outcome of the litigation
or to determine the extent of any potential liability or damages.
BROADCAST NETWORK PROGRAMMING
Section 119 of the Satellite Home Viewer Act ("SHVA") authorizes EchoStar to
sell satellite-delivered network signals (ABC, NBC, CBS Fox, etc.) to EchoStar
subscribers, but only if those subscribers qualify as "unserved" households as
that term is defined in the SHVA. Historically, EchoStar obtained broadcast
network signals for distribution to its subscribers through PrimeTime 24, Joint
Venture ("PrimeTime 24"). PrimeTime 24 also distributes network signals to
certain of EchoStar's competitors in the satellite industry.
The national networks and local affiliate stations have recently challenged
PrimeTime 24's methods of selling network programming (national and local) to
consumers based upon infringement of copyright. The U.S. District Court for the
Southern District of Florida entered a nationwide injunction preventing
PrimeTime 24 from selling its programming to consumers unless the programming
was sold according to certain stipulations in the injunction. The Court also
purported to enjoin PrimeTime 24's "distributors" as well. The Plaintiff in the
Florida litigation informed EchoStar that it considered EchoStar a "distributor"
and has since threatened EchoStar with litigation.
As a result of: (a) these rulings; (b) EchoStar's determination to sell
local network channels back into the area from which they originate; (c) 1997
adjustments to copyright royalties payable in connection with delivery of
network signals by satellite; and (d) a number of other regulatory, political,
F-34
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. OTHER COMMITMENTS AND CONTINGENCIES (CONTINUED)
legal, contractual and business factors, during July 1998, EchoStar ceased
delivering PrimeTime 24 programming, and began uplinking and distributing
network signals directly. EchoStar has also implemented Section 119 compliance
procedures which will materially restrict the market for the sale of network
signals by EchoStar. CBS and other broadcast networks have informed EchoStar
that they believe EchoStar's method of providing distant network programming
violates the SHVA and hence infringes their copyright.
On October 19, 1998, EchoStar filed a declaratory judgment action in the
United States District Court for the District of Colorado against the four major
networks. In the future, EchoStar may attempt to certify a class including the
networks as well as any and all owned and operated stations and any independent
affiliates. EchoStar has asked the court to enter a judgment declaring that
EchoStar's method of providing distant network programming does not violate the
SHVA and hence does not infringe the networks' copyrights. The Company cannot be
sure that the court will rule in our favor in this regard. Furthermore, an
October 28, 1997, ruling of the Librarian of Congress substantially increased
the royalty rate for retransmission of distant network and superstation signals.
While judicial review of this ruling is pending, the rates are now effective.
Certain national television broadcast networks (and their local affiliates)
have threatened to file counter-claims or separate lawsuits against EchoStar for
both the retransmission of local-into-local and distant-into-local signals.
While to date EchoStar has not been served with a complaint, recent press
reports indicate that a lawsuit may have been filed in Miami by the networks and
their affiliates against EchoStar. In the event of a decision adverse to
EchoStar in any such litigation, significant damage awards and additional
material restrictions on the sale of network signals by EchoStar could result.
Among other things, EchoStar could be required to terminate delivery of network
signals to a material portion of its subscriber base. Further restrictions on
the sale of network channels imposed in the future could result in decreases in
subscriber activations and subscription television services revenue and an
increase in subscriber churn.
EchoStar is subject to various other legal proceedings and claims which
arise in the ordinary course of its business. In the opinion of management, the
amount of ultimate liability with respect to those actions will not materially
affect the financial position or results of operations of EchoStar.
METEOROID EVENTS
In November 1998 certain meteoroid events occurred as the earth's orbit
passed through the particulate trail of Comet 55P (Tempel-Tuttle). While there
can be no assurance, the Company believes that its DBS satellites did not incur
any significant damage as a result of these events. Similar meteoriod events are
expected to occur again in November 1999. These meteoroid events continue to
pose a potential threat to all in-orbit geosynchronous satellites, including
EchoStar's DBS satellites. While the probability that EchoStar's spacecraft will
be damaged by space debris is very small, that probability will increase by
several orders of magnitude during the November 1999 meteoroid events. EchoStar
is presently evaluating the potential effects that the November 1999 meteoroid
events may have on its DBS satellites. At this time, EchoStar has not finally
determined the impact, if any, these meteoroid events may have on EchoStar's DBS
satellites.
F-35
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMBINING SUMMARY FINANCIAL STATEMENTS
The following pages present the consolidated and combining financial
information for DBS Corp and its affiliates and subsidiaries as of December 31,
1996 and 1997 and as of September 30, 1998, and for the three years ended
December 31, 1995, 1996 and 1997 and for the nine months ended September 30,
1997 and 1998. Consolidated and combining financial information is presented for
the following entities:
Consolidated DBS Corp (referred to as "DBS Corp")
Space Stand Alone Company (referred to as "Space")
DBSC Stand Alone Company (referred to as "DBSC")
Combined and Consolidated DBS Corp (referred to as "DBS Corp
and Affiliates and Subsidiaries")
F-36
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMBINING SUMMARY FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED AND COMBINING BALANCE SHEETS--AS OF DECEMBER 31, 1996 (IN MILLIONS)
<TABLE>
<CAPTION>
DBS CORP AND
AFFILIATES
DBS AND
CORP SPACE DBSC SUBSIDIARIES
--------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................................. $ 39 $ -- $ -- $ 39
Marketable investment securities....................................... 19 -- -- 19
Trade accounts receivable, net......................................... 14 -- -- 14
Inventories............................................................ 73 -- -- 73
Subscriber acquisition costs, net...................................... 68 -- -- 68
Other current assets................................................... 19 -- -- 19
--------- ----- ----- ------
Total current assets..................................................... 232 -- -- 232
Advances to affiliates, net.............................................. 69 (57) -- 12
Restricted cash and marketable investment securities..................... 79 -- -- 79
Property and equipment, net.............................................. 529 57 -- 586
FCC authorizations, net.................................................. 72 -- -- 72
Other noncurrent assets.................................................. 105 -- -- 105
--------- ----- ----- ------
Total assets......................................................... $ 1,086 $ -- $ -- $1,086
--------- ----- ----- ------
--------- ----- ----- ------
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current Liabilities:
Trade accounts payable................................................. $ 41 $ -- $ -- $ 41
Deferred revenue....................................................... 104 -- -- 104
Accrued expenses....................................................... 43 -- -- 43
Advances from affiliates, net.......................................... -- -- -- --
Current portion of long-term debt...................................... 11 -- -- 11
--------- ----- ----- ------
Total current liabilities................................................ 199 -- -- 199
Long-term obligations, net of current portion:
Investment in subsidiaries............................................. -- -- -- --
1994 Notes............................................................. 437 -- -- 437
1996 Notes............................................................. 386 -- -- 386
Mortgages and other notes payable, net of current portion.............. 64 -- -- 64
Long-term deferred satellite services revenue and other long-term
liabilities.......................................................... 7 -- -- 7
--------- ----- ----- ------
Total long-term liabilities.............................................. 894 -- -- 894
--------- ----- ----- ------
--------- ----- ----- ------
Total liabilities.................................................... 1,093 -- -- 1,093
Stockholders' equity (deficit)........................................... (7) -- -- (7)
--------- ----- ----- ------
Total liabilities and stockholders' equity (deficit)................. $ 1,086 $ -- $ -- $1,086
--------- ----- ----- ------
--------- ----- ----- ------
</TABLE>
F-37
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMBINING SUMMARY FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED AND COMBINING BALANCE SHEETS--AS OF DECEMBER 31, 1997 (IN MILLIONS)
<TABLE>
<CAPTION>
DBS CORP AND
AFFILIATES
DBS AND
CORP SPACE DBSC SUBSIDIARIES
--------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................................. $ 62 $ -- $ -- $ 62
Marketable investment securities....................................... 4 -- -- 4
Trade accounts receivable, net......................................... 66 -- -- 66
Inventories............................................................ 23 -- -- 23
Subscriber acquisition costs, net...................................... 19 -- -- 19
Other current assets................................................... 8 -- -- 8
--------- --- ----- ------
Total current assets..................................................... 182 -- -- 182
Advances to affiliates, net.............................................. 230 (198) (30) 2
Restricted cash and marketable investment securities..................... 188 -- -- 188
Property and equipment, net.............................................. 569 198 92 859
FCC authorizations, net.................................................. 81 -- 18 99
Other noncurrent assets.................................................. 101 -- -- 101
--------- --- ----- ------
Total assets......................................................... $ 1,351 $ -- $ 80 $1,431
--------- --- ----- ------
--------- --- ----- ------
Current Liabilities:
Trade accounts payable................................................. $ 68 $ -- $ -- $ 68
Deferred revenue....................................................... 122 -- -- 122
Accrued expenses....................................................... 97 -- -- 97
Advances from affiliates, net.......................................... -- -- -- --
Current portion of long-term debt...................................... 15 -- 3 18
--------- --- ----- ------
Total current liabilities................................................ 302 -- 3 305
1994 Notes............................................................. 500 -- -- 500
1996 Notes............................................................. 438 -- -- 438
1997 Notes............................................................. 375 -- -- 375
Mortgages and other notes payable, net of current portion.............. 41 -- 66 107
Long-term deferred satellite services revenue and other long-term
liabilities.......................................................... 20 -- -- 20
--------- --- ----- ------
Total long-term liabilities.............................................. 1,374 -- 66 1,440
--------- --- ----- ------
Total liabilities.................................................... 1,676 -- 69 1,745
Stockholders' equity (deficit)........................................... (325) -- 11 (314)
--------- --- ----- ------
--------- --- ----- ------
Total liabilities and stockholders' equity (deficit)................. $ 1,351 $ -- $ 80 $1,431
--------- --- ----- ------
--------- --- ----- ------
</TABLE>
F-38
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMBINING SUMMARY FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED AND COMBINING BALANCE SHEETS--AS OF SEPTEMBER 30, 1998 (IN
MILLIONS)
<TABLE>
<CAPTION>
DBS CORP AND
AFFILIATES
DBS AND
CORP SPACE DBSC SUBSIDIARIES
--------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents.............................................. $ 42 $ -- $ -- $ 42
Marketable investment securities....................................... 2 -- -- 2
Trade accounts receivable, net......................................... 84 -- -- 84
Inventories............................................................ 82 -- -- 82
Subscriber acquisition costs, net...................................... -- -- -- --
Other current assets................................................... 20 -- -- 20
--------- ----- ----- ------
Total current assets..................................................... 230 -- -- 230
Advances to affiliates, net.............................................. -- -- -- --
Restricted cash and marketable investment securities..................... 182 -- -- 182
Property and equipment, net.............................................. 639 99 120 858
FCC authorizations, net.................................................. 86 -- 18 104
Other noncurrent assets.................................................. 93 -- -- 93
--------- ----- ----- ------
Total assets......................................................... $ 1,230 $ 99 $ 138 $1,467
--------- ----- ----- ------
--------- ----- ----- ------
Current Liabilities:
Trade accounts payable................................................. $ 91 $ -- $ 1 $ 92
Deferred revenue....................................................... 113 -- -- 113
Accrued expenses....................................................... 131 -- -- 131
Advances from affiliates, net.......................................... (147) 109 67 29
Current portion of long-term debt...................................... 18 -- 3 21
--------- ----- ----- ------
Total current liabilities................................................ 206 109 71 386
1994 Notes............................................................. 553 -- -- 553
1996 Notes............................................................. 482 -- -- 482
1997 Notes............................................................. 375 -- -- 375
Mortgages and other notes payable, net of current portion.............. 40 -- 68 108
Long-term deferred satellite services revenue and other long-term
liabilities.......................................................... 28 -- -- 28
--------- ----- ----- ------
Total long-term liabilities.............................................. 1,478 -- 68 1,546
--------- ----- ----- ------
Total liabilities.................................................... 1,684 109 139 1,932
Stockholders' equity (deficit)........................................... (454) (10) (1) (465)
--------- ----- ----- ------
Total liabilities and stockholders' equity (deficit)................. $ 1,230 $ 99 $ 138 $1,467
--------- ----- ----- ------
--------- ----- ----- ------
</TABLE>
F-39
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR COMMUNICATIONS
CORPORATION, AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMBINING SUMMARY FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED AND COMBINING STATEMENTS OF OPERATIONS--YEAR ENDED DECEMBER 31,
1995 (IN MILLIONS)
<TABLE>
<CAPTION>
DBS CORP AND
AFFILIATES
AND
DBS CORP SPACE DBSC SUBSIDIARIES
--------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
REVENUE:
DTH equipment sales and integration services......................... $ 36 $ -- $ -- $ 36
C-band and other..................................................... 112 -- -- 112
----- ----- ----- -----
Total revenue.......................................................... 148 -- -- 148
COSTS AND EXPENSES:
Cost of sales--DTH equipment and integration services................ 30 -- -- 30
Cost of sales--C-band and other...................................... 85 -- -- 85
Advertising and other................................................ 2 -- -- 2
General and administrative........................................... 36 -- -- 36
Depreciation and amortization........................................ 3 -- -- 3
----- ----- ----- -----
Total costs and expenses............................................... 156 -- -- 156
----- ----- ----- -----
Operating loss......................................................... (8) -- -- (8)
Other Income (Expense):
Interest income...................................................... 13 -- -- 13
Interest expense, net of amounts capitalized......................... (24) -- -- (24)
Other................................................................ 1 -- -- 1
----- ----- ----- -----
Total other income (expense)........................................... (10) -- -- (10)
----- ----- ----- -----
Loss before income taxes............................................... (18) -- -- (18)
Income tax benefit (provision), net.................................... 6 -- -- 6
----- ----- ----- -----
Net loss............................................................... $ (12) $ -- $ -- $ (12)
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
F-40
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
ECHOSTAR COMMUNICATIONS CORPORATION AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
11. COMBINING SUMMARY FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED AND COMBINING STATEMENTS OF OPERATIONS--YEAR ENDED DECEMBER 31,
1996 (IN MILLIONS)
<TABLE>
<CAPTION>
DBS CORP AND
AFFILIATES
DBS AND
CORP SPACE DBSC SUBSIDIARIES
--------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
REVENUE:
DISH Network:
Subscription television services...................................... $ 50 $ -- $ -- $ 50
C-band and other...................................................... 8 -- -- 8
--------- --- --- -----
Total DISH Network...................................................... 58 -- -- 58
DTH equipment sales and integration services............................ 77 -- -- 77
Satellite services...................................................... 6 -- -- 6
Other................................................................... 56 -- -- 56
--------- --- --- -----
Total revenue............................................................. 197 -- -- 197
COSTS AND EXPENSES:
DISH Network Operating Expenses:
Subscriber-related expenses........................................... 23 -- -- 23
Customer service center and other..................................... 13 -- -- 13
Satellite and transmission............................................ 7 -- -- 7
--------- --- --- -----
Total DISH Network operating expenses................................... 43 -- -- 43
Cost of sales--DTH equipment and integration services................... 76 -- -- 76
Cost of sales--C-band and other......................................... 42 -- -- 42
Marketing:
Subscriber promotion subsidies........................................ 35 -- -- 35
Advertising and other................................................. 18 -- -- 18
--------- --- --- -----
Total marketing expenses................................................ 53 -- -- 53
General and administrative.............................................. 49 -- -- 49
Amortization of subscriber acquisition costs............................ 16 -- -- 16
Depreciation and amortization........................................... 27 -- -- 27
--------- --- --- -----
Total costs and expenses.................................................. 306 -- -- 306
--------- --- --- -----
Operating loss............................................................ (109) -- -- (109)
Other Income (Expense):
Interest income......................................................... 14 -- -- 14
Interest expense, net of amounts capitalized............................ (62) -- -- (62)
Other................................................................... -- -- -- --
--------- --- --- -----
Total other income (expense).............................................. (48) -- -- (48)
--------- --- --- -----
Loss before income taxes.................................................. (157) -- -- (157)
Income tax benefit (provision), net....................................... 55 -- -- 55
--------- --- --- -----
Net loss.................................................................. $ (102) $ -- $ -- $ (102)
--------- --- --- -----
--------- --- --- -----
</TABLE>
F-41
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
ECHOSTAR COMMUNICATIONS CORPORATION AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
11. COMBINING SUMMARY FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED AND COMBINING STATEMENTS OF OPERATIONS--YEAR ENDED DECEMBER 31,
1997 (IN MILLIONS)
<TABLE>
<CAPTION>
DBS CORP AND
AFFILIATES
DBS AND
CORP SPACE DBSC SUBSIDIARIES
--------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
REVENUE:
DISH Network:
Subscription television services...................................... $ 299 $ -- $ -- $ 299
Other................................................................. 43 -- -- 43
--------- --- --- -----
Total DISH Network...................................................... 342 -- -- 342
DTH equipment sales and integration services............................ 90 -- -- 90
Satellite services...................................................... 11 -- -- 11
C-band and other........................................................ 33 -- -- 33
--------- --- --- -----
Total revenue............................................................. 476 -- -- 476
COSTS AND EXPENSES:
DISH Network Operating Expenses:
Subscriber-related expenses........................................... 144 -- -- 144
Customer service center and other..................................... 35 -- -- 35
Satellite and transmission............................................ 14 -- -- 14
--------- --- --- -----
Total DISH Network operating expenses................................... 193 -- -- 193
Cost of sales--DTH equipment and integration services................... 61 -- -- 61
Cost of sales--C-band and other......................................... 24 -- -- 24
Marketing:
Subscriber promotion subsidies........................................ 149 -- -- 149
Advertising and other................................................. 35 -- -- 35
--------- --- --- -----
Total marketing expenses................................................ 184 -- -- 184
General and administrative.............................................. 66 -- -- 66
Amortization of subscriber acquisition costs............................ 121 -- -- 121
Depreciation and amortization........................................... 51 -- -- 51
--------- --- --- -----
Total costs and expenses.................................................. 700 -- -- 700
--------- --- --- -----
Operating loss............................................................ (224) -- -- (224)
Other Income (Expense):
Interest income......................................................... 13 -- -- 13
Interest expense, net of amounts capitalized............................ (105) -- (5) (110)
Other................................................................... (2) -- -- (2)
--------- --- --- -----
Total other income (expense).............................................. (94) -- (5) (99)
--------- --- --- -----
Loss before income taxes.................................................. (318) -- (5) (323)
Income tax benefit (provision), net....................................... -- -- -- --
--------- --- --- -----
Net loss.................................................................. $ (318) $ -- $ (5) $ (323)
--------- --- --- -----
--------- --- --- -----
</TABLE>
F-42
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
ECHOSTAR COMMUNICATIONS CORPORATION AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
11. COMBINING SUMMARY FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED AND COMBINING STATEMENTS OF OPERATIONS--NINE MONTHS ENDED
SEPTEMBER 30, 1997 (IN MILLIONS)
<TABLE>
<CAPTION>
DBS CORP AND
AFFILIATES
DBS AND
CORP SPACE DBSC SUBSIDIARIES
--------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
REVENUE:
DISH Network:
Subscription television services...................................... $ 193 $ -- $ -- $ 193
Other................................................................. 33 -- -- 33
--------- --- --- -----
Total DISH Network...................................................... 226 -- -- 226
DTH equipment sales and integration services............................ 37 -- -- 37
Satellite services...................................................... 8 -- -- 8
C-band and other........................................................ 25 -- -- 25
--------- --- --- -----
Total revenue............................................................. 296 -- -- 296
COSTS AND EXPENSES:
DISH Network Operating Expenses:
Subscriber-related expenses........................................... 97 -- -- 97
Customer service center and other..................................... 23 -- -- 23
Satellite and transmission............................................ 10 -- -- 10
--------- --- --- -----
Total DISH Network operating expenses................................... 130 -- -- 130
Cost of sales--DTH equipment and integration services................... 26 -- -- 26
Cost of sales--C-band and other......................................... 16 -- -- 16
Marketing:
Subscriber promotion subsidies........................................ 99 -- -- 99
Advertising and other................................................. 24 -- -- 24
--------- --- --- -----
Total marketing expenses................................................ 123 -- -- 123
General and administrative.............................................. 46 -- -- 46
Amortization of subscriber acquisition costs............................ 95 -- -- 95
Depreciation and amortization........................................... 38 -- -- 38
--------- --- --- -----
Total costs and expenses.................................................. 474 -- -- 474
--------- --- --- -----
Operating loss............................................................ (178) -- -- (178)
Other Income (Expense):
Interest income......................................................... 9 -- -- 9
Interest expense, net of amounts capitalized............................ (75) -- (5) (80)
Other................................................................... -- -- -- --
--------- --- --- -----
Total other income (expense).............................................. (66) -- (5) (71)
--------- --- --- -----
Loss before income taxes.................................................. (244) -- (5) (249)
Income tax benefit (provision), net....................................... -- -- -- --
--------- --- --- -----
Net loss.................................................................. $ (244) $ -- $ (5) $ (249)
--------- --- --- -----
--------- --- --- -----
</TABLE>
F-43
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
ECHOSTAR COMMUNICATIONS CORPORATION AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
11. COMBINING SUMMARY FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED AND COMBINING STATEMENTS OF OPERATIONS--NINE MONTHS ENDED
SEPTEMBER 30, 1998 (IN MILLIONS)
<TABLE>
<CAPTION>
DBS CORP AND
AFFILIATES
DBS AND
CORP SPACE DBSC SUBSIDIARIES
--------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
REVENUE:
DISH Network:
Subscription television services...................................... $ 460 $ -- $ -- $ 460
Other................................................................. 11 -- -- 11
--------- --- --- -----
Total DISH Network...................................................... 471 -- -- 471
DTH equipment sales and integration services............................ 191 -- -- 191
Satellite services...................................................... 16 -- -- 16
C-band and other........................................................ 19 -- -- 19
--------- --- --- -----
Total revenue............................................................. 697 -- -- 697
COSTS AND EXPENSES:
DISH Network Operating Expenses:
Subscriber-related expenses........................................... 211 -- -- 211
Customer service center and other..................................... 46 -- -- 46
Satellite and transmission............................................ 17 -- -- 17
--------- --- --- -----
Total DISH Network operating expenses................................... 274 -- -- 274
Cost of sales--DTH equipment and integration services................... 131 -- -- 131
Cost of sales--C-band and other......................................... 12 -- -- 12
Marketing:
Subscriber promotion subsidies........................................ 165 -- -- 165
Advertising and other................................................. 26 -- -- 26
--------- --- --- -----
Total marketing expenses................................................ 191 -- -- 191
General and administrative.............................................. 67 -- -- 67
Amortization of subscriber acquisition costs............................ 19 -- -- 19
Depreciation and amortization........................................... 43 10 6 59
--------- --- --- -----
Total costs and expenses.................................................. 737 10 6 753
Operating loss............................................................ (40) (10) (6) (56)
Other Income (Expense):
Interest income......................................................... 8 -- -- 8
Interest expense, net of amounts capitalized............................ (117) -- (5) (122)
Other................................................................... (1) -- -- (1)
--------- --- --- -----
Total other income (expense).............................................. (110) -- (5) (115)
--------- --- --- -----
Loss before income taxes.................................................. (150) (10) (11) (171)
Income tax benefit (provision), net....................................... -- -- -- --
--------- --- --- -----
Net loss.................................................................. $ (150) $ (10) $ (11) $ (171)
--------- --- --- -----
--------- --- --- -----
</TABLE>
F-44
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
ECHOSTAR COMMUNICATIONS CORPORATION AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
11. COMBINING SUMMARY FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED AND COMBINING STATEMENTS OF CASH FLOWS--YEAR ENDED DECEMBER 31,
1995 (IN MILLIONS)
<TABLE>
<CAPTION>
DBS CORP AND
AFFILIATES AND
DBS CORP SPACE DBSC SUBSIDIARIES
------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...................................................... $ (12) $ -- $ -- $ (12)
Adjustments to reconcile net income (loss) to net cash flows from
operating activities:
Depreciation and amortization........................................ 3 -- -- 3
Deferred income tax benefit.......................................... (5) -- -- (5)
Amortization of debt discount and deferred financing costs........... 24 -- -- 24
Other, net........................................................... 1 -- -- 1
Changes in current assets and current liabilities, net............... (33) -- -- (33)
--- --- --- ---
Net cash flows from operating activities............................... (22) -- -- (22)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable investment securities.......................... (3) -- -- (3)
Sales of marketable investment securities.............................. 34 -- -- 34
Purchases of restricted marketable investment securities............... (15) -- -- (15)
Purchases of property and equipment.................................... (114) (20) -- (134)
Offering proceeds and investment earnings placed in escrow............. (10) -- -- (10)
Funds released from escrow accounts.................................... 122 -- -- 122
Investment in DBSC..................................................... 5 -- -- 5
--- --- --- ---
Net cash flows from investing activities............................... 19 (20) -- (1)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from affiliates............................................... -- 20 -- 20
Net proceeds from issuance of Common Stock............................. -- -- -- --
--- --- --- ---
Net cash flows from financing activities............................... -- 20 -- 20
--- --- --- ---
Net increase (decrease) in cash and cash equivalents................... (3) -- -- (3)
Cash and cash equivalents, beginning of year........................... 18 -- -- 18
--- --- --- ---
Cash and cash equivalents, end of year................................. $ 15 $ -- $ -- $ 15
--- --- --- ---
--- --- --- ---
</TABLE>
F-45
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
ECHOSTAR COMMUNICATIONS CORPORATION AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
11. COMBINING SUMMARY FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED AND COMBINING STATEMENTS OF CASH FLOWS--YEAR ENDED DECEMBER 31,
1996 (IN MILLIONS)
<TABLE>
<CAPTION>
DBS CORP AND
AFFILIATES
DBS AND
CORP SPACE DBSC SUBSIDIARIES
--------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................................... $ (102) $ -- $ -- $ (102)
Adjustments to reconcile net income (loss) to net cash flows from
operating activities:
Depreciation and amortization........................................... 27 -- -- 27
Amortization of subscriber acquisition costs............................ 16 -- -- 16
Deferred income tax benefit............................................. (50) -- -- (50)
Amortization of debt discount and deferred financing costs.............. 61 -- -- 61
Other, net.............................................................. 10 -- -- 10
Changes in current assets and current liabilities, net.................. 15 -- -- 15
--------- --- --- -----
Net cash flows from operating activities.................................. (23) -- -- (23)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable investment securities............................. (138) -- -- (138)
Sales of marketable investment securities................................. 120 -- -- 120
Purchases of restricted marketable investment securities.................. (21) -- -- (21)
Funds released from escrow and restricted cash and marketable investment
securities.............................................................. 236 -- -- 236
Advances to affiliates.................................................... (64) 31 -- (33)
Purchases of property and equipment....................................... (184) (31) -- (215)
Offering proceeds and investment earnings placed in escrow................ (194) -- -- (194)
Payments received on convertible subordinated debentures from SSET........ 6 -- -- 6
Expenditures for FCC authorizations....................................... (55) -- -- (55)
Other..................................................................... -- -- -- --
--------- --- --- -----
Net cash flows from investing activities.................................. (294) -- -- (294)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of 1996 Notes.................................. 337 -- -- 337
Proceeds from note payable to ECC......................................... 12 -- -- 12
Repayments of mortgage indebtedness and notes payable..................... (8) -- -- (8)
--------- --- --- -----
Net cash flows from financing activities.................................. 341 -- -- 341
--------- --- --- -----
Net increase (decrease) in cash and cash equivalents...................... 24 -- -- 24
Cash and cash equivalents, beginning of year.............................. 15 -- -- 15
--------- --- --- -----
Cash and cash equivalents, end of year.................................... $ 39 $ -- $ -- $ 39
--------- --- --- -----
--------- --- --- -----
</TABLE>
F-46
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
ECHOSTAR COMMUNICATIONS CORPORATION AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
11. COMBINING SUMMARY FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED AND COMBINING STATEMENTS OF CASH FLOWS--YEAR ENDED DECEMBER 31,
1997 (IN MILLIONS)
<TABLE>
<CAPTION>
DBS CORP AND
AFFILIATES
DBS AND
CORP SPACE DBSC SUBSIDIARIES
--------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................................... $ (318) $ -- $ (5) $ (323)
Adjustments to reconcile net income (loss) to net cash flows from
operating activities:
Depreciation and amortization........................................... 51 -- -- 51
Amortization of subscriber acquisition costs............................ 121 -- -- 121
Interest on notes payable to ECC........................................ -- -- 5 5
Amortization of debt discount and deferred financing costs.............. 83 -- -- 83
Other, net.............................................................. 11 -- -- 11
Changes in current assets and current liabilities, net.................. 45 -- (1) 44
--------- --- --- -----
Net cash flows from operating activities.................................. (7) -- (1) (8)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable investment securities............................. (37) -- -- (37)
Sales of marketable investment securities................................. 52 -- -- 52
Purchases of restricted marketable investment securities.................. (1) -- -- (1)
Funds released from escrow and restricted cash and marketable investment
securities.............................................................. 120 -- -- 120
Advances to affiliates.................................................... (135) 125 19 9
Purchases of property and equipment....................................... (79) (125) (18) (222)
Offering proceeds and investment earnings placed in escrow................ (228) -- -- (228)
--------- --- --- -----
Net cash flows from investing activities.................................. (308) -- 1 (307)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Common Stock................................ -- -- -- --
Net proceeds from issuance of 1997 Notes.................................. 363 -- -- 363
Repayment of note payable to ECC.......................................... (12) -- -- (12)
Repayments of mortgage indebtedness and notes payable..................... (13) -- -- (13)
--------- --- --- -----
Net cash flows from financing activities.................................. 338 -- -- 338
--------- --- --- -----
Net increase (decrease) in cash and cash equivalents...................... 23 -- -- 23
Cash and cash equivalents, beginning of year.............................. 39 -- -- 39
--------- --- --- -----
Cash and cash equivalents, end of year.................................... $ 62 $ -- $ -- $ 62
--------- --- --- -----
--------- --- --- -----
</TABLE>
F-47
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
ECHOSTAR COMMUNICATIONS CORPORATION AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
11. COMBINING SUMMARY FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED AND COMBINING STATEMENTS OF CASH FLOWS--NINE MONTHS ENDED
SEPTEMBER 30, 1997 (IN MILLIONS)
<TABLE>
<CAPTION>
DBS CORP AND
AFFILIATES
DBS AND
CORP SPACE DBSC SUBSIDIARIES
--------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................................... $ (244) $ -- $ (5) $ (249)
Adjustments to reconcile net income (loss) to net cash flows from
operating activities:
Depreciation and amortization........................................... 38 -- -- 38
Amortization of subscriber acquisition costs............................ 95 -- -- 95
Interest on notes payable to ECC........................................ -- -- 5 5
Amortization of debt discount and deferred financing costs.............. 61 -- -- 61
Other, net.............................................................. 11 -- -- 11
Changes in current assets and current liabilities, net.................. (8) -- (1) (9)
--------- --- --- -----
Net cash flows from operating activities.................................. (47) -- (1) (48)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable investment securities............................. (33) -- -- (33)
Sales of marketable investment securities................................. 21 -- -- 21
Purchases of restricted marketable investment securities.................. (1) -- -- (1)
Funds released from escrow and restricted cash and marketable investment
securities.............................................................. 100 -- -- 100
Advance to affiliates..................................................... (119) 109 18 8
Purchases of property and equipment....................................... (50) (109) (17) (176)
Offering proceeds and investment earnings placed in escrow................ (225) -- -- (225)
Other..................................................................... (2) -- -- (2)
--------- --- --- -----
Net cash flows from investing activities.................................. (309) -- 1 (308)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Common Stock................................ -- -- -- --
Net proceeds from issuance of 1997 Notes.................................. 363 -- -- 363
Repayments of mortgage indebtedness and notes payable..................... (16) -- -- (16)
--------- --- --- -----
Net cash flows from financing activities.................................. 347 -- -- 347
--------- --- --- -----
Net increase (decrease) in cash and cash equivalents...................... (9) -- -- (9)
Cash and cash equivalents, beginning of year.............................. 39 -- -- 39
--------- --- --- -----
Cash and cash equivalents, end of year.................................... $ 30 $ -- $ -- $ 30
--------- --- --- -----
--------- --- --- -----
</TABLE>
F-48
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
ECHOSTAR COMMUNICATIONS CORPORATION AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
11. COMBINING SUMMARY FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED AND COMBINING STATEMENTS OF CASH FLOWS--NINE MONTHS ENDED
SEPTEMBER 30, 1998 (IN MILLIONS)
<TABLE>
<CAPTION>
DBS CORP AND
AFFILIATES
DBS AND
CORP SPACE DBSC SUBSIDIARIES
--------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................................... $ (150) $ (10) $ (11) $ (171)
Adjustments to reconcile net income (loss) to net cash flows from
operating activities:
Depreciation and amortization........................................... 43 10 6 59
Amortization of subscriber acquisition costs............................ 19 -- -- 19
Interest on notes payable to ECC........................................ -- -- 4 4
Amortization of debt discount and deferred financing costs.............. 89 -- -- 89
Other, net.............................................................. 8 -- -- 8
Changes in current assets and current liabilities, net.................. (48) -- -- (48)
--------- --- --- -----
Net cash flows from operating activities................................ (39) -- (1) (40)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable investment securities............................. (4) -- -- (4)
Sales of marketable investment securities................................. 6 -- -- 6
Funds released from escrow and restricted cash and marketable investment
securities.............................................................. 116 -- -- 116
Purchases of property and equipment....................................... (134) -- -- (134)
Offering proceeds and investment earnings placed in escrow................ (5) -- -- (5)
Other..................................................................... 2 -- -- 2
--------- --- --- -----
Net cash flows from investing activities.................................. (19) -- -- (19)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Common Stock................................ -- -- -- --
Advances from affiliates.................................................. 48 -- 3 51
Repayments of mortgage indebtedness and notes payable..................... (10) -- (2) (12)
--------- --- --- -----
Net cash flows from financing activities.................................. 38 -- 1 39
--------- --- --- -----
Net increase (decrease) in cash and cash equivalents...................... (20) -- -- (20)
Cash and cash equivalents, beginning of year.............................. 62 -- -- 62
--------- --- --- -----
Cash and cash equivalents, end of year.................................... $ 42 $ -- $ -- $ 42
--------- --- --- -----
--------- --- --- -----
</TABLE>
F-49
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
ECHOSTAR COMMUNICATIONS CORPORATION AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
12. OPERATIONS IN GEOGRAPHIC AREAS
The Company sells certain of its products on a worldwide basis and has
operations in Europe and the Pacific Rim. Information about the Company's
operations in different geographic areas as of December 31, 1995, 1996 and 1997
and for the years then ended, is as follows (in thousands):
<TABLE>
<CAPTION>
UNITED OTHER
STATES EUROPE INTERNATIONAL TOTAL
------------ --------- ------------ ------------
<S> <C> <C> <C> <C>
1995
- ----
Total revenue............................................... $ 95,259 $ 31,351 $ 21,910 $ 148,520
------------ --------- ------------ ------------
------------ --------- ------------ ------------
Export sales................................................ $ 6,317
------------
------------
Operating income (loss)..................................... $ (7,895) $ 146 $ (257) $ (8,006)
------------ --------- ------------
------------ --------- ------------
Other income (expense), net................................. $ (10,546)
------------
------------
Net loss before income taxes................................ $ (18,552)
------------
------------
Identifiable assets......................................... $ 63,136 $ 10,088 $ 3,788 $ 77,012
------------ --------- ------------
------------ --------- ------------
Corporate assets............................................ $ 482,283
------------
------------
Total assets................................................ $ 559,295
------------
------------
1996
- ----
Total revenue............................................... $ 159,611 $ 26,984 $ 10,508 $ 197,103
------------ --------- ------------ ------------
------------ --------- ------------ ------------
Export sales................................................ $ 1,536
------------
------------
Operating loss.............................................. $ (106,695) $ (1,274) $ (896) $ (108,865)
------------ --------- ------------
------------ --------- ------------
Other income (expense), net................................. $ (47,664)
------------
------------
Net loss before income taxes................................ $ (156,529)
------------
------------
Identifiable assets......................................... $ 836,598 $ 5,795 $ 1,871 $ 844,264
------------ --------- ------------
------------ --------- ------------
Corporate assets............................................ $ 241,281
------------
------------
Total assets................................................ $ 1,085,545
------------
------------
1997
- ----
Total revenue............................................... $ 446,461 $ 20,592 $ 8,849 $ 475,902
------------ --------- ------------ ------------
------------ --------- ------------ ------------
Export sales................................................ $ 74,065
------------
------------
Operating loss.............................................. $ (222,710) $ (1,224) $ (402) $ (224,336)
------------ --------- ------------
------------ --------- ------------
Other income (expense), net................................. $ (98,942)
------------
------------
Net loss before income taxes................................ $ (323,278)
------------
------------
Identifiable assets......................................... $1,086,450 $ 5,696 $ 2,682 $ 1,094,828
------------ --------- ------------
------------ --------- ------------
Corporate assets............................................ $ 336,946
------------
------------
Total assets................................................ $ 1,431,774
------------
------------
</TABLE>
F-50
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
ECHOSTAR COMMUNICATIONS CORPORATION AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
13. VALUATION AND QUALIFYING ACCOUNTS
The Company's valuation and qualifying accounts as of December 31, 1995,
1996 and 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND BALANCE AT
YEAR EXPENSES DEDUCTIONS END OF YEAR
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
Assets:
Allowance for doubtful accounts........................... $ 186 $ 1,160 $ (240) $ 1,106
Loan loss reserve......................................... 95 19 (36) 78
Reserve for inventory..................................... 1,585 1,511 (299) 2,797
Liabilities:
Reserve for warranty costs and other...................... 1,493 562 (950) 1,105
YEAR ENDED DECEMBER 31, 1996:
Assets:
Allowance for doubtful accounts........................... $ 1,106 $ 2,340 $ (1,952) $ 1,494
Loan loss reserve......................................... 78 157 (94) 141
Reserve for inventory..................................... 2,797 4,304 (1,438) 5,663
Liabilities:
Reserve for warranty costs and other...................... 1,105 (342) -- 763
YEAR ENDED DECEMBER 31, 1997:
Assets:
Allowance for doubtful accounts........................... $ 1,494 $ 4,343 $ (4,490) $ 1,347
Loan loss reserve......................................... 141 7 (87) 61
Reserve for inventory..................................... 5,663 1,650 (3,473) 3,840
Liabilities:
Reserve for warranty costs and other...................... 763 -- (53) 710
</TABLE>
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
The Company's quarterly results of operations are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1996:
Total revenue................................................ $ 37,057 $ 68,478 $ 35,506 $ 56,062
Operating loss............................................... (8,991) (17,588) (27,601) (54,685)
Net loss..................................................... (7,787) (21,134) (26,769) (45,986)
Year Ended December 31, 1997:
Total revenue................................................ $ 68,967 $ 97,831 $ 129,662 $ 179,442
Operating loss............................................... (43,328) (43,503) (91,202) (46,303)
Net loss..................................................... (63,303) (66,067) (119,567) (74,487)
</TABLE>
Certain revenue amounts reflected above have been reclassified to conform
with the 1997 presentation.
F-51
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
ECHOSTAR COMMUNICATIONS CORPORATION AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
15. SUBSEQUENT EVENTS (UNAUDITED)
ECHOSTAR III DEVELOPMENTS
During July 1998, the Company announced that certain of the electronic power
converters ("EPC") on its third DBS satellite, EchoStar III, were operating at
higher than expected temperatures. In August 1998, Lockheed Martin, the
satellite manufacturer, notified the Company that it had re-qualified the EPC's
at the higher temperatures. As a result, the Company does not expect that this
anomaly will have a material impact on EchoStar III's transmission capacity.
During October 1998, Lockheed Martin advised the Company that EchoStar III
had experienced an anomaly which, to date, has resulted in the loss of six
TWTAs. The satellite is equipped with a total of 44 TWTAs. Only 11 TWTAs are
necessary to fully utilize the Company's 11 frequencies at 61.5 DEG. WL, where
the satellite is located. While there has been no interruption of service for
its customers and no interruption of service is expected, the Company is
presently working with Lockheed Martin to investigate the cause and potential
implications of the anomaly. Lockheed Martin has informally advised the Company
that it is possible the anomaly may result in the loss of additional
transponders in the future.
As a result of the anomaly related to the TWTAs, the Company has instructed
its broker to notify its insurance carriers of an occurrence under the terms of
the EchoStar III launch insurance policy. The EchoStar III launch insurance
policy provides for insurance of $219.3 million covering the period from launch
of the satellite (October 5, 1997) through October 5, 1998. Under that policy,
the Company has until early 1999 to file a claim for either a constructive total
or partial loss. It may be several months before all of the data required in
connection with the filing of a claim can be accumulated. Pending completion of
the anomaly investigation, the Company had transitioned to a 60-day, $200
million in-orbit insurance policy on EchoStar III at standard industry rates,
which was renewed to February 2, 1999. However, the policy contains an exclusion
for future TWTA losses based on similar anomalies. As a result of the exclusion,
and in the event that comprehensive coverage for similar TWTA anomalies is
ultimately denied under the launch insurance policy, the Company could
potentially experience uninsured losses of capacity on EchoStar III in the
future, up to and including a total loss of capacity. While there can be no
assurance, the Company and its insurers expect that in-orbit insurance can be
procured on more traditional terms in the future if the anomaly investigation is
satisfactorily concluded and no further failures occur in the interim.
Based on information currently available, management has evaluated the
potential financial statement impact of this satellite anomaly in accordance
with its stated accounting policies. The Company has not completed its
assessment of the impairment to EchoStar III, but currently believes that
insurance proceeds will be sufficient to offset any write-down of satellite
assets that may be required because of lost transmission capacity caused by this
anomaly. However, no assurance can be provided as to the ultimate amount that
may be received from the insurance claim, or that coverage will be available.
The Company will continue to evaluate the performance of EchoStar III and may
modify its loss assessment as new events or circumstances develop. The Company
does not maintain insurance for lost profit opportunity.
F-52
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
ECHOSTAR COMMUNICATIONS CORPORATION AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
15. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
MEDIA4 ACQUISITION
During October 1998, EchoStar announced its intention to acquire
privately-held Media4, Inc. ("Media4"), an Atlanta-based supplier of broadband
satellite networking equipment for personal computers. Under the agreement,
EchoStar would issue approximately 386,000 shares of its Class A common stock,
subject to adjustment, for 100% ownership of Media4.
In connection with the merger, EchoStar has agreed to loan Media4 $250,000
per month for the period from October 1998 through the earlier of the
consummation of the merger, or December 31, 1998. Each advance will be
represented by a promissory note, bearing interest at 10%, compounded quarterly
and due and payable September 30, 1999.
EchoStar's obligation to acquire Media4 pursuant to the letter of intent is
non-binding and is subject to the negotiation and execution of a definitive
contract between the parties. Any contract signed by EchoStar for the purpose of
acquiring Media4 will be subject to a complete due diligence review of Media4 by
EchoStar, as well as the satisfaction by the seller of certain conditions. There
can be no assurance that the acquisition will be consummated.
NEWS AND MCI WORLDCOM TRANSACTION
The "110 Acquisition" was announced on November 30, 1998. Under the 110
Acquisition agreement, EchoStar will obtain MCI's license to operate 28 DBS
frequencies at the 110 DEG. WL full CONUS orbital location, in-orbit delivery of
two Loral-built satellites, currently expected to be launched during 1999; a
recently-constructed digital broadcast operations center located in Gilbert,
Arizona; a worldwide license agreement to manufacture and distribute set-top
boxes internationally using NDS encryption/decoding technology; a minimum
500,000 unit purchase commitment by an affiliated entity of News from ETC for
its set-top boxes; and a three-year no fee retransmission consent agreement for
DISH Network to rebroadcast FOX Network owned-and-operated local station signals
to their respective markets. The in-orbit delivery contract for the Loral-built
satellites, the cost of which will be borne by News, includes construction and
launch of the satellites and appropriate insurance coverage for launch and
one-year of in-orbit insurance. EchoStar and MCI also agreed that MCI will have
the non-exclusive right to bundle DISH Network service with MCI's telephony
service offerings on mutually agreeable terms. In addition, the Fox News Channel
is now carried on the DISH Network. The Company received standard launch support
payments and a provision for "most favored nation" programming rates in exchange
for carrying the programming.
In connection with the 110 Acquisition and based on EchoStar's Class A
common stock (Nasdaq: DISH) trading between $15.00 per share and $39.00 per
share (the Collar), News will receive 24,030,000 newly-issued shares of
EchoStar's Class A common stock and MCI will receive 5,970,000 newly-issued
shares of EchoStar's Class A common stock, which is approximately 37 percent of
EchoStar's fully-diluted equity and approximately 8.5 percent of the total
voting power. If the price of the Class A common stock is above the range of the
Collar, the number of newly issued shares will be adjusted downward.
By combining the capacity of the newly acquired satellites at the 110 DEG.WL
orbital slot and EchoStar's current satellites at 119 DEG.WL, EchoStar's DISH
Network would have the capability to provide
F-53
<PAGE>
ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
(A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
ECHOSTAR COMMUNICATIONS CORPORATION AS DEFINED IN NOTE 1)
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
15. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
more than 500 channels of programming, Internet/data services and HDTV, along
with the capability of broadcasting to the entire United States, including
Alaska, Hawaii, Puerto Rico and the U.S. territories in the Caribbean and would
be positioned to become a one-dish solution for local-into-local channels in
major markets across the country.
The transaction is subject to receipt of appropriate regulatory approvals
and the consent of EchoStar's shareholders. EchoStar's Board of Directors has
approved the agreement.
F-54
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The following subparagraphs briefly describe indemnification provisions for
directors, officers and controlling persons of the Company against liability,
including liability under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company 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, as amended (the "Securities Act") and is, therefore, unenforceable.
COLORADO CORPORATIONS
As provided in the Articles of Incorporation of the Company, a Colorado
corporation, the Company may eliminate or limit the personal liability of a
director to the Company or to its shareholders for monetary damages for breach
of fiduciary duty as a director; except that such provision shall not eliminate
or limit the liability of a director to the Company or to its shareholders for
monetary damages for: any breach of the director's duty of loyalty to the
Company or to its shareholders; acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law; acts specified in
Section 7-108-403 of the Colorado Business Corporation Act; or any transaction
from which the director derived an improper personal benefit. No such provisions
eliminate or limit the liability of a director to the Company or to its
shareholders for monetary damages for any act or omission occurring prior to the
date when such provision becomes effective.
1. Under provisions of the Bylaws of the Company and the Colorado Business
Corporation Act (the "Colorado Act"), each person who is or was a director of
officer of the Company will be indemnified by the Company as a matter of right
summarized as follows:
(a) Under the Colorado Act, a person who is wholly successful on the merits
in defense of a suit or proceeding brought against him by reason of the fact
that he is a director or officer of the Company shall be indemnified against
reasonable expenses (including attorneys' fees) in connection with such suit or
proceeding.
(b) Except as provided in subparagraph (c) below, a director may be
indemnified under such law against both (1) reasonable expenses (including
attorneys' fees), and (2) judgments, penalties, fines and amounts paid in
settlement, if he acted in good faith and reasonably believed, in the case of
conduct in his official capacity as a director, that his conduct was in the
Company's best interests, or in all other cases that his conduct was not opposed
to the best interests of the Company, and with respect to any criminal action,
he had no reasonable cause to believe his conduct was unlawful, but the Company
may not indemnify the director if the director is found liable to the Company or
is found liable on the basis that personal benefit was improperly received by
the director in connection with any suit or proceeding charging improper
personal benefit to the director;
(c) In connection with a suit or proceeding by or in the right of the
Company, indemnification is limited to reasonable expenses incurred in
connection with the suit or proceeding, but the Company may not indemnify the
director if the director was found liable to the Company; and
<PAGE>
(d) Officers of the Company will be indemnified to the same extent as
directors as described in (a), (b) and (c) above.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
No.
- ---
<S> <C>
3.1(a) Articles of Incorporation of the Company (incorporated by
reference to Exhibit 3.4(a) to the Company's Registration
Statement on Form S-4, Registration No. 333-31929).
3.1(b) Bylaws of the Company (incorporated by reference to Exhibit
3.4(b) to the Company's Registration Statement on Form S-4,
Registration No. 333-31929).
4.1 Indenture relating to the Seven Year Notes, dated as of January
25, 1999, by and among the Company, the Guarantors and U.S. Bank
Trust National Association, as trustee.
4.2 Form of Note for Seven Year Notes (included in Exhibit 4.1).
4.3 Indenture relating to the Ten Year Notes, dated as of January 25,
1999, by and among the Company, the Guarantors and U.S. Bank
Trust National Association, as trustee.
4.4 Form of Note for Ten Year Notes (included in Exhibit 4.3).
4.5 Registration Rights Agreement relating to the Seven Year Notes by
and among the Company, the Guarantors and the parties named
therein.
4.6 Registration Rights Agreement relating to the Ten Year Notes by
and among the Company, the Guarantors and the parties named
therein.
5.1 Opinion of Winthrop, Stimson, Putnam & Roberts regarding legality
of securities being registered.
5.2 Opinion of Friedlob Sanderson Raskin Paulson & Tourtillott, LLC
regarding the legality of securities being registered.
10.1(a) Satellite Construction Contract, dated as of February 6, 1990,
between EchoStar Satellite Corporation ("ESC") and Martin
Marietta as successor to General Electric, EchoStar, Astro-Space
Division ("General Electric") (incorporated by reference to
Exhibit 10.1(a) to the Registration Statement on Form S-1 of
Dish, Ltd. ("Dish") Registration No. 33-76450).
II-2
<PAGE>
10.1(b) First Amendment to the Satellite Construction Contract, dated as
of October 2, 1992, between ESC and Martin Marietta as successor
to General Electric (incorporated by reference to Exhibit 10.1(b)
to the Registration Statement on Form S-1 of Dish, Registration
No. 33-76450).
10.1(c) Second Amendment to the Satellite Construction Contract, dated as
of October 30, 1992, between ESC and Martin Marietta as successor
to General Electric (incorporated by reference to Exhibit 10.1(c)
to the Registration Statement on Form S-1 of Dish, Registration
No. 33-76450).
10.1(d) Third Amendment to the Satellite Construction Contract, dated as
of April 1, 1993, between ESC and Martin Marietta (incorporated
by reference to Exhibit 10.1(d)to the Registration Statement on
Form S-1 of Dish, Registration No. 33-76450).
10.1(e) Fourth Amendment to the Satellite Construction Contract, dated as
of August 19, 1993, between ESC and Martin Marietta (incorporated
by reference to Exhibit 10.1(e) to the Registration Statement on
Form S-1 of Dish, Registration No. 33-76450).
10.1(f) Form of Fifth Amendment to the Satellite Construction Contract,
between ESC and Martin Marietta (incorporated by reference to
Exhibit 10.1(f) to the Registration Statement on Form S-1 of
Dish, Registration No. 33-81234).
10.1(g) Sixth Amendment to the Satellite Construction Contract, dated as
of June 7, 1994, between ESC and Martin Marietta (incorporated by
reference to Exhibit 10.1(g) to the Registration Statement on
Form S-1 of Dish, Registration No. 33-81234).
10.1(h) Eighth Amendment to the Satellite Construction Contract, dated as
of July 18, 1996, between ESC and Martin Marietta (incorporated
by reference to Exhibit 10.1(h) to the Quarterly Report on Form
10-Q of EchoStar for the quarter ended June 30, 1996, Commission
File No. 0-26176).
10.2 Master Purchase and License Agreement, dated as of August 12,
1986, between Houston Tracker Systems, Inc. ("HTS") and
Cable/Home Communications Corp. (a subsidiary of General
Instruments Corporation) (incorporated by reference to Exhibit
10.4 to the Registration Statement on Form S-1 of Dish,
Registration No. 33-76450).
10.3 Master Purchase and License Agreement, dated as of June 18, 1986,
between Echosphere Corporation and Cable/Home Communications
Corp. (a subsidiary of General Instruments Corporation)
(incorporated by reference to Exhibit 10.5 to the Registration
Statement on Form S-1 of Dish, Registration No. 33-76450).
10.4 Merchandising Financing Agreement, dated as of June 29, 1989,
between Echo Acceptance Corporation and Household Retail
Services, Inc. (incorporated by reference to Exhibit 10.6 to the
Registration Statement on Form S-1 of Dish, Registration No.
33-76450).
10.5 Key Employee Bonus Plan, dated as of January 1, 1994
(incorporated by reference to Exhibit 10.7 to the Registration
Statement on Form S-1 of Dish, Registration No. 33-76450).
II-3
<PAGE>
10.6 Consulting Agreement, dated as of February 17, 1994, between ESC
and Telesat Canada (incorporated by reference to Exhibit 10.8 to
the Registration Statement on Form S-1 of Dish, Registration No.
33-76450).
10.7 Form of Satellite Launch Insurance Declarations (incorporated by
reference to Exhibit 10.10 to the Registration Statement on Form
S-1 of Dish, Registration No. 33-81234).
10.8 Dish 1994 Stock Incentive Plan (incorporated by reference to
Exhibit 10.11 to the Registration Statement on Form S-1 of Dish,
Registration No. 33-76450).
10.9 Form of Tracking, Telemetry and Control Contract between AT&T
Corp. and ESC (incorporated by reference to Exhibit 10.12 to the
Registration Statement on Form S-1 of Dish, Registration No.
33-81234).
10.10 Manufacturing Agreement, dated as of March 22, 1995, between
Houston Tracker Systems, Inc. and SCI Technology, Inc.
(incorporated by reference to Exhibit 10.12 to the Registration
Statement on Form S-1 of Dish, Commission File No. 33-81234).
10.11 Manufacturing Agreement dated as of April 14, 1995 by and between
ESC and Sagem Group (incorporated by reference to Exhibit 10.13
to the Registration Statement on Form S-1 of EchoStar
Communications Corporation ("ECC"), Registration No. 33-91276).
10.12 Statement of Work, dated January 31, 1995 from ESC to Divicom
Inc. (incorporated by reference to Exhibit 10.14 to the
Registration Statement on Form S-1 of ECC, Registration No.
33-91276).
10.13 Launch Services Contract, dated as of June 2, 1995, by and
between EchoStar Space Corporation and
Lockheed-Khrunichev-Energia International, Inc. (incorporated by
reference to Exhibit 10.15 to the Registration Statement on Form
S-1 of ECC, Registration No. 33-91276).
10.14 EchoStar 1995 Stock Incentive Plan (incorporated by reference to
Exhibit 10.16 to the Registration Statement on Form S-1 of ECC,
Registration No. 33-91276).
10.15(a) Eighth Amendment to Satellite Construction Contract, dated as of
February 1, 1994, between DirectSat Corporation and Martin
Marietta (incorporated by reference to Exhibit 10.17(a) to the
Quarterly Report on Form 10-Q of ECC for the quarter ended June
30, 1996, Commission File No. 0-26176).
10.15(b) Ninth Amendment to Satellite Construction Contract, dated as of
February 1, 1994, between DirectSat Corporation and Martin
Marietta (incorporated by reference to Exhibit 10.15 to the
Registration Statement of Form S-4 of ECC, Registration No.
333-03584).
10.15(c) Tenth Amendment to Satellite Construction Contract, dated as of
July 18, 1996, between DirectSat Corporation and Martin Marietta
(incorporated by reference to Exhibit 10.17(b) to the Quarterly
Report on Form 10-Q of ECC for the quarter ended June 30, 1996,
Commission File No. 0-26176).
II-4
<PAGE>
10.16 Satellite Construction Contract, dated as of July 18, 1996,
between EDBS and Lockheed Martin Corporation (incorporated by
reference to Exhibit 10.18 to the Quarterly Report on Form 10-Q
of ECC for the quarter ended June 30, 1996, Commission File No.
0-26176).
10.17 Confidential Amendment to Satellite Construction Contract between
DBSC and Martin Marietta, dated as of May 31, 1995 (incorporated
by reference to Exhibit 10.14 to the Registration Statement of
Form S-4 of ECC, Registration No. 333-03584).
10.18 Right and License Agreement by and among HTS and Asia
Broadcasting and Communications Network, Ltd., dated December 19,
1996 (incorporated by reference to Exhibit 10.18 to the Annual
Report on Form 10-K of ECC for the year ended December 31, 1996,
as amended, Commission file No. 0-26176).
10.19 Agreement between HTS, ESC and ExpressVu Inc., dated January 8,
1997, as amended (incorporated by reference to Exhibit 10.18 to
the Annual Report on Form 10-K of ECC for the year ended December
31, 1996, as amended, Commission file No. 0-26176).
10.20 Amendment No. 9 to Satellite Construction Contract, effective as
of July 18, 1996, between Direct Satellite Broadcasting
Corporation, a Delaware corporation ("DBSC") and Martin Marietta
Corporation (incorporated by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q of ECC for the quarterly period
ended June 30, 1997, Commission File No. 0-26176).
10.21 Amendment No. 10 to Satellite Construction Contract, effective as
of May 31, 1996, between DBSC and Lockheed Martin Corporation
(incorporated by reference to Exhibit 10.2 to the Quarterly
Report on Form 10-Q of ECC for the quarterly period ended June
30, 1997, Commission File No. 0-26176).
10.22 Contract for Launch Services, dated April 5, 1996, between
Lockheed Martin Commercial Launch Services, Inc. and EchoStar
Space Corporation (incorporated by reference to Exhibit 10.3 to
the Quarterly Report on Form 10-Q of ECC for the quarterly period
ended June 30, 1997, Commission File No. 0-26176).
10.23 OEM Manufacturing, Marketing and Licensing Agreement, dated as of
February 17, 1998, by and among HTS, ESC and Philips Electronics
North America Corporation (incorporated by reference to Exhibit
10.1 to the Quarterly Report on Form 10-Q of ECC for the
quarterly period ended March 31, 1998, Commission File No.
0-26176).
10.24 Licensing Agreement, dated as of February 23, 1998, by and among
HTS, ESC and VTech Communications Ltd. (incorporated by reference
to Exhibit 10.2 to the Quarterly Report on Form 10-Q of ECC for
quarterly period ended March 31, 1998, Commission File No.
0-26176).
10.25 Agreement to form NagraStar LLC, dated as of June 23, 1998 by and
between Kudelski S.A., ECC and ESC (incorporated by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q of ECC for
quarterly period ended June 30, 1998, Commission File No.
0-26176).
II-5
<PAGE>
10.26 Purchase Agreement by and among American Sky Broadcasting, LLC,
The News Corporation Limited, MCI Telecommunications Corporation
and EchoStar Communications Corporation, dated November 30, 1998.
(incorporated by reference to Exhibit 10.1 to the Form 8-K filed
by ECC on November 30, 1998, Commission File No. 0-26176).
10.27 Form of Registration Rights Agreement to be entered into among
EchoStar Communications Corporation, MCI Telecommunications
Corporation, and a to-be-named wholly-owned subsidiary of MCI
Telecommunications Corporation, American Sky Broadcasting, LLC,
and a to-be-named wholly-owned subsidiary of The News Corporation
Limited (incorporated by reference to Exhibit 10.2 to the Current
Report on Form 8-K of EchoStar, filed as of December 1, 1998).
10.28 Voting Agreement dated November 30, 1998, among EchoStar
Communications Corporation, American Sky Broadcasting, LLC,
The News Corporation Limited and MCI Telecommunications
Corporation (incorporated by reference to Exhibit 10.3 to the
Current Report on Form 8-K of EchoStar, filed as of December 1,
1998).
12 Ratio of earnings to fixed charges.
21 Subsidiaries of the Company.
23.1 Consent of Winthrop, Stimson, Putnam & Roberts (included in
Exhibit 5.1).
23.2 Consent of Friedlob Sanderson Raskin Paulson & Tourtillott, LLC
(included in Exhibit 5.2).
23.3 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (included in the signature pages to this
Registration Statement).
25.1 Statement of Eligibility on Form T-1 under the Trust Indenture
Act of 1939 of U.S. Bank Trust National Association, as Trustee
of the Indenture, relating to the Seven Year Notes (separately
bound).
25.2 Statement of Eligibility on Form T-1 under the Trust Indenture
Act of 1939 of U.S. Bank Trust National Association, as Trustee
of the Indenture, relating to the Ten Year Notes (separately
bound).
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
ITEM 22. UNDERTAKINGS
(a) 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
II-6
<PAGE>
Exchange Commission such indemnification is against public policy as expressed
in the Act 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 of 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.
(b) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Prospectus pursuant
to items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporating documents by first class mail or
other equally prompt means. This includes information contained in the
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) 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.
(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.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities 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.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of Securities Act of 1933, as amended, the
Registrants have duly caused this Registration Statement to be signed on their
behalf by the undersigned, thereunto duly authorized in the City of Littleton,
State of Colorado, as of January 27, 1999.
ECHOSTAR DBS CORPORATION
DIRECTSAT CORPORATION
ECHO ACCEPTANCE CORPORATION
ECHOSPHERE CORPORATION
DISH INSTALLATION NETWORK CORPORATION
ECHOSTAR TECHNOLOGIES CORPORATION
HT VENTURES, INC.
ECHOSTAR INTERNATIONAL CORPORATION
SATELLITE SOURCE, INC.
ECHOSTAR SATELLITE CORPORATION
HOUSTON TRACKER SYSTEMS, INC.
ECHOSTAR NORTH AMERICA CORPORATION
SKY VISTA CORPORATION
ECHOSTAR INDONESIA, INC.
DIRECT BROADCASTING SATELLITE CORPORATION
ECHOSTAR SATELLITE BROADCASTING CORPORATION
DISH, LTD.
ECHOSTAR SPACE CORPORATION
By:/s/ CHARLES W. ERGEN
--------------------
Charles W. Ergen
Chief Executive Officer
We, the undersigned officers and Directors of EchoStar DBS Corporation and
each of the above-named Guarantors hereby severally constitute and appoint David
K. Moskowitz our true and lawful attorney with full power to him to sign for us
and in our names in the capacities indicated below, the Registration Statement
on Form S-4 filed herewith and any and all pre-effective and post-effective
amendments to said Registration Statement, and generally do all such things in
our names and on our behalf in our capacities as officers and Directors to
enable EchoStar DBS Corporation and each of the above-named Guarantors to comply
with the provisions of the Securities Act, and all requirements of the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorney to said Registration
Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and as of the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------- -------- --------
<S> <C> <C>
Chairman, Chief Executive Officer and January 27, 1999
/s/ Charles W. Ergen Director (Principal Executive Officer)
- --------------------
Charles W. Ergen
Chief Operating Officer and January 27, 1999
/s/ Steven B. Schaver Chief Financial Officer
- ---------------------
II-8
<PAGE>
Steven B. Schaver (Principal Financial and Accounting Officer)
Director January 27, 1999
/s/ James DeFranco
- ------------------
James DeFranco
Director January 27, 1999
/s/ David K. Moskowitz
- ----------------------
David K. Moskowitz
</TABLE>
II-9
<PAGE>
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit Description Page Number
------- ----------- ----------
No.
---
<S> <C> <C>
3.1(a) Articles of Incorporation of the Company (incorporated
by reference to Exhibit 3.4(a) to the Company's
Registration Statement on Form S-4, Registration No.
333-31929).
3.1(b) Bylaws of the Company (incorporated by reference to
Exhibit 3.4(b) to the Company's Registration Statement
on Form S-4, Registration No. 333-31929).
4.1 Indenture relating to the Seven Year Notes, dated as of
January 25, 1999, by and among the Company, the
Guarantors and U.S. Bank Trust National Association, as
trustee.
4.2 Form of Note for Seven Year Notes (included in Exhibit 4.1).
4.3 Indenture relating to the Ten Year Notes, dated as of
January 25, 1999, by and among the Company, the
Guarantors and U.S. Bank Trust National Association, as
trustee.
4.4 Form of Note for Ten Year Notes (included in Exhibit 4.3).
4.5 Registration Rights Agreement relating to the Seven
Year Notes by and among the Company, the Guarantors and
the parties named therein.
4.6 Registration Rights Agreement relating to the Ten Year
Notes by and among the Company, the Guarantors and the
parties named therein.
5.1 Opinion of Winthrop, Stimson, Putnam & Roberts
regarding legality of securities being registered.
5.2 Opinion of Friedlob Sanderson Raskin Paulson &
Tourtillott, LLC regarding the legality of securities
being registered.
10.1(a) Satellite Construction Contract, dated as of February
6, 1990, between EchoStar Satellite Corporation ("ESC")
and Martin Marietta as successor to General Electric,
EchoStar, Astro-Space Division ("General Electric")
(incorporated by reference to Exhibit 10.1(a) to the
Registration Statement on Form S-1 of Dish, Ltd.
("Dish") Registration No. 33-76450).
10.1(b) First Amendment to the Satellite Construction Contract,
dated as of October 2, 1992, between ESC and Martin
Marietta as successor to General Electric (incorporated
by reference to Exhibit 10.1(b) to the Registration
Statement on Form S-1 of Dish, Registration No. 33-
76450).
<PAGE>
10.1(c) Second Amendment to the Satellite Construction
Contract, dated as of October 30, 1992, between ESC and
Martin Marietta as successor to General Electric
(incorporated by reference to Exhibit 10.1(c) to the
Registration Statement on Form S-1 of Dish,
Registration No. 33-76450).
10.1(d) Third Amendment to the Satellite Construction Contract,
dated as of April 1, 1993, between ESC and Martin
Marietta (incorporated by reference to Exhibit
10.1(d)to the Registration Statement on Form S-1 of
Dish, Registration No. 33-76450).
10.1(e) Fourth Amendment to the Satellite Construction
Contract, dated as of August 19, 1993, between ESC and
Martin Marietta (incorporated by reference to Exhibit
10.1(e) to the Registration Statement on Form S-1 of
Dish, Registration No. 33-76450).
10.1(f) Form of Fifth Amendment to the Satellite Construction
Contract, between ESC and Martin Marietta (incorporated
by reference to Exhibit 10.1(f) to the Registration
Statement on Form S-1 of Dish, Registration No. 33-
81234).
10.1(g) Sixth Amendment to the Satellite Construction Contract,
dated as of June 7, 1994, between ESC and Martin
Marietta (incorporated by reference to Exhibit 10.1(g)
to the Registration Statement on Form S-1 of Dish,
Registration No. 33-81234).
10.1(h) Eighth Amendment to the Satellite Construction
Contract, dated as of July 18, 1996, between ESC and
Martin Marietta (incorporated by reference to Exhibit
10.1(h) to the Quarterly Report on Form 10-Q of
EchoStar for the quarter ended June 30, 1996,
Commission File No. 0-26176).
10.2 Master Purchase and License Agreement, dated as of
August 12, 1986, between Houston Tracker Systems, Inc.
("HTS") and Cable/Home Communications Corp. (a
subsidiary of General Instruments Corporation)
(incorporated by reference to Exhibit 10.4 to the
Registration Statement on Form S-1 of Dish,
Registration No. 33-76450).
10.3 Master Purchase and License Agreement, dated as of June
18, 1986, between Echosphere Corporation and Cable/Home
Communications Corp. (a subsidiary of General
Instruments Corporation) (incorporated by reference to
Exhibit 10.5 to the Registration Statement on Form S-1
of Dish, Registration No. 33-76450).
10.4 Merchandising Financing Agreement, dated as of June 29,
1989, between Echo Acceptance Corporation and Household
Retail Services, Inc. (incorporated by reference to
Exhibit 10.6 to the Registration Statement on Form S-1
of Dish, Registration No. 33-76450).
<PAGE>
10.5 Key Employee Bonus Plan, dated as of January 1, 1994
(incorporated by reference to Exhibit 10.7 to the
Registration Statement on Form S-1 of Dish,
Registration No. 33-76450).
10.6 Consulting Agreement, dated as of February 17, 1994,
between ESC and Telesat Canada (incorporated by
reference to Exhibit 10.8 to the Registration Statement
on Form S-1 of Dish, Registration No. 33-76450).
10.7 Form of Satellite Launch Insurance Declarations
(incorporated by reference to Exhibit 10.10 to the
Registration Statement on Form S-1 of Dish,
Registration No. 33-81234).
10.8 Dish 1994 Stock Incentive Plan (incorporated by
reference to Exhibit 10.11 to the Registration
Statement on Form S-1 of Dish, Registration No. 33-
76450).
10.9 Form of Tracking, Telemetry and Control Contract
between AT&T Corp. and ESC (incorporated by reference
to Exhibit 10.12 to the Registration Statement on Form
S-1 of Dish, Registration No. 33-81234).
10.10 Manufacturing Agreement, dated as of March 22, 1995,
between Houston Tracker Systems, Inc. and SCI
Technology, Inc. (incorporated by reference to Exhibit
10.12 to the Registration Statement on Form S-1 of
Dish, Commission File No. 33-81234).
10.11 Manufacturing Agreement dated as of April 14, 1995 by
and between ESC and Sagem Group (incorporated by
reference to Exhibit 10.13 to the Registration
Statement on Form S-1 of EchoStar Communications
Corporation ("ECC"), Registration No. 33-91276).
10.12 Statement of Work, dated January 31, 1995 from ESC to
Divicom Inc. (incorporated by reference to Exhibit
10.14 to the Registration Statement on Form S-1 of ECC,
Registration No. 33-91276).
10.13 Launch Services Contract, dated as of June 2, 1995, by
and between EchoStar Space Corporation and Lockheed-
Khrunichev-Energia International, Inc. (incorporated by
reference to Exhibit 10.15 to the Registration
Statement on Form S-1 of ECC, Registration No. 33-
91276).
10.14 EchoStar 1995 Stock Incentive Plan (incorporated by
reference to Exhibit 10.16 to the Registration
Statement on Form S-1 of ECC, Registration No. 33-
91276).
10.15(a) Eighth Amendment to Satellite Construction Contract,
dated as of February 1, 1994, between DirectSat
Corporation and Martin Marietta (incorporated by
reference to Exhibit 10.17(a) to the Quarterly Report
on Form 10-Q of ECC for the quarter ended June 30,
1996, Commission File No. 0-26176).
<PAGE>
10.15(b) Ninth Amendment to Satellite Construction Contract,
dated as of February 1, 1994, between DirectSat
Corporation and Martin Marietta (incorporated by
reference to Exhibit 10.15 to the Registration
Statement of Form S-4 of ECC, Registration No. 333-
03584).
10.15(c) Tenth Amendment to Satellite Construction Contract,
dated as of July 18, 1996, between DirectSat
Corporation and Martin Marietta (incorporated by
reference to Exhibit 10.17(b) to the Quarterly Report
on Form 10-Q of ECC for the quarter ended June 30,
1996, Commission File No. 0-26176).
10.16 Satellite Construction Contract, dated as of July 18,
1996, between EDBS and Lockheed Martin Corporation
(incorporated by reference to Exhibit 10.18 to the
Quarterly Report on Form 10-Q of ECC for the quarter
ended June 30, 1996, Commission File No. 0-26176).
10.17 Confidential Amendment to Satellite Construction
Contract between DBSC and Martin Marietta, dated as of
May 31, 1995 (incorporated by reference to Exhibit
10.14 to the Registration Statement of Form S-4 of ECC,
Registration No. 333-03584).
10.18 Right and License Agreement by and among HTS and Asia
Broadcasting and Communications Network, Ltd., dated
December 19, 1996 (incorporated by reference to Exhibit
10.18 to the Annual Report on Form 10-K of ECC for the
year ended December 31, 1996, as amended, Commission
file No. 0-26176).
10.19 Agreement between HTS, ESC and ExpressVu Inc., dated
January 8, 1997, as amended (incorporated by reference
to Exhibit 10.18 to the Annual Report on Form 10-K of
ECC for the year ended December 31, 1996, as amended,
Commission file No. 0-26176).
10.20 Amendment No. 9 to Satellite Construction Contract,
effective as of July 18, 1996, between Direct Satellite
Broadcasting Corporation, a Delaware corporation
("DBSC") and Martin Marietta Corporation (incorporated
by reference to Exhibit 10.1 to the Quarterly Report on
Form 10-Q of ECC for the quarterly period ended June
30, 1997, Commission File No. 0-26176).
10.21 Amendment No. 10 to Satellite Construction Contract,
effective as of May 31, 1996, between DBSC and Lockheed
Martin Corporation (incorporated by reference to
Exhibit 10.2 to the Quarterly Report on Form 10-Q of
ECC for the quarterly period ended June 30, 1997,
Commission File No. 0-26176).
10.22 Contract for Launch Services, dated April 5, 1996,
between Lockheed Martin Commercial Launch Services,
Inc. and EchoStar Space Corporation (incorporated by
reference to Exhibit 10.3 to the Quarterly Report on
Form 10-Q of ECC for the quarterly period ended June
30, 1997, Commission File No. 0-26176).
<PAGE>
10.23 OEM Manufacturing, Marketing and Licensing Agreement,
dated as of February 17, 1998, by and among HTS, ESC
and Philips Electronics North America Corporation
(incorporated by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q of ECC for the quarterly
period ended March 31, 1998, Commission File No. 0-
26176).
10.24 Licensing Agreement, dated as of February 23, 1998, by
and among HTS, ESC and VTech Communications Ltd.
(incorporated by reference to Exhibit 10.2 to the
Quarterly Report on Form 10-Q of ECC for quarterly
period ended March 31, 1998, Commission File No. 0-
26176).
10.25 Agreement to form NagraStar LLC, dated as of June 23,
1998 by and between Kudelski S.A., ECC and ESC
(incorporated by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q of ECC for quarterly
period ended June 30, 1998, Commission File No. 0-
26176).
10.26 Purchase Agreement by and among American Sky
Broadcasting, LLC, The News Corporation Limited, MCI
Telecommunications Corporation and EchoStar
Communications Corporation, dated November 30, 1998.
(incorporated by reference to Exhibit 10.1 to the Form
8-K filed by ECC on November 30, 1998, Commission File
No. 0-26176).
10.27 Form of Registration Rights Agreement to be entered
into among EchoStar Communications Corporation, MCI
Telecommunications Corporation, and a to-be-named
wholly-owned subsidiary of MCI Telecommunications
Corporation, American Sky Broadcasting, LLC, and a to-
be-named wholly-owned subsidiary of The News
Corporation Limited (incorporated by reference to
Exhibit 10.2 to the Current Report on Form 8-K of
EchoStar, filed as of December 1, 1998).
10.28 Voting Agreement dated November 30, 1998, among
EchoStar Communications Corporation, American Sky
Broadcasting, LLC, The News Corporation Limited and
MCI Telecommunications Corporation (incorporated by
reference to Exhibit 10.3 to the Current Report on Form
8-K of EchoStar, filed as of December 1, 1998).
12 Ratio of earnings to fixed charges.
21 Subsidiaries of the Company.
23.1 Consent of Winthrop, Stimson, Putnam & Roberts
(included in Exhibit 5.1).
23.2 Consent of Friedlob Sanderson Raskin Paulson &
Tourtillott, LLC (included in Exhibit 5.2).
23.3 Consent of Arthur Andersen LLP.
<PAGE>
24 Power of Attorney (included in the signature pages to
this Registration Statement).
25.1 Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of U.S. Bank Trust National
Association, as Trustee of the Indenture, relating to
the Seven Year Notes (separately bound).
25.2 Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of U.S. Bank Trust National
Association, as Trustee of the Indenture, relating to
the Ten Year Notes (separately bound).
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
<PAGE>
EXHIBIT 4.1
ECHOSTAR DBS CORPORATION
$375,000,000
9 1/4% SENIOR NOTES DUE 2006
----------------------------
---------
INDENTURE
Dated as of January 25, 1999
---------
U.S. Bank Trust National Association
---------
Trustee
<PAGE>
INDENTURE dated as of January 25, 1999 among EchoStar DBS Corporation
(the "Company"), a Colorado corporation, the Guarantors (as defined herein) and
U.S. Bank Trust National Association, as trustee (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the Company's 9 1/4% Senior Notes due 2006.
RECITALS
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of the Company's 9 1/4% Senior Notes due
2006.
EchoStar (as defined herein) owns beneficially and of record 100% of the
Capital Stock of the Company; the Company and/or EchoStar, directly or
indirectly, owns beneficially and of record 100% of the Capital Stock or other
ownership interests, as the case may be, of each Guarantor; EchoStar, the
Company and the Guarantors are members of the same consolidated group of
companies and are engaged in related businesses and the Guarantors will derive
direct and indirect economic benefit from the issuance of the Notes.
Accordingly, each of the Guarantors has duly authorized the execution and
delivery of this Indenture to provide for its Guarantees with respect to the
Notes as set forth in this Indenture.
All things necessary (i) to make the Notes, when executed by the Company
and authenticated and delivered hereunder and duly issued by the Company, the
valid obligations of the Company, (ii) to make the Guarantees of each of the
Guarantors, when executed by the respective Guarantors and endorsed on the Notes
executed, authenticated and delivered hereunder, the valid obligations of the
respective Guarantors, and (iii) to make this Indenture a valid agreement of the
Company and of each of the Guarantors, all in accordance with their respective
terms, have been done.
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually agreed as follows for the equal and
ratable benefit of the Holders of the Notes.
ARTICLE 1.
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.1. DEFINITIONS.
"144A GLOBAL NOTE" means a global note substantially in the form of
Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend
and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold in reliance on Rule 144A.
"ACCOUNTS RECEIVABLE SUBSIDIARY" means one Unrestricted Subsidiary of
the Company specifically designated as an Accounts Receivable Subsidiary for the
purpose of financing the accounts receivable of the Company, and provided that
any such designation shall not be deemed to prohibit the Company from financing
accounts receivable through any other entity, including, without
<PAGE>
limitation, any other Unrestricted Subsidiary.
"ACCOUNTS RECEIVABLE SUBSIDIARY NOTES" means the notes to be issued by
the Accounts Receivable Subsidiary for the purchase of accounts receivable.
"ACQUIRED DEBT" means, with respect to any specified Person,
Indebtedness of any other Person existing at the time such other Person merges
with or into or becomes a Subsidiary of such specified Person, or Indebtedness
incurred by such Person in connection with the acquisition of assets, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person or
the acquisition of such assets, as the case may be.
"ACQUIRED SUBSCRIBER" means a subscriber to a pay television service
provided by a pay television provider that is not an Affiliate of the Company at
the time the Company or one of its Restricted Subsidiaries purchases the right
to provide pay television service to such subscriber from such pay television
provider, whether directly or through the acquisition of the entity providing
pay television service to such subscriber.
"ACQUIRED SUBSCRIBER DEBT" means (i) Indebtedness the proceeds of which
are used to pay the purchase price for Acquired Subscribers or to acquire the
entity which has the right to provide pay television service to such Acquired
Subscribers or to acquire from such entity or an Affiliate of such entity assets
used or to be used in connection with such pay television business; PROVIDED
that such Indebtedness is incurred within three years after the date of the
acquisition of such Acquired Subscriber and (ii) Acquired Debt of any such
entity being acquired; PROVIDED that in no event shall the amount of such
Indebtedness and Acquired Debt for any Acquired Subscriber exceed the sum of the
actual purchase price (inclusive of such Acquired Debt) for such Acquired
Subscriber, such entity and such assets plus the cost of converting such
Acquired Subscriber to usage of a delivery format for pay television service
made available by the Company or any of its Restricted Subsidiaries.
"AFFILIATE" of any specified Person means any other Person directly or
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; PROVIDED FURTHER that no individual, other than a
director of EchoStar or the Company or an officer of EchoStar or the Company
with a policy making function, shall be deemed an Affiliate of the Company or
any of its Subsidiaries solely by reason of such individual's employment,
position or responsibilities by or with respect to EchoStar, the Company or any
of their
3
<PAGE>
respective Subsidiaries.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"APPLICABLE PROCEDURES" means, with respect to any transfer or exchange
of or for beneficial interests in any Global Note, the rules and procedures of
the Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"BANKRUPTCY LAW" means title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"BROKER-DEALER" has the meaning set forth in the Registration Rights
Agreement.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE OBLIGATION" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at the time any determination thereof is to be
made shall be the amount of the liability in respect of a capital lease that
would at such time be so required to be capitalized on a balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock or
partnership or membership interests, whether common or preferred.
"CASH EQUIVALENTS" means: (a) United States dollars; (b) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition; (c) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500 million; (d) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clauses (b) and (c) entered into with any financial institution
meeting the qualifications specified in clause (c) above; (e) commercial paper
rated P-1, A-1 or the equivalent thereof by Moody's or S&P, respectively, and in
each case maturing within six months after the date of acquisition; and
(f) money market funds offered by any domestic commercial or investment bank
having capital and surplus in excess of $500 million at least 95% of the assets
of which constitute Cash Equivalents of the kinds described in clauses
(a) through (e) of this definition.
"CEDEL" means Cedel Bank, SA.
"CHANGE OF CONTROL" means: (a) any transaction or series of transactions
(including, without limitation, a tender offer, merger or consolidation) the
result of
4
<PAGE>
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 EchoStar 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 this
Indenture (as adjusted for stock splits and dividends and other distributions
payable in Equity Interests), after giving effect to the repurchase of the
Series A Cumulative Preferred Stock on or about the date of this Indenture, or
(ii) do not have the voting power to elect at least a majority of the Board of
Directors of EchoStar; (b) the first day on which a majority of the members of
the Board of Directors of EchoStar are not Continuing Directors; or (c) any time
that EchoStar shall cease to beneficially own 100% of the Equity Interests of
the Company.
"COMMON STOCK" of any Person means Capital Stock of such Person that
does not rank prior as to the payment of dividends or as of the distribution of
assets upon any voluntary liquidation, dissolution or winding up of such Person,
to shares of Capital Stock or any other class of such Person.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period, plus, to the
extent deducted in computing Consolidated Net Income: (a) provision for taxes
based on income or profits; (b) Consolidated Interest Expense; (c) depreciation
and amortization (including amortization of goodwill and other intangibles) of
such Person for such period; and (d) any extraordinary loss and any net loss
realized in connection with any Asset Sale, in each case, on a consolidated
basis determined in accordance with GAAP, PROVIDED that Consolidated Cash Flow
shall not include interest income derived from the net proceeds of the Offering.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for
any period, consolidated interest expense of such Person for such period,
whether paid or accrued (including amortization of original issue discount and
deferred financing costs, non-cash interest payments and the interest component
of Capital Lease Obligations), on a consolidated basis determined in accordance
with GAAP; PROVIDED, HOWEVER that with respect to the calculation of the
consolidated interest expense of the Company, the interest expense of
Unrestricted Subsidiaries shall be excluded.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED, HOWEVER, that: (a) the Net Income of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
5
<PAGE>
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person, in the case of a gain, or to the extent of any
contributions or other payments by the referent Person, in the case of a loss;
(b) the Net Income of any Person that is a Subsidiary that is not a Wholly Owned
Subsidiary (or, with respect to the calculation of the Consolidated Net Income
of the Company, a Wholly Owned Restricted Subsidiary) shall be included only to
the extent of the amount of dividends or distributions paid in cash to the
referent Person; (c) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded; (d) the Net Income of any Subsidiary of such Person shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions is not at the time permitted by operation of the terms of its
charter or bylaws or any other agreement, instrument, judgment, decree, order,
statute, rule or government regulation to which it is subject; and (e) the
cumulative effect of a change in accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person, the sum of:
(a) the stockholders' equity of such Person; plus (b) the amount reported on
such Person's most recent balance sheet with respect to any series of preferred
stock (other than Disqualified Stock) that by its terms is not entitled to the
payment of dividends unless such dividends may be declared and paid only out of
net earnings in respect of the year of such declaration and payment, but only to
the extent of any cash received by such Person upon issuance of such preferred
stock, less: (i) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the date of this Indenture in the book value of any asset owned by
such Person or a consolidated Subsidiary of such Person; and (ii) all
unamortized debt discount and expense and unamortized deferred charges, all of
the foregoing determined in accordance with GAAP.
"CONTINUING DIRECTOR" means, as of any date of determination, any member
of the Board of Directors of EchoStar who: (a) was a member of such Board of
Directors on the date of this 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.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the
Trustee specified in Section 11.02 or such other address as to which the Trustee
may give notice to the Company.
"CREDIT AGREEMENT" means any one or more credit agreements (which may
include or consist of revolving credits) between the Company and one or more
banks or other financial institutions providing financing for the business of
the Company and the Company's Restricted Subsidiaries, PROVIDED that the lenders
party to the Credit Agreement may not be Affiliates of EchoStar, the Company or
their respective Subsidiaries and PROVIDED FURTHER that the Guarantors may be
guarantors under such agreements.
6
<PAGE>
"DBS" means direct broadcast satellite.
"DBSC" means Direct Broadcasting Satellite Corporation, a Colorado
corporation.
"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.
"DEFERRED PAYMENTS" means Indebtedness to satellite construction or
launch contractors incurred after the date of this Indenture in connection with
the construction or launch of one or more satellites of the Company or its
Restricted Subsidiaries used by it in the businesses described in Section 4.17
in an amount not to exceed at any one time outstanding in the aggregate
$135 million.
"DEFINITIVE NOTE" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 of this Indenture,
substantially in the form of Exhibit A hereto except that such Note shall not
bear the Global Note Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Note" attached thereto.
"DEPOSITARY" means the Depository Trust Company and any and all
successors thereto appointed as depositary hereunder and having become such
pursuant to an applicable provision of this Indenture.
"DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
on which the Notes mature; PROVIDED, HOWEVER, that any such Capital Stock may
require the issuer of such Capital Stock to make an offer to purchase such
Capital Stock upon the occurrence of certain events if the terms of such Capital
Stock provide that such an offer may not be satisfied and the purchase of such
Capital Stock may not be consummated until the 91st day after the Notes have
been paid in full.
"DNCC" means Dish Network Credit Corporation, a Colorado corporation.
"ECHOSTAR" means EchoStar Communications Corporation, a Nevada
corporation, together with each Wholly Owned Subsidiary of EchoStar that
beneficially owns 100% of the Equity Interests of the Company, but only so long
as EchoStar beneficially owns 100% of the Equity Interests of such Subsidiary.
"ECHOSTAR DISH NETWORK-SM-" means the DBS service of the Company and
its Subsidiaries.
"ECHOSTAR I" means the Company's high-powered direct broadcast satellite
7
<PAGE>
designated as EchoStar I in the Offering Memorandum.
"ECHOSTAR II" means the Company's high-powered direct broadcast
satellite designated as EchoStar II in the Offering Memorandum.
"ECHOSTAR III" means the high-powered direct broadcast satellite
designated as EchoStar III in the Offering Memorandum.
"ECHOSTAR IV" means the high-powered direct broadcast satellite
designated as EchoStar IV in the Offering Memorandum.
"ELIGIBLE INSTITUTION" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated Investment Grade at the time as of which
any investment or rollover therein is made.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ESBC" means EchoStar Satellite Broadcasting Corporation, a Colorado
corporation.
"ESC" means EchoStar Satellite Corporation, a Colorado corporation.
"ETC" means EchoStar Technologies Corporation, a Texas corporation.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE NOTES" means the Notes issued in the Exchange Offer pursuant
to Section 2.06(f).
"EXCHANGE OFFER" has the meaning set forth in the Registration Rights
Agreement.
"EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in the
Registration Rights Agreement.
"EXISTING INDEBTEDNESS" means the Notes and any other Indebtedness of
the Company and its Subsidiaries in existence on the date of this Indenture
until such amounts are repaid.
"FCC" means Federal Communications Commission.
"FULL-CONUS ORBITAL SLOT" means an orbital slot that is capable of
providing
8
<PAGE>
DBS service to the entire continental United States.
"GAAP" means United States 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 may be approved by a significant segment of
the accounting profession of the U.S., which are applicable as of the date of
determination; PROVIDED that, except as otherwise specifically provided, all
calculations made for purposes of determining compliance with the terms of the
provisions of this Indenture shall utilize GAAP as in effect on the date of this
Indenture.
"GLOBAL NOTE LEGEND" means the legend set forth in Section 2.01, which
is required to be placed on all Global Notes issued under this Indenture.
"GLOBAL NOTES" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, substantially in the
form of Exhibit A hereto issued in accordance with Section 2.01 or 2.06 of this
Indenture.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"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.
"GUARANTEE" means a guarantee of the Notes on the terms set forth in
this Indenture.
"GUARANTOR" means any entity that executes a Guarantee of the
obligations of the Company under the Notes, and their respective successors and
assigns.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations
of such Person pursuant to any arrangement with any other Person, whereby,
directly or indirectly, such Person is entitled to receive from time to time
periodic payments calculated by applying either floating or a fixed rate of
interest on a stated notional amount in exchange for periodic payments made by
such other Person calculated by applying a fixed or a floating rate of interest
on the same notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars and similar agreements designed to protect such
Person against fluctuations in interest rates.
"HOLDER" means a Person in whose name a Note is registered.
"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,
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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 (including pursuant to capital leases) or
representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
(other than Hedging Obligations) 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 amount of all obligations of such Person with
respect to the redemption, repayment or other repurchase of any Disqualified
Stock or, with respect to any Subsidiary of such Person, the liquidation
preference with respect to, any Preferred Equity Interests (but excluding, in
each case, any accrued dividends) as well as the guarantee of items that would
be included within this definition.
"INDEBTEDNESS TO CASH FLOW RATIO" means, with respect to any Person, the
ratio of: (a) the Indebtedness of such Person and its Subsidiaries (or, if such
Person is the Company, of the Company and its Restricted Subsidiaries) as of the
end of the most recently ended fiscal quarter, plus the amount of any
Indebtedness incurred subsequent to the end of such fiscal quarter; to (b) such
Person's Consolidated Cash Flow for the most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such event for which such calculation is being made
shall occur (the "Measurement Period"), PROVIDED, HOWEVER; that: (i) in making
such computation, Indebtedness shall include the total amount of funds
outstanding and available under any revolving credit facilities; and (ii) in the
event that such Person or any of its Subsidiaries (or, if such Person is the
Company, any of its Restricted Subsidiaries) consummates a material acquisition
or an Asset Sale or other disposition of assets subsequent to the commencement
of the Measurement Period but prior to the event for which the calculation of
the Indebtedness to Cash Flow Ratio is made, then the Indebtedness to Cash Flow
Ratio shall be calculated giving pro forma effect to such material acquisition
or Asset Sale or other disposition of assets, as if the same had occurred at the
beginning of the applicable period.
"INDENTURE" means this Indenture, as amended or supplemented from time
to time.
"INDIRECT PARTICIPANT" means a Person who holds a beneficial interest in
a Global Note through a Participant.
"INITIAL PURCHASERS" means, with respect to the Notes, Donaldson, Lufkin
& Jenrette Securities Corporation, Bear, Stearns & Co. Inc., Lehman Brothers
Inc., NationsBanc Montgomery Securities LLC, CIBC Oppenheimer Corp. and ING
Baring Furman Selz LLC.
"INVESTMENT GRADE" means with respect to a security, that such security
is rated, by at least two nationally recognized statistical rating
organizations, in one of each such organization's four highest generic rating
categories.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans (including
guarantees), advances or capital contributions (excluding commission, travel and
similar advances to
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officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. 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.
"LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent status) of any jurisdiction).
"MARKETABLE SECURITIES" means: (a) Government Securities; (b) any
certificate of deposit maturing not more than 365 days after the date of
acquisition issued by, or time deposit of, an Eligible Institution;
(c) commercial paper maturing not more than 365 days after the date of
acquisition issued by a corporation (other than an Affiliate of the Company)
with an Investment Grade rating, at the time as of which any investment therein
is made, issued or offered by an Eligible Institution; (d) any bankers
acceptances or money market deposit accounts issued or offered by an Eligible
Institution; and (e) any fund investing exclusively in investments of the types
described in clauses (a) through (d) above.
"MAXIMUM SECURED AMOUNT" means at any time (i) in the event the Company
at such time has a rating or has received in writing an indicative rating on all
outstanding Notes of both "Ba3" from Moody's and "BB-" from S&P, an amount equal
to the greater of (x) the product of 1.25 times the Trailing Cash Flow Amount
and (y) $500 million and (ii) in the event the Company does not have both of
such ratings or indicative ratings at such time, $500 million.
"MEDIA 4" means Media4, Inc., a Georgia corporation.
"MOODY'S" means Moody's Investors Service, Inc.
"NAGRASTAR" means NagraStar LLC, a Colorado limited liability
corporation.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such
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Person, determined in accordance with GAAP, excluding, however, any gain (but
not loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions), and
excluding any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss) and excluding any
unusual gain (but not loss) relating to recovery of insurance proceeds on
satellites, together with any related provision for taxes on such extraordinary
gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the Company
or any of its Restricted Subsidiaries, as the case may be, in respect of any
Asset Sale, net of the direct costs relating to such Asset Sale (including,
without limitation, legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof, taxes
paid or payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements), amounts required to be
applied to the repayment of Indebtedness secured by a Lien on the asset or
assets that are the subject of such Asset Sale and any reserve for adjustment in
respect of the sale price of such asset or assets. Net Proceeds shall exclude
any non-cash proceeds received from any Asset Sale, but shall include such
proceeds when and as converted by the Company or any Restricted Subsidiary to
cash.
"NON-CORE ASSETS" means: (1) all intangible authorizations, rights,
interests and other intangible assets related to all "western" DBS orbital
locations other than 148 DEG. WL (as the term "western" is used by the
FCC) held by the Company and/or any of its Subsidiaries at any time,
including without limitation the authorizations for 22 DBS frequencies at 175
DEG. WL and ESC's permit for 11 unspecified western assignments; (2) all
intangible authorizations, rights, interests and other intangible assets
related to the Fixed Satellite Service in the Ku-band, Ka-band and C-band
held by the Company and/or any of its Subsidiaries at any time, including
without limitation the license of ESC for a two satellite Ku-band system at
83 DEG. and 121 DEG. WL, the license of ESC for a two satellite Ka-band
system at 83 DEG. WL and 121 DEG. WL, and the application of ESC to add
C-band capabilities to a Ku-band satellite authorized at 83 DEG. WL; (3)
all intangible authorizations, rights, interests and other intangible assets
related to the Mobile-Satellite Service ("MSS") held by the Company and/or
any of its Subsidiaries at any time, including without limitation the license
of E-SAT, Inc. for a low-earth orbit MSS system, (4) all intangible
authorizations, rights, interests and other intangible assets related to
local multi-point distribution service and (5) any Subsidiary of the Company
the assets of which consist solely of (i) any combination of the foregoing
and (ii) other assets to the extent permitted under the provision described
under the second paragraph of Section 4.21.
"NON-RECOURSE INDEBTEDNESS" of any Person means Indebtedness of such
Person that: (i) is not guaranteed by any other Person (except a Wholly Owned
Subsidiary of the referent Person); (ii) is not recourse to and does not
obligate any other Person (except a Wholly Owned Subsidiary of the referent
Person) in any way; (iii) does not subject any property or assets of any other
Person (except a Wholly Owned Subsidiary of the referent Person), directly or
indirectly, contingently or otherwise, to the satisfaction thereof, and (iv) is
not required by GAAP to be reflected on the financial statements of any other
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Person (other than a Subsidiary of the referent Person) prepared in accordance
with GAAP.
"NON-U.S. PERSON" means a Person who is not a U.S. Person.
"NOTES" means the 9 1/4% Senior Notes due 2006 issued under this
Indenture on the date of this Indenture. For purpose of this Indenture, the
term "Notes" shall include any Exchange Notes and all Notes and Exchange Notes
shall vote together as a single class.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFERING" means the offering of the Notes and of the Company's 9 3/8%
Senior Notes due 2009 pursuant to the Offering Memorandum.
"OFFERING MEMORANDUM" means the Offering Memorandum dated January 15,
1999 relating to and used in connection with the initial offering of the Notes
and of the Company's 9 3/8% Senior Notes due 2009 by the Initial Purchasers.
"OFFICER" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, Controller,
Secretary or any Vice-President of such Person.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, principal financial officer, treasurer or principal
accounting officer of the Company.
"110 ACQUISITION" means the purchase of MCI WorldCom, Inc.'s
authorization for 28 additional DBS frequencies at the 110 DEG. WL
Full-CONUS Orbital Slot, together with two satellites that are to be
delivered in-orbit and other related assets and rights, all as described in
the Offering Memorandum.
"OPINION OF COUNSEL" means an opinion from legal counsel, who may be an
employee of or counsel to the Company (or any Guarantor, if applicable), any
Subsidiary of the Company (or any Guarantor, if applicable) or the Trustee.
"PARTICIPANT" means, with respect to the Depositary, Euroclear or Cedel,
a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to DTC, shall include Euroclear and Cedel).
"PERMITTED INVESTMENTS" means: (a) Investments in the Company or in a
Wholly Owned Restricted Subsidiary of the Company that is a Guarantor,
(b) Investments in Cash Equivalents and Marketable Securities; and
(c) Investments by the Company or any Subsidiary of the Company in a Person if,
as a result of such Investment: (i) such Person becomes a Wholly Owned
Restricted Subsidiary of the Company and becomes a
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Guarantor, or (ii) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Restricted Subsidiary of the
Company that is a Guarantor; PROVIDED that if at any time a Restricted
Subsidiary of the Company shall cease to be a Subsidiary of the Company, the
Company shall be deemed to have made a Restricted Investment in the amount of
its remaining investment, if any, in such former Subsidiary.
"PERMITTED LIENS" means: (a) Liens securing the Notes and Liens securing
any Guarantee; (b) Liens securing the Deferred Payments; (c) Liens securing any
Indebtedness permitted under Section 4.09 of this Indenture; PROVIDED that such
Liens under this clause (c) shall not secure Indebtedness in an amount exceeding
the Maximum Secured Amount at the time that such Lien is incurred; (d) Liens
securing Purchase Money Indebtedness, PROVIDED that such Indebtedness was
permitted to be incurred by the terms of this Indenture and such Liens do not
extend to any assets of the Company or its Restricted Subsidiaries other than
the assets so acquired; (e) Liens securing Indebtedness the proceeds of which
are used to develop, construct, launch or insure any satellites other than
EchoStar I, EchoStar II, EchoStar III, EchoStar IV or any permitted replacements
of any such satellites, PROVIDED that such Indebtedness was permitted to be
incurred by the terms of this Indenture and such Liens do not extend to any
assets of the Company or its Restricted Subsidiaries other than such satellites
being developed, constructed, launched or insured, and to the related licenses,
permits and construction, launch and TT&C contracts; (f) Liens on orbital slots,
licenses and other assets and rights of the Company, PROVIDED that such orbital
slots, licenses and other assets and rights relate solely to the satellites
referred to in clause (e) of this definition; (g) Liens on property of a Person
existing at the time such Person is merged into or consolidated with the Company
or any Restricted Subsidiary of the Company, PROVIDED, that such Liens were not
incurred in connection with, or in contemplation of, such merger or
consolidation, other than in the ordinary course of business; (h) Liens on
property of an Unrestricted Subsidiary at the time that it is designated as a
Restricted Subsidiary pursuant to the definition of "Unrestricted Subsidiary,"
PROVIDED that such Liens were not incurred in connection with, or contemplation
of, such designation; (i) Liens on property existing at the time of acquisition
thereof by the Company or any Restricted Subsidiary of the Company; PROVIDED
that such Liens were not incurred in connection with, or in contemplation of,
such acquisition and do not extend to any assets of the Company or any of its
Restricted Subsidiaries other than the property so acquired; (j) Liens to secure
the performance of statutory obligations, surety or appeal bonds or performance
bonds, or landlords', carriers', warehousemen's, mechanics', suppliers',
materialmen's or other like Liens, in any case incurred in the ordinary course
of business and with respect to amounts not yet delinquent or being contested in
good faith by appropriate process of law, if a reserve or other appropriate
provision, if any, as is required by GAAP shall have been made therefor;
(k) Liens existing on the date of this Indenture; (l) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; PROVIDED that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (m) Liens incurred in the ordinary course of business of the
Company or any Restricted Subsidiary of the Company (including, without
limitation, Liens securing Purchase Money Indebtedness)
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<PAGE>
with respect to obligations that do not exceed $10 million in principal amount
in the aggregate at any one time outstanding; (n) Liens securing Indebtedness in
an amount not to exceed $10 million incurred pursuant to clause (xi) of the
second paragraph of Section 4.09 of this Indenture; (o) Liens on any asset of
the Company or a Guarantor securing Indebtedness in an amount not to exceed $10
million; (p) Liens securing Indebtedness permitted under clause (xii) of the
second paragraph of the provision described under Section 4.09 of this
Indenture; provided that such Liens shall not extend to assets other than the
assets that secure such Indebtedness being refinanced; (q) any interest or title
of a lessor under any Capital Lease Obligation; PROVIDED that such Capital Lease
Obligation is permitted under the other provisions of this Indenture; (r) Liens
not provided for in clauses (a) through (q) above, securing Indebtedness
incurred in compliance with the terms of this Indenture provided that the Notes
are secured by the assets subject to such Liens on an equal and ratable basis or
on a basis prior to such Liens; PROVIDED that to the extent that such Lien
secured Indebtedness that is subordinated to the Notes, such Lien shall be
subordinated to and be later in priority than the Notes on the same basis and
(s) extensions, renewals or refundings of any Liens referred to in clauses
(a) through (q) above, PROVIDED that (i) any such extension, renewal or
refunding does not extend to any assets or secure any Indebtedness not securing
or secured by the Liens being extended, renewed or refinanced and (ii) any
extension, renewal or refunding of a Lien originally incurred pursuant to clause
(c) above shall not secure Indebtedness in an amount greater than the Maximum
Secured Amount at the time of such extension, renewal or refunding.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust or
unincorporated organization (including any subdivision or ongoing business of
any such entity or substantially all of the assets of any such entity,
subdivision or business).
"PREFERRED EQUITY INTEREST", in any Person, means an Equity Interest of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person.
"PREFERRED STOCK", as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"PRINCIPAL" means Charles W. Ergen.
"PRIVATE PLACEMENT LEGEND" means the legend set forth in Section 2.01 to
be placed on all Notes issued under this Indenture except where otherwise
permitted by the provisions of this Indenture.
"PURCHASE MONEY INDEBTEDNESS" means (i) indebtedness of the Company or
any
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Guarantor (including indebtedness that otherwise satisfies this clause (i) which
was incurred prior to the date the obligor thereunder became a Guarantor)
incurred (within 365 days of such purchase) to finance the purchase of any
assets (including the purchase of Equity Interests of Persons that are not
Affiliates of the Company) of the Company or any Guarantor: (a) to the extent
the amount of Indebtedness thereunder does not exceed 100% of the purchase cost
of such assets; and (b) to the extent that no more than $20 million of such
Indebtedness at any one time outstanding is recourse to the Company or any of
its Restricted Subsidiaries or any of their respective assets, other than the
assets so purchased; or (ii) indebtedness of the Company or any Guarantor which
refinances indebtedness referred to in clause (i) of this definition, PROVIDED
that such refinancing satisfies subclauses (a) and (b) of such clause (i).
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"RECEIVABLES TRUST" means a trust organized solely for the purpose of
securitizing the accounts receivable held by the Accounts Receivable Subsidiary
that (a) shall not engage in any business other than (i) the purchase of
accounts receivable or participation interests therein from the Accounts
Receivable Subsidiary and the servicing thereof, (ii) the issuance of and
distribution of payments with respect to the securities permitted to be issued
under clause (b) below and (iii) other activities incidental to the foregoing,
(b) shall not at any time incur Indebtedness or issue any securities, except
(i) certificates representing undivided interests in the trust issued to the
Accounts Receivable Subsidiary and (ii) debt securities issued in an arm's
length transaction for consideration solely in the form of cash and Cash
Equivalents, all of which (net of any issuance fees and expenses) shall promptly
be paid to the Accounts Receivable Subsidiary, and (c) shall distribute to the
Accounts Receivable Subsidiary as a distribution on the Accounts Receivable
Subsidiary's beneficial interest in the trust no less frequently than once every
six months all available cash and Cash Equivalents held by it, to the extent not
required for reasonable operating expenses or reserves therefor or to service
any securities issued pursuant to clause (b) above that are not held by the
Accounts Receivable Subsidiary.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
for the Notes, dated as of January 25, 1999, by and among the Company and the
other parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time.
"REGULATION S" means Regulation S promulgated under the Securities Act.
"REGULATION S GLOBAL NOTE" means a global Note bearing the Private
Placement Legend and deposited with or on behalf of the Depositary and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Notes initially
sold in reliance on Rule 903 of Regulation S.
"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.
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"RESPONSIBLE OFFICER," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the Private
Placement Legend.
"RESTRICTED GLOBAL NOTE" means a Global Note bearing the Private
Placement Legend.
"RESTRICTED INVESTMENT" means an Investment other than Permitted
Investments.
"RESTRICTED PERIOD" means the 40-day restricted period as defined in
Regulation S.
"RESTRICTED 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 the Company or one or more
Subsidiaries of the Company or a combination thereof, other than Unrestricted
Subsidiaries. Notwithstanding the foregoing, for purposes of this Indenture,
until the consummation of the reorganization of EchoStar and its subsidiaries
described in the Offering Memorandum, DBSC shall be deemed to be a Subsidiary of
the Company.
"RULE 144" means Rule 144 promulgated under the Securities Act.
"RULE 144A" means Rule 144A promulgated under the Securities Act.
"RULE 903" means Rule 903 promulgated under the Securities Act.
"RULE 904" means Rule 904 promulgated under the Securities Act.
"S&P" means Standard & Poor's Rating Services.
"SATELLITE INSURANCE" means insurance providing coverage for a satellite
in an amount which is, together with cash, Cash Equivalents and Marketable
Securities segregated and reserved on the balance sheet of the Company, for the
duration of the insured period or until applied in accordance with Section 4.16
of this Indenture. For purposes of this Indenture, the proceeds of any
Satellite Insurance shall be deemed to include the amount of cash, Cash
Equivalents and Marketable Securities segregated and reserved by the Company for
purposes of the preceding sentence.
"SERIES A CUMULATIVE PREFERRED STOCK" means the Series A Cumulative
Preferred Stock of EchoStar outstanding on the date of this Indenture.
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"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SATELLITE RECEIVER" means any satellite receiver capable of receiving
programming from the EchoStar Dish Network-SM-.
"SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"SKYVISTA" means SkyVista Corporation, a Colorado corporation.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture.
"SUBSIDIARY" means, with respect to any Person, 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 such
Person or one or more of the other Subsidiaries of such Person or a combination
thereof. Notwithstanding the foregoing, for purposes of this Indenture, until
the consummation of the reorganization of EchoStar and its Subsidiaries
described in the Offering Memorandum, DBSC shall be deemed to be a Subsidiary of
the Company.
"SUPPLEMENTAL INDENTURE" means any supplemental indenture relating to
this Indenture.
"TIA" means the Trust Indenture Act of 1939 as in effect on the date of
this Indenture.
"TRAILING CASH FLOW AMOUNT" means the Consolidated Cash Flow of the
Company during the most recent four fiscal quarters of the Company for which
financial statements are available.
"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 serving hereunder.
"TT&C" means telemetry, tracking and control.
"U.S. PERSON" means a U.S. Person as defined in Rule 902(k) under the
Securities Act.
"UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
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"UNRESTRICTED GLOBAL NOTE" means a permanent global Note substantially
in the form of Exhibit A attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing Notes that do not bear the Private Placement
Legend.
"UNRESTRICTED SUBSIDIARY" means; (A) E-Sat, Inc., EchoStar Real Estate
Corporation, EchoStar International (Mauritius) Ltd., EchoStar Manufacturing and
Distribution Pvt. Ltd. and Satrec Mauritius Ltd.; and (B) any Subsidiary of the
Company designated as an Unrestricted Subsidiary in a resolution of the Board of
Directors of the Company (a) no portion of the Indebtedness or any other
obligation (contingent or otherwise) of which, immediately after such
designation: (i) is guaranteed by the Company or any other Subsidiary of the
Company (other than another Unrestricted Subsidiary); (ii) is recourse to or
obligates the Company or any other Subsidiary of the Company (other than another
Unrestricted Subsidiary) in any way; or (iii) subjects any property or asset of
the Company or any other Subsidiary of the Company (other than another
Unrestricted Subsidiary), directly or indirectly, contingently or otherwise, to
satisfaction thereof; (b) with which neither the Company nor any other
Subsidiary of the Company (other than another Unrestricted Subsidiary) has any
contract, agreement, arrangement, understanding or is subject to an obligation
of any kind, written or oral, other than on terms no less favorable to the
Company or such other Subsidiary than those that might be obtained at the time
from Persons who are not Affiliates of the Company; and (c) with which neither
the Company nor any other Subsidiary of the Company (other than another
Unrestricted Subsidiary) has any obligation: (i) to subscribe for additional
shares of Capital Stock or other equity interests therein; or (ii) to maintain
or preserve such Subsidiary's financial condition or to cause such Subsidiary to
achieve certain levels of operating results; PROVIDED, HOWEVER, that none of the
Company, ESC and Echosphere Corporation may be designated as Unrestricted
Subsidiaries. At any time after the date of this Indenture that the Company
designates an additional Subsidiary (other than ETC or a Subsidiary that
constitutes a Non-Core Asset) as an Unrestricted Subsidiary, the Company will be
deemed to have made a Restricted Investment in an amount equal to the fair
market value (as determined in good faith by the Board of Directors of the
Company evidenced by a resolution of the Board of Directors of the Company and
set forth in an Officers' Certificate delivered to the Trustee no later than
five business days following January 1 and July 1 of each year and ten days
following a request from the Trustee, which certificate shall cover the six
months preceding such January 1, July 1 or date of request, as the case may be)
of such Subsidiary and to have incurred all Indebtedness of such Unrestricted
Subsidiary. An Unrestricted Subsidiary may be designated as a Restricted
Subsidiary of the Company if, at the time of such designation after giving pro
forma effect thereto, no Default or Event of Default shall have occurred or be
continuing.
"VOTING STOCK" of any Person means Capital Stock of such Person that
ordinarily has voting power for the election of directors (or Persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
19
<PAGE>
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" means a Wholly Owned Subsidiary of
the Company that is a Restricted Subsidiary.
"WHOLLY OWNED SUBSIDIARY" means, with respect to any Person, any
Subsidiary all of the outstanding voting stock (other than directors' qualifying
shares) of which is owned by such Person, directly or indirectly.
SECTION 1.2. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
TERM DEFINED IN SECTION
<S> <C>
"Affiliate Transaction" 4.11
"Asset Sale" 4.10
"Change of Control Offer" 4.15
"Change of Control Payment" 4.15
"Change of Control Payment Date" 4.15
"Covenant Defeasance" 8.03
"DTC" 2.01
"ETC Amount Due 4.21
"Event of Default" 6.01
"Excess Proceeds" 4.10; 4.16
"Excess Proceeds Offer" 3.09
"incur" 4.09
"Legal Defeasance" 8.02
"Non-Core Asset Amount Due" 4.21
"Offer Amount" 3.09
"Offer Period" 3.09
"Paying Agent" 2.03
"Payment Default" 6.01
"Payout" 4.21
"Permitted Refinancing" 4.09
"Private Placement Legend" 2.01
"Purchase Date" 3.09
"Refinancing Indebtedness" 4.09
"Registrar" 2.03
"Restricted Payments" 4.07
</TABLE>
20
<PAGE>
SECTION 1.3. 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 and any Guarantee of 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;
"OBLIGOR" on the Notes means each of the Company and any successor
obligor upon the Notes or any Guarantor.
All other terms used in this Indenture that are defined by the TIA,
defined by reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.4. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2.
THE NOTES
SECTION 2.1. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto, the terms of which are
incorporated in and made a part of
21
<PAGE>
this Indenture. The Guarantees of the Notes by the Guarantors shall be
substantially in the forms set forth in Article 10 and Exhibit B hereto, the
terms of which are incorporated in and made a part of this Indenture. The Notes
and the Guarantees of the Notes by the Guarantors may have notations, legends or
endorsements approved as to form by the Company or the Guarantors, as the case
may be, and required by law, stock exchange rule, agreements to which the
Company or the Guarantors, as the case may be, are subject or usage. Each Note
shall be dated the date of its authentication. The Notes shall be issuable only
in denominations of $1,000 and integral multiples thereof.
The Notes shall initially be issued in the form of Global Notes and the
Depository Trust Company ("DTC"), its nominees, and their respective successors,
shall act as the Depositary with respect thereto. Each Global Note shall (i) be
registered in the name of the Depositary for such Global Note or the nominee of
such Depositary, (ii) shall be delivered by the Trustee to such Depositary or
pursuant to such Depositary's instructions, and (iii) shall bear a legend (the
"Global Note Legend") substantially to the following effect:
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New
York corporation ("DTC") 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 in 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.
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN
THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR
A SUCCESSOR DEPOSITARY. THIS NOTE IS NOT EXCHANGEABLE
FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER
THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER
OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR
BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR
ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE
OF SUCH SUCCESSOR DEPOSITARY) MAY BE REGISTERED
22
<PAGE>
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
Except as permitted by Section 2.06(g), any Note not registered under
the Securities Act shall bear the following legend (the "Private Placement
Legend") on the face thereof:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY,
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, UNITED STATES PERSONS, EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1)
REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)(A
"QIB") OR THAT IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE
TIME PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO
ACCOUNT THE PROVISIONS OF RULE 144(d) UNDER THE
SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT
AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE,
RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE
COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM
THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER
THE SECURITIES ACT, (C) IN AN OFFSHORE TRANSACTION
MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) 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 (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH
APPLICABLE SECURITIES LAWS
23
<PAGE>
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS NOTE OR AN INTEREST THEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES PERSON" HAVE THE
MEANINGS ASCRIBED TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING."
The Trustee must refuse to register any transfer of a Note bearing such legend
that would violate the restrictions described in such legend.
SECTION 2.2. FORM OF EXECUTION AND AUTHENTICATION.
Two Officers of the Company shall sign the Notes for the Company by
manual or facsimile signature. The Company's seal shall be reproduced on the
Notes.
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
the Trustee. The signature of the Trustee 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 two
Officers of the Company, authenticate Notes for original issue up to an
aggregate principal amount of $375,000,000 of the Notes. The aggregate
principal amount of Notes outstanding at any time shall not exceed the amount
set forth herein except as provided in Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. Unless limited by the terms of such appointment,
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 the Company or any Affiliate of the Company.
SECTION 2.3. REGISTRAR AND PAYING AGENT.
The Company shall maintain (i) an office or agency where Notes may be
presented for registration of transfer or for exchange (including any
co-registrar, the "REGISTRAR") and (ii) an office or agency where Notes may be
presented for payment ("PAYING AGENT"). The Registrar shall keep a register of
the Notes and of their transfer
24
<PAGE>
and exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional
paying agent. The Company may change any Paying Agent, Registrar or
co-registrar without prior notice to any Holder of a Note. The Company shall
notify the Trustee and the Trustee shall notify the Holders of the Notes of the
name and address of any Agent not a party to this Indenture. The Company or any
Guarantor may act as Paying Agent, Registrar or co-registrar. The Company shall
enter into an appropriate agency agreement with any Agent not a party to this
Indenture, which shall incorporate the provisions of the TIA. The agreement
shall implement the provisions of this Indenture that relate to such Agent. The
Company shall notify the Trustee of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, or fails to give the
foregoing notice, the Trustee shall act as such, and shall be entitled to
appropriate compensation in accordance with Section 7.07.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the Notes.
SECTION 2.4. 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 shall hold in trust for the benefit of
the Holders of the Notes or the Trustee all money held by the Paying Agent for
the payment of principal of, premium, if any, and interest on the Notes, and
shall notify the Trustee of any Default by the Company or any Guarantor 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. 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 a Guarantor) shall have no further liability for the money delivered
to the Trustee. If the Company or a Guarantor acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders of
the Notes all money held by it as Paying Agent.
SECTION 2.5. LISTS OF HOLDERS OF THE NOTES.
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 of the Notes and shall otherwise comply with TIA Section 312(a). If
the Trustee is not the Registrar, the Company shall furnish to the Trustee at
least seven Business Days 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
of the Notes, including the aggregate principal amount of the Notes held by each
thereof, and the Company and each Guarantor shall otherwise comply with TIA
Section 312(a).
SECTION 2.6. TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. A Global Note may not be
25
<PAGE>
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary and a successor Depositary is not appointed by the Company within 90
days after the date of such notice from the Depositary, (ii) the Depositary has
ceased to be a clearing agency registered under the Exchange Act, (iii) the
Company in its sole discretion determines that the Global Notes (in whole but
not in part) should be exchanged for Definitive Notes and delivers a written
notice to such effect to the Trustee or (iv) there shall have occurred and be
continuing a Default or an Event of Default under this Indenture. In any such
case, the Company will notify the Trustee in writing that, upon surrender by the
Direct Participants and Indirect Participants of their interest in such Global
Note, Certificated Notes will be issued to each Person that such Direct
Participants and Indirect Participants and DTC identify as being the beneficial
owner of the related Notes. Global Notes also may be exchanged or replaced, in
whole or in part, as provided in Sections 2.07 and 2.10 of this Indenture. Every
Note authenticated and delivered in exchange for, or in lieu of, a Global Note
or any portion thereof, pursuant to this Section 2.06 or Section 2.7 or 2.10 of
this Indenture, shall be authenticated and delivered in the form of, and shall
be, a Global Note. A Global Note may not be exchanged for another Note other
than as provided in this Section 2.06. However, beneficial interests in a
Global Note may be transferred and exchanged as provided in Section 2.06(b), (c)
or (f) of this Indenture.
(b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL
NOTES. The transfer and exchange of beneficial interests in the Global Notes
shall be effected through the Depositary, in accordance with the provisions of
this Indenture and the Applicable Procedures. Beneficial interests in the
Restricted Global Notes shall be subject to restrictions on transfer comparable
to those set forth in this Indenture to the extent required by the Securities
Act. Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
(i) TRANSFER OF BENEFICIAL INTERESTS IN THE
SAME GLOBAL NOTE. Beneficial interests in any Restricted
Global Note may be transferred to Persons who take
delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the
transfer restrictions set forth in the Private Placement
Legend; PROVIDED, HOWEVER, that prior to the expiration
of the Restricted Period, no transfer of beneficial
interests in the Regulation S Global Note may be made to
a U.S. Person or for the account or benefit of a U.S.
Person (other than an Initial Purchaser) unless permitted
by applicable law and made in compliance with
subparagraphs (ii) and (iii) below. Beneficial interests
in any Unrestricted Global Note may be transferred to
Persons who take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note. No
written
26
<PAGE>
orders or instructions shall be required to be delivered to the
Registrar to effect the transfers described in this Section
2.06(b)(i) unless specifically stated above.
(ii) ALL OTHER TRANSFERS AND EXCHANGES OF
BENEFICIAL INTERESTS IN GLOBAL NOTES. In connection with
all transfers and exchanges of beneficial interests that
are not subject to Section 2.06(b)(i) above, the
transferor of such beneficial interest must deliver to
the Registrar either (A) (1) a written order from a
Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures
directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Note in
an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in
accordance with the Applicable Procedures containing
information regarding the Participant account to be
credited with such increase or, if Definitive Notes are
at such time permitted to be issued pursuant to this
Indenture, (B) (1) a written order from a Participant or
an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Note in an
amount equal to the beneficial interest to be transferred
or exchanged and (2) instructions given by the Depositary
to the Registrar containing information regarding the
Person in whose name such Definitive Note shall be
registered to effect the transfer or exchange referred to
in (1) above. Upon consummation of an Exchange Offer by
the Company in accordance with Section 2.06(f), the
requirements of this Section 2.06(b)(ii) shall be deemed
to have been satisfied upon receipt by the Registrar of
the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in
the Restricted Global Notes. Upon satisfaction of all of
the requirements for transfer or exchange of beneficial
interests in Global Notes contained in this Indenture and
the Notes or otherwise applicable under the Securities
Act, the Trustee shall adjust the principal amount of the
relevant Global Note(s) pursuant to Section 2.06(h).
(iii) TRANSFER OF BENEFICIAL INTERESTS TO
ANOTHER RESTRICTED GLOBAL NOTE. A beneficial interest in
any Restricted Global Note may be transferred to a Person
who takes delivery thereof in the form of a beneficial
interest in another Restricted Global Note if the
transfer complies with the requirements of Section
2.06(b)(ii) above and the Registrar receives the
following:
(A) if the transferee will take delivery
in the form of
27
<PAGE>
a beneficial interest in the 144A Global Note, then the
transferor must deliver a certificate in the form of
Exhibit C hereto, including the certifications in item
(1) thereof; and
(B) if the transferee will take delivery
in the form of a beneficial interest in the
Regulation S Global Note, then the transferor
must deliver a certificate in the form of Exhibit
C hereto, including the certifications in item
(2) thereof.
(iv) TRANSFER AND EXCHANGE OF BENEFICIAL
INTERESTS IN A RESTRICTED GLOBAL NOTE FOR BENEFICIAL
INTERESTS IN AN UNRESTRICTED GLOBAL NOTE. A beneficial
interest in any Restricted Global Note may be exchanged
by any Holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who
takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note if the exchange
or transfer complies with the requirements of Section
2.06(b)(ii) above and:
(A) such exchange or transfer is
effected pursuant to the Exchange Offer in
accordance with the Registration Rights Agreement
and the Holder of the beneficial interest to be
transferred, in the case of an exchange, or the
transferee, in the case of a transfer, certifies
in the applicable Letter of Transmittal that it
is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange
Notes or (3) a Person who is an "affiliate" (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant
to a Shelf Registration Statement in accordance
with the Registration Rights Agreement;
(C) such transfer is effected by a
Broker-Dealer pursuant to an Exchange Offer
Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the
following:
(1) if the Holder of
such beneficial interest in a Restricted
Global Note proposes to exchange such
beneficial interest for a beneficial
interest in an Unrestricted Global Note, a
certificate from such Holder in the form
of Exhibit D hereto, including the
certifications in item (1)(a) thereof, or
28
<PAGE>
(2) if the Holder of
such beneficial interest in a Restricted
Global Note proposes to transfer such
beneficial interest to a Person who shall
take delivery thereof in the form of a
beneficial interest in an Unrestricted
Global Note, a certificate from such
Holder in the form of Exhibit C hereto,
including the certifications in item (4)
thereof;
and, in each such case set forth in this
subparagraph (D), if the Registrar so requests or
if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable
to the Registrar to the effect that such exchange
or transfer is in compliance with the Securities
Act and that the restrictions on transfer
contained in this Indenture and in the Private
Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or
(D) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) TRANSFER OR EXCHANGE OF BENEFICIAL INTERESTS FOR DEFINITIVE
NOTES.
(i) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL
NOTES TO RESTRICTED DEFINITIVE NOTES. If any Holder of a
beneficial interest in a Restricted Global Note proposes
to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a
Restricted Definitive Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the Holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for a
Restricted Definitive Note, a certificate from
such Holder in the form of Exhibit D hereto,
including the certifications in item (2)(a)
thereof;
(B) if such beneficial interest is being
transferred to a QIB in accordance with Rule 144A
under the Securities
29
<PAGE>
Act, a certificate to the effect set forth in Exhibit C
hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being
transferred to a Non-U.S. Person in an offshore
transaction in accordance with Rule 903 or Rule
904 under the Securities Act, a certificate to
the effect set forth in Exhibit C hereto,
including the certifications in item (2) thereof;
(D) if such beneficial interest is being
transferred pursuant to an exemption from the
registration requirements of the Securities Act
in accordance with Rule 144 under the Securities
Act, a certificate to the effect set forth in
Exhibit C hereto, including the certifications in
item (3)(a) thereof;
(E) if such beneficial interest is being
transferred to the Company or any of its
Subsidiaries, a certificate to the effect set
forth in Exhibit C hereto, including the
certifications in item (3)(b) thereof; or
(F) if such beneficial interest is being
transferred pursuant to an effective registration
statement under the Securities Act, a certificate
to the effect set forth in Exhibit C hereto,
including the certifications in item (3)(c)
thereof,
the Trustee shall cause the aggregate principal amount of
the applicable Global Note to be reduced accordingly
pursuant to Section 2.06(h), and the Company shall
execute and the Trustee shall authenticate and deliver to
the Person designated in the instructions a Restricted
Definitive Note in the appropriate principal amount. Any
Restricted Definitive Note issued in exchange for a
beneficial interest in a Restricted Global Note pursuant
to this Section 2.06(c) shall be registered in such name
or names and in such authorized denomination or
denominations as the Holder of such beneficial interest
shall instruct the Registrar through instructions from
the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Restricted
Definitive Notes to the Persons in whose names such Notes
are so registered. Any Restricted Definitive Note issued
in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c)(i) shall
bear the Private Placement Legend and shall be subject to
all restrictions on transfer contained therein.
(ii) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL
NOTES TO
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<PAGE>
UNRESTRICTED DEFINITIVE NOTES. A Holder of a beneficial interest
in a Restricted Global Note may exchange such beneficial interest
for an Unrestricted Definitive Note or may transfer such
beneficial interest to a Person who takes delivery thereof in the
form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is
effected pursuant to an Exchange Offer in
accordance with the Registration Rights Agreement
and the Holder of such beneficial interest, in
the case of an exchange, or the transferee, in
the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not
(1) a broker-dealer, (2) a Person participating
in the distribution of the Exchange Notes or (3)
a Person who is an "affiliate" (as defined in
Rule 144) of the Company;
(B) such transfer is effected pursuant
to a Shelf Registration Statement in accordance
with the Registration Rights Agreement;
(C) such transfer is effected by a
Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the
following:
(1) if the Holder of such
beneficial interest in a Restricted Global
Note proposes to exchange such beneficial
interest for a Definitive Note that does
not bear the Private Placement Legend, a
certificate from such Holder in the form
of Exhibit D hereto, including the
certifications in item (1)(b) thereof; or
(2) if the Holder of such
beneficial interest in a Restricted Global
Note proposes to transfer such beneficial
interest to a Person who shall take
delivery thereof in the form of a
Definitive Note that does not bear the
Private Placement Legend, a certificate
from such Holder in the form of Exhibit C
hereto, including the certifications in
item (4) thereof,
and, in each such case set forth in this subparagraph
(D), if the Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer
contained in this Indenture and in the Private Placement
31
<PAGE>
Legend are no longer required in order to maintain compliance
with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or
(D) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
(iii) BENEFICIAL INTERESTS IN UNRESTRICTED
GLOBAL NOTES TO UNRESTRICTED DEFINITIVE NOTES. If any
Holder of a beneficial interest in an Unrestricted Global
Note proposes to exchange such beneficial interest for a
Definitive Note or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a
Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii), the Trustee
shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant
to Section 2.06(h), and the Company shall execute and the
Trustee shall authenticate and deliver to the Person
designated in the instructions a Definitive Note in the
appropriate principal amount. Any Definitive Note issued
in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall be registered in such name or
names and in such authorized denomination or
denominations as the Holder of such beneficial interest
shall instruct the Registrar through instructions from
the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive
Notes to the Persons in whose names such Notes are so
registered. Any Definitive Note issued in exchange for a
beneficial interest pursuant to this Section 2.06(c)(iii)
shall not bear the Private Placement Legend.
(d) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR BENEFICIAL
INTERESTS.
(i) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL
INTERESTS IN RESTRICTED GLOBAL NOTES. If any Holder of a
Restricted Definitive Note proposes to exchange such Note
for a beneficial interest in a Restricted Global Note or
to transfer such Restricted Definitive Notes to a Person
who takes delivery thereof in the form of a beneficial
interest in a Restricted Global Note, then, upon receipt
by the Registrar of the following documentation:
(A) if the Holder of such Restricted
Definitive Note proposes to exchange such Note
for a beneficial interest in
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a Restricted Global Note, a certificate from such Holder
in the form of Exhibit D hereto, including the
certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note
is being transferred to a QIB in accordance with
Rule 144A under the Securities Act, a certificate
to the effect set forth in Exhibit C hereto,
including the certifications in item (1) thereof;
(C) if such Restricted Definitive Note
is being transferred to a Non-U.S. Person in an
offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit C
hereto, including the certifications in item (2)
thereof;
(D) if such Restricted Definitive Note
is being transferred pursuant to an exemption
from the registration requirements of the
Securities Act in accordance with Rule 144 under
the Securities Act, a certificate to the effect
set forth in Exhibit C hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note
is being transferred to the Company or any of its
Subsidiaries, a certificate to the effect set
forth in Exhibit C hereto, including the
certifications in item (3)(b) thereof; or
(F) if such Restricted Definitive Note
is being transferred pursuant to an effective
registration statement under the Securities Act,
a certificate to the effect set forth in Exhibit
C hereto, including the certifications in item
(3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note,
increase or cause to be increased the aggregate principal
amount of, in the case of clause (A) above, the
appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global Note, and in the case of
clause (C) above, the Regulation S Global Note.
(ii) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL
INTERESTS IN UNRESTRICTED GLOBAL NOTES. A Holder of a
Restricted Definitive Note may exchange such Note for a
beneficial interest in an Unrestricted Global Note or
transfer such Restricted Definitive Note to a Person who
takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note only if:
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(A) such exchange or transfer is
effected pursuant to the Exchange Offer in
accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or
the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange
Notes or (3) a Person who is an "affiliate" (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant
to a Shelf Registration Statement in accordance
with the Registration Rights Agreement;
(C) such transfer is effected by a
Broker-Dealer pursuant to an Exchange Offer
Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the
following:
(1) if the Holder of such
Definitive Notes proposes to exchange such
Notes for a beneficial interest in the
Unrestricted Global Note, a certificate
from such Holder in the form of Exhibit D
hereto, including the certifications in
item (1)(c) thereof; or
(2) if the Holder of such
Definitive Notes proposes to transfer such
Notes to a Person who shall take delivery
thereof in the form of a beneficial
interest in the Unrestricted Global Note,
a certificate from such Holder in the form
of Exhibit C hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph
(D), if the Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer
contained in this Indenture and in the Private Placement
Legend are no longer required in order to maintain
compliance with the Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.06(d)(ii), the Trustee
shall cancel the Definitive Notes and increase or cause
to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) UNRESTRICTED DEFINITIVE NOTES TO
BENEFICIAL INTERESTS
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IN UNRESTRICTED GLOBAL NOTES. A Holder of an Unrestricted
Definitive Note may exchange such Note for a beneficial interest
in an Unrestricted Global Note or transfer such Unrestricted
Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note at
any time. Upon receipt of a request for such an exchange or
transfer, the Trustee shall cancel the applicable Unrestricted
Definitive Note and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global
Notes.
If any such exchange or transfer from an Unrestricted Definitive Note or
a Restricted Definitive Note, as the case may be, to a beneficial interest is
effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time
when an Unrestricted Global Note has not yet been issued, the Company shall
issue and, upon receipt of an Authentication Order in accordance with Section
2.02 of this Indenture, the Trustee shall authenticate one or more Unrestricted
Global Notes in an aggregate principal amount equal to the principal amount of
Unrestricted Definitive Notes or Restricted Definitive Notes, as the case may
be, so transferred.
(e) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR DEFINITIVE
NOTES. Upon request by a Holder of Definitive Notes and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar shall
register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied by
a written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by its attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional certifications,
documents and information, as applicable, required pursuant to the following
provisions of this Section 2.06(e).
(i) RESTRICTED DEFINITIVE NOTES TO RESTRICTED
DEFINITIVE NOTES. Any Restricted Definitive Note may be
transferred to and registered in the name of Persons who
take delivery thereof in the form of a Restricted
Definitive Note if the Registrar receives the following:
(A) if the transfer will be made
pursuant to Rule 144A under the Securities Act,
then the transferor must deliver a certificate in
the form of Exhibit C hereto, including the
certifications in item (1) thereof;
(B) if the transfer will be made
pursuant to Rule 903 or Rule 904, then the
transferor must deliver a certificate in the form
of Exhibit C hereto, including the certifications
in item (2) thereof; and
(C) if the transfer will be made
pursuant to any
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<PAGE>
other exemption from the registration requirements of
the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit C hereto, including
the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(ii) RESTRICTED DEFINITIVE NOTES TO
UNRESTRICTED DEFINITIVE NOTES. Any Restricted Definitive
Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person
or Persons who take delivery thereof in the form of an
Unrestricted Definitive Note if:
(A) such exchange or transfer is
effected pursuant to an Exchange Offer in
accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or
the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange
Notes or (3) a Person who is an "affiliate" (as
defined in Rule 144) of the Company;
(B) any such transfer is effected
pursuant to a Shelf Registration Statement in
accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a
Broker-Dealer pursuant to an Exchange Offer
Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the
following:
(1) if the Holder of such
Restricted Definitive Notes proposes to
exchange such Notes for an Unrestricted
Definitive Note, a certificate from such
Holder in the form of Exhibit D hereto,
including the certifications in item
(1)(d) thereof; or
(2) if the Holder of such
Restricted Definitive Notes proposes to
transfer such Notes to a Person who shall
take delivery thereof in the form of an
Unrestricted Definitive Note, a
certificate from such Holder in the form
of Exhibit C hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this
subparagraph (D), if the Registrar so
requests, an Opinion of
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<PAGE>
Counsel in form reasonably acceptable to the
Company to the effect that such exchange or
transfer is in compliance with the Securities Act
and that the restrictions on transfer contained in
this Indenture and in the Private Placement Legend
are no longer required in order to maintain
compliance with the Securities Act.
(iii) UNRESTRICTED DEFINITIVE NOTES TO
UNRESTRICTED DEFINITIVE NOTES. A Holder of Unrestricted
Definitive Notes may transfer such Notes to a Person who
takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request to register
such a transfer, the Registrar shall register the
Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.
(F) EXCHANGE OFFER. Upon the occurrence of an Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not "affiliates" (as defined in Rule 144) of the Company,
and accepted for exchange in an Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in an Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Restricted Definitive Notes so accepted
Unrestricted Definitive Notes in the appropriate principal amount.
(G) LEGENDS. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) PRIVATE PLACEMENT LEGEND.
(A) Except as permitted by subparagraph
(B) below, each Global Note (other than an
Unrestricted Global Note) and each Definitive
Note (and all Notes issued in exchange therefor
or substitution thereof) shall bear the Private
Placement Legend.
(B) Notwithstanding the foregoing, any
Global Note or Definitive Note issued pursuant to
subparagraphs (b)(iv), (c)(ii), (c)(iii),
(d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to
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this Section 2.06 (and all Notes issued in exchange
therefor or substitution thereof) shall not bear the
Private Placement Legend.
(ii) GLOBAL NOTE LEGEND. Each Global Note
shall bear the Global Note Legend.
(H) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as
all beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11. At any
time prior to such cancellation, if any beneficial interest in a Global Note is
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note or for Definitive Notes,
the principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note by the Trustee
or by the Depositary at the direction of the Trustee to reflect such reduction;
and if the beneficial interest is being exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in another
Global Note, such other Global Note shall be increased accordingly and an
endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(I) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee
shall authenticate Global Notes and Definitive Notes upon
the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a
Holder of a beneficial interest in a Global Note or to a
Holder of a Definitive Note for any registration of
transfer or exchange, 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 taxes or similar
governmental charge payable upon exchange or transfer
pursuant to Sections 2.10, 3.06, 3.09 and 9.05).
(iii) The Registrar shall not be required to
register the transfer of or exchange any Note selected
for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes
issued upon any registration of transfer or exchange of
Global Notes or Definitive Notes shall be the valid
obligations of the Company,
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<PAGE>
evidencing the same debt, and entitled to the same benefits of
this Indenture, as the Global Notes or Definitive Notes
surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to
issue, to register the transfer of or to exchange any
Notes during a period beginning at the opening of
business on a Business Day 15 days before the day of any
selection of Notes for redemption under Section 3.02 of
this Indenture and ending at the close of business on the
day of selection or (B) to register the transfer of or to
exchange any Note so selected for redemption in whole or
in part, except the unredeemed portion of any Note being
redeemed in part.
(vi) Prior to due presentment for the
registration of a transfer of any Note, the Trustee, any
Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner
of such Note for the purpose of receiving payment of
principal of and interest on such Notes and for all other
purposes, and none of the Trustee, any Agent or the
Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global
Notes and Definitive Notes in accordance with the
provisions of Section 2.02 of this Indenture.
(viii) All certifications, certificates and
Opinions of Counsel required to be submitted to the
Registrar pursuant to this Section 2.06 to effect a
registration of transfer or exchange may be submitted by
facsimile.
SECTION 2.7. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Company and
the Trustee receive evidence to their satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by two Officers of the Company, shall authenticate a
replacement Note if the Trustee's requirements for replacements of Notes are
met. If required by the Trustee or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Trustee and the
Company to protect the Company, the Guarantors, the Trustee, any Agent or any
authenticating agent from any loss which any of them may suffer if a Note is
replaced. Each of the Company and the Trustee may charge for its expenses in
replacing a Note.
Every replacement Note is an additional obligation of the Company and
the Guarantors.
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SECTION 2.8. 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 pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01, it ceases to be outstanding and interest on it ceases to accrue.
Subject to Section 2.09, a Note does not cease to be outstanding because
the Company, a Subsidiary of the Company or an Affiliate of the Company holds
the Note.
SECTION 2.9. 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, any Subsidiary of the Company or any Affiliate of the Company shall be
considered as though not outstanding, except that for purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Notes which a Responsible Officer knows to be so owned shall be
so considered. Notwithstanding the foregoing, Notes that are to be acquired by
the Company, any Subsidiary of the Company or an Affiliate of the Company
pursuant to an exchange offer, tender offer or other agreement shall not be
deemed to be owned by the Company, a Subsidiary of the Company or an Affiliate
of the Company until legal title to such Notes passes to the Company, such
Subsidiary or such Affiliate, as the case may be.
SECTION 2.10.TEMPORARY NOTES.
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 and the Trustee consider appropriate for temporary Notes. Without
unreasonable delay, the Company shall prepare and the Trustee, upon receipt of
the written order of the Company signed by two Officers of the Company, shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as definitive Notes.
SECTION 2.11. CANCELLATION.
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The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall destroy canceled Notes
(subject to the record retention requirement of the Exchange Act), unless the
Company directs canceled Notes to be returned to it. The Company may not issue
new Notes to replace Notes that it has redeemed or paid or that have been
delivered to the Trustee for cancellation. All canceled Notes held by the
Trustee shall be destroyed and certification of their destruction delivered to
the Company, unless by a written order, signed by two Officers of the Company,
the Company shall direct that canceled Notes be returned to it.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders of
the Notes on a subsequent special record date, which date shall be at the
earliest practicable date but in all events at least five Business Days prior to
the payment date, in each case at the rate provided in the Notes. The Company
shall, with the consent of the Trustee, fix or cause to be fixed each such
special record date and payment date. At least 15 days before the special
record date, the Company (or the Trustee, in the name of and at the expense of
the Company) shall mail to Holders of the Notes a notice that states the special
record date, the related payment date and the amount of such interest to be
paid.
SECTION 2.13. RECORD DATE.
The record date for purposes of determining the identity of Holders of
the Notes entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided for
in TIA Section 316(c).
SECTION 2.14. CUSIP NUMBER.
The Company in issuing the Notes may use a "CUSIP" number and, if it
does so, the Trustee shall use the CUSIP number in notices of redemption or
exchange as a convenience to Holders; PROVIDED that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes and that reliance may be placed
only on the other identification numbers printed on the Notes. The Company will
promptly notify the Trustee of any change in the CUSIP number.
ARTICLE 3.
REDEMPTION
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SECTION 3.1. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07, it shall furnish to the Trustee, at least
45 days (unless a shorter period is acceptable to the Trustee) but not more than
60 days before a redemption date, an Officers' Certificate setting forth (i) the
redemption date, (ii) the principal amount of Notes to be redeemed and (iii) the
redemption price.
SECTION 3.2. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the
selection of Notes for redemption will be made by the Trustee in compliance with
the requirements of the principal national securities exchange, if any, on which
the Notes are listed, or if the Notes are not so listed on a PRO RATA basis, by
lot or in accordance with any other method the Trustee considers fair and
appropriate, PROVIDED that no Notes with a principal amount of $1,000 or less
shall be redeemed in part. In the event of partial redemption by lot, the
particular Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
them selected shall be in amounts of $1,000 or whole multiples of $1,000; except
that if all of the Notes of a Holder are to be redeemed, the entire outstanding
amount of Notes held by such Holder, even if not a multiple of $1,000, shall be
redeemed. Except as provided in the preceding sentence, provisions of this
Indenture that apply to Notes called for redemption also apply to portions of
Notes called for redemption.
SECTION 3.3. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09, at least 30 days but not more
than 60 days before a redemption date, the Company shall mail or cause to be
mailed, 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 being redeemed in part only, the portion of
the principal amount of such Note to be redeemed and that, after the redemption
date
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upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; PROVIDED, HOWEVER, that the
Company shall have delivered to the Trustee, at least 45 days (unless a shorter
period is acceptable to the Trustee) 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 3.4. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03,
Notes called for redemption become due and payable on the redemption date at the
redemption price.
SECTION 3.5. DEPOSIT OF REDEMPTION PRICE.
On or prior to any 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. The Trustee or
the Paying Agent shall promptly return to the Company any money deposited with
the Trustee or the Paying Agent by the Company in excess of the amounts
necessary to pay the redemption price of, and accrued interest on, all Notes to
be redeemed.
On and after the redemption date, interest shall cease to accrue on the
Notes or the portions of Notes called for redemption. If a Note is redeemed on
or after an interest record date but on or prior to the related interest payment
date, then any accrued and unpaid interest shall be paid to the Person in whose
name such Note was registered at the close of business on such record date. If
any Note called for redemption shall not be so paid upon surrender for
redemption because
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of the failure of the Company to comply with the preceding paragraph, interest
shall be paid on the unpaid principal, from the redemption date until such
principal is paid, and to the extent lawful on any interest not paid on such
unpaid principal, in each case at the rate provided in the Notes.
SECTION 3.6. NOTES REDEEMED IN PART.
Upon surrender and cancellation of a Note that is redeemed in part, the
Company shall issue and the Trustee shall authenticate for the Holder of the
Notes at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
SECTION 3.7. OPTIONAL REDEMPTION
Except as provided in the next paragraph, the Notes will not be
redeemable at the Company's option prior to February 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) set forth below, together
with accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the 12-month period beginning on February 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.625%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.313
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to February 1, 2002,
the Company may redeem up to 35% of the aggregate principal amount of the Notes
outstanding at a redemption price equal to 109.250% of the principal amount
thereof on the repurchase date, together with accrued and unpaid interest to
such repurchase date, with the net cash proceeds of one or more public or
private sales (including sales to EchoStar, regardless of whether EchoStar
obtained such funds from an offering of Equity Interests or Indebtedness of
EchoStar or otherwise) of Equity Interests (other than Disqualified Stock) of
the Company (other than proceeds from a sale to any Subsidiary of the Company or
any employee benefit plan in which the Company or any of its Subsidiaries
participates); PROVIDED that: (a) at least 65% in aggregate principal amount of
the Notes originally issued remain outstanding immediately after the occurrence
of such redemption; (b) such redemption occurs within 120 days of the date of
the closing of any such sale; and (c) the sale of such Equity Interests is made
in compliance with the terms of this Indenture.
SECTION 3.8. MANDATORY REDEMPTION.
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The Notes will not be subject to any mandatory redemption or sinking
fund provisions.
SECTION 3.9. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
When the cumulative amount of Excess Proceeds that have not been applied
in accordance with Section 4.10 and 4.16 herein or this Section 3.09, exceeds
$17.5 million, the Company shall be obligated to make an offer to all Holders of
the Notes (an "EXCESS PROCEEDS OFFER") to purchase the maximum principal amount
of Notes that may be purchased out of such Excess Proceeds at an offer price in
cash in an amount equal to 101% of the principal amount thereof, together with
accrued and unpaid interest to the date fixed for the closing of such offer in
accordance with the procedures set forth in this Section 3.09. To the extent
the Company or a Restricted Subsidiary is required under the terms of
Indebtedness of the Company or such Restricted Subsidiary which is PARI PASSU
with, or (in the case of any secured Indebtedness) senior with respect to such
collateral to, the Notes with any proceeds which constitute Excess Proceeds
under this Indenture, the Company shall make a pro rata offer to the holders of
all other PARI PASSU Indebtedness (including the Notes) with such proceeds. If
the aggregate principal amount of Notes and other PARI PASSU Indebtedness
surrendered by holders thereof exceeds the amount of such Excess Proceeds, the
Trustee shall select the Notes and other PARI PASSU Indebtedness to be purchased
on a PRO RATA basis.
The Excess Proceeds Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "OFFER PERIOD"). No later than
five Business Days after the termination of the Offer Period (the "PURCHASE
DATE"), the Company shall purchase the maximum principal amount of Notes that
may be purchased with such Excess Proceeds (which maximum principal amount of
Notes shall be the "OFFER AMOUNT") or, if less than the Offer Amount has been
tendered, all Notes tendered in response to the Excess Proceeds Offer.
If the Purchase Date is on or after an interest 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 shall be payable to Holders who tender
Notes pursuant to the Excess Proceeds Offer.
Upon the commencement of any Excess Proceeds Offer, the Company shall
send, by first class mail, a notice to each of the Holders of the Notes, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Excess Proceeds
Offer. The notice, which shall govern the terms of the Excess Proceeds Offer,
shall state:
(a) that the Excess Proceeds Offer is being made pursuant to
this Section 3.09 and the length of time the Excess Proceeds Offer shall remain
open;
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(b) the Offer Amount, the purchase price and the Purchase
Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that any Note accepted for payment pursuant to the
Excess Proceeds Offer shall cease to accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant
to any Excess Proceeds Offer shall 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 at least three business
days before the Purchase Date;
(f) that Holders shall be entitled to withdraw their
election if the Company, depositary or Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a telegram,
telex, facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have the Note
purchased;
(g) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Offer Amount, the Company shall select the
Notes to be purchased on a PRO RATA basis (with such adjustments as may be
deemed appropriate by the Company so that only Notes in denominations of
$1,000, or integral multiples thereof, shall be purchased); and
(h) that Holders whose Notes were purchased only in part
shall be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered.
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a PRO RATA basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Excess Proceeds
Offer, or if less than the Offer Amount has been tendered, all Notes or portion
thereof tendered, and deliver to the Trustee an Officers' Certificate stating
that such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.09. The Company, Depositary or
Paying Agent, as the case may be, shall promptly (but in any case not later than
five days after the Purchase Date) mail or deliver to each tendering Holder an
amount equal to the purchase price of the Note tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly issue a new
Note, and the Trustee shall authenticate and mail or deliver such new Note, to
such Holder equal in principal amount to any unpurchased portion of the Note
surrendered. Any Note not so accepted shall be promptly mailed or delivered by
the Company
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to the Holder thereof. The Company shall publicly announce the results of the
Excess Proceeds Offer on the Purchase Date. To the extent that the aggregate
principal amount of Notes tendered pursuant to an Excess Proceeds Offer is less
than the amount of such Excess Proceeds, the Company may use any remaining
Excess Proceeds for general corporate purposes. Upon completion of an Excess
Proceeds Offer, the amount of Excess Proceeds shall be reset at zero.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06.
ARTICLE 4.
COVENANTS
SECTION 4.1. PAYMENT OF NOTES.
The Company shall pay or cause to be paid 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, if other than the Company, holds as of 10:00 a.m.
Eastern Time on the due date money deposited by or on behalf of the Company in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
the then applicable interest rate on the Notes to the extent lawful; it shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace period) at the same rate to the extent lawful.
SECTION 4.2. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain an office or agency (which may be an office
of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where
Notes may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all
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such purposes and may from time to time rescind such designations; PROVIDED,
HOWEVER, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency for such purposes.
The Company shall give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.03.
SECTION 4.3. REPORTS.
(a) Whether or not required by the rules and regulations of
the SEC, so long as any of the Notes remain outstanding, the Company shall
cause copies of all quarterly and annual financial reports and of the
information, documents, and other reports (or copies of such portions of any
of the foregoing as the SEC may by rules and regulations prescribe) which the
Company is required to file with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act (including all information that would be required to be
contained in Forms 10-Q and 10-K and including information that would be
required with respect to the Guarantors) to be filed with the SEC and the
Trustee and mailed to the Holders at their addresses appearing in the
register of Notes maintained by the Registrar, in each case, within 15 days
of filing with the SEC. If the Company is not subject to the requirements of
such Section 13 or 15(d) of the Exchange Act, the Company shall nevertheless
continue to cause the annual and quarterly financial statements, including
any notes thereto (and, with respect to annual reports, an auditors' report
by an accounting firm of established national reputation) and a "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
comparable to that which would have been required to appear in annual or
quarterly reports filed under Section 13 or 15(d) of the Exchange Act
(including all financial information that would be required to be contained
in Forms 10-Q and 10-K and including all information that would be required
with respect to the Guarantors), to be so filed with the SEC for public
availability (to the extent permitted by the SEC) and the Trustee and mailed
to the Holders within 120 days after the end of the Company's fiscal years
and within 60 days after the end of each of the first three quarters of each
such fiscal year. The Company and the Guarantors shall also comply with the
provisions of TIA Section 314(a).
(b) The Company shall provide the Trustee with a sufficient
number of copies of all reports and other documents and information that the
Trustee may be required to deliver to the Holders of the Notes under this
Section 4.03.
SECTION 4.4. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company, the Guarantors and their respective
Subsidiaries during
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the preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether each has kept, observed, performed
and fulfilled its obligations under this Indenture and further stating, as to
each such Officer signing such certificate, that to the best of his or her
knowledge each entity has kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions of this Indenture
including, without limitation, a default in the performance or breach of Section
4.07, Section 4.09, Section 4.10 or Section 4.15 (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action each is taking or proposes
to take with respect thereto) and that to the best of his or her knowledge no
event has occurred and remains in existence by reason of which payments on
account of the principal of or interest, if any, on the Notes is prohibited or
if such event has occurred, a description of the event and what action each is
taking or proposes to take with respect thereto.
(b) [Intentionally Omitted].
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming
aware of (i) any Default or Event of Default, or (ii) any default under any
Indebtedness referred to in Section 6.01(f) or (g) of this Indenture, an
Officers' Certificate specifying such Default, Event of Default or default
and what action the Company or any of its Affiliates is taking or proposes to
take with respect thereto.
SECTION 4.5. TAXES.
The Company shall pay, 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 or where the
failure to effect such payment is not adverse in any material respect to the
Holders of the Notes.
SECTION 4.6. STAY, EXTENSION AND USURY LAWS.
The Company and each Guarantor covenants (to the extent that it may
lawfully do so) that it shall 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, that may
affect the covenants or the performance of this Indenture; and the Company and
each Guarantor (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and covenants that it shall
not, by resort to any such law, hinder, delay or impede the execution of any
power herein granted to the Trustee, but shall suffer and permit the execution
of every such power as though no such law has been enacted.
SECTION 4.7. LIMITATION ON RESTRICTED PAYMENTS.
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Neither the Company nor any of its Restricted Subsidiaries may, directly
or indirectly:
(a) declare or pay any dividend or make any distribution on
account of any Equity Interests of the Company other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of
the Company;
(b) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of EchoStar, the Company or any of their respective
Subsidiaries or Affiliates, other than any such Equity Interests owned by the
Company or any Wholly Owned Restricted Subsidiary;
(c) purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is expressly subordinated in right of payment to
the Notes or the Guarantees, except in accordance with the scheduled
mandatory redemption, sinking fund or repayment provisions set forth in the
original documentation governing such Indebtedness;
(d) declare or pay any dividend or make any distribution on
account of any Equity Interests of any Restricted Subsidiary, other than (x)
to the Company or any Wholly Owned Restricted Subsidiary or (y) to all
holders of any class or series of Equity Interests of such Restricted
Subsidiary on a PRO RATA basis; PROVIDED that in the case of this clause (y),
such dividends or distributions may not be in the form of Indebtedness or
Disqualified Stock; or
(e) make any Restricted Investment (all such prohibited payments
and other actions set forth in clauses (a) through (e) being collectively
referred to as "Restricted Payments"), unless, at the time of such Restricted
Payment:
(i) no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence
thereof;
(ii) after giving effect to such Restricted Payment
and the incurrence of any Indebtedness the net proceeds of which
are used to finance such Restricted Payment, the Indebtedness to
Cash Flow Ratio of the Company would not have exceeded 8.0 to 1;
and
(iii) such Restricted Payment, together with the
aggregate of all other Restricted Payments after the date of
this Indenture, is less than the sum of (A) the difference of
(x) cumulative Consolidated Cash Flow of the Company determined
at the time of such Restricted Payment (or, in case such
Consolidated Cash Flow shall be a deficit, minus 100% of such
deficit) minus (y) 120% of Consolidated Interest Expense of the
Company, each as determined for the period (taken as one
accounting period) from April 1, 1999 to the end of the
Company's most recently ended fiscal
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quarter for which internal financial statements are available at the
time of such Restricted Payment; plus (B) an amount equal to 100% of the
aggregate net cash proceeds and, in the case of proceeds consisting of
assets used in or constituting a business permitted under Section 4.17
of this Indenture, 100% of the fair market value of the aggregate net
proceeds other than cash received by the Company either from capital
contributions from EchoStar, or from the issue or sale (including an
issue or sale to EchoStar) of Equity Interests (other than Disqualified
Stock) of the Company (other than Equity Interests sold to any
Subsidiary of the Company), since the date of the Indenture, but, in the
case of any net cash proceeds, only to the extent such net cash proceeds
are not used to redeem Notes pursuant to the second paragraph of Section
3.07 of this Indenture; PROVIDED that the proceeds calculated for
purposes of this clause (B) shall exclude cash and non-cash property and
assets received by the Company pursuant to Section 4.18 and Section 4.19
hereof; plus (C) in the event that any Unrestricted Subsidiary is
designated by the Company as a Restricted Subsidiary, an amount equal to
the fair market value of the net Investment of the Company or a
Restricted Subsidiary in such Subsidiary at the time of such
designation; PROVIDED, HOWEVER, that the foregoing sum shall not exceed
the amount of the Investments made by the Company or any Restricted
Subsidiary in any such Unrestricted Subsidiary since the date of the
Indenture, plus (D) 100% of any cash dividends and other cash
distributions received by the Company and its Wholly Owned Restricted
Subsidiaries from an Unrestricted Subsidiary to the extent not included
in Cumulative Consolidated Cash Flow plus (E), to the extent not
included in clauses (A) through (D) above, an amount equal to the net
reduction in Investments of the Company and its Restricted Subsidiaries
since the date of this Indenture resulting from payments in cash of
interest on Indebtedness, dividends, or repayment of loans or advances,
or other transfers of property, in each case, to the Company or to a
Wholly Owned Restricted Subsidiary or from the net cash proceeds from
the sale, conveyance or other disposition of any such Investment;
PROVIDED, HOWEVER, that the foregoing sum shall not exceed, with respect
to any Person in whom such Investment was made, the amount of
Investments previously made by the Company or any Restricted Subsidiary
in such Person which were included in computations made pursuant to this
clause (iii).
The foregoing provisions will not prohibit the following (provided that
with respect to clauses (2), (3), (5), (6), (7), (8), (9), (12), (13) and
(14) below, no Default or Event of Default shall have occurred and be continuing
therein):
(1) the payment of any dividend within 60 days after
the date of declaration thereof, if at such date of declaration
such payment would have complied with the provisions of this
Indenture;
(2) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company in exchange
for, or out of the net
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proceeds of the substantially concurrent capital contribution from
EchoStar or from the substantially concurrent issue or sale (including
to EchoStar) of Equity Interests (other than Disqualified Stock) of the
Company (other than Equity Interests issued or sold to any Subsidiary of
the Company);
(3) Investments in an aggregate amount not to exceed
$75 million plus, to the extent not included in Consolidated
Cash Flow, an amount equal to the net reduction in such
Investments resulting from payments in cash of interest on
Indebtedness, dividends or repayment of loans or advances, or
other transfers of property, in each case, to the Company or to
a Wholly Owned Restricted Subsidiary or from the net cash
proceeds from the sale, conveyance or other disposition of any
such Investment; PROVIDED, HOWEVER, that the foregoing sum shall
not exceed, with respect to any Person in whom such Investment
was made, the amount of Investments previously made by the
Company or any Restricted Subsidiary in such Person pursuant to
this clause (3);
(4) Investments to fund the financing activity of
DNCC in the ordinary course of its business in an amount not to
exceed, as of the date of determination, the sum of
(A) $35 million plus (B) 40% of the aggregate cost to DNCC for
each Satellite Receiver purchased by DNCC and leased by DNCC to
a retail consumer in excess of 100,000 units;
(5) cash dividends or distributions to EchoStar to
the extent required for the purchase of employee stock options
to purchase Capital Stock of EchoStar, or Capital Stock of
EchoStar issued pursuant to the exercise of employee stock
options to purchase Capital Stock of EchoStar, in an aggregate
amount not to exceed $2 million in any calendar year and in an
aggregate amount not to exceed $10 million since the date of the
Indenture;
(6) a Permitted Refinancing (as defined in Section
4.09);
(7) Investments in an amount equal to 100% of the
aggregate net proceeds (whether or not in cash) received by the
Company from capital contributions from EchoStar or from the
issue and sale (including a sale to EchoStar) of Equity
Interests (other than Disqualified Stock) of the Company (other
than Equity Interests issued or sold to a Subsidiary of the
Company), on or after the date of the Indenture; PROVIDED THAT
such proceeds shall include only $300 million in the case of
assets contributed pursuant to Section 4.18 hereof and shall
include all of the cash contributed pursuant to Section 4.19
hereof plus, to the extent not included in Consolidated Cash
Flow, an amount equal to the net reduction in such Investments
resulting from payments in cash of interest on Indebtedness,
dividends, or repayment of loans or advances, or other transfers
of property, in each case, to the Company or to a Wholly Owned
Restricted
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Subsidiary or from the net cash proceeds from the sale, conveyance, or
other disposition of any such Investment; PROVIDED, HOWEVER, that the
foregoing sum shall not exceed, with respect to any Person in whom such
Investment was made, the amount of Investments previously made by the
Company or any Restricted Subsidiary in such Person pursuant to this
clause (7) in each case, PROVIDED that such Investments are in
businesses of the type described under Section 4.17 of this Indenture;
(8) Investments in any Restricted Subsidiary which is
a Guarantor but which is not a Wholly Owned Restricted
Subsidiary;
(9) Investments in NagraStar in an aggregate amount
not to exceed $25 million and in SkyVista in an aggregate amount
not to exceed $10 million;
(10) cash dividends or other cash distributions to
EchoStar in an amount sufficient to enable EchoStar to
(A) repurchase its 12 1/8% Senior Exchange Notes, (B) pay interest
on any of its 12 1/8% Senior Exchange Notes which remain
outstanding following consummation of the Tender Offers (as
defined in the Offering Memorandum) and (C) either (x) redeem
such 12 1/8% Senior Exchange Notes that remain outstanding at the
prices set forth in the indenture governing such notes; or
(y) repurchase or defease such notes at any time prior to such
redemption; PROVIDED in each case, that EchoStar has irrevocably
agreed, for the benefit of the Holders of the Notes, to apply
such cash pursuant to the clause above under which such dividend
or other distribution was made;
(11) cash dividends or distributions to EchoStar to
the extent required for the purchase of odd-lots of Equity
Interests of EchoStar, in an amount not to exceed $5 million in
the aggregate;
(12) the making of any Restricted Payment (including
the receipt of any Investment) permitted under or resulting from
any transaction permitted under Section 4.21 of this Indenture;
PROVIDED that all conditions to any such Restricted Payment set
forth in such Section 4.21 are satisfied; or
(13) Investments made as a result of the receipt of
non-cash proceeds from Asset Sales made in compliance with
Section 4.10 of this Indenture.
Restricted Payments made pursuant to clauses (1), (2), (4), (7) (but
only to the extent that net proceeds received by the Company as set forth in
such clause (7) were included in the computations made in clause (iii)(B) of the
first paragraph of this Section 4.07), (11) and (13) (but only to the extent
such Investments pursuant to clause (13) (a) were made as a result of the
receipt of
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non-cash proceeds from Asset Sales as set forth in clause (y) of the last
paragraph of Section 4.10 of this Indenture and (b) are not designated as
Investments made pursuant to an applicable provision of the immediately
preceding paragraph of this Section 4.07 (other than clause (13) thereof)) shall
be included as Restricted Payments in any computation made pursuant to
clause (3) of the first paragraph of this Section 4.07. Restricted Payments made
pursuant to clauses (3), (5), (6), (7) (but only to the extent that net proceeds
received by the Company as set forth in such clause (7) were not included in the
computations made in clause (iii)(B) of the first paragraph of this Section
4.07), (8), (9), (10), (12) and (13) (but only to the extent such Investments
pursuant to clause (13) (a) were not made as a result of the receipt of non-cash
proceeds from Asset Sales as set forth in clause (y) of the last paragraph of
Section 4.10 or (b) if made pursuant to such clause (y), were designated as
Investments made pursuant to an applicable provision of the immediately
preceding paragraph of this Section 4.07 (other than clause (13) thereof)) shall
not be included as Restricted Payments in any computation made pursuant to
clause (iii) of the first paragraph of this Section 4.07.
If the Company or any Restricted Subsidiary makes an Investment which
was included in computations made pursuant to this Section 4.07 and the Person
in which such Investment was made subsequently becomes a Restricted Subsidiary
that is a Guarantor, to the extent such Investment resulted in a reduction in
the amounts calculated under clause (iii) of the first paragraph of or under any
other provision of this Section 4.07, then such amount shall be increased by the
amount of such reduction.
Not later than five business days after January 1 and July 1 of each
year and ten days following a request from the Trustee, the Company shall
deliver to the Trustee an Officers' Certificate stating that each Restricted
Payment made in the six months preceding such January 1, July 1 or date of
request, as the case may be, is permitted and setting forth the basis upon which
the calculations required by this Section 4.07 were computed, which calculations
shall be based upon the Company's latest available financial statements.
SECTION 4.8. LIMITATIONS CONCERNING DISTRIBUTIONS BY SUBSIDIARIES, ETC.
The Company shall not, and shall not permit any Restricted Subsidiary of
the Company to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(a) pay dividends or make any other distribution to the Company or
any of its Restricted Subsidiaries on its Capital Stock or with respect to any
other interest or participation in, or measured by, its profits, or pay any
Indebtedness owed to the Company or any of its Restricted Subsidiaries;
(b) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
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(c) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries;
except for such encumbrances or restrictions existing under or by reasons of:
(i) Existing Indebtedness and existing agreements as
in effect on the date of the Indenture;
(ii) applicable law or regulation;
(iii) any instrument governing Acquired Debt as in
effect at the time of acquisition (except to the extent such
Indebtedness was incurred in connection with, or in
contemplation of, such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties
or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, provided that the
Consolidated Cash Flow of such Person shall not be taken into
account in determining whether such acquisition was permitted by
the terms of the Indenture; except to the extent that dividends
or other distributions are permitted notwithstanding such
encumbrance or restriction and could have been distributed;
(iv) by reason of customary non-assignment provisions
in leases entered into in the ordinary course of business and
consistent with past practices;
(v) Refinancing Indebtedness (as defined in Section
4.09 of this Indenture), PROVIDED that the restrictions
contained in the agreements governing such Refinancing
Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced;
(vi) the Indenture and the Notes;
(vii) Permitted Liens; or
(viii) any agreement for the sale of any Subsidiary or
its assets that restricts distributions by that Subsidiary
pending its sale; provided that during the entire period in
which such encumbrance or restriction is effective, such sale
(together with any other sales pending) would be permitted under
the terms of this Indenture.
SECTION 4.9. INCURRENCE OF INDEBTEDNESS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to (collectively,
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"incur") any Indebtedness (including Acquired Debt); PROVIDED, HOWEVER, that,
notwithstanding the foregoing the Company and any Guarantor may incur
Indebtedness (including Acquired Debt), if, after giving effect to the
incurrence of such Indebtedness and the application of the net proceeds thereof
on a pro forma basis, the Indebtedness to Cash Flow Ratio of the Company would
not have exceeded 8.0 to 1.
The foregoing limitation will not apply to any of the following
incurrences of Indebtedness:
(i) Indebtedness represented by the Notes, the
Guarantees and the Indenture;
(ii) the incurrence by the Company or any
Guarantor of Acquired Subscriber Debt not to exceed
$1,250 per Acquired Subscriber;
(iii) the incurrence by the Company or any
Guarantor of Deferred Payments and letters of credit with
respect thereto;
(iv) Indebtedness of the Company or any
Guarantor that ranks PARI PASSU with or is subordinated
to the Notes and the Guarantees in an aggregate principal
amount not to exceed $700 million at any one time
outstanding, which Indebtedness may be secured to the
extent permitted under Section 4.12 of this Indenture;
PROVIDED that up to $75 million at any one time
outstanding of such Indebtedness may be incurred by
Restricted Subsidiaries that are not Guarantors; PROVIDED
further that any Indebtedness incurred pursuant to this
clause (iv) that is incurred pursuant to a Credit
Agreement shall be incurred pursuant to a Credit
Agreement under which the Company is the sole primary
obligor (and under which the Guarantors (and no other
Restricted Subsidiary) may guarantee the primary
obligations of the Company);
(v) Indebtedness between and among the Company
and each of the Guarantors;
(vi) Acquired Debt of a Person incurred prior
to the date upon which such Person was acquired by the
Company or any Guarantor (excluding Indebtedness incurred
by such entity other than in the ordinary course of its
business in connection with, or in contemplation of, such
entity being so acquired) in an amount not to exceed
(A) $30 million in the aggregate for all such Persons
other than those described in the immediately following
clause (B); and (B) $5 million acquired in connection
with the acquisition of Media4;
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(vii) Existing Indebtedness;
(viii) the incurrence of Purchase Money
Indebtedness by the Company or any Guarantor in an amount
not to exceed the cost of construction, acquisition or
improvement of assets used in any business permitted
under Section 4.17 of this Indenture, being constructed,
acquired or improved as well as any launch costs and
insurance premiums related to such assets;
(ix) Hedging Obligations of the Company or any
of its Restricted Subsidiaries covering Indebtedness of
the Company or such Restricted Subsidiary to the extent
the notional principal amount of such Hedging Obligation
does not exceed the principal amount of the Indebtedness
to which such Hedging Obligation relates; PROVIDED,
HOWEVER, that such Hedging Obligations are entered into
to protect the Company and its Restricted Subsidiaries
from fluctuation in interest rates on Indebtedness
incurred in accordance with this Indenture;
(x) Indebtedness of the Company or any
Restricted Subsidiary in respect of performance bonds or
letters of credit of the Company or any Restricted
Subsidiary or surety bonds provided by the Company or any
Restricted Subsidiary incurred in the ordinary course of
business and on ordinary business terms in connection
with the businesses permitted under Section 4.17 of this
Indenture;
(xi) Indebtedness of the Company or any
Guarantor the proceeds of which are used solely to
finance the construction and development of a call center
owned by the Company or a Guarantor in McKeesport,
Pennsylvania or any refinancing thereof; PROVIDED that
the aggregate of all Indebtedness incurred pursuant to
this clause (xi) shall in no event exceed $10 million at
any one time outstanding;
(xii) the incurrence by the Company or any
Guarantor of Indebtedness issued in exchange for, or the
proceeds of which are used to extend, refinance, renew,
replace, substitute or refund in whole or in part
Indebtedness referred to in the first paragraph of this
Section 4.09 or in clauses (i), (ii), (iii), (vi) or
(vii) above ("Refinancing Indebtedness"); PROVIDED,
HOWEVER, that: (A) the principal amount of such
Refinancing Indebtedness shall not exceed the principal
amount and accrued interest of the Indebtedness so
extended, refinanced, renewed, replaced, substituted or
refunded and any premiums payable and reasonable fees,
expenses, commissions and costs in connection therewith;
(B) the Refinancing Indebtedness shall have a final
maturity later
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than, and a Weighted Average Life to Maturity equal to or greater
than, the final maturity and Weighted Average Life to Maturity,
respectively, of the Indebtedness being extended, refinanced,
renewed, replaced or refunded; and (C) the Refinancing
Indebtedness shall be subordinated in right of payment to the
Notes and the Guarantees, if at all, on terms at least as
favorable to the holders of Notes as those contained in the
documentation governing the Indebtedness being extended,
refinanced, renewed, replaced or refunded (a "Permitted
Refinancing");
(xiii) the guarantee by the Company or any
Guarantor of Indebtedness of the Company or a Restricted
Subsidiary that was permitted to be incurred by another
provision of this Section 4.09; or
(xiv) Indebtedness under Capital Lease
Obligations of the Company or any Guarantor with respect
to no more than two direct broadcast satellites at any
time.
For purposes of determining compliance with this Section 4.09, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories described in clauses (i) through (xiv) above or is permitted to be
incurred pursuant to the first paragraph of this Section 4.09 and also meets the
criteria of one or more of the categories described in clauses (i) through
(xiv) above, the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this Section 4.09 and may from
time to time reclassify such item of Indebtedness in any manner in which such
item could be incurred at the time of such reclassification. Accrual of interest
and the accretion of accreted value will not be deemed to be an incurrence of
Indebtedness for purposes of this Section 4.09.
SECTION 4.10. ASSET SALES.
If the Company or any Restricted Subsidiary, in a single transaction or
a series of related transactions:
(a) sells, leases (in a manner that has the effect of a disposition),
conveys or otherwise disposes of any of its assets (including by way of a
sale-and-leaseback transaction), other than: (i) sales or other dispositions of
inventory in the ordinary course of business; (ii) sales or other dispositions
to the Company or a Wholly Owned Restricted Subsidiary of the Company by the
Company or any Restricted Subsidiary; (iii) sales or other dispositions of
accounts receivable to DNCC for cash in an amount at least equal to the fair
market value of such accounts receivable; (iv) sales or other dispositions of
rights to construct or launch satellites; and (v) sales or other dispositions
permitted under Section 4.21 of this Indenture (PROVIDED THAT the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company shall be governed by the provisions
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of Article 5 of this Indenture);
(b) issues or sells Equity Interests of any Restricted Subsidiary
(other than any issue or sale of Equity Interests of ETC or a Subsidiary which
constitutes a Non-Core Asset permitted under Section 4.21 of this Indenture);
in either case, which assets or Equity Interests: (i) have a fair market value
in excess of $35 million (as determined in good faith by the Board of Directors
of the Company evidenced by a resolution of the Board of Directors of the
Company and set forth in an Officers' Certificate delivered to the Trustee); or
(ii) are sold or otherwise disposed of for net proceeds in excess of $35 million
(each of the foregoing, an "Asset Sale"), then:
(A) the Company or such Restricted Subsidiary,
as the case may be, must receive consideration at the
time of such Asset Sale at least equal to the fair market
value (as determined in good faith by the Board of
Directors of the Company evidenced by a resolution of the
Board of Directors of the Company and set forth in an
Officers' Certificate delivered to the Trustee not later
than the fifth business day following January 1 and
July 1 of each year and ten days following a request from
the Trustee which certificate shall cover each Asset Sale
made in the six months preceding January 1, July 1 or
date of request, as the case may be) of the assets sold
or otherwise disposed of; and
(B) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary, as
the case may be, must be in the form of (x) cash, Cash
Equivalents or Marketable Securities, (y) any asset which
is promptly (and in no event later than 90 days after the
date of transfer to the Company or a Restricted
Subsidiary) converted into cash; PROVIDED that to the
extent that such conversion is at a price that is less
than the fair market value (as determined above) of such
asset at the time of the Asset Sale in which such asset
was acquired, the Company shall be deemed to have made a
Restricted Payment in the amount by which such fair
market value exceeds the cash received upon conversion;
or (z) properties and capital assets (excluding Equity
Interests) to be used by the Company or any of its
Restricted Subsidiaries in a business permitted under
Section 4.17 of this Indenture; PROVIDED, HOWEVER, that
up to $20 million of assets in addition to assets
specified in clauses (x), (y) or (z) above at any one
time may be considered to be cash for purposes of this
clause (B), PROVIDED that the provisions of the next
paragraph are complied with as such non-cash assets are
converted to cash. The amount of any liabilities of the
Company or any Restricted Subsidiary that are assumed by
or on behalf of the transferee in connection with an
Asset Sale (and from which the Company or
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such Restricted Subsidiary are unconditionally released) shall be
deemed to be cash for the purpose of this clause (B).
The Net Proceeds from such Asset Sale shall be used only: (i) to acquire
assets used in, or stock or other ownership interests in a Person that upon the
consummation of such Asset Sale becomes a Restricted Subsidiary and will be
engaged primarily in, the business of the Company as described under Section
4.17 of this Indenture, to repurchase Notes or if the Company sells any of its
satellites after launch such that the Company or its Restricted Subsidiaries own
less than three in-orbit satellites, only to purchase a replacement satellite;
or (ii) as set forth in the next sentence. Any Net Proceeds from any Asset Sale
that are not applied or invested as provided in the preceding sentence within
365 days after such Asset Sale shall constitute "Excess Proceeds" and shall be
applied to an offer to purchase Notes and other senior Indebtedness of the
Company if and when required under Section 3.09 of this Indenture.
Clause (B) of the second preceding paragraph shall not apply to all or
such portion of the consideration (i) as is designated by the Company in an
Asset Sale as being subject to this paragraph; and (ii) with respect to which
the aggregate fair market value at the time of receipt of all consideration
received by the Company or any Restricted Subsidiary in all such Asset Sales so
designated does not exceed the amount contributed to the Company under Section
4.19 of this Indenture, plus, to the extent any such consideration did not
satisfy clauses (B)(x) or (B)(z) above, upon the exchange or repayment of such
consideration for or with assets which satisfy such clauses, an amount equal to
the fair market value of such consideration (evidenced by a resolution of the
Board of Directors of the Company and set forth in an Officers' Certificate
delivered to the Trustee as set forth in clause (A) above).
In addition, clause (B) above shall not apply to any Asset Sale
(x) where assets not related to the direct broadcast satellite business are
contributed to a joint venture between the Company or one of its Restricted
Subsidiaries and a third party that is not an Affiliate of EchoStar or any of
its Subsidiaries; PROVIDED THAT following the sale, lease, conveyance or other
disposition the Company or one of its Wholly Owned Restricted Subsidiaries owns
at least 50% of the voting and equity interest in such joint venture, (y) to the
extent the consideration therefor received by the Company or a Restricted
Subsidiary would constitute Indebtedness or Equity Interests of a Person that is
not an Affiliate of EchoStar, the Company or one of their respective
Subsidiaries; PROVIDED that the acquisition of such Indebtedness or Equity
Interests is permitted under the provisions of Section 4.07 of this Indenture
and (z) where assets sold are satellites, uplink centers or call centers,
PROVIDED that, in the case of clause (z) the Company and its Restricted
Subsidiaries continue to own at least three satellites, one uplink center and
one call center.
SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
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The Company shall not and shall not permit any Restricted Subsidiary to,
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (including any Unrestricted Subsidiary) (each of the
foregoing, an "Affiliate Transaction"), unless:
(a) such Affiliate Transaction is on terms that are no less favorable
to the Company or its Restricted Subsidiaries than those that would have been
obtained in a comparable transaction by the Company or such Subsidiaries with an
unrelated Person; and
(b) if such Affiliate Transaction involves aggregate payments in
excess of $15 million such Affiliate Transaction has been approved by a majority
of the disinterested members of the Board of Directors of the Company, and the
Company delivers to the Trustee no later than five business days following
January 1 or July 1 of each year or ten days following a request from the
Trustee a resolution of the Board of Directors of the Company set forth in an
Officers' Certificate certifying that such Affiliate Transaction has been so
approved and complies with clause (a) above;
PROVIDED, HOWEVER, that (i) the payment of compensation to directors and
management of EchoStar and its Subsidiaries; (ii) transactions between or among
the Company and its Wholly Owned Subsidiaries (other than Unrestricted
Subsidiaries of the Company); (iii) any dividend, distribution, sale, conveyance
or other disposition of any assets of, or Equity Interests in, any Non-Core
Assets or ETC or the proceeds of a sale, conveyance or other disposition
thereof, in accordance with the provisions of this Indenture; (iv) transactions
permitted by the provisions of this Indenture described above under clauses (1),
(2), (5), (6), (8), (9), (10), (11) and (12) of the second paragraph of Section
4.07 of this Indenture; (v) so long as it complies with clause (a) above, the
provision of backhaul, uplink, transmission, billing, customer service,
programming acquisition and other ordinary course services by the Company or any
of its Restricted Subsidiaries to Satellite Communications Operating Corporation
and to Transponder Encryption Services Corporation on a basis consistent with
past practice; and (vi) any transactions between the Company or any Restricted
Subsidiary of the Company and any Affiliate of the Company the Equity Interests
of which Affiliate are owned solely by the Company or one of its Restricted
Subsidiaries, on the one hand, and by Persons who are not Affiliates of the
Company or Restricted Subsidiaries of the Company, on the other hand, shall, in
each case, not be deemed Affiliate Transactions.
SECTION 4.12. LIMITATION ON LIENS.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create, incur, assume or suffer to exist any Lien on
any asset now owned or hereafter acquired, or on any income or profits therefrom
or assign or convey any right to receive income therefrom, except Permitted
Liens.
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SECTION 4.13. ADDITIONAL SUBSIDIARY GUARANTEES.
If the Company or any Guarantor transfers or causes to be transferred,
in one or a series of related transactions, property or assets (including,
without limitation, businesses, divisions, real property, assets or equipment)
having a fair market value (as determined in good faith by the Board of
Directors of the Company evidenced by a resolution of the Board of Directors of
the Company and set forth in an Officers' Certificate delivered to the Trustee
no later than five business days following January 1 and July 1 of each year or
ten days following a request from the Trustee, which certificate shall cover the
six months preceding January 1, July 1 or date of request, as the case may be)
exceeding the sum of $20 million in the aggregate for all such transfers after
the date of this Indenture minus the fair market value of Restricted
Subsidiaries acquired or created after the date of this Indenture that are not
Guarantors (fair market value being determined as of the time of such
acquisition) to Restricted Subsidiaries that are not Guarantors of the Notes,
the Company, shall, or shall cause each of such Subsidiaries to which any amount
exceeding such $20 million (less such fair market value) is transferred to:
(i) execute and deliver to the Trustee a supplemental indenture in form and
substance reasonably satisfactory to the Trustee pursuant to which such
Subsidiary shall unconditionally guarantee all of the Company's obligations
under the Notes on the terms set forth in this Indenture; and (ii) deliver to
the Trustee an Opinion of Counsel reasonably satisfactory to the Trustee that
such supplemental indenture and Guarantee have been duly authorized, executed
and delivered by and are valid and binding obligations of such Subsidiary or
such owner, as the case may be; PROVIDED, HOWEVER, that the foregoing provisions
shall not apply to transfers of property or assets (other than cash) by the
Company or any Guarantor in exchange for cash, Cash Equivalents or Marketable
Securities in an amount equal to the fair market value (as determined in good
faith by the Board of Directors of the Company evidenced by a resolution of the
Board of Directors of the Company and set forth in an Officers' Certificate
delivered to the Trustee no later than five business days following January 1
and July 1 of each year or ten days following a request from the Trustee, which
certificate shall cover the six months preceding January 1, July 1 or date of
request, as the case may be) of such property or assets. In addition, if (i) the
Company or any of its Restricted Subsidiaries acquires or creates another
Restricted Subsidiary or (ii) an Unrestricted Subsidiary of the Company is
redesignated as a Restricted Subsidiary or otherwise ceases to be an
Unrestricted Subsidiary, such Subsidiary shall execute a supplemental indenture
and deliver an opinion, each as required in the preceding sentence; PROVIDED
that no supplemental indenture or opinion shall be required if the fair market
value (as determined in good faith by the Board of Directors of the Company and
set forth in an Officers' Certificate delivered to the Trustee no later than
five business days following January 1 and July 1 of each year or ten days
following a request from the Trustee, which certificate shall cover the six
months preceding such January 1, July 1 or date of request, as the case may be)
of all such Restricted Subsidiaries created, acquired or designated since the
date of this Indenture (fair market value being determined as of the time of
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creation, acquisition or designation) does not exceed the sum of $20 million in
the aggregate minus the fair market value of the assets transferred to any
Subsidiaries of the Company which do not execute supplemental indentures
pursuant to the preceding sentences; PROVIDED FURTHER that to the extent a
Restricted Subsidiary is subject to the terms of any instrument governing
Acquired Debt, as in effect at the time of acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition) which instrument or restriction prohibits such Restricted
Subsidiary from issuing a guarantee of the Notes, such Restricted Subsidiary
shall not be required to execute such a supplemental indenture until it is
permitted to issue such guarantee pursuant to the terms of such Acquired Debt.
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 of this Indenture and the next succeeding paragraph
of this Section 4.14, the Company shall do or cause to be done all things
necessary to preserve and keep in full force and effect (i) its existence as a
corporation, and subject to 4.10, 4.21 and 10.03, the corporate, partnership or
other existence of any Restricted Subsidiary, in accordance with the respective
organizational documents (as the same may be amended from time to time) of the
Company or any Restricted Subsidiary and (ii) subject to Section 4.10, 4.21 and
10.03, the rights (charter and statutory), licenses and franchises of the
Company and its Restricted Subsidiaries; 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 Restricted Subsidiary if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.15. OFFER TO PURCHASE UPON CHANGE IN CONTROL.
Upon the occurrence of a Change of Control, the Company will be required
to make an offer (a "Change of Control Offer") to each Holder of Notes to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Notes at a purchase price equal to 101% of the aggregate principal
amount thereof, together with accrued and unpaid interest thereon to the date of
repurchase (in either case, the "Change of Control Payment"). Within 15 days
following any Change of Control, the Company shall mail a notice to each Holder
stating:
(a) that the Change of Control Offer is being made pursuant to the
covenant entitled "Section 4.15 - Offer to Purchase Upon Change in Control";
(b) the purchase price and the purchase date, which shall be no
earlier than 30 days nor later than 40 days after the date such notice is mailed
(the "Change of Control Payment Date");
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(c) that any Notes not tendered will continue to accrue interest in
accordance with the terms of this Indenture;
(d) that, unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control Payment
Date;
(e) 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 setting forth the name of the Holder, the
principal amount of Notes delivered for purchase, and a statement that such
Holder is withdrawing his election to have such Notes purchased;
(f) that Holders whose Notes are being purchased only in part will
be issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof; and
(g) any other information material to such Holder's decision to
tender Notes.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes in connection with a Change of Control.
SECTION 4.16. MAINTENANCE OF INSURANCE.
At all times, the Company or a Wholly Owned Restricted Subsidiary which
is a Guarantor will maintain and be the named beneficiary under Satellite
Insurance with respect to at least one-half of the satellites owned or leased by
the Company or its Subsidiaries (insured in an amount at least equal to the
depreciated cost of such satellites).
In the event that the Company or its Restricted Subsidiaries receive
proceeds from any Satellite Insurance covering any satellite owned by the
Company or any of its Restricted Subsidiaries, or in the event that the Company
or any of its Subsidiaries receives proceeds from any insurance maintained by
any satellite manufacturer or any launch provider covering any of such
satellites, all such proceeds (including any cash, Cash Equivalents or
Marketable Securities deemed to be proceeds of Satellite Insurance pursuant to
the respective definition thereof) shall be used only: (i) to purchase a
replacement satellite if at such time the Company or a Restricted Subsidiary
then owns less than three satellites, PROVIDED that if such replacement
satellite is of lesser value compared to the
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insured satellite, any insurance proceeds remaining after purchase of such
replacement satellite must be applied to the construction, launch and insurance
of a satellite of equal or greater value as compared to the insured satellite
(or in accordance with clause (iii) below); (ii) for purposes permitted under
Section 4.17 hereof if at such time the Company or a Restricted Subsidiary owns
three or more satellites (or in accordance with clause (iii) below); or (iii) to
the extent that such proceeds are not applied or contractually committed to be
applied as described in (i) or (ii) above within 365 days of the receipt of such
proceeds as "Excess Proceeds" to be applied to an offer to purchase Notes as set
forth under Section 3.09 hereof.
SECTION 4.17. ACTIVITIES OF THE COMPANY.
Neither the Company nor any of its Restricted Subsidiaries may engage in
any business other than developing, owning, engaging in and dealing with all or
any part of the business of domestic and international media, entertainment,
electronics or communications, and reasonably related extensions thereof,
including but not limited to the purchase, ownership, operation, leasing and
selling of, and generally dealing in or with, one or more communications
satellites and the transponders thereon, and communications uplink centers, the
acquisition, transmission, broadcast, production and other provision of
programming relating thereto and the manufacturing, distribution and financing
of equipment (including consumer electronic equipment) relating thereto.
SECTION 4.18. THE 110 ACQUISITION.
Upon consummation of the 110 Acquisition, all property and assets
acquired in such transaction or the right to receive such property and assets
will be contributed as capital contributions to the Company or one or more of
the Guarantors that is a Wholly Owned Restricted Subsidiary.
SECTION 4.19. ECHOSTAR EQUITY CONTRIBUTION.
Concurrently with or within five business days of the consummation of
the Offering, EchoStar shall make a capital contribution to the common equity of
the Company in the form of cash, Cash Equivalents or Marketable Securities in an
aggregate amount no less than $200 million.
SECTION 4.20. ACCOUNTS RECEIVABLE SUBSIDIARY.
The Company:
(a) may, and may permit any of its Subsidiaries to, notwithstanding
the provisions of Section 4.07 of this Indenture, make Investments in an
Accounts Receivable Subsidiary: (i) the proceeds of which are applied within
five Business Days of the making thereof solely to finance: (A) the purchase of
accounts receivable of the Company and its Subsidiaries or (B) payments required
in connection with the termination of all then existing arrangements relating to
the
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sale of accounts receivable or participation interests therein by an Accounts
Receivable Subsidiary (provided that the Accounts Receivable Subsidiary shall
receive cash, Cash Equivalents and accounts receivable having an aggregate fair
market value not less than the amount of such payments in exchange therefor) and
(ii) in the form of Accounts Receivable Subsidiary Notes to the extent permitted
by clause (b) below;
(b) shall not, and shall not permit any of its Subsidiaries to, sell
accounts receivable to an Accounts Receivable Subsidiary except for
consideration in an amount not less than that which would be obtained in an
arm's length transaction and solely in the form of cash or Cash Equivalents;
provided that an Accounts Receivable Subsidiary may pay the purchase price for
any such accounts receivable in the form of Accounts Receivable Subsidiary Notes
so long as, after giving effect to the issuance of any such Accounts Receivable
Subsidiary Notes, the aggregate principal amount of all Accounts Receivable
Subsidiary Notes outstanding shall not exceed 20% of the aggregate purchase
price paid for all outstanding accounts receivable purchased by an Accounts
Receivable Subsidiary since the date of this Indenture (and not written off or
required to be written off in accordance with the normal business practice of an
Accounts Receivable Subsidiary);
(c) shall not permit an Accounts Receivable Subsidiary to sell any
accounts receivable purchased from the Company or its Subsidiaries or
participation interests therein to any other Person except on an arm's length
basis and solely for consideration in the form of cash or Cash Equivalents or
certificates representing undivided interests of a Receivables Trust; provided
an Accounts Receivable Subsidiary may not sell such certificates to any other
Person except on an arm's length basis and solely for consideration in the form
of cash or Cash Equivalents;
(d) shall not, and shall not permit any of its Subsidiaries to, enter
into any guarantee, subject any of their respective properties or assets (other
than the accounts receivable sold by them to an Accounts Receivable Subsidiary)
to the satisfaction of any liability or obligation or otherwise incur any
liability or obligation (contingent or otherwise), in each case, on behalf of an
Accounts Receivable Subsidiary or in connection with any sale of accounts
receivable or participation interests therein by or to an Accounts Receivable
Subsidiary, other than obligations relating to breaches of representations,
warranties, covenants and other agreements of the Company or any of its
Subsidiaries with respect to the accounts receivable sold by the Company or any
of its Subsidiaries to an Accounts Receivable Subsidiary or with respect to the
servicing thereof; PROVIDED that neither the Company nor any of its Subsidiaries
shall at any time guarantee or be otherwise liable for the collectibility of
accounts receivable sold by them;
(e) shall not permit an Accounts Receivable Subsidiary to engage in
any business or transaction other than the purchase and sale of accounts
receivable or participation interests therein of the Company and its
Subsidiaries and activities
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incidental thereto;
(f) shall not permit an Accounts Receivable Subsidiary to incur any
Indebtedness other than the Accounts Receivable Subsidiary Notes, Indebtedness
owed to the Company and Non-Recourse Indebtedness; PROVIDED that the aggregate
principal amount of all such Indebtedness of an Accounts Receivable Subsidiary
shall not exceed the book value of its total assets as determined in accordance
with GAAP;
(g) shall cause any Accounts Receivable Subsidiary to remit to the
Company or a Restricted Subsidiary of the Company on a monthly basis as a
distribution all available cash and Cash Equivalents not held in a collection
account pledged to acquirers of accounts receivable or participation interests
therein, to the extent not applied to (i) pay interest or principal on the
Accounts Receivable Subsidiary Notes or any Indebtedness of such Accounts
Receivable Subsidiary owed to the Company, (ii) pay or maintain reserves for
reasonable operating expenses of such Accounts Receivable Subsidiary or to
satisfy reasonable minimum operating capital requirements or (iii) to finance
the purchase of additional accounts receivable of the Company and its
Subsidiaries; and
(h) shall not, and shall not permit any of its Subsidiaries to, sell
accounts receivable to, or enter into any other transaction with or for the
benefit of, an Accounts Receivable Subsidiary (i) if such Accounts Receivable
Subsidiary pursuant to or within the meaning of any Bankruptcy Law (A) commences
a voluntary case, (B) consents to the entry of an order for relief against it in
an involuntary case, (C) consents to the appointment of a custodian of it or for
all or substantially all of its property, (D) makes a general assignment for the
benefit of its creditors, or (E) generally is not paying its debts as they
become due; or (ii) if a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (A) is for relief against such Accounts
Receivable Subsidiary in an involuntary case, (B) appoints a Custodian of such
Accounts Receivable Subsidiary or for all or substantially all of the property
of such Accounts Receivable Subsidiary, or (C) orders the liquidation of such
Accounts Receivable Subsidiary, and, with respect to clause (ii) hereof, the
order or decree remains unstayed and in effect for 60 consecutive days.
SECTION 4.21. DISPOSITIONS OF ETC AND NON-CORE ASSETS.
Notwithstanding Section 4.07 and Section 4.10 of this Indenture, in the
event that the 110 Acquisition has been consummated, the requirements set forth
in Section 4.18 of this Indenture have been satisfied and the Indebtedness to
Cash Flow Ratio of the Company would not have exceeded 6.0 to 1 on a pro forma
basis after giving effect to the sale of all of the Company's Equity Interests
in or assets of ETC, then (1) the payment of any dividend or distribution
consisting of Equity Interests or assets of ETC or the proceeds of a sale,
conveyance or other
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disposition of such Equity Interests or assets or the sale, conveyance or other
disposition of Equity Interests or assets of ETC or the proceeds of a sale,
conveyance or other disposition of such Equity Interests or assets shall not
constitute a Restricted Payment and (2) the sale, conveyance or other
disposition of the Equity Interests or assets of ETC or the proceeds of a sale,
conveyance or other disposition of such Equity Interests or assets shall not
constitute an Asset Sale and (3) upon delivery of an Officers' Certificate to
the Trustee evidencing satisfaction of the conditions to such release and a
written request to the Trustee requesting such a release, ETC shall be
discharged and released from its Guarantee and, PROVIDED that the Company
designates ETC as an Unrestricted Subsidiary, from all covenants and
restrictions contained in this Indenture; PROVIDED that no such payment,
dividend, distribution, sale, conveyance or other disposition of any kind
(collectively, a "Payout") described in clauses (1) and (2) above shall be
permitted if at the time of such Payout (1) after giving pro forma effect to
such Payout, the Company would not have been permitted under Section 4.07 of
this Indenture to make a Restricted Payment in an amount equal to the total (the
"ETC Amount Due") of (x) the amount of all Investments (other than the
contribution of (i) title to the headquarters building of ETC in Inverness,
Colorado and the tangible assets therein to the extent used by ETC as of the
date of this Indenture and (ii) patents, trademarks and copyrights applied for
or granted as of the date of this Indenture to the extent used by ETC or result
from the business of ETC, in each case, to ETC) made in ETC by the Company or
its Restricted Subsidiaries since the date of this Indenture (which, in the case
of Investments in exchange for assets, shall be valued at the fair market value
of each such asset at the time each such Investment was made) minus (y) the
amount of the after-tax value of all cash returns on such Investments paid to
the Company or its Wholly Owned Restricted Subsidiaries (or, in the case of a
non-Wholly Owned Restricted Subsidiary, the pro rata portion thereof
attributable to the Company) minus (z) $25 million and (2) any contract,
agreement or understanding between ETC and the Company or any Restricted
Subsidiary of the Company and any loan or advance to or guarantee with, or for
the benefit of, ETC issued or made by the Company or one of its Restricted
Subsidiaries, is on terms that are less favorable to the Company or its
Restricted Subsidiaries than those that would have been obtained in a comparable
transaction by the Company or such Restricted Subsidiaries with an unrelated
Person, all as evidenced by a resolution of the Board of Directors of the
Company set forth in an Officers' Certificate delivered to the Trustee
certifying that each such contract, agreement, understanding, loan, advance and
guarantee has been approved by a majority of the members of such Board. In the
event that at the time of such Payout, the condition set forth in clause (1) of
the proviso of the preceding sentence cannot be satisfied, ETC may seek to have
a Person other than the Company or one of its Restricted Subsidiaries pay in
cash an amount to the Company or its Restricted Subsidiaries such that after
taxes, such amount is greater than or equal to the ETC Amount Due or the portion
of the ETC Amount Due which would not have been permitted to be made as a
Restricted Payment by the Company; PROVIDED that such payment shall be treated
for purposes of this Section 4.21 as a cash return on the Investments made in
ETC and provided further that for all purposes under this Indenture, such
payment shall not be included in any calculation under clauses (iii)(A) through
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(iii)(E) of the first paragraph of Section 4.07 of this Indenture. To the
extent that the ETC Amount Due or any portion thereof would have been permitted
to be made as a Restricted Payment by the Company and was not paid by another
Person as permitted by the preceding sentence, the Company shall be deemed to
have made a Restricted Payment in the amount of such ETC Amount Due or portion
thereof, as the case may be. It shall be a condition to any Payout pursuant to
the first paragraph of this Section 4.21 that, commencing with the quarter
commencing July 1, 1999, the Company shall have caused ETC to maintain, in
accordance with GAAP, consolidated financial statements for ETC and its
Subsidiaries on a "stand-alone" basis.
Notwithstanding Section 4.07 and Section 4.10 of this Indenture, (1) the
payment of any dividend or distribution consisting of Equity Interests or assets
of any Non-Core Asset or the proceeds of a sale, conveyance or other disposition
of such Equity Interests or assets or the sale, conveyance or other disposition
of Equity Interests in or assets of any Non-Core Asset or the proceeds of a
sale, conveyance or other disposition of such Equity Interests or assets shall
not constitute a Restricted Payment and (2) the sale, conveyance or other
disposition of the Equity Interests or assets of any Non-Core Asset or the
proceeds of a sale, conveyance or other disposition of such Equity Interests or
assets shall not constitute an Asset Sale; and (3) upon delivery of an Officers'
Certificate to the Trustee evidencing satisfaction of the conditions to such
release and a written request to the Trustee requesting such a release, any such
Non-Core Asset that is a Guarantor shall be discharged and released from its
Guarantee and, provided the Company designates such Non-Core Asset as an
Unrestricted Subsidiary, from all covenants and restrictions contained in this
Indenture; PROVIDED that no Payout of any Non-Core Asset shall be permitted such
as described in clauses (1) and (2) above if at the time of such Payout
(1) after giving pro forma effect to such Payout, the Company would not have
been permitted under Section 4.07 of this Indenture to make a Restricted Payment
in an amount equal to the total (the "Non-Core Asset Amount Due") of (x) the
amount of all Investments made in such Non-Core Asset by the Company or its
Restricted Subsidiaries since the date of this Indenture (which, in the case of
Investments in exchange for assets, shall be valued at the fair market value of
each such asset at the time each such Investment was made) minus (y) the amount
of the after-tax value of all cash returns on such Investments paid to the
Company or its Wholly Owned Restricted Subsidiaries (or, in the case of a
non-Wholly Owned Restricted Subsidiary, the pro rata portion thereof
attributable to the Company) minus (z) $25 million in the aggregate for all such
Payouts and $5 million for any single such Payout and (2) any contract,
agreement or understanding between or relating to a Non-Core Asset and the
Company or a Restricted Subsidiary of the Company and any loan or advance to or
guarantee with, or for the benefit of, a Restricted Subsidiary which is a
Non-Core Asset issued or made by the Company or one of its Restricted
Subsidiaries, is on terms that are less favorable to the Company or its
Restricted Subsidiaries than those that would have been obtained in a comparable
transaction by the Company or such Restricted Subsidiaries with an unrelated
Person, all as evidenced by a resolution of the Board of Directors of the
Company
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set forth in an Officers' Certificate delivered to the Trustee certifying that
each such contract, agreement, understanding, loan, advance and guarantee has
been approved by a majority of such Board. In the event that at the time of such
Payout, the condition set forth in clause (1) of the proviso of the preceding
sentence cannot be satisfied, such Restricted Subsidiary which is a Non-Core
Asset may seek to have a Person other than the Company or one of its Restricted
Subsidiaries pay in cash an amount to the Company such that after taxes, such
amount, is greater than or equal to the Amount Due or the portion of the
Non-Core Asset Amount Due which would not have been permitted to be made as a
Restricted Payment by the Company; PROVIDED that such payment shall be treated
for purposes of this Section 4.21 as a cash return on the Investments made in a
Non-Core Asset and provided further that for all purposes under this Indenture,
such payment shall not be included in any calculation under clauses (iii)(A)
through (iii)(E) of the first paragraph of Section 4.07 of this Indenture. To
the extent that the Non-Core Asset Amount Due or any portion thereof would have
been permitted to be made as a Restricted Payment by the Company and was not
paid by another Person as permitted by the preceding sentence, the Company shall
be deemed to have made a Restricted Payment in the amount of such Non-Core Asset
Amount Due or portion thereof, as the case may be.
Promptly after any Payout pursuant to the terms of this Section 4.21,
the Company shall deliver an Officers' Certificate to the Trustee setting forth
the Investments made by the Company or its Restricted Subsidiaries in ETC or a
Non-Core Asset, as the case may be, and certifying that the requirements of this
Section 4.21 have been satisfied in connection with the making of such Payout.
SECTION 4.22. PAYMENTS FOR CONSENT.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any holder of a Note for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
or agreed to be paid to all holders of the Notes that consent, waive or agree to
amend in the time frame set forth in the solicitation documents relating to such
consent, waiver or agreement.
ARTICLE 5.
SUCCESSORS
SECTION 5.1. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company may not consolidate or merge with or into (whether or not
the Company is the surviving entity), or 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 Person unless (a) the Company is
the
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surviving Person or the Person formed by or surviving any such consolidation or
merger (if other than the Company) or 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 Person formed by or surviving any such
consolidation or merger (if other than the Company) or the Person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall 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; (c) immediately after such transaction no Default or Event of
Default exists; and (d) the Company or the Person formed by or surviving any
such consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (i) shall have Consolidated Net Worth immediately after the transaction
(but prior to any purchase accounting adjustments or accrual of deferred tax
liabilities resulting from the transaction) not less than the Consolidated Net
Worth of the Company immediately preceding the transaction and (ii) would, at
the time of such transaction after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Indebtedness to Cash Flow Ratio test set forth in the first paragraph of
Section 4.09.
Notwithstanding the foregoing, the Company may merge with another Person
if (a) the Company is the surviving Person; (b) the consideration issued or paid
by the Company in such merger consists solely of Equity Interests (other than
Disqualified Stock) of the Company or Equity Interests of EchoStar; and (c)
immediately after giving effect to such merger, the Company's Indebtedness to
Cash Flow Ratio does not exceed the Company's Indebtedness to Cash Flow Ratio
immediately prior to such merger.
SECTION 5.2. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company in
accordance with Section 5.01, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such sale,
lease, conveyance or other disposition is made shall succeed to, and be
substituted for (so that from and after the date of such consolidation, merger,
sale, lease, conveyance or other disposition, the provisions of this Indenture
referring to the Company shall refer instead to the successor corporation and
not to the Company), 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.
ARTICLE 6.
DEFAULTS AND REMEDIES
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SECTION 6.1. EVENTS OF DEFAULT.
Each of the following constitutes an "EVENT OF DEFAULT":
(a) default for 30 days in the payment when due of
interest on the Notes;
(b) default in the payment when due of principal of the
Notes at maturity, upon redemption or otherwise;
(c) failure to comply with the provisions of Section
4.10, Section 4.11, Section 4.15 or, Section 4.16;
(d) default under Section 4.07 or Section 4.09, which
default remains uncured for 30 days, or the breach of any
representation or warranty, or the making of any untrue
statement, in any certificate delivered by the Company pursuant
to this Indenture;
(e) failure by the Company for 60 days after notice from
the Trustee or the Holders of at least 25% in principal amount
of the Notes then outstanding to comply with any of its other
agreements in this Indenture or the Notes;
(f) 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 Restricted Subsidiaries (or the payment of which
is guaranteed by the Company or any of its Restricted
Subsidiaries), which default is caused by a failure to pay when
due principal or interest on such Indebtedness within the grace
period provided in such Indebtedness (a "PAYMENT DEFAULT"), and
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, aggregates $20.0 million or
more;
(g) 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 Restricted Subsidiaries (or the payment of which
is guaranteed by the Company or any of its Restricted
Subsidiaries), which default results in the acceleration of such
Indebtedness prior to its express maturity and the principal
amount of any such Indebtedness, together with the principal
amount of any other Indebtedness under which there has been a
Payment Default or the maturity of which has been so
accelerated, aggregates $20.0 million or more; provided that
any acceleration (other than an acceleration which is the result
of a Payment Default under clause (f) above) of Indebtedness
under the Outstanding Deferred Payments in aggregate principal
amount not to exceed $50 million shall be deemed not to
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constitute an acceleration pursuant to this clause (g);
(h) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments (other than any judgment as
to which a reputable insurance company has accepted full
liability) aggregating in excess of $20.0 million, which
judgments are not stayed within 60 days after their entry;
(i) any Guarantee of the Notes or this Indenture shall
be held in a judicial proceeding to be unenforceable or invalid
or shall cease for any reason to be in full force and effect, or
any Guarantor, or any Person acting on behalf of any Guarantor,
shall deny or disaffirm its obligations under its Guarantee of
any Notes or this Indenture;
(j) EchoStar, the Company, any Guarantor or any
Significant Subsidiary of the Company pursuant to or within the
meaning of Bankruptcy Law: (i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it in
an involuntary case; (iii) consents to the appointment of a
Custodian of it or for all or substantially all of its property;
or (iv) makes a general assignment for the benefit of its
creditors; and
(k) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (i) is for relief
against EchoStar, the Company, any Guarantor or any Significant
Subsidiary of the Company in an involuntary case; (ii) appoints
a Custodian of EchoStar, the Company, any Guarantor or any
Significant Subsidiary of the Company or for all or
substantially all of the property of EchoStar, the Company, any
Guarantor or any Significant Subsidiary of the Company; or (iii)
orders the liquidation of EchoStar, the Company, any Guarantor
or any Significant Subsidiary of the Company, and the order or
decree remains unstayed and in effect for 60 consecutive days.
SECTION 6.2. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clause (j) or (k) of Section 6.01) 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 written notice to the Company and the
Trustee, may declare all the Notes to be due and payable immediately. In the
case of an Event of Default specified in clause (j) or (k) of Section 6.01, with
respect to EchoStar, the Company, any Guarantor or any Significant Subsidiary of
the Company, all outstanding Notes shall become and be immediately due and
payable without further action or notice. Holders of the Notes may not enforce
this Indenture or the Notes except as provided in this Indenture. The Trustee
may withhold from Holders of the 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
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determines that withholding notice is in such Holders' interest. The Holders of
a majority in aggregate principal amount of the then outstanding Notes by
written notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, interest or premium that has become due solely because of the
acceleration) have been cured or waived.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company or its
Subsidiaries with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to Section 3.07, an equivalent premium shall also become and be
immediately due and payable to the extent permitted by law.
All powers of the Trustee under this Indenture will be subject to
applicable provisions of the Communications Act, including without limitation,
the requirements of prior approval for DE FACTO or DE JURE transfer of control
or assignment of Title III licenses.
SECTION 6.3. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes and 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 of a Note 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 6.4. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of
Notes then outstanding, by notice to the Trustee, may on behalf of the Holders
of all of the Notes waive an existing Default or Event of Default and its
consequences under this Indenture, except a continuing Default or Event of
Default in the payment of the principal of, premium, if any, or interest on, the
Notes. Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
SECTION 6.5. CONTROL BY MAJORITY.
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Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for
exercising 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
conflicts with the law or this Indenture that the Trustee determines may be
unduly prejudicial to the rights of other Holders of Notes or that may involve
the Trustee in personal liability.
SECTION 6.6. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written
notice of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of
the then outstanding Notes make a written request to the Trustee
to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and,
if requested, provide 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 and, if
requested, the provision 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 of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
SECTION 6.7. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium, if any, 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 of
the Note.
SECTION 6.8. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
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continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to 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 (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), the Company's creditors or the Company's
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder of
a Note to make such payments to the Trustee, and in the event that the Trustee
shall consent to the making of such payments directly to the Holders of the
Notes, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07. To the
extent that the payment of any such compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 out of the estate in any such proceeding, shall be
denied for any reason, payment of the same shall be secured by a Lien on, and
shall be paid out of, any and all distributions, dividends, money, securities
and other properties which the Holders of the Notes may be entitled to receive
in such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder of a Note any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder of a Note thereof,
or to authorize the Trustee to vote in respect of the claim of any Holder of a
Note in any such proceeding.
SECTION 6.10. 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, its agents and attorneys for amounts
due under Section 7.07, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the
costs and expenses of collection;
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Second: to Holders of Notes for amounts due and unpaid
on the Notes for principal, premium, if any, and interest,
ratably, without preference or priority of any kind, according
to the amounts due and payable on the Notes for principal,
premium, if any and interest, respectively; and
Third: to the Company or to such party as a court of
competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes.
SECTION 6.11. 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 does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.1. 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 their 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 duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform
only those duties that are specifically set forth in this Indenture and
no others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; 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.
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However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabilities 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;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible 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 6.05.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to the Trustee 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 7.2. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon 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. The Trustee may consult with
counsel and the advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection from liability in respect of any
action taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.
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(c) The Trustee may act through its attorneys and 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 conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company or any Guarantor shall be
sufficient if signed by an Officer of the Company or such Guarantor.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
(g) Except with respect to Section 4.01, the Trustee shall have no duty
to inquire as to the performance of the Company's covenants in Article 4. In
addition, the Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) any Event of Default occurring pursuant to Sections
4.01, 6.01(a) and 6.01(b) or (ii) any Default or Event of Default of which the
Trustee shall have received written notification or obtained actual knowledge.
(h) Delivery of reports, information and documents to the Trustee under
Section 4.03 is for informational purposes only and the Trustee's receipt of the
foregoing shall not constitute constructive notice of any information contained
therein or determinable from information contained therein, including the
Company's compliance with any of its covenants hereunder.
SECTION 7.3. 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 any Affiliate of
the Company with the same rights it would have if it were not Trustee. However,
in the event that the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue as Trustee (if any of the Notes are registered pursuant to the
Securities Act), or resign. Any Agent may do the same with like rights and
duties. The Trustee is also subject to Sections 7.10 and 7.11.
SECTION 7.4. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and 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 or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture,
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it shall not be responsible for the use or application of any money received by
any Paying Agent other than the Trustee, and it shall not be responsible for any
statement or recital herein or any statement in the Notes or any other document
in connection with the sale of the Notes or pursuant to this Indenture other
than its certificate of authentication.
SECTION 7.5. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders
of Notes 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 of
principal of, premium, if any, or interest on any Note, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders
of the Notes.
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall mail to the Holders of the
Notes a brief report dated as of such reporting date that complies with TIA
Section 313(a) (but if no event described in TIA Section 313(a) has occurred
within the twelve months preceding the reporting date, no report need be
transmitted). The Trustee also shall comply with TIA Section 313(b). 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 the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which any Notes are listed. The Company shall promptly notify the Trustee when
any Notes are listed on any stock exchange.
SECTION 7.7. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and 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 promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, except any such
loss, liability or expense as may be attributable to the gross negligence,
willful misconduct or bad faith of the Trustee. The Trustee shall notify the
Company
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promptly of any claim for which it may seek indemnity. Failure by the Trustee
to so notify the Company shall not relieve the Company of its obligations
hereunder. 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 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 obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien shall survive the satisfaction and discharge of
this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(j) or (k) occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
SECTION 7.8. 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.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company and obtaining the prior written
approval of the FCC, if so required by the Communications Act, including Section
310(d) and the rules and regulations promulgated thereunder. The Holders of at
least a majority in principal amount of the then outstanding Notes may remove
the Trustee by so notifying the Trustee and the Company in writing. The Company
may remove the Trustee (subject to the prior written approval of the FCC, if
required by the Communications Act, including Section 310(d), and the rules and
regulations promulgated thereunder) if:
(a) the Trustee fails to comply with Section 7.10;
(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) the Trustee is no longer in compliance with the
foreign ownership provisions of Section 310 of the
Communications Act and the rules and regulations promulgated
thereunder.
(d) a Custodian or public officer takes charge of the
Trustee or its
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property; or
(e) 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 Notes 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 after written request by any Holder of a Note who has
been a Holder of a Note for at least six months fails to comply with Section
7.10, such Holder of a Note 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 of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
shall continue for the benefit of the retiring Trustee.
SECTION 7.9. 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 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof authorized under such laws to exercise corporate
trustee power, shall be subject to supervision or examination by federal or
state authority and shall have a combined capital and surplus of at least $25
million as set forth in its most recent published annual report of condition.
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This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11. 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 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, with respect to
the Notes, elect to have either Section 8.02 or 8.03 be applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article 8.
SECTION 8.2. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 of the option applicable
to this Section 8.02, the Company and the Guarantors shall be deemed to have
been discharged from its obligations with respect to all outstanding Notes on
the date the conditions set forth below are satisfied (hereinafter, "LEGAL
DEFEASANCE"). For this purpose, such Legal Defeasance means that the Company
shall be deemed to have paid and discharged the entire Indebtedness represented
by the outstanding Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest on such Notes when such payments are due, or on the
redemption date, as the case may be, (b) the Company's obligations with respect
to such Notes under Sections 2.05, 2.07, 2.08, 2.10, 2.11 and 4.02, (c) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and the
Company's obligations in connection therewith and (d) this Article 8. Subject
to compliance with this Article 8, the Company may exercise its option under
this Section 8.02 notwithstanding the prior exercise of its option under Section
8.03 with respect to the Notes.
SECTION 8.3. COVENANT DEFEASANCE.
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Upon the Company's exercise under Section 8.01 of the option applicable
to this Section 8.03, the Company shall be released from its obligations under
the covenants contained in Sections 3.09, 4.03, 4.04, 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21 and 5.01 with
respect to the outstanding Notes on and after the date the conditions set forth
below are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, such Covenant Defeasance means that, with respect to the outstanding
Notes, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 6.01(c),
but, except as specified above, the remainder of this Indenture and such Notes
shall be unaffected thereby. In addition, upon the Company's exercise under
Section 8.01 of the option applicable to this Section 8.03, Sections 6.01(c)
through 6.01(i) shall not constitute Events of Default.
SECTION 8.4. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or Section 8.03 to the outstanding Notes:
(a) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee
satisfying the requirements of Section 7.10 who shall agree to
comply with the provisions of this Article 8 applicable to it)
as trust funds in trust for the purpose of making the following
payments, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of such Notes, (i) cash in
U.S. Dollars, (ii) non-callable Government Securities which
through the scheduled payment of principal and interest in
respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, cash in
U.S. Dollars, or (iii) a combination thereof, in such amounts,
as will be sufficient in each case, in the opinion of a
nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the
Trustee, to pay and discharge and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge (A)
the principal of, premium, if any, and interest on the
outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be, of such principal or
installment of principal, premium, if any, or interest and (B)
any mandatory sinking fund payments or analogous payments
applicable to the outstanding Notes on the day on which such
payments are due and payable in accordance with the terms of
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this Indenture and of such Notes; PROVIDED that the Trustee shall have
been irrevocably instructed to apply such money or the proceeds of such
non-callable Government Securities to said payments with respect to the
Notes;
(b) In the case of an election under Section 8.02, the
Company shall have delivered to the Trustee an Opinion of
Counsel in the United States reasonably satisfactory to the
Trustee confirming that (i) the Company has received from, or
there has been published by, the Internal Revenue Service a
ruling or (ii) since the date hereof, there has been a change in
the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion shall confirm that,
the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such
Legal Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not
occurred;
(c) In the case of an election under Section 8.03, the
Company shall have delivered to the Trustee an Opinion of
Counsel in the United States reasonably satisfactory to the
Trustee to the effect that the Holders of the outstanding Notes
will not recognize income, gain or loss for Federal income tax
purposes as a result of such Covenant Defeasance and will be
subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred;
(d) No Default or Event of Default with respect to the
Notes shall have occurred and be continuing on the date of such
deposit or, in so far as Section 6.01(j) or 6.01(k) is
concerned, at any time in the period ending on the 91st day
after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of
such period);
(e) Such Legal Defeasance or Covenant Defeasance shall
not result in a breach or violation of, or constitute a default
under, this Indenture or any other material agreement or
instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is
bound;
(f) The Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit made by the
Company pursuant to its election under Section 8.02 or 8.03 was
not made by the Company with the intent of preferring the
Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and
(g) The Company shall have delivered to the Trustee an
Officers'
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Certificate and an Opinion of Counsel in the United States, each stating
that all conditions precedent provided for relating to either the Legal
Defeasance under Section 8.02 or the Covenant Defeasance under Section
8.03 (as the case may be) have been complied with as contemplated by
this Section 8.04.
SECTION 8.5. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06, all money and Government Securities (including
the proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this Section 8.05, the "Trustee") pursuant to
Section 8.04 in respect of the outstanding Notes shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company or a Guarantor, if any, acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or Government Securities
deposited pursuant to Section 8.04 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or Government Securities held by it as provided in Section
8.04 which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee (which may be the opinion delivered under Section 8.04(a)), are in
excess of the amount thereof which would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.6. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustees thereof, shall thereupon cease;
PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the
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expense of the Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Company.
SECTION 8.7. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
Dollars or Government Notes in accordance with Section 8.02 or 8.03, as the case
may be, by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the Company's obligations under this Indenture and the Notes shall be revived
and reinstated as though no deposit had occurred pursuant to Section 8.02 or
8.03 until such time as the Trustee or Paying Agent is permitted to apply all
such money in accordance with Section 8.02 or 8.03, as the case may be;
PROVIDED, HOWEVER, that, if the Company makes any payment of principal of,
premium, if any, or interest on any Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.1. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the Notes or
the Guarantees without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes or Guarantees in
addition to or in place of certificated Notes or the Guarantees;
(c) to provide for the assumption of the Company's or a
Guarantor's obligations to the Holders of the Notes in the case
of a merger or consolidation pursuant to Article 5, with respect
to the Company and pursuant to Section 10.03, with respect to
the Guarantors;
(d) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or the Guarantees
or that does not adversely affect the legal rights hereunder of
any Holder of the Notes or the Guarantors; or
(e) to comply with requirements of the SEC in order to
effect or
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maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of the Board
of Directors of the Company and each Guarantor authorizing the execution of any
such amended or supplemental Indenture, and upon receipt by the Trustee of the
documents described in Section 9.06, the Trustee shall join with the Company and
the Guarantors in the execution of any amended or supplemental Indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations which may be therein contained, but the
Trustee shall not be obligated to enter into such amended or supplemental
Indenture which affects its own rights, duties or immunities under this
Indenture or otherwise.
SECTION 9.2. WITH CONSENT OF HOLDERS OF NOTES.
The Company, Guarantors and the Trustee may amend or supplement this
Indenture, the Notes or the Guarantees or any amended or supplemental Indenture
with the written consent of the Holders of Notes of at least a majority in
aggregate principal amount of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange offer for the Notes), and
any existing Default and its consequences or compliance with any provision of
this Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for the Notes).
Notwithstanding the foregoing, (a) Sections 3.09, 4.10 and 4.15 of this
Indenture (including, in each case, the related definitions) may not be amended
or waived without the written consent of at least 66-2/3% in principal amount of
the Notes then outstanding (including consents obtained in connection with a
tender offer or exchange offer for the Notes) and (b) without the consent of
each Holder affected, an amendment or waiver may not (with respect to any Notes
held by a non-consenting Holder of Notes):
(i) reduce the aggregate principal amount of Notes
whose Holders must consent to an amendment, supplement or
waiver;
(ii) reduce the principal of or change the fixed
maturity of any Note or alter the provisions with respect to the
redemption of the Notes;
(iii) reduce the rate of or change the time for payment
of interest on any Note;
(iv) waive a Default or Event of Default in the
payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the
Holders of at least a majority in aggregate principal amount of
the then outstanding Notes and a waiver of the payment default
that resulted from such acceleration);
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(v) make any Note payable in money other than that
stated in the Notes;
(vi) make any change in the provisions of this
Indenture relating to waivers of past Defaults or the rights of
Holders of Notes to receive payments of principal of or interest
on the Notes;
(vii) waive a redemption payment with respect to any
Note; or
(viii) make any change in the foregoing amendment and
waiver provisions.
Upon the request of the Company accompanied by a resolution of the Board
of Directors of the Company and each Guarantor authorizing the execution of any
such amended or supplemental Indenture, and upon the filing with the Trustee of
evidence satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of the documents described in Section
9.06, the Trustee shall join with the Company and the Guarantors in the
execution of such amended or supplemental Indenture unless such amended or
supplemental Indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes.
SECTION 9.3. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture, the Notes or the
Guarantees shall be set forth in an amended or supplemental Indenture that
complies with the TIA as then in effect.
SECTION 9.4. 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 of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
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debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder of a Note.
The Company may fix a record date for determining which Holders of the
Notes must consent to such amendment, supplement or waiver. If the Company
fixes a record date, the record date shall be fixed at (i) the later of 30 days
prior to the first solicitation of such consent or the date of the most recent
list of Holders of Notes furnished to the Trustee prior to such solicitation
pursuant to Section 2.05 or (ii) such other date as the Company shall designate.
SECTION 9.5. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement 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, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. Neither
the Company nor any Guarantor may sign an amendment or supplemental Indenture
until its Board of Directors approves it.
ARTICLE 10.
GUARANTEES
SECTION 10.1. GUARANTEE.
Each of the Guarantors, jointly and severally, hereby unconditionally
guarantees to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, irrespective of the validity
and enforceability of this Indenture, the Notes or the Obligations of the
Company hereunder or thereunder, that: (a) the principal of and interest on the
Notes will be promptly paid in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest on the overdue principal of
and interest on the Notes, if any, if lawful, and all other obligations of the
Company to the Holders or the
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Trustee hereunder or thereunder will be promptly paid in full or performed, all
in accordance with the terms hereof and thereof; and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due of any amount
so guaranteed or any performance so guaranteed for whatever reason, each of the
Guarantors, jointly and severally, will be obligated to pay the same
immediately. Each of the Guarantors, jointly and severally, hereby agrees that
its obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Notes or this Indenture, the absence of any
action to enforce the same, any waiver or consent by any Holder of the Notes
with respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor. Each of the Guarantors, jointly and severally, hereby waives
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require a
proceeding first aginst the Company, protest, notice (except that the Trustee
shall provide at least ten days' prior written notice to the Company on behalf
of the Guarantors before taking any action for which the Communications Act
and/or the FCC rules require such notice and which right to notice is not
waivable by any Guarantor) and all demands whatsoever and covenant that this
Guarantee will not be discharged except by complete performance of the
Obligations guaranteed hereby. If any Holder or the Trustee is required by any
court or otherwise to return to the Company or any Guarantor, or any Custodian,
Trustee, liquidator or other similar official acting in relation to either the
Company or any Guarantor, any amount paid by either to the Trustee or such
Holder, this Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each of the Guarantors, jointly and
severally, agrees that it shall not be entitled to any right of subrogation in
relation to the Holders in respect of any obligations guaranteed hereby. Each
of the Guarantors, jointly and severally, further agrees that, as between such
Guarantor, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the Obligations guaranteed hereby may be accelerated as
provided in Article 6 for the purposes of this Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6, such obligations
(whether or not due and payable) shall forthwith become due and payable by each
Guarantor for the purpose of this Guarantee.
Notwithstanding the foregoing, in the event that any Guarantee would
constitute or result in a violation of any applicable fraudulent conveyance or
similar law of any relevant jurisdiction, the liability of the applicable
Guarantor under its Guarantee shall be reduced to the maximum amount permissible
under such fraudulent conveyance or similar law. The Guarantors hereby agree as
among themselves that each Guarantor that makes a payment or distribution under
a Guarantee shall be entitled to a pro rata contribution from each other
Guarantor
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hereunder based on the net assets of each other Guarantor. The preceding
sentence shall in no way affect the rights of the Holders of Notes to the
benefits of this Indenture, the Notes or the Guarantees.
Nothing in this Section 10.01 shall apply to claims of, or payments to,
the Trustee under or pursuant to the provisions of Section 7.07.
Nothing contained in this Section 10.01 or elsewhere in this Indenture,
the Notes or the Guarantees, shall impair, as between any Guarantor and the
Holder of any Note, the obligation of such Guarantor, which is unconditional and
absolute, to pay to the Holder thereof the principal of, premium, if any, and
interest on the Notes in accordance with their terms and the terms of the
Guarantee and this Indenture, nor shall anything herein or therein prevent the
Trustee or the Holder of any Note from exercising all remedies otherwise
permitted by applicable law or hereunder or thereunder upon the occurrence of an
Event of Default.
SECTION 10.2. EXECUTION AND DELIVERY OF GUARANTEES.
To evidence its Guarantee set forth in Section 10.01, each Guarantor
hereby agrees that a notation of such Guarantee substantially in the form of
Exhibit B shall be endorsed by an officer of such Guarantor on each Note
authenticated and delivered by the Trustee and that this Indenture shall be
executed on behalf of such Guarantor by its President or one of its Vice
Presidents and attested to by an Officer.
Each of the Guarantors, jointly and severally, hereby agrees that its
Guarantee set forth in Section 10.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Guarantee.
If an officer or Officer whose signature is on this Indenture or on the
Guarantee of a Guarantor no longer holds that office at the time the Trustee
authenticates the Note on which the Guarantee of such Guarantor is endorsed, the
Guarantee of such Guarantor shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantees set forth in
this Indenture on behalf of the Guarantors.
SECTION 10.3. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
Subject to 10.04, a Guarantor may not, and the Company will not cause or
permit any Guarantor to, consolidate or merge with or into (whether or not such
Guarantor is the surviving entity), or 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 Person other than the Company or
another Guarantor unless:
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(a) such Guarantor is the surviving Person or the Person
formed by or surviving any such consolidation or merger (if
other than such Guarantor) or 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 Person formed by or surviving any such consolidation
or merger (if other than such Guarantor) or the Person to which
such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of
such Guarantor, pursuant to a supplemental indenture in form
reasonably satisfactory to the Trustee, under the Notes and this
Indenture;
(c) immediately after such transaction no Default or Event of
Default exists; and
(d) (i) the Company shall have Consolidated Net Worth
immediately after the transaction (after any purchase accounting
adjustments or accrual of deferred tax liabilities resulting
from the transaction) not less than the Consolidated Net Worth
of the Company immediately preceding the transaction.
In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor corporation, by supplemental indenture, executed
and delivered to the Trustee and satisfactory in form to the Trustee, of any
Guarantee previously signed by the Guarantor and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Guarantees to be issuable hereunder by such Guarantor
and delivered to the Trustee. All the Guarantees so issued shall in all
respects have the same legal rank and benefit under this Indenture as the
Guarantees theretofore and thereafter issued in accordance with the terms of
this Indenture as though all of such Guarantees had been issued at the date of
the execution of such Guarantee by such Guarantor.
Nothing contained in this Indenture shall prevent any consolidation or
merger of a Guarantor that is a Wholly Owned Restricted Subsidiary with or into
the Company or another Guarantor that is a Wholly Owned Restricted Subsidiary of
the Company or shall prevent any sale or conveyance of the property of a
Guarantor that is a Wholly Owned Restricted Subsidiary as an entirety or
substantially as an entirety to the Company or another Guarantor that is a
Wholly Owned Restricted Subsidiary of the Company. Except as set forth in
Articles 4 and 5, nothing contained in this Indenture shall prevent any
consolidation or merger of a Guarantor that is a Restricted Subsidiary with or
into the Company or
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another Guarantor that is a Restricted Subsidiary of the Company or shall
prevent any sale or conveyance of the property of a Guarantor that is a
Restricted Subsidiary as an entirety or substantially as an entirety to the
Company or another Guarantor that is a Restricted Subsidiary of the Company.
SECTION 10.4. RELEASES FROM GUARANTEES.
If pursuant to any direct or indirect sale of assets (including, if
applicable, all of the capital stock of any Guarantor) or other disposition by
way of merger, consolidation or otherwise the assets sold include all or
substantially all of the assets of any Guarantor or all of the capital stock of
any such Guarantor, then such Guarantor or the Person acquiring the property (in
the event of a sale or other disposition of all or substantially all of the
assets of such a Guarantor) shall be released and relieved of its obligations
under its Guarantee or Section 10.03, as the case may be; PROVIDED that in the
event of an Asset Sale, the Net Proceeds from such sale or other disposition are
applied in accordance with the provisions of Section 4.10. In addition, a
Guarantor shall be released and relieved of its obligations under its Guarantee
or Section 10.03, as the case may be (1) if such Guarantor is dissolved or
liquidated in accordance with the provisions of this Indenture; (2) if the
Company designates any such Guarantor as an Unrestricted Subsidiary in
compliance with the terms of this Indenture; or (3) without limiting the
generality of the foregoing, in the case of ETC or any Guarantor which
constitutes a Non-Core Asset, upon the sale or other disposition of any Equity
Interest of ETC or such Guarantor which constitutes a Non-Core Asset,
respectively. Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the provisions of this
Indenture, including without limitation Section 4.10 or 4.21 if applicable, the
Trustee shall execute any documents reasonably required in order to evidence the
release of any such Guarantor from its obligations under its Guarantee. Any
such Guarantor not released from its obligations under its Guarantee shall
remain liable for the full amount of principal of and interest on the Notes and
for the other obligations of such Guarantor under this Indenture as provided in
this Article 10.
ARTICLE 11.
MISCELLANEOUS
SECTION 11.1. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA Section 318(c), the imposed duties shall control.
SECTION 11.2. NOTICES.
Any notice or communication by the Company, the Guarantors or the
Trustee to the other is duly given if in writing and delivered in Person or
mailed
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by first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
other's address:
If to the Company or the Guarantors:
EchoStar DBS Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
Telecopier No.: (303) 799-1699
Attention: David K. Moskowitz, Esq.
With a copy to:
Winthrop, Stimson, Putnam & Roberts
1 Battery Park Plaza
New York, NY 10004
Telecopier No.: (212) 858-1500
Attention: David Ambrosia, Esq.
If to the Trustee:
U.S. Bank Trust National Association
180 East Fifth Street
Saint Paul, Minnesota 55101
Telecopier No: (651) 244-0711
Attention: Corporate Trust Administration
The Company, each Guarantor or the Trustee, by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders of
Notes) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder of a Note shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA Section 313(c), to the extent required by
the TIA. Failure to mail a notice or communication to a Holder of a Note or any
defect in it shall not affect its sufficiency with respect to other Holders of
Notes.
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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 of Notes, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 11.3. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders of the Notes may communicate pursuant to TIA Section 312(b) with
other Holders of Notes 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 11.4. 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 in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent and covenants, if any,
provided for in this Indenture relating to the proposed action
have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been
satisfied.
SECTION 11.5. 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 a certificate provided
pursuant to TIA Section 314(a)(4)) shall include:
(a) a statement that the Person making such certificate or
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, he or
she has made such examination or investigation as is necessary
to enable him to express an informed opinion as to whether or
not such covenant or condition has been satisfied; and
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(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 11.6. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders of Notes. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 11.7. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES,
INCORPORATORS AND STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of EchoStar,
the Company, the Guarantors or any of their Affiliates, as such, shall have any
liability for any obligations of EchoStar, the Company, the Guarantors and any
of their Affiliates under the Notes, the Guarantees or this 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
issuance of the Notes.
SECTION 11.8. GOVERNING LAW.
The internal law of the State of New York shall govern and be used to
construe this Indenture, the Notes and the Guarantees.
SECTION 11.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of EchoStar, the Company or any of their respective Subsidiaries.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 11.10. SUCCESSORS.
All agreements of the Company, the Guarantors in this Indenture, the
Notes and the Guarantees shall bind the successors of the Company and the
Guarantors, respectively. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 11.11. 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 11.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed
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copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents 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 of this Indenture and shall in no way modify or restrict any
of the terms or provisions hereof.
[Signatures on following page]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
ECHOSTAR DBS CORPORATION,
a Colorado corporation
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
DIRECT BROADCASTING SATELLITE CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR SATELLITE CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR TECHNOLOGIES CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR SATELLITE BROADCASTING CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
<PAGE>
DISH, LTD.
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
DIRECTSAT CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHO ACCEPTANCE CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSPHERE CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
<PAGE>
DISH INSTALLATION NETWORK CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
HT VENTURES, INC.
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR INTERNATIONAL CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
SATELLITE SOURCE, INC.
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
HOUSTON TRACKER SYSTEMS, INC.
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
<PAGE>
ECHOSTAR NORTH AMERICA CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
SKY VISTA CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR INDONESIA, INC.
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR SPACE CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee
By: /s/ Richard H. Prokosch
------------------------------------------
Name: Richard H. Prokosch
Title: Assistant Vice President
<PAGE>
EXHIBIT A
[Face of Note]
- ---------------------------------------------------------------------------
9 1/4% Senior Note due 2006
Cert. No.
CUSIP No.
---------
EchoStar DBS Corporation
promises to pay to
- ----------------
or its registered assigns
the principal sum of
--------------
Dollars on February 1, 2006.
Interest Payment Dates: February 1 and August 1, commencing August 1, 1999.
Record Dates: January 15 and July 15 (whether or not a Business Day).
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed.
Dated:
------------
ECHOSTAR DBS CORPORATION
By:
------------------------------
Title:
By:
------------------------------
Title:
(SEAL)
This is one of the Notes
referred to in the within-
mentioned Indenture:
U.S. Bank Trust National Association, as Trustee
By:
--------------------
A-103
<PAGE>
Authorized Signatory
Dated:
---------------
(Back of Note)
Capitalized terms used herein have the meanings assigned to them in
the Indenture (as defined below) unless otherwise indicated
(a) INTEREST. EchoStar DBS Corporation, a Colorado corporation (the
"Company") promises to pay interest on the principal amount of this Note at the
rate and in the manner specified below. Interest will accrue at 9 1/4% per annum
and will be payable semi-annually in cash on each February 1 and August 1,
commencing August 1, 1999, or if any such day is not a Business Day on the next
succeeding Business Day (each an "INTEREST PAYMENT DATE") to Holders of record
of the Notes at the close of business on the immediately preceding January 15
and July 15, whether or not a Business Day. Interest will be computed on the
basis of a 360-day year consisting of twelve 30-day months. Interest shall
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from January 25, 1999. To the extent lawful, the Company
shall pay interest on overdue principal at the rate of the then applicable
interest rate on the Notes; it shall pay interest on overdue installments of
interest (without regard to any applicable grace periods) at the same rate to
the extent lawful. In addition, Holders may be entitled to the benefits of
certain provisions of the Registration Rights Agreement.
(b) 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 next preceding the Interest Payment Date,
even if such Notes are canceled after such record date and on or before such
Interest Payment Date. The Holder hereof must surrender this Note to a Paying
Agent to collect principal payments. The Company will pay principal and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts. The Notes will be payable both as to
principal and interest at the office or agency of the Company maintained for
such purpose or, at the option of the Company, payment of interest may be made
by check mailed to the Holders of Notes at their respective addresses set forth
in the register of Holders of Notes. Unless otherwise designated by the Company,
the Company's office or agency will be the office of the Trustee maintained for
such purpose.
(c) PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or
co-registrar without prior notice to any Holder of a Note. The Company may act
in any such capacity.
(d) INDENTURE. The Company issued the Notes under an Indenture, dated as
of January 25, 1999 (the "INDENTURE"), among the Company, the Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part
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of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Sections 77aaa-77bbbb), as in effect on the date of the Indenture. The
Notes are subject to all such terms, and Holders of Notes are referred to the
Indenture and such act for a statement of such terms. The terms of the Indenture
shall govern any inconsistencies between the Indenture and the Notes. The Notes
are unsecured obligations of the Company limited to $375,000,000 in aggregate
principal amount.
(e) OPTIONAL REDEMPTION. Except as provided in the next paragraph, the
Notes will not be redeemable at the Company's option prior to February 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)
set forth below, together with accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the 12-month period beginning on
February 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003 104.625%
2004 102.313
2005 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to February 1, 2002, the
Company may redeem up to 35% of the aggregate principal amount of the Notes
outstanding at a redemption price equal to 109.250% of the principal amount
thereof on the repurchase date, together with accrued and unpaid interest to
such repurchase date, with the net cash proceeds of one or more public or
private sales (including sales to EchoStar, regardless of whether EchoStar
obtained such funds from an offering of Equity Interests or Indebtedness of
EchoStar or otherwise) of Equity Interests (other than Disqualified Stock) of
the Company (other than proceeds from a sale to any Subsidiary of the Company or
any employee benefit plan in which the Company or any of its Subsidiaries
participates); PROVIDED that: (a) at least 65% in aggregate principal amount of
the Notes originally issued remain outstanding immediately after the occurrence
of such redemption; (b) such redemption occurs within 120 days of the date of
the closing of any such sale; and (c) the sale of such Equity Interests is made
in compliance with the terms of the Indenture.
(f) REPURCHASE AT OPTION OF HOLDER. Upon the occurrence of a Change of
Control, the Company will be required to offer to purchase on the Change of
Control Payment Date all outstanding Notes at a purchase price equal to 101% of
the aggregate principal amount thereof, together with accrued and unpaid
interest thereon to the date of purchase. 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 Change of Control Payment Date and may elect to have such
Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" appearing below.
When the cumulative amount of Excess Proceeds that have not been applied in
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accordance with Section 4.10 (Asset Sales) and 4.16 (Maintenance of Insurance)
or Section 3.09 (Offer to Purchase By Application of Excess Proceeds) of the
Indenture, exceeds $17.5 million, the Company will be required to offer to
purchase the maximum principal amount of Notes that may be purchased out of such
Excess Proceeds at an offer price in cash in an amount equal to 101% of the
principal amount thereof, together with accrued and unpaid interest thereon to
the date of purchase. To the extent the Company or a Restricted Subsidiary is
required under the terms of Indebtedness of the Company or such Restricted
Subsidiary which is PARI PASSU with, or (in the case of any secured
Indebtedness) senior with respect to such collateral to, the Notes with any
proceeds which constitute Excess Proceeds under the Indenture, the Company shall
make a pro rata offer to the holders of all other PARI PASSU Indebtedness
(including the Notes) with such proceeds. If the aggregate principal amount of
Notes and other PARI PASSU Indebtedness surrendered by holders thereof exceeds
the amount of such Excess Proceeds, the Trustee shall select the Notes and other
PARI PASSU Indebtedness to be purchased on a PRO RATA basis. Holders of Notes
that are subject to an offer to purchase will receive a Excess Proceeds Offer
from the Company prior to any related Purchase Payment Date and may elect to
have such Notes purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
(g) NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes may be redeemed
in part but only in whole multiples of $1,000, unless all of the Notes held by a
Holder of Notes are to be redeemed. On and after the redemption date, interest
ceases to accrue on Notes or portions of them called for redemption unless the
Company fails to redeem such Notes or such portions thereof.
(h) 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 and the Trustee may require a Holder of a Note,
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. Also, it need not exchange or register the
transfer of any Notes for a period of 15 days before a selection of Notes to be
redeemed.
(i) PERSONS DEEMED OWNERS. Prior to due presentment to the Trustee for
registration of the transfer of this Note, the Trustee, any Agent and the
Company may deem and treat the Person in whose name this Note is registered as
its absolute owner for the purpose of receiving payment of principal of,
premium, if any, and interest on this Note and for all other purposes
whatsoever, whether or not this Note is overdue, and neither the Trustee, any
Agent nor the Company shall be affected by notice to the contrary. The
registered Holder of a Note shall be treated as its owner for all purposes.
(j) AMENDMENTS, SUPPLEMENT AND WAIVERS. Subject to certain exceptions,
the Indenture or Notes may be amended or supplemented with the consent of the
Holders
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<PAGE>
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 the Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for the Notes).
Notwithstanding the foregoing, (a) Sections 3.09 (Offer to Purchase by
Application of Excess Proceeds), 4.10 (Asset Sales) and 4.15 (Offer to
Repurchase Upon Change in Control) of the Indenture (including, in each case,
the related definitions) may not be amended or waived without the written
consent of at least 66 2/3% in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the Notes) and (b) without the consent of each Holder affected, an amendment
or waiver may not (with respect to any Notes held by a non-consenting Holder of
Notes) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver; reduce the principal of or change the fixed
maturity of any Note or alter the provisions with respect to the redemption of
the Notes; reduce the rate of or change the time for payment of interest on any
Note; waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal amount
of the then outstanding Notes and a waiver of the payment default that resulted
from such acceleration); make any Note payable in money other than that stated
in the Notes; make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to rceive payments of
principal of or interest on the Notes; waive a redemption payment with respect
to any Note; or make any change in the foregoing amendment and waiver
provisions. Notwithstanding the foregoing, without the consent of any Holder of
a Note, the Indenture or the Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency; to provide for uncertificated Notes in
addition to or in place of certificated Notes; to provide for the assumption of
the Company's obligations to the Holders of the Notes in case of a merger or
consolidation; to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder; or to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.
(k) DEFAULTS AND REMEDIES. Each of the following constitutes an Event of
Default:
(a) default for 30 days in the payment when due of interest on
the Notes;
(b) default in payment when due of principal of the Notes at
maturity, upon repurchase, redemption or otherwise;
(c) failure to comply with the provisions described under Section
4.15 (Offer to Purchase Upon Change in Control), Section 4.16
(Maintenance of Insurance), Section 4.11 (Limitation on Transactions
with Affiliates) or Section 4.10 (Asset Sales) of the Indenture;
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<PAGE>
(d) default under the provisions described under Section 4.07
(Limitation on Restricted Payments) or Section 4.09 (Incurrence of
Indebtedness) of the Indenture which default remains uncured for
30 days, or the breach of any representation or warranty, or the
making of any untrue statement, in any certificate delivered by the
Company pursuant to the Indenture;
(e) failure by the Company for 60 days after notice from the
Trustee or the holders of at least 25% in principal amount of the then
outstanding Notes to comply with any of its other agreements in the
Indenture or the Notes;
(f) 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 Restricted Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Restricted Subsidiaries), which default is
caused by a failure to pay when due principal or interest on such
Indebtedness within the grace period provided in such Indebtedness (a
"Payment Default"), and 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, aggregates $20 million
or more;
(g) 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 Restricted Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Restricted Subsidiaries), which default
results in the acceleration of such Indebtedness prior to its express
maturity and 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 $20 million or more; provided that any
acceleration (other than an acceleration which is the result of a
Payment Default under clause (f) above) of Indebtedness under the
Outstanding Deferred Payments in aggregate principal amount not to
exceed $50 million shall be deemed not to constitute an acceleration
pursuant to this clause (g);
(h) failure by the Company or any of its Restricted Subsidiaries
to pay final judgments (other than any judgment as to which a
reputable insurance company has accepted full liability) aggregating
in excess of $20 million, which judgments are not stayed within
60 days after their entry;
(i) certain events of bankruptcy or insolvency with respect to
EchoStar, the Company or certain of the Company's Subsidiaries
(including the filing of a voluntary case, the consent to an order of
relief in an involuntary case, the consent to the appointment of a
custodian, a general
A-108
<PAGE>
assignment for the benefit of creditors or an order of a court for relief
in an involuntary case, appointing a custodian or ordering liquidation,
which order remains unstayed for 60 days); and
(j) any Guarantee of the Notes shall be held in a judicial
proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect, or any Guarantors, or any
Person acting on behalf of any Guarantor, shall deny or disaffirm its
obligations under its Guarantee of any Notes.
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 Notes may
declare all the Notes to be due and payable immediately (plus, in the case of an
Event of Default that is the result of an action by the Company or any of its
Subsidiaries intended to avoid restrictions on or premiums related to
redemptions of the Notes contained in the Indenture or the Notes, an amount of
premium that would have been applicable pursuant to the Notes or as set forth in
the Indenture). Notwithstanding the foregoing, in the case of an Event of
Default arising from the events of bankruptcy or insolvency with respect to the
Company or any of its Subsidiaries described in (i) above, all outstanding Notes
will become due and payable without further action or notice. Holders of the
Notes 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 may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from holders of the 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 such holders' interest.
The holders of a majority in aggregate principal amount of the then
outstanding Notes, by notice to the Trustee, may on behalf of the holders of all
of the Notes 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 or premium on, or principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
All powers of the Trustee under the Indenture will be subject to applicable
provisions of the Communications Act, including without limitation, the
requirements of prior approval for DE FACTO or DE JURE transfer of control or
assignment of Title III licenses.
(l) TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture, in
its individual or any other capacity, may make loans to, accept deposits from,
and perform services for the Company or its Affiliates, and may otherwise deal
with the Company or
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its Affiliates, as if it were not Trustee; however, if the Trustee acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the SEC for permission to continue as Trustee or resign.
(m) NO PERSONAL LIABILITIES OF DIRECTORS, OFFICERS, EMPLOYEES,
INCORPORATORS AND STOCKHOLDERS. No director, officer, employee, incorporator or
stockholder of the Company or any of its Affiliates, as such, shall have any
liability for any obligations of the Company or any of its Affiliates under this
Note 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 issuance of the Notes.
(n) GUARANTEE. Payment of principal and interest (including interest on
overdue principal and overdue interest, if lawful) is unconditionally
guaranteed, jointly and severally, by each of the Guarantors.
(o) AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
(p) ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder of a Note 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 (5 Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
(q) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Note Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Holders of Notes. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
The Company will furnish to any Holder of a Note upon written request and
without charge a copy of the Indenture. Request may be made to:
EchoStar DBS Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
Attention: David K. Moskowitz, Esq.
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<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- ---------------------------
(Insert assignee's soc. sec. 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.
- ---------------------------
Date:
--------------
Your Signature:
-----------------
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee.
A-111
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by the
Company pursuant to Section 3.09 or Section 4.15 of the Indenture check the
appropriate box:
Section 3.09 Section 4.15
- --- ---
If you want to have only part of the Note purchased by the Company pursuant
to Section 3.09 or Section 4.15 of the Indenture, state the amount you elect to
have purchased:
$
-------------------
Date:
--------------
Your Signature:
-----------------
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee.
A-112
<PAGE>
[ATTACHMENT FOR GLOBAL NOTES]
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease in Amount of Increase of this Global Note Signature of authorized
Principal Amount of Principal Amount of following such officer of Trustee or
Date of Exchange this Global Note the Global Note. decrease (or Increase) Note Custodian
---------------- ----------------- ---------------- ---------------------- --------------
<S> <C> <C> <C> <C>
</TABLE>
A-113
<PAGE>
EXHIBIT B
Guarantee
[Name of Guarantor] and its successors under the Indenture, jointly
and severally with any other Guarantors, hereby irrevocably and unconditionally
guarantees (i) the due and punctual payment of the principal of, premium, if
any, and interest on the Notes, whether at maturity, by acceleration or
otherwise, the due and punctual payment of interest on the overdue principal of
and interest, if any, on the Notes, to the extent lawful, and the due and
punctual performance of all other obligations of EchoStar DBS Corporation (the
"Company") to the Holders or the Trustee all in accordance with the terms set
forth in Article 10 of the Indenture, (ii) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise and (iii) has agreed to pay any and all costs and expenses (including
reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing
any rights under this Guarantee. Capitalized terms used herein have the meanings
assigned to them in the Indenture unless otherwise indicated.
No stockholder, officer, director or incorporator, as such, past,
present or future, of [name of Guarantor] shall have any personal liability
under this Guarantee by reason of his or its status as such stockholder,
officer, director or incorporator.
This Guarantee shall be binding upon [name of Guarantor] and its
successors and assigns and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Note upon which this Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
THE TERMS OF ARTICLE 10 OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
This Guarantee shall be governed by and construed in accordance with
the laws of the State of New York.
[NAME OF GUARANTOR]
By:
------------------------------
Name:
B-114
<PAGE>
Title:
B-115
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF TRANSFER
EchoStar DBS Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
U.S. Bank Trust National Association
180 East 5th Street
St. Paul, MN 55101
Re: 9 1/4% Senior Notes due 2006
----------------------------
Reference is hereby made to the Indenture, dated as of January 25, 1999
(the "INDENTURE"), between EchoStar DBS Corporation, as issuer (the "COMPANY"),
the Guarantors named therein and U.S. Bank Trust National Association, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
________________ (the "TRANSFEROR") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $____ in such Note[s] or interests (the "TRANSFER"), to
__________ (the "TRANSFEREE"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. : CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer
is being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. : CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The
Transfer is
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<PAGE>
EXHIBIT C
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and, accordingly, the Transferor hereby further certifies that
(i) the Transfer is not being made to a Person in the United States and (x) at
the time the buy order was originated, the Transferee was outside the United
States or such Transferor and any Person acting on its behalf reasonably
believed and believes that the Transferee was outside the United States or (y)
the transaction was executed in, on or through the facilities of a designated
offshore securities market and neither such Transferor nor any Person acting on
its behalf knows that the transaction was prearranged with a buyer in the United
States, (ii) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities
Act, (iii) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act and (iv) if the proposed
transfer is being made prior to the expiration of the Restricted Period, the
transfer is not being made to a U.S. Person or for the account or benefit of a
U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
Transfer enumerated in the Private Placement Legend printed on the Regulation S
Global Note and/or the Definitive Note and in the Indenture and the Securities
Act.
3. : CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A
BENEFICIAL INTEREST IN A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE
SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being
effected in compliance with the transfer restrictions applicable to beneficial
interests in Restricted Global Notes and Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act and any applicable blue
sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) : such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) : or such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) : such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act.
4. : CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
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<PAGE>
EXHIBIT C
(a) : CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) : CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) : CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
-------------------------------------
[Insert Name of Transferor]
By:
----------------------------------
Name:
Title:
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<PAGE>
EXHIBIT C
Dated:
--------------------
C-119
<PAGE>
EXHIBIT C
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP ___________), or
(ii) / / Regulation S Global Note (CUSIP ___________), or
(b) / / a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP ___________), or
(ii) / / Regulation S Global Note (CUSIP ___________),or
(iii) / / Unrestricted Global Note (CUSIP ___________), or
(b) / / a Restricted Definitive Note; or
(c) / / an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
C-120
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE OF EXCHANGE
EchoStar DBS Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
U.S. Bank Trust National Association
180 East 5th Street
St. Paul, NlN 55101
Re: 9 1/4% Senior Notes due 2006
----------------------------
(CUSIP )
---------
Reference is hereby made to the Indenture, dated as of January 25, 1999
(collectively, the "INDENTURE"), between EchoStar DBS Corporation, as issuer
(the "COMPANY"), the Guarantors named therein and U.S. Bank Trust National
Association, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
_______________ (the "OWNER") owns and proposes to exchange the Note[s] or
interest in such Note[s] specified herein, in the principal amount of $________
in such Note[s] or interests (the "EXCHANGE"). In connection with the Exchange,
the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE.
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE.
In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Note for a beneficial interest in an Unrestricted Global Note
in an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Global Notes and pursuant to and in accordance with the United
States Securities Act of 1933, as amended (the "Securities Act"), (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the beneficial interest in an Unrestricted Global Note is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(b) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note
is being acquired for the Owner's own account without
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<PAGE>
EXHIBIT D
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Notes and pursuant to and in
accordance with the Securities Act, (iii) the restrictions on transfer contained
in the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the Definitive Note is
being acquired in compliance with any applicable blue sky securities laws of any
state of the United States.
(c) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES.
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Note and in
the Indenture and the Securities Act.
(b) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
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EXHIBIT D
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the [CHECK ONE] : 144A Global Note, : Regulation S Global Note with an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
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<PAGE>
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company.
--------------------------------
[Insert Name of Transferor]
By:
-----------------------------
Name:
Title:
Dated:
--------------------
By:
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<PAGE>
EXHIBIT D
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION
BY REFERENCE 1
SECTION 1.01. Definitions 1
SECTION 1.02. Other Definitions 18
Section 1.03. Incorporation by Reference of Trust Indenture Act 18
Section 1.04. Rules of Construction 19
ARTICLE 2. THE NOTES 19
SECTION 2.01. Form and Dating 19
SECTION 2.02. FORM OF EXECUTION AND AUTHENTICATION 21
SECTION 2.03. REGISTRAR AND PAYING AGENT 22
Section 2.04. Paying Agent to Hold Money in Trust 22
Section 2.05. Lists of Holders of the Notes 23
Section 2.06. Transfer and Exchange 23
Section 2.07. Replacement Notes 36
Section 2.08. Outstanding Notes 36
Section 2.09. Treasury Notes 36
SECTION 2.10. TEMPORARY NOTES. 37
SECTION 2.11. Cancellation 37
Section 2.12. Defaulted Interest 37
SECTION 2.13. RECORD DATE 38
SECTION 2.14. CUSIP NUMBER 38
ARTICLE 3. REDEMPTION 38
SECTION 3.01. NOTICES TO TRUSTEE 38
SECTION 3.02. Selection of Notes to be Redeemed 38
Section 3.03. Notice of Redemption 39
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION 39
SECTION 3.05. Deposit of Redemption Price 39
SECTION 3.06. Notes Redeemed in Part 40
SECTION 3.07. Optional Redemption 40
SECTION 3.08. Mandatory Redemption 41
SECTION 3.09. Offer to Purchase by Application of Excess
Proceeds 41
ARTICLE 4. COVENANTS 43
SECTION 4.01. Payment of Notes 43
D-125
<PAGE>
EXHIBIT D
SECTION 4.02. Maintenance of Office or Agency 43
SECTION 4.03. Reports 44
SECTION 4.04. COMPLIANCE CERTIFICATE 44
SECTION 4.05. TAXES 45
SECTION 4.06. STAY, EXTENSION AND USURY LAWS 45
SECTION 4.07. LIMITATION ON RESTRICTED PAYMENTS 46
SECTION 4.08. LIMITATIONS CONCERNING DISTRIBUTIONS BY
SUBSIDIARIES, ETC 50
SECTION 4.09. INCURRENCE OF INDEBTEDNESS 51
SECTION 4.10. ASSET SALES 54
SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES 56
SECTION 4.12. LIMITATION ON LIENS 57
SECTION 4.13. ADDITIONAL SUBSIDIARY GUARANTEES 57
SECTION 4.14. CORPORATE EXISTENCE 58
SECTION 4.15. OFFER TO PURCHASE UPON CHANGE IN CONTROL 58
SECTION 4.16. MAINTENANCE OF INSURANCE 59
SECTION 4.17. ACTIVITIES OF THE COMPANY 60
SECTION 4.18. THE 110 ACQUISITION 60
SECTION 4.19. ECHOSTAR EQUITY CONTRIBUTION 60
SECTION 4.20. ACCOUNTS RECEIVABLE SUBSIDIARY. 60
SECTION 4.21. DISPOSITIONS OF ETC AND NON-CORE ASSETS 62
SECTION 4.22. PAYMENTS FOR CONSENT 65
ARTICLE 5. SUCCESSORS 65
Section 5.01. Merger, Consolidation, or Sale of Assets 65
Section 5.02. Successor Corporation Substituted 66
ARTICLE 6. DEFAULTS AND REMEDIES 66
Section 6.01. Events of Default 66
Section 6.02. Acceleration 68
Section 6.03. Other Remedies 68
Section 6.04. Waiver of Past Defaults 69
Section 6.05. Control by Majority 69
Section 6.06. Limitation on Suits 69
Section 6.07. Rights of Holders of Notes to Receive Payment 70
Section 6.08. Collection Suit by Trustee 70
Section 6.09. Trustee May file Proofs of Claim 70
Section 6.10. Priorities 71
Section 6.11. Undertaking for Costs 71
ARTICLE 7. TRUSTEE 72
Section 7.01. Duties of Trustee 72
Section 7.02. Rights of Trustee 73
Section 7.03. Individual Rights of Trustee 74
D-126
<PAGE>
EXHIBIT D
Section 7.04. Trustee's Disclaimer 74
Section 7.05. Notice of Defaults 74
Section 7.06. Reports by Trustee to Holders of the Notes 74
Section 7.07. Compensation and Indemnity 75
Section 7.08. Replacement of Trustee 75
Section 7.09. Successor Trustee by Merger, Etc 76
Section 7.10. Eligibility; Disqualification 77
Section 7.11. Preferential Collection of Claims Against
Company 77
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE 77
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance 77
Section 8.02. Legal Defeasance and Discharge 77
Section 8.03. Covenant Defeasance 78
Section 8.04. Conditions to Legal or Covenant Defeasance 78
Section 8.05. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions 80
Section 8.06. Repayment to Company 80
Section 8.07. Reinstatement 81
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER 81
Section 9.01. Without Consent of Holders of Notes 81
Section 9.02. With Consent of Holders of Notes 82
Section 9.03. Compliance with Trust Indenture Act 83
Section 9.04. Revocation and Effect of Consents 83
Section 9.05. Notation on or Exchange of Notes 84
Section 9.06. Trustee to Sign Amendments, Etc 84
ARTICLE 10. GUARANTEES 84
Section 10.01. Guarantee 84
Section 10.02. Execution and Delivery of Guarantees 86
Section 10.03. Guarantors May Consolidate, Etc., on Certain
Terms 86
Section 10.04. Releases from Guarantees 87
ARTICLE 11. MISCELLANEOUS 88
Section 11.01. Trust Indenture Act Controls 88
Section 11.02. Notices 88
Section 11.03. Communication by Holders of Notes with Other
Holders of Notes89
Section 11.04. Certificate and Opinion as to Conditions
Precedent 89
Section 11.05. Statements Required in Certificate or Opinion 89
Section 11.06. Rules by Trustee and Agents 90
Section 11.07. No Personal Liability of Directors, Officers,
Employees, Incorporators and Stockholders 90
D-127
<PAGE>
EXHIBIT D
Section 11.08. Governing Law 90
Section 11.09. No Adverse Interpretation of Other Agreements 90
Section 11.10. Successors 90
Section 11.11. Severability 90
Section 11.12. Counterpart Originals 91
Section 11.13. Table of Contents, Headings, Etc 91
</TABLE>
D-128
<PAGE>
EXHIBITS
EXHIBIT A FORM OF NOTE
EXHIBIT B FORM OF GUARANTEE
EXHIBIT C FORM OF CERTIFICATE OF TRANSFER
EXHIBIT D FORM OF CERTIFICATE OF EXCHANGE
D-129
<PAGE>
EXHIBIT 4.3
ECHOSTAR DBS CORPORATION
$1,625,000,000
9 3/8% SENIOR NOTES DUE 2009
-----------------------
---------
INDENTURE
Dated as of January 25, 1999
---------
U.S. Bank Trust National Association
---------
Trustee
<PAGE>
INDENTURE dated as of January 25, 1999 among EchoStar DBS Corporation (the
"Company"), a Colorado corporation, the Guarantors (as defined herein) and U.S.
Bank Trust National Association, as trustee (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the Company's 9 3/8% Senior Notes due 2009.
RECITALS
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of the Company's 9 3/8% Senior Notes due
2009.
EchoStar (as defined herein) owns beneficially and of record 100% of the
Capital Stock of the Company; the Company and/or EchoStar, directly or
indirectly, owns beneficially and of record 100% of the Capital Stock or other
ownership interests, as the case may be, of each Guarantor; EchoStar, the
Company and the Guarantors are members of the same consolidated group of
companies and are engaged in related businesses and the Guarantors will derive
direct and indirect economic benefit from the issuance of the Notes.
Accordingly, each of the Guarantors has duly authorized the execution and
delivery of this Indenture to provide for its Guarantees with respect to the
Notes as set forth in this Indenture.
All things necessary (i) to make the Notes, when executed by the Company
and authenticated and delivered hereunder and duly issued by the Company, the
valid obligations of the Company, (ii) to make the Guarantees of each of the
Guarantors, when executed by the respective Guarantors and endorsed on the Notes
executed, authenticated and delivered hereunder, the valid obligations of the
respective Guarantors, and (iii) to make this Indenture a valid agreement of the
Company and of each of the Guarantors, all in accordance with their respective
terms, have been done.
For and in consideration of the premises and the purchase of the Notes by
the Holders thereof, it is mutually agreed as follows for the equal and ratable
benefit of the Holders of the Notes.
ARTICLE 1.
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.1. DEFINITIONS.
"144A GLOBAL NOTE" means a global note substantially in the form of Exhibit
A hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"ACCOUNTS RECEIVABLE SUBSIDIARY" means one Unrestricted Subsidiary of the
Company specifically designated as an Accounts Receivable Subsidiary for the
purpose of financing the accounts receivable of the Company, and provided that
any such designation shall not be deemed to prohibit the Company from financing
accounts receivable through any other entity, including, without
<PAGE>
limitation, any other Unrestricted Subsidiary.
"ACCOUNTS RECEIVABLE SUBSIDIARY NOTES" means the notes to be issued by the
Accounts Receivable Subsidiary for the purchase of accounts receivable.
"ACQUIRED DEBT" means, with respect to any specified Person, Indebtedness
of any other Person existing at the time such other Person merges with or into
or becomes a Subsidiary of such specified Person, or Indebtedness incurred by
such Person in connection with the acquisition of assets, including Indebtedness
incurred in connection with, or in contemplation of, such other Person merging
with or into or becoming a Subsidiary of such specified Person or the
acquisition of such assets, as the case may be.
"ACQUIRED SUBSCRIBER" means a subscriber to a pay television service
provided by a pay television provider that is not an Affiliate of the Company at
the time the Company or one of its Restricted Subsidiaries purchases the right
to provide pay television service to such subscriber from such pay television
provider, whether directly or through the acquisition of the entity providing
pay television service to such subscriber.
"ACQUIRED SUBSCRIBER DEBT" means (i) Indebtedness the proceeds of which are
used to pay the purchase price for Acquired Subscribers or to acquire the entity
which has the right to provide pay television service to such Acquired
Subscribers or to acquire from such entity or an Affiliate of such entity assets
used or to be used in connection with such pay television business; PROVIDED
that such Indebtedness is incurred within three years after the date of the
acquisition of such Acquired Subscriber and (ii) Acquired Debt of any such
entity being acquired; PROVIDED that in no event shall the amount of such
Indebtedness and Acquired Debt for any Acquired Subscriber exceed the sum of the
actual purchase price (inclusive of such Acquired Debt) for such Acquired
Subscriber, such entity and such assets plus the cost of converting such
Acquired Subscriber to usage of a delivery format for pay television service
made available by the Company or any of its Restricted Subsidiaries.
"AFFILIATE" of any specified Person means any other Person directly or
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; PROVIDED FURTHER that no individual, other than a
director of EchoStar or the Company or an officer of EchoStar or the Company
with a policy making function, shall be deemed an Affiliate of the Company or
any of its Subsidiaries solely by reason of such individual's employment,
position or responsibilities by or with respect to EchoStar, the Company or any
of their
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<PAGE>
respective Subsidiaries.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"APPLICABLE PROCEDURES" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"BANKRUPTCY LAW" means title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"BROKER-DEALER" has the meaning set forth in the Registration Rights
Agreement.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE OBLIGATION" means, as to any Person, the obligations of such
Person under a lease that are required to be classified and accounted for as
capital lease obligations under GAAP and, for purposes of this definition, the
amount of such obligations at the time any determination thereof is to be made
shall be the amount of the liability in respect of a capital lease that would at
such time be so required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock or partnership or
membership interests, whether common or preferred.
"CASH EQUIVALENTS" means: (a) United States dollars; (b) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition; (c) certificates of deposit and eurodollar
time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million; (d) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clauses (b) and (c) entered into with any financial institution
meeting the qualifications specified in clause (c) above; (e) commercial paper
rated P-1, A-1 or the equivalent thereof by Moody's or S&P, respectively, and in
each case maturing within six months after the date of acquisition; and
(f) money market funds offered by any domestic commercial or investment bank
having capital and surplus in excess of $500 million at least 95% of the assets
of which constitute Cash Equivalents of the kinds described in clauses
(a) through (e) of this definition.
"CEDEL" means Cedel Bank, SA.
"CHANGE OF CONTROL" means: (a) any transaction or series of transactions
(including, without limitation, a tender offer, merger or consolidation) the
result of
4
<PAGE>
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 EchoStar 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 this
Indenture (as adjusted for stock splits and dividends and other distributions
payable in Equity Interests), after giving effect to the repurchase of the
Series A Cumulative Preferred Stock on or about the date of this Indenture, or
(ii) do not have the voting power to elect at least a majority of the Board of
Directors of EchoStar; (b) the first day on which a majority of the members of
the Board of Directors of EchoStar are not Continuing Directors; or (c) any time
that EchoStar shall cease to beneficially own 100% of the Equity Interests of
the Company.
"COMMON STOCK" of any Person means Capital Stock of such Person that does
not rank prior as to the payment of dividends or as of the distribution of
assets upon any voluntary liquidation, dissolution or winding up of such Person,
to shares of Capital Stock or any other class of such Person.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period, plus, to the extent
deducted in computing Consolidated Net Income: (a) provision for taxes based on
income or profits; (b) Consolidated Interest Expense; (c) depreciation and
amortization (including amortization of goodwill and other intangibles) of such
Person for such period; and (d) any extraordinary loss and any net loss realized
in connection with any Asset Sale, in each case, on a consolidated basis
determined in accordance with GAAP, PROVIDED that Consolidated Cash Flow shall
not include interest income derived from the net proceeds of the Offering.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, consolidated interest expense of such Person for such period, whether
paid or accrued (including amortization of original issue discount and deferred
financing costs, non-cash interest payments and the interest component of
Capital Lease Obligations), on a consolidated basis determined in accordance
with GAAP; PROVIDED, HOWEVER that with respect to the calculation of the
consolidated interest expense of the Company, the interest expense of
Unrestricted Subsidiaries shall be excluded.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; PROVIDED,
HOWEVER, that: (a) the Net Income of any Person that is not a Subsidiary or that
is accounted for by the equity method of accounting shall be
5
<PAGE>
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person, in the case of a gain, or to the extent of any
contributions or other payments by the referent Person, in the case of a loss;
(b) the Net Income of any Person that is a Subsidiary that is not a Wholly Owned
Subsidiary (or, with respect to the calculation of the Consolidated Net Income
of the Company, a Wholly Owned Restricted Subsidiary) shall be included only to
the extent of the amount of dividends or distributions paid in cash to the
referent Person; (c) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded; (d) the Net Income of any Subsidiary of such Person shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions is not at the time permitted by operation of the terms of its
charter or bylaws or any other agreement, instrument, judgment, decree, order,
statute, rule or government regulation to which it is subject; and (e) the
cumulative effect of a change in accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person, the sum of:
(a) the stockholders' equity of such Person; plus (b) the amount reported on
such Person's most recent balance sheet with respect to any series of preferred
stock (other than Disqualified Stock) that by its terms is not entitled to the
payment of dividends unless such dividends may be declared and paid only out of
net earnings in respect of the year of such declaration and payment, but only to
the extent of any cash received by such Person upon issuance of such preferred
stock, less: (i) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the date of this Indenture in the book value of any asset owned by
such Person or a consolidated Subsidiary of such Person; and (ii) all
unamortized debt discount and expense and unamortized deferred charges, all of
the foregoing determined in accordance with GAAP.
"CONTINUING DIRECTOR" means, as of any date of determination, any member of
the Board of Directors of EchoStar who: (a) was a member of such Board of
Directors on the date of this 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.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the
Trustee specified in Section 11.02 or such other address as to which the Trustee
may give notice to the Company.
"CREDIT AGREEMENT" means any one or more credit agreements (which may
include or consist of revolving credits) between the Company and one or more
banks or other financial institutions providing financing for the business of
the Company and the Company's Restricted Subsidiaries, PROVIDED that the lenders
party to the Credit Agreement may not be Affiliates of EchoStar, the Company or
their respective Subsidiaries and PROVIDED FURTHER that the Guarantors may be
guarantors under such agreements.
6
<PAGE>
"DBS" means direct broadcast satellite.
"DBSC" means Direct Broadcasting Satellite Corporation, a Colorado
corporation.
"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.
"DEFERRED PAYMENTS" means Indebtedness to satellite construction or launch
contractors incurred after the date of this Indenture in connection with the
construction or launch of one or more satellites of the Company or its
Restricted Subsidiaries used by it in the businesses described in Section 4.17
in an amount not to exceed at any one time outstanding in the aggregate
$135 million.
"DEFINITIVE NOTE" means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.06 of this Indenture,
substantially in the form of Exhibit A hereto except that such Note shall not
bear the Global Note Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Note" attached thereto.
"DEPOSITARY" means the Depository Trust Company and any and all successors
thereto appointed as depositary hereunder and having become such pursuant to an
applicable provision of this Indenture.
"DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
on which the Notes mature; PROVIDED, HOWEVER, that any such Capital Stock may
require the issuer of such Capital Stock to make an offer to purchase such
Capital Stock upon the occurrence of certain events if the terms of such Capital
Stock provide that such an offer may not be satisfied and the purchase of such
Capital Stock may not be consummated until the 91st day after the Notes have
been paid in full.
"DNCC" means Dish Network Credit Corporation, a Colorado corporation.
"ECHOSTAR" means EchoStar Communications Corporation, a Nevada corporation,
together with each Wholly Owned Subsidiary of EchoStar that beneficially owns
100% of the Equity Interests of the Company, but only so long as EchoStar
beneficially owns 100% of the Equity Interests of such Subsidiary.
"ECHOSTAR DISH NETWORK-SM-" means the DBS service of the Company and its
Subsidiaries.
"ECHOSTAR I" means the Company's high-powered direct broadcast satellite
7
<PAGE>
designated as EchoStar I in the Offering Memorandum.
"ECHOSTAR II" means the Company's high-powered direct broadcast satellite
designated as EchoStar II in the Offering Memorandum.
"ECHOSTAR III" means the high-powered direct broadcast satellite designated
as EchoStar III in the Offering Memorandum.
"ECHOSTAR IV" means the high-powered direct broadcast satellite designated
as EchoStar IV in the Offering Memorandum.
"ELIGIBLE INSTITUTION" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated Investment Grade at the time as of which
any investment or rollover therein is made.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ESBC" means EchoStar Satellite Broadcasting Corporation, a Colorado
corporation.
"ESC" means EchoStar Satellite Corporation, a Colorado corporation.
"ETC" means EchoStar Technologies Corporation, a Texas corporation.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE NOTES" means the Notes issued in the Exchange Offer pursuant to
Section 2.06(f).
"EXCHANGE OFFER" has the meaning set forth in the Registration Rights
Agreement.
"EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in the
Registration Rights Agreement.
"EXISTING INDEBTEDNESS" means the Notes and any other Indebtedness of the
Company and its Subsidiaries in existence on the date of this Indenture until
such amounts are repaid.
"FCC" means Federal Communications Commission.
"FULL-CONUS ORBITAL SLOT" means an orbital slot that is capable of
providing
8
<PAGE>
DBS service to the entire continental United States.
"GAAP" means United States 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 may be approved by a significant segment of
the accounting profession of the U.S., which are applicable as of the date of
determination; PROVIDED that, except as otherwise specifically provided, all
calculations made for purposes of determining compliance with the terms of the
provisions of this Indenture shall utilize GAAP as in effect on the date of this
Indenture.
"GLOBAL NOTE LEGEND" means the legend set forth in Section 2.01, which is
required to be placed on all Global Notes issued under this Indenture.
"GLOBAL NOTES" means, individually and collectively, each of the Restricted
Global Notes and the Unrestricted Global Notes, substantially in the form of
Exhibit A hereto issued in accordance with Section 2.01 or 2.06 of this
Indenture.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"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.
"GUARANTEE" means a guarantee of the Notes on the terms set forth in this
Indenture.
"GUARANTOR" means any entity that executes a Guarantee of the obligations
of the Company under the Notes, and their respective successors and assigns.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person pursuant to any arrangement with any other Person, whereby, directly
or indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either floating or a fixed rate of interest on a
stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements designed to protect such Person
against fluctuations in interest rates.
"HOLDER" means a Person in whose name a Note is registered.
"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,
9
<PAGE>
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 (including pursuant to capital leases) or
representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
(other than Hedging Obligations) 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 amount of all obligations of such Person with
respect to the redemption, repayment or other repurchase of any Disqualified
Stock or, with respect to any Subsidiary of such Person, the liquidation
preference with respect to, any Preferred Equity Interests (but excluding, in
each case, any accrued dividends) as well as the guarantee of items that would
be included within this definition.
"INDEBTEDNESS TO CASH FLOW RATIO" means, with respect to any Person, the
ratio of: (a) the Indebtedness of such Person and its Subsidiaries (or, if such
Person is the Company, of the Company and its Restricted Subsidiaries) as of the
end of the most recently ended fiscal quarter, plus the amount of any
Indebtedness incurred subsequent to the end of such fiscal quarter; to (b) such
Person's Consolidated Cash Flow for the most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such event for which such calculation is being made
shall occur (the "Measurement Period"), PROVIDED, HOWEVER; that: (i) in making
such computation, Indebtedness shall include the total amount of funds
outstanding and available under any revolving credit facilities; and (ii) in the
event that such Person or any of its Subsidiaries (or, if such Person is the
Company, any of its Restricted Subsidiaries) consummates a material acquisition
or an Asset Sale or other disposition of assets subsequent to the commencement
of the Measurement Period but prior to the event for which the calculation of
the Indebtedness to Cash Flow Ratio is made, then the Indebtedness to Cash Flow
Ratio shall be calculated giving pro forma effect to such material acquisition
or Asset Sale or other disposition of assets, as if the same had occurred at the
beginning of the applicable period.
"INDENTURE" means this Indenture, as amended or supplemented from time to
time.
"INDIRECT PARTICIPANT" means a Person who holds a beneficial interest in a
Global Note through a Participant.
"INITIAL PURCHASERS" means, with respect to the Notes, Donaldson, Lufkin &
Jenrette Securities Corporation, Bear, Stearns & Co. Inc., Lehman Brothers Inc.,
NationsBanc Montgomery Securities LLC, CIBC Oppenheimer Corp. and ING Baring
Furman Selz LLC.
"INVESTMENT GRADE" means with respect to a security, that such security is
rated, by at least two nationally recognized statistical rating organizations,
in one of each such organization's four highest generic rating categories.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans (including
guarantees), advances or capital contributions (excluding commission, travel and
similar advances to
10
<PAGE>
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. 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.
"LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared by
the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent status) of any jurisdiction).
"MARKETABLE SECURITIES" means: (a) Government Securities; (b) any
certificate of deposit maturing not more than 365 days after the date of
acquisition issued by, or time deposit of, an Eligible Institution;
(c) commercial paper maturing not more than 365 days after the date of
acquisition issued by a corporation (other than an Affiliate of the Company)
with an Investment Grade rating, at the time as of which any investment therein
is made, issued or offered by an Eligible Institution; (d) any bankers
acceptances or money market deposit accounts issued or offered by an Eligible
Institution; and (e) any fund investing exclusively in investments of the types
described in clauses (a) through (d) above.
"MAXIMUM SECURED AMOUNT" means at any time (i) in the event the Company at
such time has a rating or has received in writing an indicative rating on all
outstanding Notes of both "Ba3" from Moody's and "BB-" from S&P, an amount equal
to the greater of (x) the product of 1.25 times the Trailing Cash Flow Amount
and (y) $500 million and (ii) in the event the Company does not have both of
such ratings or indicative ratings at such time, $500 million.
"MEDIA 4" means Media4, Inc., a Georgia corporation.
"MOODY'S" means Moody's Investors Service, Inc.
"NAGRASTAR" means NagraStar LLC, a Colorado limited liability corporation.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such
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Person, determined in accordance with GAAP, excluding, however, any gain (but
not loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions), and
excluding any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss) and excluding any
unusual gain (but not loss) relating to recovery of insurance proceeds on
satellites, together with any related provision for taxes on such extraordinary
gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries, as the case may be, in respect of any Asset
Sale, net of the direct costs relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof, taxes
paid or payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements), amounts required to be
applied to the repayment of Indebtedness secured by a Lien on the asset or
assets that are the subject of such Asset Sale and any reserve for adjustment in
respect of the sale price of such asset or assets. Net Proceeds shall exclude
any non-cash proceeds received from any Asset Sale, but shall include such
proceeds when and as converted by the Company or any Restricted Subsidiary to
cash.
"NON-CORE ASSETS" means: (1) all intangible authorizations, rights,
interests and other intangible assets related to all "western" DBS orbital
locations other than 148 DEG. WL (as the term "western" is used by the
FCC) held by the Company and/or any of its Subsidiaries at any time,
including without limitation the authorizations for 22 DBS frequencies at 175
DEG. WL and ESC's permit for 11 unspecified western assignments; (2) all
intangible authorizations, rights, interests and other intangible assets
related to the Fixed Satellite Service in the Ku-band, Ka-band and C-band
held by the Company and/or any of its Subsidiaries at any time, including
without limitation the license of ESC for a two satellite Ku-band system at
83 DEG. and 121 DEG. WL, the license of ESC for a two satellite Ka-band
system at 83 DEG. WL and 121 DEG. WL, and the application of ESC to add
C-band capabilities to a Ku-band satellite authorized at 83 DEG. WL; (3)
all intangible authorizations, rights, interests and other intangible assets
related to the Mobile-Satellite Service ("MSS") held by the Company and/or
any of its Subsidiaries at any time, including without limitation the license
of E-SAT, Inc. for a low-earth orbit MSS system, (4) all intangible
authorizations, rights, interests and other intangible assets related to
local multi-point distribution service and (5) any Subsidiary of the Company
the assets of which consist solely of (i) any combination of the foregoing
and (ii) other assets to the extent permitted under the provision described
under the second paragraph of Section 4.21.
"NON-RECOURSE INDEBTEDNESS" of any Person means Indebtedness of such Person
that: (i) is not guaranteed by any other Person (except a Wholly Owned
Subsidiary of the referent Person); (ii) is not recourse to and does not
obligate any other Person (except a Wholly Owned Subsidiary of the referent
Person) in any way; (iii) does not subject any property or assets of any other
Person (except a Wholly Owned Subsidiary of the referent Person), directly or
indirectly, contingently or otherwise, to the satisfaction thereof, and (iv) is
not required by GAAP to be reflected on the financial statements of any other
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<PAGE>
Person (other than a Subsidiary of the referent Person) prepared in accordance
with GAAP.
"NON-U.S. PERSON" means a Person who is not a U.S. Person.
"NOTES" means the 9 3/8% Senior Notes due 2009 issued under this
Indenture on the date of this Indenture. For purpose of this Indenture, the
term "Notes" shall include any Exchange Notes and all Notes and Exchange
Notes shall vote together as a single class.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFERING" means the offering of the Notes and of the Company's 9 1/4%
Senior Notes due 2006 pursuant to the Offering Memorandum.
"OFFERING MEMORANDUM" means the Offering Memorandum dated January 15, 1999
relating to and used in connection with the initial offering of the Notes and of
the Company's 9 1/4% Senior Notes due 2006 by the Initial Purchasers.
"OFFICER" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, Controller, Secretary
or any Vice-President of such Person.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the principal executive
officer, principal financial officer, treasurer or principal accounting officer
of the Company.
"110 ACQUISITION" means the purchase of MCI WorldCom, Inc.'s authorization
for 28 additional DBS frequencies at the 110 DEG. WL Full-CONUS Orbital Slot,
together with two satellites that are to be delivered in-orbit and other related
assets and rights, all as described in the Offering Memorandum.
"OPINION OF COUNSEL" means an opinion from legal counsel, who may be an
employee of or counsel to the Company (or any Guarantor, if applicable), any
Subsidiary of the Company (or any Guarantor, if applicable) or the Trustee.
"PARTICIPANT" means, with respect to the Depositary, Euroclear or Cedel, a
Person who has an account with the Depositary, Euroclear or Cedel, respectively
(and, with respect to DTC, shall include Euroclear and Cedel).
"PERMITTED INVESTMENTS" means: (a) Investments in the Company or in a
Wholly Owned Restricted Subsidiary of the Company that is a Guarantor,
(b) Investments in Cash Equivalents and Marketable Securities; and
(c) Investments by the Company or any Subsidiary of the Company in a Person if,
as a result of such Investment: (i) such Person becomes a Wholly Owned
Restricted Subsidiary of the Company and becomes a
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<PAGE>
Guarantor, or (ii) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Restricted Subsidiary of the
Company that is a Guarantor; PROVIDED that if at any time a Restricted
Subsidiary of the Company shall cease to be a Subsidiary of the Company, the
Company shall be deemed to have made a Restricted Investment in the amount of
its remaining investment, if any, in such former Subsidiary.
"PERMITTED LIENS" means: (a) Liens securing the Notes and Liens securing
any Guarantee; (b) Liens securing the Deferred Payments; (c) Liens securing any
Indebtedness permitted under Section 4.09 of this Indenture; PROVIDED that such
Liens under this clause (c) shall not secure Indebtedness in an amount exceeding
the Maximum Secured Amount at the time that such Lien is incurred; (d) Liens
securing Purchase Money Indebtedness, PROVIDED that such Indebtedness was
permitted to be incurred by the terms of this Indenture and such Liens do not
extend to any assets of the Company or its Restricted Subsidiaries other than
the assets so acquired; (e) Liens securing Indebtedness the proceeds of which
are used to develop, construct, launch or insure any satellites other than
EchoStar I, EchoStar II, EchoStar III, EchoStar IV or any permitted replacements
of any such satellites, PROVIDED that such Indebtedness was permitted to be
incurred by the terms of this Indenture and such Liens do not extend to any
assets of the Company or its Restricted Subsidiaries other than such satellites
being developed, constructed, launched or insured, and to the related licenses,
permits and construction, launch and TT&C contracts; (f) Liens on orbital slots,
licenses and other assets and rights of the Company, PROVIDED that such orbital
slots, licenses and other assets and rights relate solely to the satellites
referred to in clause (e) of this definition; (g) Liens on property of a Person
existing at the time such Person is merged into or consolidated with the Company
or any Restricted Subsidiary of the Company, PROVIDED, that such Liens were not
incurred in connection with, or in contemplation of, such merger or
consolidation, other than in the ordinary course of business; (h) Liens on
property of an Unrestricted Subsidiary at the time that it is designated as a
Restricted Subsidiary pursuant to the definition of "Unrestricted Subsidiary,"
PROVIDED that such Liens were not incurred in connection with, or contemplation
of, such designation; (i) Liens on property existing at the time of acquisition
thereof by the Company or any Restricted Subsidiary of the Company; PROVIDED
that such Liens were not incurred in connection with, or in contemplation of,
such acquisition and do not extend to any assets of the Company or any of its
Restricted Subsidiaries other than the property so acquired; (j) Liens to secure
the performance of statutory obligations, surety or appeal bonds or performance
bonds, or landlords', carriers', warehousemen's, mechanics', suppliers',
materialmen's or other like Liens, in any case incurred in the ordinary course
of business and with respect to amounts not yet delinquent or being contested in
good faith by appropriate process of law, if a reserve or other appropriate
provision, if any, as is required by GAAP shall have been made therefor;
(k) Liens existing on the date of this Indenture; (l) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; PROVIDED that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (m) Liens incurred in the ordinary course of business of the
Company or any Restricted Subsidiary of the Company (including, without
limitation, Liens securing Purchase Money Indebtedness)
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<PAGE>
with respect to obligations that do not exceed $10 million in principal amount
in the aggregate at any one time outstanding; (n) Liens securing Indebtedness in
an amount not to exceed $10 million incurred pursuant to clause (xi) of the
second paragraph of Section 4.09 of this Indenture; (o) Liens on any asset of
the Company or a Guarantor securing Indebtedness in an amount not to exceed $10
million; (p) Liens securing Indebtedness permitted under clause (xii) of the
second paragraph of the provision described under Section 4.09 of this
Indenture; provided that such Liens shall not extend to assets other than the
assets that secure such Indebtedness being refinanced; (q) any interest or title
of a lessor under any Capital Lease Obligation; PROVIDED that such Capital Lease
Obligation is permitted under the other provisions of this Indenture; (r) Liens
not provided for in clauses (a) through (q) above, securing Indebtedness
incurred in compliance with the terms of this Indenture provided that the Notes
are secured by the assets subject to such Liens on an equal and ratable basis or
on a basis prior to such Liens; PROVIDED that to the extent that such Lien
secured Indebtedness that is subordinated to the Notes, such Lien shall be
subordinated to and be later in priority than the Notes on the same basis and
(s) extensions, renewals or refundings of any Liens referred to in clauses
(a) through (q) above, PROVIDED that (i) any such extension, renewal or
refunding does not extend to any assets or secure any Indebtedness not securing
or secured by the Liens being extended, renewed or refinanced and (ii) any
extension, renewal or refunding of a Lien originally incurred pursuant to clause
(c) above shall not secure Indebtedness in an amount greater than the Maximum
Secured Amount at the time of such extension, renewal or refunding.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust or
unincorporated organization (including any subdivision or ongoing business of
any such entity or substantially all of the assets of any such entity,
subdivision or business).
"PREFERRED EQUITY INTEREST", in any Person, means an Equity Interest of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person.
"PREFERRED STOCK", as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"PRINCIPAL" means Charles W. Ergen.
"PRIVATE PLACEMENT LEGEND" means the legend set forth in Section 2.01 to be
placed on all Notes issued under this Indenture except where otherwise permitted
by the provisions of this Indenture.
"PURCHASE MONEY INDEBTEDNESS" means (i) indebtedness of the Company or any
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Guarantor (including indebtedness that otherwise satisfies this clause (i) which
was incurred prior to the date the obligor thereunder became a Guarantor)
incurred (within 365 days of such purchase) to finance the purchase of any
assets (including the purchase of Equity Interests of Persons that are not
Affiliates of the Company) of the Company or any Guarantor: (a) to the extent
the amount of Indebtedness thereunder does not exceed 100% of the purchase cost
of such assets; and (b) to the extent that no more than $20 million of such
Indebtedness at any one time outstanding is recourse to the Company or any of
its Restricted Subsidiaries or any of their respective assets, other than the
assets so purchased; or (ii) indebtedness of the Company or any Guarantor which
refinances indebtedness referred to in clause (i) of this definition, PROVIDED
that such refinancing satisfies subclauses (a) and (b) of such clause (i).
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"RECEIVABLES TRUST" means a trust organized solely for the purpose of
securitizing the accounts receivable held by the Accounts Receivable Subsidiary
that (a) shall not engage in any business other than (i) the purchase of
accounts receivable or participation interests therein from the Accounts
Receivable Subsidiary and the servicing thereof, (ii) the issuance of and
distribution of payments with respect to the securities permitted to be issued
under clause (b) below and (iii) other activities incidental to the foregoing,
(b) shall not at any time incur Indebtedness or issue any securities, except
(i) certificates representing undivided interests in the trust issued to the
Accounts Receivable Subsidiary and (ii) debt securities issued in an arm's
length transaction for consideration solely in the form of cash and Cash
Equivalents, all of which (net of any issuance fees and expenses) shall promptly
be paid to the Accounts Receivable Subsidiary, and (c) shall distribute to the
Accounts Receivable Subsidiary as a distribution on the Accounts Receivable
Subsidiary's beneficial interest in the trust no less frequently than once every
six months all available cash and Cash Equivalents held by it, to the extent not
required for reasonable operating expenses or reserves therefor or to service
any securities issued pursuant to clause (b) above that are not held by the
Accounts Receivable Subsidiary.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement for
the Notes, dated as of January 25, 1999, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"REGULATION S" means Regulation S promulgated under the Securities Act.
"REGULATION S GLOBAL NOTE" means a global Note bearing the Private
Placement Legend and deposited with or on behalf of the Depositary and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Notes initially
sold in reliance on Rule 903 of Regulation S.
"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.
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"RESPONSIBLE OFFICER," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the Private
Placement Legend.
"RESTRICTED GLOBAL NOTE" means a Global Note bearing the Private Placement
Legend.
"RESTRICTED INVESTMENT" means an Investment other than Permitted
Investments.
"RESTRICTED PERIOD" means the 40-day restricted period as defined in
Regulation S.
"RESTRICTED 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 the Company or one or more
Subsidiaries of the Company or a combination thereof, other than Unrestricted
Subsidiaries. Notwithstanding the foregoing, for purposes of this Indenture,
until the consummation of the reorganization of EchoStar and its Subsidiaries
described in the Offering Memorandum, DBSC shall be deemed to be a Restricted
Subsidiary of the Company.
"RULE 144" means Rule 144 promulgated under the Securities Act.
"RULE 144A" means Rule 144A promulgated under the Securities Act.
"RULE 903" means Rule 903 promulgated under the Securities Act.
"RULE 904" means Rule 904 promulgated under the Securities Act.
"S&P" means Standard & Poor's Rating Services.
"SATELLITE INSURANCE" means insurance providing coverage for a satellite in
an amount which is, together with cash, Cash Equivalents and Marketable
Securities segregated and reserved on the balance sheet of the Company, for the
duration of the insured period or until applied in accordance with Section 4.16
of this Indenture. For purposes of this Indenture, the proceeds of any
Satellite Insurance shall be deemed to include the amount of cash, Cash
Equivalents and Marketable Securities segregated and reserved by the Company for
purposes of the preceding sentence.
"SERIES A CUMULATIVE PREFERRED STOCK" means the Series A Cumulative
Preferred Stock of EchoStar outstanding on the date of this Indenture.
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"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SATELLITE RECEIVER" means any satellite receiver capable of receiving
programming from the EchoStar Dish Network.4
"SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"SKYVISTA" means SkyVista Corporation, a Colorado corporation.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
this Indenture.
"SUBSIDIARY" means, with respect to any Person, 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 such
Person or one or more of the other Subsidiaries of such Person or a combination
thereof. Notwithstanding the foregoing, for purposes of this Indenture, until
the consummation of the reorganization of EchoStar and its Subsidiaries
described in the Offering Memorandum, DBSC shall be deemed to be a Subsidiary of
the Company.
"SUPPLEMENTAL INDENTURE" means any supplemental indenture relating to this
Indenture.
"TIA" means the Trust Indenture Act of 1939 as in effect on the date of
this Indenture.
"TRAILING CASH FLOW AMOUNT" means the Consolidated Cash Flow of the Company
during the most recent four fiscal quarters of the Company for which financial
statements are available.
"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 serving hereunder.
"TT&C" means telemetry, tracking and control.
"U.S. PERSON" means a U.S. Person as defined in Rule 902(k) under the
Securities Act.
"UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes that do
not
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bear and are not required to bear the Private Placement Legend.
"UNRESTRICTED GLOBAL NOTE" means a permanent global Note substantially in
the form of Exhibit A attached hereto that bears the Global Note Legend and that
has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing Notes that do not bear the Private Placement
Legend.
"UNRESTRICTED SUBSIDIARY" means; (A) E-Sat, Inc., EchoStar Real Estate
Corporation, EchoStar International (Mauritius) Ltd., EchoStar Manufacturing and
Distribution Pvt. Ltd. and Satrec Mauritius Ltd.; and (B) any Subsidiary of the
Company designated as an Unrestricted Subsidiary in a resolution of the Board of
Directors of the Company (a) no portion of the Indebtedness or any other
obligation (contingent or otherwise) of which, immediately after such
designation: (i) is guaranteed by the Company or any other Subsidiary of the
Company (other than another Unrestricted Subsidiary); (ii) is recourse to or
obligates the Company or any other Subsidiary of the Company (other than another
Unrestricted Subsidiary) in any way; or (iii) subjects any property or asset of
the Company or any other Subsidiary of the Company (other than another
Unrestricted Subsidiary), directly or indirectly, contingently or otherwise, to
satisfaction thereof; (b) with which neither the Company nor any other
Subsidiary of the Company (other than another Unrestricted Subsidiary) has any
contract, agreement, arrangement, understanding or is subject to an obligation
of any kind, written or oral, other than on terms no less favorable to the
Company or such other Subsidiary than those that might be obtained at the time
from Persons who are not Affiliates of the Company; and (c) with which neither
the Company nor any other Subsidiary of the Company (other than another
Unrestricted Subsidiary) has any obligation: (i) to subscribe for additional
shares of Capital Stock or other equity interests therein; or (ii) to maintain
or preserve such Subsidiary's financial condition or to cause such Subsidiary to
achieve certain levels of operating results; PROVIDED, HOWEVER, that none of the
Company, ESC and Echosphere Corporation may be designated as Unrestricted
Subsidiaries. At any time after the date of this Indenture that the Company
designates an additional Subsidiary (other than ETC or a Subsidiary that
constitutes a Non-Core Asset) as an Unrestricted Subsidiary, the Company will be
deemed to have made a Restricted Investment in an amount equal to the fair
market value (as determined in good faith by the Board of Directors of the
Company evidenced by a resolution of the Board of Directors of the Company and
set forth in an Officers' Certificate delivered to the Trustee no later than
five business days following January 1 and July 1 of each year and ten days
following a request from the Trustee, which certificate shall cover the six
months preceding such January 1, July 1 or date of request, as the case may be)
of such Subsidiary and to have incurred all Indebtedness of such Unrestricted
Subsidiary. An Unrestricted Subsidiary may be designated as a Restricted
Subsidiary of the Company if, at the time of such designation after giving pro
forma effect thereto, no Default or Event of Default shall have occurred or be
continuing.
"VOTING STOCK" of any Person means Capital Stock of such Person that
ordinarily has voting power for the election of directors (or Persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
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"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
principal amount of such Indebtedness into (b) the total of the product obtained
by multiplying (i) the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal, including payment at
final maturity, in respect thereof, by (ii) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" means a Wholly Owned Subsidiary of the
Company that is a Restricted Subsidiary.
"WHOLLY OWNED SUBSIDIARY" means, with respect to any Person, any Subsidiary
all of the outstanding voting stock (other than directors' qualifying shares) of
which is owned by such Person, directly or indirectly.
SECTION 1.2. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
TERM DEFINED IN SECTION
<S> <C>
"Affiliate Transaction" 4.11
"Asset Sale" 4.10
"Change of Control Offer" 4.15
"Change of Control Payment" 4.15
"Change of Control Payment Date" 4.15
"Covenant Defeasance" 8.03
"DTC" 2.01
"ETC Amount Due 4.21
"Event of Default" 6.01
"Excess Proceeds" 4.10; 4.16
"Excess Proceeds Offer" 3.09
"incur" 4.09
"Legal Defeasance" 8.02
"Non-Core Asset Amount Due" 4.21
"Offer Amount" 3.09
"Offer Period" 3.09
"Paying Agent" 2.03
"Payment Default" 6.01
"Payout" 4.21
"Permitted Refinancing" 4.09
"Private Placement Legend" 2.01
"Purchase Date" 3.09
"Refinancing Indebtedness" 4.09
"Registrar" 2.03
"Restricted Payments" 4.07
</TABLE>
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SECTION 1.3. 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 and any Guarantee of 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;
"OBLIGOR" on the Notes means each of the Company and any successor obligor
upon the Notes or any Guarantor.
All other terms used in this Indenture that are defined by the TIA, defined
by reference to another statute or defined by SEC rule under the TIA have the
meanings so assigned to them.
SECTION 1.4. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include
the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2.
THE NOTES
SECTION 2.1. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto, the terms of which are
incorporated in and made a part of
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this Indenture. The Guarantees of the Notes by the Guarantors shall be
substantially in the forms set forth in Article 10 and Exhibit B hereto, the
terms of which are incorporated in and made a part of this Indenture. The Notes
and the Guarantees of the Notes by the Guarantors may have notations, legends or
endorsements approved as to form by the Company or the Guarantors, as the case
may be, and required by law, stock exchange rule, agreements to which the
Company or the Guarantors, as the case may be, are subject or usage. Each Note
shall be dated the date of its authentication. The Notes shall be issuable only
in denominations of $1,000 and integral multiples thereof.
The Notes shall initially be issued in the form of Global Notes and the
Depository Trust Company ("DTC"), its nominees, and their respective successors,
shall act as the Depositary with respect thereto. Each Global Note shall (i) be
registered in the name of the Depositary for such Global Note or the nominee of
such Depositary, (ii) shall be delivered by the Trustee to such Depositary or
pursuant to such Depositary's instructions, and (iii) shall bear a legend (the
"Global Note Legend") substantially to the following effect:
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC") 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
in 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.
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR
DEPOSITARY. THIS NOTE IS NOT EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR
ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A
TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITARY TO A NOMINEE
OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY) MAY BE REGISTERED
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EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
Except as permitted by Section 2.06(g), any Note not registered under the
Securities Act shall bear the following legend (the "Private Placement Legend")
on the face thereof:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, UNITED STATES PERSONS,
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER (1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)(A
"QIB") OR THAT IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE
PROVISIONS OF RULE 144(d) UNDER THE SECURITIES ACT, IF
APPLICABLE) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE
OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS
NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES,
(B) TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE
SECURITIES ACT, (C) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF THE SECURITIES ACT, (D)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (E) 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 (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE
SECURITIES LAWS
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OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS NOTE OR AN INTEREST THEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES PERSON" HAVE THE
MEANINGS ASCRIBED TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING."
The Trustee must refuse to register any transfer of a Note bearing such legend
that would violate the restrictions described in such legend.
SECTION 2.2. FORM OF EXECUTION AND AUTHENTICATION.
Two Officers of the Company shall sign the Notes for the Company by manual
or facsimile signature. The Company's seal shall be reproduced on the Notes.
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
the Trustee. The signature of the Trustee 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 two
Officers of the Company, authenticate Notes for original issue up to an
aggregate principal amount of $1,625,000,000 of the Notes. The aggregate
principal amount of Notes outstanding at any time shall not exceed the amount
set forth herein except as provided in Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. Unless limited by the terms of such appointment, 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 the Company or any Affiliate of the Company.
SECTION 2.3. REGISTRAR AND PAYING AGENT.
The Company shall maintain (i) an office or agency where Notes may be
presented for registration of transfer or for exchange (including any
co-registrar, the "REGISTRAR") and (ii) an office or agency where Notes may be
presented for payment ("PAYING AGENT"). The Registrar shall keep a register of
the Notes and of their transfer
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and exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional
paying agent. The Company may change any Paying Agent, Registrar or
co-registrar without prior notice to any Holder of a Note. The Company shall
notify the Trustee and the Trustee shall notify the Holders of the Notes of the
name and address of any Agent not a party to this Indenture. The Company or any
Guarantor may act as Paying Agent, Registrar or co-registrar. The Company shall
enter into an appropriate agency agreement with any Agent not a party to this
Indenture, which shall incorporate the provisions of the TIA. The agreement
shall implement the provisions of this Indenture that relate to such Agent. The
Company shall notify the Trustee of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, or fails to give the
foregoing notice, the Trustee shall act as such, and shall be entitled to
appropriate compensation in accordance with Section 7.07.
The Company initially appoints the Trustee as Registrar, Paying Agent and
agent for service of notices and demands in connection with the Notes.
SECTION 2.4. 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 shall hold in trust for the benefit of the
Holders of the Notes or the Trustee all money held by the Paying Agent for the
payment of principal of, premium, if any, and interest on the Notes, and shall
notify the Trustee of any Default by the Company or any Guarantor 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. 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
a Guarantor) shall have no further liability for the money delivered to the
Trustee. If the Company or a Guarantor acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Holders of the Notes
all money held by it as Paying Agent.
SECTION 2.5. LISTS OF HOLDERS OF THE NOTES.
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 of the Notes and shall otherwise comply with TIA Section 312(a). If
the Trustee is not the Registrar, the Company shall furnish to the Trustee at
least seven Business Days 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
of the Notes, including the aggregate principal amount of the Notes held by each
thereof, and the Company and each Guarantor shall otherwise comply with TIA
Section 312(a).
SECTION 2.6. TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. A Global Note may not be
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transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary and a successor Depositary is not appointed by the Company within 90
days after the date of such notice from the Depositary, (ii) the Depositary has
ceased to be a clearing agency registered under the Exchange Act, (iii) the
Company in its sole discretion determines that the Global Notes (in whole but
not in part) should be exchanged for Definitive Notes and delivers a written
notice to such effect to the Trustee or (iv) there shall have occurred and be
continuing a Default or an Event of Default under this Indenture. In any such
case, the Company will notify the Trustee in writing that, upon surrender by the
Direct Participants and Indirect Participants of their interest in such Global
Note, Certificated Notes will be issued to each Person that such Direct
Participants and Indirect Participants and DTC identify as being the beneficial
owner of the related Notes. Global Notes also may be exchanged or replaced, in
whole or in part, as provided in Sections 2.07 and 2.10 of this Indenture. Every
Note authenticated and delivered in exchange for, or in lieu of, a Global Note
or any portion thereof, pursuant to this Section 2.06 or Section 2.7 or 2.10 of
this Indenture, shall be authenticated and delivered in the form of, and shall
be, a Global Note. A Global Note may not be exchanged for another Note other
than as provided in this Section 2.06. However, beneficial interests in a
Global Note may be transferred and exchanged as provided in Section 2.06(b), (c)
or (f) of this Indenture.
(b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth in this Indenture to the extent required by the Securities Act.
Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
(i) TRANSFER OF BENEFICIAL INTERESTS IN THE SAME GLOBAL
NOTE. Beneficial interests in any Restricted Global Note may
be transferred to Persons who take delivery thereof in the form
of a beneficial interest in the same Restricted Global Note in
accordance with the transfer restrictions set forth in the
Private Placement Legend; PROVIDED, HOWEVER, that prior to the
expiration of the Restricted Period, no transfer of beneficial
interests in the Regulation S Global Note may be made to a U.S.
Person or for the account or benefit of a U.S. Person (other
than an Initial Purchaser) unless permitted by applicable law
and made in compliance with subparagraphs (ii) and (iii) below.
Beneficial interests in any Unrestricted Global Note may be
transferred to Persons who take delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note. No
written
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orders or instructions shall be required to be delivered to the
Registrar to effect the transfers described in this Section
2.06(b)(i) unless specifically stated above.
(ii) ALL OTHER TRANSFERS AND EXCHANGES OF BENEFICIAL
INTERESTS IN GLOBAL NOTES. In connection with all transfers
and exchanges of beneficial interests that are not subject to
Section 2.06(b)(i) above, the transferor of such beneficial
interest must deliver to the Registrar either (A) (1) a written
order from a Participant or an Indirect Participant given to
the Depositary in accordance with the Applicable Procedures
directing the Depositary to credit or cause to be credited a
beneficial interest in another Global Note in an amount equal
to the beneficial interest to be transferred or exchanged and
(2) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant
account to be credited with such increase or, if Definitive
Notes are at such time permitted to be issued pursuant to this
Indenture, (B) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with
the Applicable Procedures directing the Depositary to cause to
be issued a Definitive Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2)
instructions given by the Depositary to the Registrar
containing information regarding the Person in whose name such
Definitive Note shall be registered to effect the transfer or
exchange referred to in (1) above. Upon consummation of an
Exchange Offer by the Company in accordance with Section
2.06(f), the requirements of this Section 2.06(b)(ii) shall be
deemed to have been satisfied upon receipt by the Registrar of
the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the
Restricted Global Notes. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests
in Global Notes contained in this Indenture and the Notes or
otherwise applicable under the Securities Act, the Trustee
shall adjust the principal amount of the relevant Global
Note(s) pursuant to Section 2.06(h).
(iii) TRANSFER OF BENEFICIAL INTERESTS TO ANOTHER
RESTRICTED GLOBAL NOTE. A beneficial interest in any Restricted
Global Note may be transferred to a Person who takes delivery
thereof in the form of a beneficial interest in another
Restricted Global Note if the transfer complies with the
requirements of Section 2.06(b)(ii) above and the Registrar
receives the following:
(A) if the transferee will take delivery in the
form of
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a beneficial interest in the 144A Global Note, then the
transferor must deliver a certificate in the form of Exhibit C
hereto, including the certifications in item (1) thereof; and
(B) if the transferee will take delivery in the
form of a beneficial interest in the Regulation S Global
Note, then the transferor must deliver a certificate in the
form of Exhibit C hereto, including the certifications in
item (2) thereof.
(iv) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR BENEFICIAL INTERESTS IN AN
UNRESTRICTED GLOBAL NOTE. A beneficial interest in any
Restricted Global Note may be exchanged by any Holder thereof
for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note if the
exchange or transfer complies with the requirements of Section
2.06(b)(ii) above and:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder of the
beneficial interest to be transferred, in the case of an
exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
"affiliate" (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to a Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to an Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit D
hereto, including the certifications in item (1)(a)
thereof, or
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(2) if the Holder of such beneficial
interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D),
if the Registrar so requests or if the Applicable Procedures
so require, an Opinion of Counsel in form reasonably
acceptable to the Registrar to the effect that such exchange
or transfer is in compliance with the Securities Act and
that the restrictions on transfer contained in this
Indenture and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities
Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02, the Trustee shall authenticate one or more Unrestricted
Global Notes in an aggregate principal amount equal to the aggregate principal
amount of beneficial interests transferred pursuant to subparagraph (B) or (D)
above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) TRANSFER OR EXCHANGE OF BENEFICIAL INTERESTS FOR DEFINITIVE NOTES.
(i) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO
RESTRICTED DEFINITIVE NOTES. If any Holder of a beneficial
interest in a Restricted Global Note proposes to exchange such
beneficial interest for a Restricted Definitive Note or to
transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Restricted Definitive Note,
then, upon receipt by the Registrar of the following
documentation:
(A) if the Holder of such beneficial interest in
a Restricted Global Note proposes to exchange such
beneficial interest for a Restricted Definitive Note, a
certificate from such Holder in the form of Exhibit D
hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being
transferred to a QIB in accordance with Rule 144A under the
Securities
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Act, a certificate to the effect set forth in Exhibit C hereto,
including the certifications in item (1) thereof;
(C) if such beneficial interest is being
transferred to a Non-U.S. Person in an offshore transaction
in accordance with Rule 903 or Rule 904 under the Securities
Act, a certificate to the effect set forth in Exhibit C
hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule
144 under the Securities Act, a certificate to the effect
set forth in Exhibit C hereto, including the certifications
in item (3)(a) thereof;
(E) if such beneficial interest is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit C hereto,
including the certifications in item (3)(b) thereof; or
(F) if such beneficial interest is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit C hereto, including the certifications in
item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to
Section 2.06(h), and the Company shall execute and the Trustee
shall authenticate and deliver to the Person designated in the
instructions a Restricted Definitive Note in the appropriate
principal amount. Any Restricted Definitive Note issued in
exchange for a beneficial interest in a Restricted Global Note
pursuant to this Section 2.06(c) shall be registered in such
name or names and in such authorized denomination or
denominations as the Holder of such beneficial interest shall
instruct the Registrar through instructions from the Depositary
and the Participant or Indirect Participant. The Trustee shall
deliver such Restricted Definitive Notes to the Persons in
whose names such Notes are so registered. Any Restricted
Definitive Note issued in exchange for a beneficial interest in
a Restricted Global Note pursuant to this Section 2.06(c)(i)
shall bear the Private Placement Legend and shall be subject to
all restrictions on transfer contained therein.
(ii) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO
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UNRESTRICTED DEFINITIVE NOTES. A Holder of a beneficial interest in
a Restricted Global Note may exchange such beneficial interest for
an Unrestricted Definitive Note or may transfer such beneficial
interest to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected
pursuant to an Exchange Offer in accordance with the
Registration Rights Agreement and the Holder of such
beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
"affiliate" (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to a Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such beneficial interest in
a Restricted Global Note proposes to exchange such
beneficial interest for a Definitive Note that does
not bear the Private Placement Legend, a certificate
from such Holder in the form of Exhibit D hereto,
including the certifications in item (1)(b) thereof;
or
(2) if the Holder of such beneficial interest in
a Restricted Global Note proposes to transfer such
beneficial interest to a Person who shall take
delivery thereof in the form of a Definitive Note
that does not bear the Private Placement Legend, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (4)
thereof,
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable to
the Registrar to the effect that such exchange or transfer is
in compliance with the Securities Act and that the restrictions
on transfer contained in this Indenture and in the Private
Placement
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Legend are no longer required in order to maintain compliance with
the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02, the Trustee shall authenticate one or more Unrestricted
Global Notes in an aggregate principal amount equal to the aggregate principal
amount of beneficial interests transferred pursuant to subparagraph (B) or (D)
above.
(iii) BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES TO
UNRESTRICTED DEFINITIVE NOTES. If any Holder of a beneficial
interest in an Unrestricted Global Note proposes to exchange
such beneficial interest for a Definitive Note or to transfer
such beneficial interest to a Person who takes delivery thereof
in the form of a Definitive Note, then, upon satisfaction of
the conditions set forth in Section 2.06(b)(ii), the Trustee
shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section
2.06(h), and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal
amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall be
registered in such name or names and in such authorized
denomination or denominations as the Holder of such beneficial
interest shall instruct the Registrar through instructions from
the Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Notes to the Persons in
whose names such Notes are so registered. Any Definitive Note
issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall not bear the Private Placement
Legend.
(d) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR BENEFICIAL INTERESTS.
(i) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES. If any Holder of a Restricted
Definitive Note proposes to exchange such Note for a beneficial
interest in a Restricted Global Note or to transfer such
Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted
Global Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the Holder of such Restricted Definitive
Note proposes to exchange such Note for a beneficial
interest in
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a Restricted Global Note, a certificate from such Holder in the
form of Exhibit D hereto, including the certifications in item
(2)(b) thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit C hereto, including the certifications in item (1)
thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore transaction
in accordance with Rule 903 or Rule 904 under the Securities
Act, a certificate to the effect set forth in Exhibit C
hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule
144 under the Securities Act, a certificate to the effect
set forth in Exhibit C hereto, including the certifications
in item (3)(a) thereof;
(E) if such Restricted Definitive Note is
being transferred to the Company or any of its Subsidiaries,
a certificate to the effect set forth in Exhibit C hereto,
including the certifications in item (3)(b) thereof; or
(F) if such Restricted Definitive Note is
being transferred pursuant to an effective registration
statement under the Securities Act, a certificate to the
effect set forth in Exhibit C hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note,
increase or cause to be increased the aggregate principal
amount of, in the case of clause (A) above, the appropriate
Restricted Global Note, in the case of clause (B) above, the
144A Global Note, and in the case of clause (C) above, the
Regulation S Global Note.
(ii) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS
IN UNRESTRICTED GLOBAL NOTES. A Holder of a Restricted
Definitive Note may exchange such Note for a beneficial
interest in an Unrestricted Global Note or transfer such
Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted
Global Note only if:
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(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case of
an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
"affiliate" (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to a Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to an Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes
proposes to exchange such Notes for a beneficial
interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit D
hereto, including the certifications in item (1)(c)
thereof; or
(2) if the Holder of such Definitive Notes
proposes to transfer such Notes to a Person who shall
take delivery thereof in the form of a beneficial
interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable to
the Registrar to the effect that such exchange or transfer is
in compliance with the Securities Act and that the restrictions
on transfer contained in this Indenture and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.06(d)(ii), the Trustee shall
cancel the Definitive Notes and increase or cause to be
increased the aggregate principal amount of the Unrestricted
Global Note.
(iii) UNRESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS
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IN UNRESTRICTED GLOBAL NOTES. A Holder of an Unrestricted
Definitive Note may exchange such Note for a beneficial interest in
an Unrestricted Global Note or transfer such Unrestricted Definitive
Notes to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note at any time. Upon
receipt of a request for such an exchange or transfer, the Trustee
shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of
one of the Unrestricted Global Notes.
If any such exchange or transfer from an Unrestricted Definitive Note or a
Restricted Definitive Note, as the case may be, to a beneficial interest is
effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time
when an Unrestricted Global Note has not yet been issued, the Company shall
issue and, upon receipt of an Authentication Order in accordance with Section
2.02 of this Indenture, the Trustee shall authenticate one or more Unrestricted
Global Notes in an aggregate principal amount equal to the principal amount of
Unrestricted Definitive Notes or Restricted Definitive Notes, as the case may
be, so transferred.
(e) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR DEFINITIVE
NOTES. Upon request by a Holder of Definitive Notes and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar shall
register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied by
a written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by its attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional certifications,
documents and information, as applicable, required pursuant to the following
provisions of this Section 2.06(e).
(i) RESTRICTED DEFINITIVE NOTES TO RESTRICTED DEFINITIVE
NOTES. Any Restricted Definitive Note may be transferred to
and registered in the name of Persons who take delivery thereof
in the form of a Restricted Definitive Note if the Registrar
receives the following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit C hereto,
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule
903 or Rule 904, then the transferor must deliver a
certificate in the form of Exhibit C hereto, including the
certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any
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<PAGE>
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a certificate in
the form of Exhibit C hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof,
if applicable.
(ii) RESTRICTED DEFINITIVE NOTES TO UNRESTRICTED
DEFINITIVE NOTES. Any Restricted Definitive Note may be
exchanged by the Holder thereof for an Unrestricted Definitive
Note or transferred to a Person or Persons who take delivery
thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected
pursuant to an Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case of
an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
"affiliate" (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to a
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a
Broker-Dealer pursuant to an Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive
Notes proposes to exchange such Notes for an
Unrestricted Definitive Note, a certificate from such
Holder in the form of Exhibit D hereto, including the
certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive
Notes proposes to transfer such Notes to a Person who
shall take delivery thereof in the form of an
Unrestricted Definitive Note, a certificate from such
Holder in the form of Exhibit C hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph
(D), if the Registrar so requests, an Opinion of
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Counsel in form reasonably acceptable to the Company to
the effect that such exchange or transfer is in compliance
with the Securities Act and that the restrictions on
transfer contained in this Indenture and in the Private
Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) UNRESTRICTED DEFINITIVE NOTES TO UNRESTRICTED
DEFINITIVE NOTES. A Holder of Unrestricted Definitive Notes
may transfer such Notes to a Person who takes delivery thereof
in the form of an Unrestricted Definitive Note. Upon receipt of
a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.
(f) EXCHANGE OFFER. Upon the occurrence of an Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not "affiliates" (as defined in Rule 144) of the Company,
and accepted for exchange in an Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in an Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Restricted Definitive Notes so accepted
Unrestricted Definitive Notes in the appropriate principal amount.
(g) LEGENDS. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) PRIVATE PLACEMENT LEGEND.
(A) Except as permitted by subparagraph (B)
below, each Global Note (other than an Unrestricted Global
Note) and each Definitive Note (and all Notes issued in
exchange therefor or substitution thereof) shall bear the
Private Placement Legend.
(B) Notwithstanding the foregoing, any Global
Note or Definitive Note issued pursuant to subparagraphs
(b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii),
(e)(iii) or (f) to
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this Section 2.06 (and all Notes issued in exchange therefor or
substitution thereof) shall not bear the Private Placement
Legend.
(ii) GLOBAL NOTE LEGEND. Each Global Note shall bear the
Global Note Legend.
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11. At any
time prior to such cancellation, if any beneficial interest in a Global Note is
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note or for Definitive Notes,
the principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note by the Trustee
or by the Depositary at the direction of the Trustee to reflect such reduction;
and if the beneficial interest is being exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in another
Global Note, such other Global Note shall be increased accordingly and an
endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES.
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate
Global Notes and Definitive Notes upon the Company's order or
at the Registrar's request.
(ii) No service charge shall be made to a Holder of a
beneficial interest in a Global Note or to a Holder of a
Definitive Note for any registration of transfer or exchange,
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 taxes or
similar governmental charge payable upon exchange or transfer
pursuant to Sections 2.10, 3.06, 3.09 and 9.05).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in
whole or in part, except the unredeemed portion of any Note
being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or
Definitive Notes shall be the valid obligations of the Company,
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<PAGE>
evidencing the same debt, and entitled to the same benefits of this
Indenture, as the Global Notes or Definitive Notes surrendered upon
such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a
period beginning at the opening of business on a Business Day
15 days before the day of any selection of Notes for redemption
under Section 3.02 of this Indenture and ending at the close of
business on the day of selection or (B) to register the
transfer of or to exchange any Note so selected for redemption
in whole or in part, except the unredeemed portion of any Note
being redeemed in part.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company
may deem and treat the Person in whose name any Note is
registered as the absolute owner of such Note for the purpose
of receiving payment of principal of and interest on such Notes
and for all other purposes, and none of the Trustee, any Agent
or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section
2.02 of this Indenture.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to
this Section 2.06 to effect a registration of transfer or
exchange may be submitted by facsimile.
SECTION 2.7. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Company and the
Trustee receive evidence to their satisfaction of the destruction, loss or theft
of any Note, the Company shall issue and the Trustee, upon the written order of
the Company signed by two Officers of the Company, shall authenticate a
replacement Note if the Trustee's requirements for replacements of Notes are
met. If required by the Trustee or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Trustee and the
Company to protect the Company, the Guarantors, the Trustee, any Agent or any
authenticating agent from any loss which any of them may suffer if a Note is
replaced. Each of the Company and the Trustee may charge for its expenses in
replacing a Note.
Every replacement Note is an additional obligation of the Company and the
Guarantors.
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SECTION 2.8. 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 pursuant to Section 2.07, it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Note is
held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01,
it ceases to be outstanding and interest on it ceases to accrue.
Subject to Section 2.09, a Note does not cease to be outstanding because
the Company, a Subsidiary of the Company or an Affiliate of the Company holds
the Note.
SECTION 2.9. 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, any Subsidiary of the Company or any Affiliate of the Company shall be
considered as though not outstanding, except that for purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Notes which a Responsible Officer knows to be so owned shall be
so considered. Notwithstanding the foregoing, Notes that are to be acquired by
the Company, any Subsidiary of the Company or an Affiliate of the Company
pursuant to an exchange offer, tender offer or other agreement shall not be
deemed to be owned by the Company, a Subsidiary of the Company or an Affiliate
of the Company until legal title to such Notes passes to the Company, such
Subsidiary or such Affiliate, as the case may be.
SECTION 2.10. TEMPORARY NOTES.
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 and the Trustee consider appropriate for temporary Notes. Without
unreasonable delay, the Company shall prepare and the Trustee, upon receipt of
the written order of the Company signed by two Officers of the Company, shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as definitive Notes.
SECTION 2.11. CANCELLATION.
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The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall destroy canceled Notes
(subject to the record retention requirement of the Exchange Act), unless the
Company directs canceled Notes to be returned to it. The Company may not issue
new Notes to replace Notes that it has redeemed or paid or that have been
delivered to the Trustee for cancellation. All canceled Notes held by the
Trustee shall be destroyed and certification of their destruction delivered to
the Company, unless by a written order, signed by two Officers of the Company,
the Company shall direct that canceled Notes be returned to it.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it shall pay
the defaulted interest in any lawful manner plus, to the extent lawful, interest
payable on the defaulted interest, to the Persons who are Holders of the Notes
on a subsequent special record date, which date shall be at the earliest
practicable date but in all events at least five Business Days prior to the
payment date, in each case at the rate provided in the Notes. The Company
shall, with the consent of the Trustee, fix or cause to be fixed each such
special record date and payment date. At least 15 days before the special
record date, the Company (or the Trustee, in the name of and at the expense of
the Company) shall mail to Holders of the Notes a notice that states the special
record date, the related payment date and the amount of such interest to be
paid.
SECTION 2.13. RECORD DATE.
The record date for purposes of determining the identity of Holders of the
Notes entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided for in TIA
Section 316(c).
SECTION 2.14. CUSIP NUMBER.
The Company in issuing the Notes may use a "CUSIP" number and, if it does
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders; PROVIDED that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes and that reliance may be placed only on
the other identification numbers printed on the Notes. The Company will
promptly notify the Trustee of any change in the CUSIP number.
ARTICLE 3.
REDEMPTION
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SECTION 3.1. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07, it shall furnish to the Trustee, at least 45 days
(unless a shorter period is acceptable to the Trustee) but not more than 60 days
before a redemption date, an Officers' Certificate setting forth (i) the
redemption date, (ii) the principal amount of Notes to be redeemed and (iii) the
redemption price.
SECTION 3.2. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the selection
of Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or if the Notes are not so listed on a PRO RATA basis, by lot
or in accordance with any other method the Trustee considers fair and
appropriate, PROVIDED that no Notes with a principal amount of $1,000 or less
shall be redeemed in part. In the event of partial redemption by lot, the
particular Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
them selected shall be in amounts of $1,000 or whole multiples of $1,000; except
that if all of the Notes of a Holder are to be redeemed, the entire outstanding
amount of Notes held by such Holder, even if not a multiple of $1,000, shall be
redeemed. Except as provided in the preceding sentence, provisions of this
Indenture that apply to Notes called for redemption also apply to portions of
Notes called for redemption.
SECTION 3.3. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09, at least 30 days but not more
than 60 days before a redemption date, the Company shall mail or cause to be
mailed, 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 being redeemed in part only, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
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upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; PROVIDED, HOWEVER, that the Company
shall have delivered to the Trustee, at least 45 days (unless a shorter period
is acceptable to the Trustee) 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 3.4. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03, Notes
called for redemption become due and payable on the redemption date at the
redemption price.
SECTION 3.5. DEPOSIT OF REDEMPTION PRICE.
On or prior to any 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. The Trustee or
the Paying Agent shall promptly return to the Company any money deposited with
the Trustee or the Paying Agent by the Company in excess of the amounts
necessary to pay the redemption price of, and accrued interest on, all Notes to
be redeemed.
On and after the redemption date, interest shall cease to accrue on the
Notes or the portions of Notes called for redemption. If a Note is redeemed on
or after an interest record date but on or prior to the related interest payment
date, then any accrued and unpaid interest shall be paid to the Person in whose
name such Note was registered at the close of business on such record date. If
any Note called for redemption shall not be so paid upon surrender for
redemption because
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of the failure of the Company to comply with the preceding paragraph, interest
shall be paid on the unpaid principal, from the redemption date until such
principal is paid, and to the extent lawful on any interest not paid on such
unpaid principal, in each case at the rate provided in the Notes.
SECTION 3.6. NOTES REDEEMED IN PART.
Upon surrender and cancellation of a Note that is redeemed in part, the
Company shall issue and the Trustee shall authenticate for the Holder of the
Notes at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
SECTION 3.7. OPTIONAL REDEMPTION
Except as provided in the next paragraph, the Notes will not be redeemable
at the Company's option prior to February 1, 2004. 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) set forth below, together with
accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the 12-month period beginning on February 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2004 104.688%
2005 103.516
2006 102.344
2007 101.172
2008 100.00%
</TABLE>
Notwithstanding the foregoing, at any time prior to February 1, 2002, the
Company may redeem up to 35% of the aggregate principal amount of the Notes
outstanding at a redemption price equal to 109.375% of the principal amount
thereof on the repurchase date, together with accrued and unpaid interest to
such repurchase date, with the net cash proceeds of one or more public or
private sales (including sales to EchoStar, regardless of whether EchoStar
obtained such funds from an offering of Equity Interests or Indebtedness of
EchoStar or otherwise) of Equity Interests (other than Disqualified Stock) of
the Company (other than proceeds from a sale to any Subsidiary of the Company or
any employee benefit plan in which the Company or any of its Subsidiaries
participates); PROVIDED that: (a) at least 65% in aggregate principal amount of
the Notes originally issued remain outstanding immediately after the occurrence
of such redemption; (b) such redemption occurs within 120 days of the date of
the closing of any such sale; and (c) the sale of such Equity Interests is made
in compliance with the terms of this Indenture.
SECTION 3.8. MANDATORY REDEMPTION.
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The Notes will not be subject to any mandatory redemption or sinking fund
provisions.
SECTION 3.9. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
When the cumulative amount of Excess Proceeds that have not been applied in
accordance with Section 4.10 and 4.16 herein or this Section 3.09, exceeds $17.5
million, the Company shall be obligated to make an offer to all Holders of the
Notes (an "EXCESS PROCEEDS OFFER") to purchase the maximum principal amount of
Notes that may be purchased out of such Excess Proceeds at an offer price in
cash in an amount equal to 101% of the principal amount thereof, together with
accrued and unpaid interest to the date fixed for the closing of such offer in
accordance with the procedures set forth in this Section 3.09. To the extent
the Company or a Restricted Subsidiary is required under the terms of
Indebtedness of the Company or such Restricted Subsidiary which is PARI PASSU
with, or (in the case of any secured Indebtedness) senior with respect to such
collateral to, the Notes with any proceeds which constitute Excess Proceeds
under this Indenture, the Company shall make a pro rata offer to the holders of
all other PARI PASSU Indebtedness (including the Notes) with such proceeds. If
the aggregate principal amount of Notes and other PARI PASSU Indebtedness
surrendered by holders thereof exceeds the amount of such Excess Proceeds, the
Trustee shall select the Notes and other PARI PASSU Indebtedness to be purchased
on a PRO RATA basis.
The Excess Proceeds Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "OFFER PERIOD"). No later than
five Business Days after the termination of the Offer Period (the "PURCHASE
DATE"), the Company shall purchase the maximum principal amount of Notes that
may be purchased with such Excess Proceeds (which maximum principal amount of
Notes shall be the "OFFER AMOUNT") or, if less than the Offer Amount has been
tendered, all Notes tendered in response to the Excess Proceeds Offer.
If the Purchase Date is on or after an interest 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 shall be payable to Holders who tender
Notes pursuant to the Excess Proceeds Offer.
Upon the commencement of any Excess Proceeds Offer, the Company shall send,
by first class mail, a notice to each of the Holders of the Notes, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Excess Proceeds
Offer. The notice, which shall govern the terms of the Excess Proceeds Offer,
shall state:
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(a) that the Excess Proceeds Offer is being made pursuant to this
Section 3.09 and the length of time the Excess Proceeds Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that any Note accepted for payment pursuant to the Excess
Proceeds Offer shall cease to accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to any
Excess Proceeds Offer shall 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 at least three business days
before the Purchase Date;
(f) that Holders shall be entitled to withdraw their election if
the Company, depositary or Paying Agent, as the case may be, receives, not later
than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have the Note purchased;
(g) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a PRO RATA basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(h) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered.
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a PRO RATA basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Excess Proceeds
Offer, or if less than the Offer Amount has been tendered, all Notes or portion
thereof tendered, and deliver to the Trustee an Officers' Certificate stating
that such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.09. The Company, Depositary or
Paying Agent, as the case may be, shall promptly (but in any case not later than
five days after the Purchase Date) mail or deliver to each tendering Holder an
amount equal to the purchase price of the Note tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly issue a new
Note, and the Trustee shall authenticate and mail or deliver such new Note, to
such Holder
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equal in principal amount to any unpurchased portion of the Note surrendered.
Any Note not so accepted shall be promptly mailed or delivered by the Company to
the Holder thereof. The Company shall publicly announce the results of the
Excess Proceeds Offer on the Purchase Date. To the extent that the aggregate
principal amount of Notes tendered pursuant to an Excess Proceeds Offer is less
than the amount of such Excess Proceeds, the Company may use any remaining
Excess Proceeds for general corporate purposes. Upon completion of an Excess
Proceeds Offer, the amount of Excess Proceeds shall be reset at zero.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06.
ARTICLE 4.
COVENANTS
SECTION 4.1. PAYMENT OF NOTES.
The Company shall pay or cause to be paid 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, if other than the Company, holds as of 10:00 a.m.
Eastern Time on the due date money deposited by or on behalf of the Company in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
the then applicable interest rate on the Notes to the extent lawful; it shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace period) at the same rate to the extent lawful.
SECTION 4.2. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain an office or agency (which may be an office of
the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where
Notes may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
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offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; PROVIDED,
HOWEVER, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency for such purposes.
The Company shall give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
SECTION 4.3. REPORTS.
(a) Whether or not required by the rules and regulations of the
SEC, so long as any of the Notes remain outstanding, the Company shall cause
copies of all quarterly and annual financial reports and of the information,
documents, and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which the Company is required
to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act
(including all information that would be required to be contained in Forms 10-Q
and 10-K and including information that would be required with respect to the
Guarantors) to be filed with the SEC and the Trustee and mailed to the Holders
at their addresses appearing in the register of Notes maintained by the
Registrar, in each case, within 15 days of filing with the SEC. If the Company
is not subject to the requirements of such Section 13 or 15(d) of the Exchange
Act, the Company shall nevertheless continue to cause the annual and quarterly
financial statements, including any notes thereto (and, with respect to annual
reports, an auditors' report by an accounting firm of established national
reputation) and a "Management's Discussion and Analysis of Financial Condition
and Results of Operations," comparable to that which would have been required to
appear in annual or quarterly reports filed under Section 13 or 15(d) of the
Exchange Act (including all financial information that would be required to be
contained in Forms 10-Q and 10-K and including all information that would be
required with respect to the Guarantors), to be so filed with the SEC for public
availability (to the extent permitted by the SEC) and the Trustee and mailed to
the Holders within 120 days after the end of the Company's fiscal years and
within 60 days after the end of each of the first three quarters of each such
fiscal year. The Company and the Guarantors shall also comply with the
provisions of TIA Section 314(a).
(b) The Company shall provide the Trustee with a sufficient number
of copies of all reports and other documents and information that the Trustee
may be required to deliver to the Holders of the Notes under this Section 4.03.
SECTION 4.4. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
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activities of the Company, the Guarantors and their respective Subsidiaries
during the preceding fiscal year has been made under the supervision of the
signing Officers with a view to determining whether each has kept, observed,
performed and fulfilled its obligations under this Indenture and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge each entity has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture including, without limitation, a default in the performance or breach
of Section 4.07, Section 4.09, Section 4.10 or Section 4.15 (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action each is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action each is taking or proposes to take with respect thereto.
(b) [Intentionally Omitted].
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of (i) any
Default or Event of Default, or (ii) any default under any Indebtedness referred
to in Section 6.01(f) or (g) of this Indenture, an Officers' Certificate
specifying such Default, Event of Default or default and what action the Company
or any of its Affiliates is taking or proposes to take with respect thereto.
SECTION 4.5. TAXES.
The Company shall pay, 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 or where the
failure to effect such payment is not adverse in any material respect to the
Holders of the Notes.
SECTION 4.6. STAY, EXTENSION AND USURY LAWS.
The Company and each Guarantor covenants (to the extent that it may
lawfully do so) that it shall 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, that may
affect the covenants or the performance of this Indenture; and the Company and
each Guarantor (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and covenants that it shall
not, by resort to any such law, hinder, delay or impede the execution of any
power herein granted to the Trustee, but shall suffer and permit the execution
of every such power as though no such law has been enacted.
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SECTION 4.7. LIMITATION ON RESTRICTED PAYMENTS.
Neither the Company nor any of its Restricted Subsidiaries may, directly or
indirectly:
(a) declare or pay any dividend or make any distribution on account of
any Equity Interests of the Company other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company;
(b) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of EchoStar, the Company or any of their respective Subsidiaries or
Affiliates, other than any such Equity Interests owned by the Company or any
Wholly Owned Restricted Subsidiary;
(c) purchase, redeem, defease or otherwise acquire or retire for value
any Indebtedness that is expressly subordinated in right of payment to the Notes
or the Guarantees, except in accordance with the scheduled mandatory redemption,
sinking fund or repayment provisions set forth in the original documentation
governing such Indebtedness;
(d) declare or pay any dividend or make any distribution on account of
any Equity Interests of any Restricted Subsidiary, other than (x) to the Company
or any Wholly Owned Restricted Subsidiary or (y) to all holders of any class or
series of Equity Interests of such Restricted Subsidiary on a PRO RATA basis;
PROVIDED that in the case of this clause (y), such dividends or distributions
may not be in the form of Indebtedness or Disqualified Stock; or
(e) make any Restricted Investment (all such prohibited payments and
other actions set forth in clauses (a) through (e) being collectively referred
to as "Restricted Payments"), unless, at the time of such Restricted Payment:
(i) no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence thereof;
(ii) after giving effect to such Restricted Payment and
the incurrence of any Indebtedness the net proceeds of which are used
to finance such Restricted Payment, the Indebtedness to Cash Flow
Ratio of the Company would not have exceeded 8.0 to 1; and
(iii) such Restricted Payment, together with the aggregate
of all other Restricted Payments after the date of this Indenture, is
less than the sum of (A) the difference of (x) cumulative Consolidated
Cash Flow of the Company determined at the time of such Restricted
Payment (or, in case such Consolidated Cash Flow shall be a deficit,
minus 100% of such deficit) minus (y) 120% of Consolidated Interest
Expense of the Company, each as determined for the period (taken as
one accounting period) from April 1, 1999 to the end of the Company's
most recently ended fiscal
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quarter for which internal financial statements are available at the time
of such Restricted Payment; plus (B) an amount equal to 100% of the
aggregate net cash proceeds and, in the case of proceeds consisting of
assets used in or constituting a business permitted under Section 4.17 of
this Indenture, 100% of the fair market value of the aggregate net proceeds
other than cash received by the Company either from capital contributions
from EchoStar, or from the issue or sale (including an issue or sale to
EchoStar) of Equity Interests (other than Disqualified Stock) of the
Company (other than Equity Interests sold to any Subsidiary of the
Company), since the date of the Indenture, but, in the case of any net cash
proceeds, only to the extent such net cash proceeds are not used to redeem
Notes pursuant to the second paragraph of Section 3.07 of this Indenture;
PROVIDED that the proceeds calculated for purposes of this clause (B) shall
exclude cash and non-cash property and assets received by the Company
pursuant to Section 4.18 and Section 4.19 hereof; plus (C) in the event
that any Unrestricted Subsidiary is designated by the Company as a
Restricted Subsidiary, an amount equal to the fair market value of the net
Investment of the Company or a Restricted Subsidiary in such Subsidiary at
the time of such designation; PROVIDED, HOWEVER, that the foregoing sum
shall not exceed the amount of the Investments made by the Company or any
Restricted Subsidiary in any such Unrestricted Subsidiary since the date of
the Indenture, plus (D) 100% of any cash dividends and other cash
distributions received by the Company and its Wholly Owned Restricted
Subsidiaries from an Unrestricted Subsidiary to the extent not included in
Cumulative Consolidated Cash Flow plus (E), to the extent not included in
clauses (A) through (D) above, an amount equal to the net reduction in
Investments of the Company and its Restricted Subsidiaries since the date
of this Indenture resulting from payments in cash of interest on
Indebtedness, dividends, or repayment of loans or advances, or other
transfers of property, in each case, to the Company or to a Wholly Owned
Restricted Subsidiary or from the net cash proceeds from the sale,
conveyance or other disposition of any such Investment; PROVIDED, HOWEVER,
that the foregoing sum shall not exceed, with respect to any Person in whom
such Investment was made, the amount of Investments previously made by the
Company or any Restricted Subsidiary in such Person which were included in
computations made pursuant to this clause (iii).
The foregoing provisions will not prohibit the following (provided that
with respect to clauses (2), (3), (5), (6), (7), (8), (9), (12), (13) and
(14) below, no Default or Event of Default shall have occurred and be continuing
therein):
(1) the payment of any dividend within 60 days after the
date of declaration thereof, if at such date of declaration such
payment would have complied with the provisions of this Indenture;
(2) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company in exchange for, or
out of the net
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proceeds of the substantially concurrent capital contribution from EchoStar
or from the substantially concurrent issue or sale (including to EchoStar)
of Equity Interests (other than Disqualified Stock) of the Company (other
than Equity Interests issued or sold to any Subsidiary of the Company);
(3) Investments in an aggregate amount not to exceed
$75 million plus, to the extent not included in Consolidated Cash
Flow, an amount equal to the net reduction in such Investments
resulting from payments in cash of interest on Indebtedness, dividends
or repayment of loans or advances, or other transfers of property, in
each case, to the Company or to a Wholly Owned Restricted Subsidiary
or from the net cash proceeds from the sale, conveyance or other
disposition of any such Investment; PROVIDED, HOWEVER, that the
foregoing sum shall not exceed, with respect to any Person in whom
such Investment was made, the amount of Investments previously made by
the Company or any Restricted Subsidiary in such Person pursuant to
this clause (3);
(4) Investments to fund the financing activity of DNCC in
the ordinary course of its business in an amount not to exceed, as of
the date of determination, the sum of (A) $35 million plus (B) 40% of
the aggregate cost to DNCC for each Satellite Receiver purchased by
DNCC and leased by DNCC to a retail consumer in excess of 100,000
units;
(5) cash dividends or distributions to EchoStar to the
extent required for the purchase of employee stock options to purchase
Capital Stock of EchoStar, or Capital Stock of EchoStar issued
pursuant to the exercise of employee stock options to purchase Capital
Stock of EchoStar, in an aggregate amount not to exceed $2 million in
any calendar year and in an aggregate amount not to exceed $10 million
since the date of the Indenture;
(6) a Permitted Refinancing (as defined in Section 4.09);
(7) Investments in an amount equal to 100% of the
aggregate net proceeds (whether or not in cash) received by the
Company from capital contributions from EchoStar or from the issue and
sale (including a sale to EchoStar) of Equity Interests (other than
Disqualified Stock) of the Company (other than Equity Interests issued
or sold to a Subsidiary of the Company), on or after the date of the
Indenture; PROVIDED THAT such proceeds shall include only $300 million
in the case of assets contributed pursuant to Section 4.18 hereof and
shall include all of the cash contributed pursuant to Section 4.19
hereof plus, to the extent not included in Consolidated Cash Flow, an
amount equal to the net reduction in such Investments resulting from
payments in cash of interest on Indebtedness, dividends, or repayment
of loans or advances, or other transfers of property, in each case, to
the Company or to a Wholly Owned Restricted
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Subsidiary or from the net cash proceeds from the sale, conveyance, or
other disposition of any such Investment; PROVIDED, HOWEVER, that the
foregoing sum shall not exceed, with respect to any Person in whom such
Investment was made, the amount of Investments previously made by the
Company or any Restricted Subsidiary in such Person pursuant to this clause
(7) in each case, PROVIDED that such Investments are in businesses of the
type described under Section 4.17 of this Indenture;
(8) Investments in any Restricted Subsidiary which is a
Guarantor but which is not a Wholly Owned Restricted Subsidiary;
(9) Investments in NagraStar in an aggregate amount not
to exceed $25 million and in SkyVista in an aggregate amount not to
exceed $10 million;
(10) cash dividends or other cash distributions to
EchoStar in an amount sufficient to enable EchoStar to (A) repurchase
its 12 1/8% Senior Exchange Notes, (B) pay interest on any of its 12 1/8%
Senior Exchange Notes which remain outstanding following consummation
of the Tender Offers (as defined in the Offering Memorandum) and
(C) either (x) redeem such 12 1/8% Senior Exchange Notes that remain
outstanding at the prices set forth in the indenture governing such
notes; or (y) repurchase or defease such notes at any time prior to
such redemption; PROVIDED in each case, that EchoStar has irrevocably
agreed, for the benefit of the Holders of the Notes, to apply such
cash pursuant to the clause above under which such dividend or other
distribution was made;
(11) cash dividends or distributions to EchoStar to the
extent required for the purchase of odd-lots of Equity Interests of
EchoStar, in an amount not to exceed $5 million in the aggregate;
(12) the making of any Restricted Payment (including the
receipt of any Investment) permitted under or resulting from any
transaction permitted under Section 4.21 of this Indenture; PROVIDED
that all conditions to any such Restricted Payment set forth in such
Section 4.21 are satisfied; or
(13) Investments made as a result of the receipt of
non-cash proceeds from Asset Sales made in compliance with Section
4.10 of this Indenture.
Restricted Payments made pursuant to clauses (1), (2), (4), (7) (but only
to the extent that net proceeds received by the Company as set forth in such
clause (7) were included in the computations made in clause (iii)(B) of the
first paragraph of this Section 4.07), (11) and (13) (but only to the extent
such Investments pursuant to clause (13) (a) were made as a result of the
receipt of
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non-cash proceeds from Asset Sales as set forth in clause (y) of the last
paragraph of Section 4.10 of this Indenture and (b) are not designated as
Investments made pursuant to an applicable provision of the immediately
preceding paragraph of this Section 4.07 (other than clause (13) thereof)) shall
be included as Restricted Payments in any computation made pursuant to
clause (3) of the first paragraph of this Section 4.07. Restricted Payments made
pursuant to clauses (3), (5), (6), (7) (but only to the extent that net proceeds
received by the Company as set forth in such clause (7) were not included in the
computations made in clause (iii)(B) of the first paragraph of this Section
4.07), (8), (9), (10), (12) and (13) (but only to the extent such Investments
pursuant to clause (13) (a) were not made as a result of the receipt of non-cash
proceeds from Asset Sales as set forth in clause (y) of the last paragraph of
Section 4.10 or (b) if made pursuant to such clause (y), were designated as
Investments made pursuant to an applicable provision of the immediately
preceding paragraph of this Section 4.07 (other than clause (13) thereof)) shall
not be included as Restricted Payments in any computation made pursuant to
clause (iii) of the first paragraph of this Section 4.07.
If the Company or any Restricted Subsidiary makes an Investment which was
included in computations made pursuant to this Section 4.07 and the Person in
which such Investment was made subsequently becomes a Restricted Subsidiary that
is a Guarantor, to the extent such Investment resulted in a reduction in the
amounts calculated under clause (iii) of the first paragraph of or under any
other provision of this Section 4.07, then such amount shall be increased by the
amount of such reduction.
Not later than five business days after January 1 and July 1 of each year
and ten days following a request from the Trustee, the Company shall deliver to
the Trustee an Officers' Certificate stating that each Restricted Payment made
in the six months preceding such January 1, July 1 or date of request, as the
case may be, is permitted and setting forth the basis upon which the
calculations required by this Section 4.07 were computed, which calculations
shall be based upon the Company's latest available financial statements.
SECTION 4.8. LIMITATIONS CONCERNING DISTRIBUTIONS BY SUBSIDIARIES, ETC.
The Company shall not, and shall not permit any Restricted Subsidiary of
the Company to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(a) pay dividends or make any other distribution to the Company or any
of its Restricted Subsidiaries on its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits, or pay any
Indebtedness owed to the Company or any of its Restricted Subsidiaries;
(b) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
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(c) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries;
except for such encumbrances or restrictions existing under or by reasons of:
(i) Existing Indebtedness and existing agreements as in
effect on the date of the Indenture;
(ii) applicable law or regulation;
(iii) any instrument governing Acquired Debt as in effect
at the time of acquisition (except to the extent such Indebtedness was
incurred in connection with, or in contemplation of, such
acquisition), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the
Person, or the property or assets of the Person, so acquired, provided
that the Consolidated Cash Flow of such Person shall not be taken into
account in determining whether such acquisition was permitted by the
terms of the Indenture; except to the extent that dividends or other
distributions are permitted notwithstanding such encumbrance or
restriction and could have been distributed;
(iv) by reason of customary non-assignment provisions in
leases entered into in the ordinary course of business and consistent
with past practices;
(v) Refinancing Indebtedness (as defined in Section 4.09
of this Indenture), PROVIDED that the restrictions contained in the
agreements governing such Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the
Indebtedness being refinanced;
(vi) the Indenture and the Notes;
(vii) Permitted Liens; or
(viii) any agreement for the sale of any Subsidiary or its
assets that restricts distributions by that Subsidiary pending its
sale; provided that during the entire period in which such encumbrance
or restriction is effective, such sale (together with any other sales
pending) would be permitted under the terms of this Indenture.
SECTION 4.9. INCURRENCE OF INDEBTEDNESS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to (collectively,
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"incur") any Indebtedness (including Acquired Debt); PROVIDED, HOWEVER, that,
notwithstanding the foregoing the Company and any Guarantor may incur
Indebtedness (including Acquired Debt), if, after giving effect to the
incurrence of such Indebtedness and the application of the net proceeds thereof
on a pro forma basis, the Indebtedness to Cash Flow Ratio of the Company would
not have exceeded 8.0 to 1.
The foregoing limitation will not apply to any of the following
incurrences of Indebtedness:
(i) Indebtedness represented by the Notes, the Guarantees
and the Indenture;
(ii) the incurrence by the Company or any Guarantor of
Acquired Subscriber Debt not to exceed $1,250 per Acquired
Subscriber;
(iii) the incurrence by the Company or any Guarantor of
Deferred Payments and letters of credit with respect thereto;
(iv) Indebtedness of the Company or any Guarantor that
ranks PARI PASSU with or is subordinated to the Notes and the
Guarantees in an aggregate principal amount not to exceed $700
million at any one time outstanding, which Indebtedness may be
secured to the extent permitted under Section 4.12 of this
Indenture; PROVIDED that up to $75 million at any one time
outstanding of such Indebtedness may be incurred by Restricted
Subsidiaries that are not Guarantors; PROVIDED further that any
Indebtedness incurred pursuant to this clause (iv) that is
incurred pursuant to a Credit Agreement shall be incurred
pursuant to a Credit Agreement under which the Company is the
sole primary obligor (and under which the Guarantors (and no
other Restricted Subsidiary) may guarantee the primary
obligations of the Company);
(v) Indebtedness between and among the Company and each
of the Guarantors;
(vi) Acquired Debt of a Person incurred prior to the date
upon which such Person was acquired by the Company or any
Guarantor (excluding Indebtedness incurred by such entity other
than in the ordinary course of its business in connection with,
or in contemplation of, such entity being so acquired) in an
amount not to exceed (A) $30 million in the aggregate for all
such Persons other than those described in the immediately
following clause (B); and (B) $5 million acquired in connection
with the acquisition of Media4;
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(vii) Existing Indebtedness;
(viii) the incurrence of Purchase Money Indebtedness by
the Company or any Guarantor in an amount not to exceed the
cost of construction, acquisition or improvement of assets used
in any business permitted under Section 4.17 of this Indenture,
being constructed, acquired or improved as well as any launch
costs and insurance premiums related to such assets;
(ix) Hedging Obligations of the Company or any of its
Restricted Subsidiaries covering Indebtedness of the Company or
such Restricted Subsidiary to the extent the notional principal
amount of such Hedging Obligation does not exceed the principal
amount of the Indebtedness to which such Hedging Obligation
relates; PROVIDED, HOWEVER, that such Hedging Obligations are
entered into to protect the Company and its Restricted
Subsidiaries from fluctuation in interest rates on Indebtedness
incurred in accordance with this Indenture;
(x) Indebtedness of the Company or any Restricted
Subsidiary in respect of performance bonds or letters of credit
of the Company or any Restricted Subsidiary or surety bonds
provided by the Company or any Restricted Subsidiary incurred
in the ordinary course of business and on ordinary business
terms in connection with the businesses permitted under Section
4.17 of this Indenture;
(xi) Indebtedness of the Company or any Guarantor the
proceeds of which are used solely to finance the construction
and development of a call center owned by the Company or a
Guarantor in McKeesport, Pennsylvania or any refinancing
thereof; PROVIDED that the aggregate of all Indebtedness
incurred pursuant to this clause (xi) shall in no event exceed
$10 million at any one time outstanding;
(xii) the incurrence by the Company or any Guarantor of
Indebtedness issued in exchange for, or the proceeds of which
are used to extend, refinance, renew, replace, substitute or
refund in whole or in part Indebtedness referred to in the
first paragraph of this Section 4.09 or in clauses (i), (ii),
(iii), (vi) or (vii) above ("Refinancing Indebtedness");
PROVIDED, HOWEVER, that: (A) the principal amount of such
Refinancing Indebtedness shall not exceed the principal amount
and accrued interest of the Indebtedness so extended,
refinanced, renewed, replaced, substituted or refunded and any
premiums payable and reasonable fees, expenses, commissions and
costs in connection therewith;
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(B) the Refinancing Indebtedness shall have a final maturity later
than, and a Weighted Average Life to Maturity equal to or greater
than, the final maturity and Weighted Average Life to Maturity,
respectively, of the Indebtedness being extended, refinanced,
renewed, replaced or refunded; and (C) the Refinancing Indebtedness
shall be subordinated in right of payment to the Notes and the
Guarantees, if at all, on terms at least as favorable to the holders
of Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced or
refunded (a "Permitted Refinancing");
(xiii) the guarantee by the Company or any Guarantor of
Indebtedness of the Company or a Restricted Subsidiary that was
permitted to be incurred by another provision of this Section
4.09; or
(xiv) Indebtedness under Capital Lease Obligations of the
Company or any Guarantor with respect to no more than two
direct broadcast satellites at any time.
For purposes of determining compliance with this Section 4.09, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories described in clauses (i) through (xiv) above or is permitted to be
incurred pursuant to the first paragraph of this Section 4.09 and also meets the
criteria of one or more of the categories described in clauses (i) through
(xiv) above, the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this Section 4.09 and may from
time to time reclassify such item of Indebtedness in any manner in which such
item could be incurred at the time of such reclassification. Accrual of interest
and the accretion of accreted value will not be deemed to be an incurrence of
Indebtedness for purposes of this Section 4.09.
SECTION 4.10. ASSET SALES.
If the Company or any Restricted Subsidiary, in a single transaction or a
series of related transactions:
(a) sells, leases (in a manner that has the effect of a disposition),
conveys or otherwise disposes of any of its assets (including by way of a
sale-and-leaseback transaction), other than: (i) sales or other dispositions of
inventory in the ordinary course of business; (ii) sales or other dispositions
to the Company or a Wholly Owned Restricted Subsidiary of the Company by the
Company or any Restricted Subsidiary; (iii) sales or other dispositions of
accounts receivable to DNCC for cash in an amount at least equal to the fair
market value of such accounts receivable; (iv) sales or other dispositions of
rights to construct or launch satellites; and (v) sales or other dispositions
permitted under Section 4.21 of this Indenture (PROVIDED THAT the sale, lease,
conveyance or other disposition of all or
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substantially all of the assets of the Company shall be governed by the
provisions of Article 5 of this Indenture);
(b) issues or sells Equity Interests of any Restricted Subsidiary (other
than any issue or sale of Equity Interests of ETC or a Subsidiary which
constitutes a Non-Core Asset permitted under Section 4.21 of this Indenture);
in either case, which assets or Equity Interests: (i) have a fair market value
in excess of $35 million (as determined in good faith by the Board of Directors
of the Company evidenced by a resolution of the Board of Directors of the
Company and set forth in an Officers' Certificate delivered to the Trustee); or
(ii) are sold or otherwise disposed of for net proceeds in excess of $35 million
(each of the foregoing, an "Asset Sale"), then:
(A) the Company or such Restricted Subsidiary, as the case
may be, must receive consideration at the time of such Asset Sale
at least equal to the fair market value (as determined in good
faith by the Board of Directors of the Company evidenced by a
resolution of the Board of Directors of the Company and set forth
in an Officers' Certificate delivered to the Trustee not later
than the fifth business day following January 1 and July 1 of each
year and ten days following a request from the Trustee which
certificate shall cover each Asset Sale made in the six months
preceding January 1, July 1 or date of request, as the case may
be) of the assets sold or otherwise disposed of; and
(B) at least 75% of the consideration therefor received by
the Company or such Restricted Subsidiary, as the case may be,
must be in the form of (x) cash, Cash Equivalents or Marketable
Securities, (y) any asset which is promptly (and in no event later
than 90 days after the date of transfer to the Company or a
Restricted Subsidiary) converted into cash; PROVIDED that to the
extent that such conversion is at a price that is less than the
fair market value (as determined above) of such asset at the time
of the Asset Sale in which such asset was acquired, the Company
shall be deemed to have made a Restricted Payment in the amount by
which such fair market value exceeds the cash received upon
conversion; or (z) properties and capital assets (excluding Equity
Interests) to be used by the Company or any of its Restricted
Subsidiaries in a business permitted under Section 4.17 of this
Indenture; PROVIDED, HOWEVER, that up to $20 million of assets in
addition to assets specified in clauses (x), (y) or (z) above at
any one time may be considered to be cash for purposes of this
clause (B), PROVIDED that the provisions of the next paragraph are
complied with as such non-cash assets are converted to cash. The
amount of any liabilities of the Company or any Restricted
Subsidiary that are assumed by or on behalf of the transferee in
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connection with an Asset Sale (and from which the Company or such
Restricted Subsidiary are unconditionally released) shall be deemed
to be cash for the purpose of this clause (B).
The Net Proceeds from such Asset Sale shall be used only: (i) to acquire
assets used in, or stock or other ownership interests in a Person that upon the
consummation of such Asset Sale becomes a Restricted Subsidiary and will be
engaged primarily in, the business of the Company as described under Section
4.17 of this Indenture, to repurchase Notes or if the Company sells any of its
satellites after launch such that the Company or its Restricted Subsidiaries own
less than three in-orbit satellites, only to purchase a replacement satellite;
or (ii) as set forth in the next sentence. Any Net Proceeds from any Asset Sale
that are not applied or invested as provided in the preceding sentence within
365 days after such Asset Sale shall constitute "Excess Proceeds" and shall be
applied to an offer to purchase Notes and other senior Indebtedness of the
Company if and when required under Section 3.09 of this Indenture.
Clause (B) of the second preceding paragraph shall not apply to all or such
portion of the consideration (i) as is designated by the Company in an Asset
Sale as being subject to this paragraph; and (ii) with respect to which the
aggregate fair market value at the time of receipt of all consideration received
by the Company or any Restricted Subsidiary in all such Asset Sales so
designated does not exceed the amount contributed to the Company under Section
4.19 of this Indenture, plus, to the extent any such consideration did not
satisfy clauses (B)(x) or (B)(z) above, upon the exchange or repayment of such
consideration for or with assets which satisfy such clauses, an amount equal to
the fair market value of such consideration (evidenced by a resolution of the
Board of Directors of the Company and set forth in an Officers' Certificate
delivered to the Trustee as set forth in clause (A) above).
In addition, clause (B) above shall not apply to any Asset Sale (x) where
assets not related to the direct broadcast satellite business are contributed to
a joint venture between the Company or one of its Restricted Subsidiaries and a
third party that is not an Affiliate of EchoStar or any of its Subsidiaries;
PROVIDED THAT following the sale, lease, conveyance or other disposition the
Company or one of its Wholly Owned Restricted Subsidiaries owns at least 50% of
the voting and equity interest in such joint venture, (y) to the extent the
consideration therefor received by the Company or a Restricted Subsidiary would
constitute Indebtedness or Equity Interests of a Person that is not an Affiliate
of EchoStar, the Company or one of their respective Subsidiaries; PROVIDED that
the acquisition of such Indebtedness or Equity Interests is permitted under the
provisions of Section 4.07 of this Indenture and (z) where assets sold are
satellites, uplink centers or call centers, PROVIDED that, in the case of
clause (z) the Company and its Restricted Subsidiaries continue to own at least
three satellites, one uplink center and one call center.
SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
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The Company shall not and shall not permit any Restricted Subsidiary to,
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (including any Unrestricted Subsidiary) (each of the
foregoing, an "Affiliate Transaction"), unless:
(a) such Affiliate Transaction is on terms that are no less favorable to
the Company or its Restricted Subsidiaries than those that would have been
obtained in a comparable transaction by the Company or such Subsidiaries with an
unrelated Person; and
(b) if such Affiliate Transaction involves aggregate payments in excess
of $15 million such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors of the Company, and the Company
delivers to the Trustee no later than five business days following January 1 or
July 1 of each year or ten days following a request from the Trustee a
resolution of the Board of Directors of the Company set forth in an Officers'
Certificate certifying that such Affiliate Transaction has been so approved and
complies with clause (a) above;
PROVIDED, HOWEVER, that (i) the payment of compensation to directors and
management of EchoStar and its Subsidiaries; (ii) transactions between or among
the Company and its Wholly Owned Subsidiaries (other than Unrestricted
Subsidiaries of the Company); (iii) any dividend, distribution, sale, conveyance
or other disposition of any assets of, or Equity Interests in, any Non-Core
Assets or ETC or the proceeds of a sale, conveyance or other disposition
thereof, in accordance with the provisions of this Indenture; (iv) transactions
permitted by the provisions of this Indenture described above under clauses (1),
(2), (5), (6), (8), (9), (10), (11) and (12) of the second paragraph of Section
4.07 of this Indenture; (v) so long as it complies with clause (a) above, the
provision of backhaul, uplink, transmission, billing, customer service,
programming acquisition and other ordinary course services by the Company or any
of its Restricted Subsidiaries to Satellite Communications Operating Corporation
and to Transponder Encryption Services Corporation on a basis consistent with
past practice; and (vi) any transactions between the Company or any Restricted
Subsidiary of the Company and any Affiliate of the Company the Equity Interests
of which Affiliate are owned solely by the Company or one of its Restricted
Subsidiaries, on the one hand, and by Persons who are not Affiliates of the
Company or Restricted Subsidiaries of the Company, on the other hand, shall, in
each case, not be deemed Affiliate Transactions.
SECTION 4.12. LIMITATION ON LIENS.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, create, incur, assume or suffer to exist any Lien on any
asset
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now owned or hereafter acquired, or on any income or profits therefrom or assign
or convey any right to receive income therefrom, except Permitted Liens.
SECTION 4.13. ADDITIONAL SUBSIDIARY GUARANTEES.
If the Company or any Guarantor transfers or causes to be transferred, in
one or a series of related transactions, property or assets (including, without
limitation, businesses, divisions, real property, assets or equipment) having a
fair market value (as determined in good faith by the Board of Directors of the
Company evidenced by a resolution of the Board of Directors of the Company and
set forth in an Officers' Certificate delivered to the Trustee no later than
five business days following January 1 and July 1 of each year or ten days
following a request from the Trustee, which certificate shall cover the six
months preceding January 1, July 1 or date of request, as the case may be)
exceeding the sum of $20 million in the aggregate for all such transfers after
the date of this Indenture minus the fair market value of Restricted
Subsidiaries acquired or created after the date of this Indenture that are not
Guarantors (fair market value being determined as of the time of such
acquisition) to Restricted Subsidiaries that are not Guarantors of the Notes,
the Company, shall, or shall cause each of such Subsidiaries to which any amount
exceeding such $20 million (less such fair market value) is transferred to:
(i) execute and deliver to the Trustee a supplemental indenture in form and
substance reasonably satisfactory to the Trustee pursuant to which such
Subsidiary shall unconditionally guarantee all of the Company's obligations
under the Notes on the terms set forth in this Indenture; and (ii) deliver to
the Trustee an Opinion of Counsel reasonably satisfactory to the Trustee that
such supplemental indenture and Guarantee have been duly authorized, executed
and delivered by and are valid and binding obligations of such Subsidiary or
such owner, as the case may be; PROVIDED, HOWEVER, that the foregoing provisions
shall not apply to transfers of property or assets (other than cash) by the
Company or any Guarantor in exchange for cash, Cash Equivalents or Marketable
Securities in an amount equal to the fair market value (as determined in good
faith by the Board of Directors of the Company evidenced by a resolution of the
Board of Directors of the Company and set forth in an Officers' Certificate
delivered to the Trustee no later than five business days following January 1
and July 1 of each year or ten days following a request from the Trustee, which
certificate shall cover the six months preceding January 1, July 1 or date of
request, as the case may be) of such property or assets. In addition, if (i) the
Company or any of its Restricted Subsidiaries acquires or creates another
Restricted Subsidiary or (ii) an Unrestricted Subsidiary of the Company is
redesignated as a Restricted Subsidiary or otherwise ceases to be an
Unrestricted Subsidiary, such Subsidiary shall execute a supplemental indenture
and deliver an opinion, each as required in the preceding sentence; PROVIDED
that no supplemental indenture or opinion shall be required if the fair market
value (as determined in good faith by the Board of Directors of the Company and
set forth in an Officers' Certificate delivered to the Trustee no later than
five business days following January 1 and July 1 of each year or ten days
following a request from the Trustee, which certificate shall cover the six
months preceding such January 1, July 1 or date of request, as the case
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may be) of all such Restricted Subsidiaries created, acquired or designated
since the date of this Indenture (fair market value being determined as of the
time of creation, acquisition or designation) does not exceed the sum of $20
million in the aggregate minus the fair market value of the assets transferred
to any Subsidiaries of the Company which do not execute supplemental indentures
pursuant to the preceding sentences; PROVIDED FURTHER that to the extent a
Restricted Subsidiary is subject to the terms of any instrument governing
Acquired Debt, as in effect at the time of acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition) which instrument or restriction prohibits such Restricted
Subsidiary from issuing a guarantee of the Notes, such Restricted Subsidiary
shall not be required to execute such a supplemental indenture until it is
permitted to issue such guarantee pursuant to the terms of such Acquired Debt.
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 of this Indenture and the next succeeding paragraph of
this Section 4.14, the Company shall do or cause to be done all things necessary
to preserve and keep in full force and effect (i) its existence as a
corporation, and subject to Sections 4.10, 4.21 and 10.03, the corporate,
partnership or other existence of any Restricted Subsidiary, in accordance with
the respective organizational documents (as the same may be amended from time to
time) of the Company or any Restricted Subsidiary and (ii) subject to Sections
4.10, 4.21 and 10.03, the rights (charter and statutory), licenses and
franchises of the Company and its Restricted Subsidiaries; 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 Restricted
Subsidiary if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in
any material respect to the Holders of the Notes.
SECTION 4.15. OFFER TO PURCHASE UPON CHANGE IN CONTROL.
Upon the occurrence of a Change of Control, the Company will be required to
make an offer (a "Change of Control Offer") to each Holder of Notes to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Notes at a purchase price equal to 101% of the aggregate principal
amount thereof, together with accrued and unpaid interest thereon to the date of
repurchase (in either case, the "Change of Control Payment"). Within 15 days
following any Change of Control, the Company shall mail a notice to each Holder
stating:
(a) that the Change of Control Offer is being made pursuant to the
covenant entitled "Section 4.15 - Offer to Purchase Upon Change in Control";
(b) the purchase price and the purchase date, which shall be no earlier
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than 30 days nor later than 40 days after the date such notice is mailed (the
"Change of Control Payment Date");
(c) that any Notes not tendered will continue to accrue interest in
accordance with the terms of this Indenture;
(d) that, unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control Payment
Date;
(e) 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 setting forth the name of the Holder, the
principal amount of Notes delivered for purchase, and a statement that such
Holder is withdrawing his election to have such Notes purchased;
(f) that Holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof; and
(g) any other information material to such Holder's decision to tender
Notes.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes in connection with a Change of Control.
SECTION 4.16. MAINTENANCE OF INSURANCE.
At all times, the Company or a Wholly Owned Restricted Subsidiary which is
a Guarantor will maintain and be the named beneficiary under Satellite Insurance
with respect to at least one-half of the satellites owned or leased by the
Company or its Subsidiaries (insured in an amount at least equal to the
depreciated cost of such satellites).
In the event that the Company or its Restricted Subsidiaries receive
proceeds from any Satellite Insurance covering any satellite owned by the
Company or any of its Restricted Subsidiaries, or in the event that the Company
or any of its Subsidiaries receives proceeds from any insurance maintained by
any satellite manufacturer or any launch provider covering any of such
satellites, all such proceeds (including any cash, Cash Equivalents or
Marketable Securities deemed to be proceeds of Satellite Insurance pursuant to
the respective definition thereof) shall be used only: (i) to purchase a
replacement satellite if at such time
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the Company or a Restricted Subsidiary then owns less than three satellites,
PROVIDED that if such replacement satellite is of lesser value compared to the
insured satellite, any insurance proceeds remaining after purchase of such
replacement satellite must be applied to the construction, launch and insurance
of a satellite of equal or greater value as compared to the insured satellite
(or in accordance with clause (iii) below); (ii) for purposes permitted under
Section 4.17 hereof if at such time the Company or a Restricted Subsidiary owns
three or more satellites (or in accordance with clause (iii) below); or (iii) to
the extent that such proceeds are not applied or contractually committed to be
applied as described in (i) or (ii) above within 365 days of the receipt of such
proceeds as "Excess Proceeds" to be applied to an offer to purchase Notes as set
forth under Section 3.09 hereof.
SECTION 4.17. ACTIVITIES OF THE COMPANY.
Neither the Company nor any of its Restricted Subsidiaries may engage in
any business other than developing, owning, engaging in and dealing with all or
any part of the business of domestic and international media, entertainment,
electronics or communications, and reasonably related extensions thereof,
including but not limited to the purchase, ownership, operation, leasing and
selling of, and generally dealing in or with, one or more communications
satellites and the transponders thereon, and communications uplink centers, the
acquisition, transmission, broadcast, production and other provision of
programming relating thereto and the manufacturing, distribution and financing
of equipment (including consumer electronic equipment) relating thereto.
SECTION 4.18. THE 110 ACQUISITION.
Upon consummation of the 110 Acquisition, all property and assets acquired
in such transaction or the right to receive such property and assets will be
contributed as capital contributions to the Company or one or more of the
Guarantors that is a Wholly Owned Restricted Subsidiary.
SECTION 4.19. ECHOSTAR EQUITY CONTRIBUTION.
Concurrently with or within five business days of the consummation of the
Offering, EchoStar shall make a capital contribution to the common equity of the
Company in the form of cash, Cash Equivalents or Marketable Securities in an
aggregate amount no less than $200 million.
SECTION 4.20. ACCOUNTS RECEIVABLE SUBSIDIARY.
The Company:
(a) may, and may permit any of its Subsidiaries to, notwithstanding the
provisions of Section 4.07 of this Indenture, make Investments in an Accounts
Receivable Subsidiary: (i) the proceeds of which are applied within five
Business
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Days of the making thereof solely to finance: (A) the purchase of accounts
receivable of the Company and its Subsidiaries or (B) payments required in
connection with the termination of all then existing arrangements relating to
the sale of accounts receivable or participation interests therein by an
Accounts Receivable Subsidiary (provided that the Accounts Receivable Subsidiary
shall receive cash, Cash Equivalents and accounts receivable having an aggregate
fair market value not less than the amount of such payments in exchange
therefor) and (ii) in the form of Accounts Receivable Subsidiary Notes to the
extent permitted by clause (b) below;
(b) shall not, and shall not permit any of its Subsidiaries to, sell
accounts receivable to an Accounts Receivable Subsidiary except for
consideration in an amount not less than that which would be obtained in an
arm's length transaction and solely in the form of cash or Cash Equivalents;
provided that an Accounts Receivable Subsidiary may pay the purchase price for
any such accounts receivable in the form of Accounts Receivable Subsidiary Notes
so long as, after giving effect to the issuance of any such Accounts Receivable
Subsidiary Notes, the aggregate principal amount of all Accounts Receivable
Subsidiary Notes outstanding shall not exceed 20% of the aggregate purchase
price paid for all outstanding accounts receivable purchased by an Accounts
Receivable Subsidiary since the date of this Indenture (and not written off or
required to be written off in accordance with the normal business practice of an
Accounts Receivable Subsidiary);
(c) shall not permit an Accounts Receivable Subsidiary to sell any
accounts receivable purchased from the Company or its Subsidiaries or
participation interests therein to any other Person except on an arm's length
basis and solely for consideration in the form of cash or Cash Equivalents or
certificates representing undivided interests of a Receivables Trust; provided
an Accounts Receivable Subsidiary may not sell such certificates to any other
Person except on an arm's length basis and solely for consideration in the form
of cash or Cash Equivalents;
(d) shall not, and shall not permit any of its Subsidiaries to, enter
into any guarantee, subject any of their respective properties or assets (other
than the accounts receivable sold by them to an Accounts Receivable Subsidiary)
to the satisfaction of any liability or obligation or otherwise incur any
liability or obligation (contingent or otherwise), in each case, on behalf of an
Accounts Receivable Subsidiary or in connection with any sale of accounts
receivable or participation interests therein by or to an Accounts Receivable
Subsidiary, other than obligations relating to breaches of representations,
warranties, covenants and other agreements of the Company or any of its
Subsidiaries with respect to the accounts receivable sold by the Company or any
of its Subsidiaries to an Accounts Receivable Subsidiary or with respect to the
servicing thereof; PROVIDED that neither the Company nor any of its Subsidiaries
shall at any time guarantee or be otherwise liable for the collectibility of
accounts receivable sold by them;
(e) shall not permit an Accounts Receivable Subsidiary to engage in
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any business or transaction other than the purchase and sale of accounts
receivable or participation interests therein of the Company and its
Subsidiaries and activities incidental thereto;
(f) shall not permit an Accounts Receivable Subsidiary to incur any
Indebtedness other than the Accounts Receivable Subsidiary Notes, Indebtedness
owed to the Company and Non-Recourse Indebtedness; PROVIDED that the aggregate
principal amount of all such Indebtedness of an Accounts Receivable Subsidiary
shall not exceed the book value of its total assets as determined in accordance
with GAAP;
(g) shall cause any Accounts Receivable Subsidiary to remit to the
Company or a Restricted Subsidiary of the Company on a monthly basis as a
distribution all available cash and Cash Equivalents not held in a collection
account pledged to acquirers of accounts receivable or participation interests
therein, to the extent not applied to (i) pay interest or principal on the
Accounts Receivable Subsidiary Notes or any Indebtedness of such Accounts
Receivable Subsidiary owed to the Company, (ii) pay or maintain reserves for
reasonable operating expenses of such Accounts Receivable Subsidiary or to
satisfy reasonable minimum operating capital requirements or (iii) to finance
the purchase of additional accounts receivable of the Company and its
Subsidiaries; and
(h) shall not, and shall not permit any of its Subsidiaries to, sell
accounts receivable to, or enter into any other transaction with or for the
benefit of, an Accounts Receivable Subsidiary (i) if such Accounts Receivable
Subsidiary pursuant to or within the meaning of any Bankruptcy Law (A) commences
a voluntary case, (B) consents to the entry of an order for relief against it in
an involuntary case, (C) consents to the appointment of a custodian of it or for
all or substantially all of its property, (D) makes a general assignment for the
benefit of its creditors, or (E) generally is not paying its debts as they
become due; or (ii) if a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (A) is for relief against such Accounts
Receivable Subsidiary in an involuntary case, (B) appoints a Custodian of such
Accounts Receivable Subsidiary or for all or substantially all of the property
of such Accounts Receivable Subsidiary, or (C) orders the liquidation of such
Accounts Receivable Subsidiary, and, with respect to clause (ii) hereof, the
order or decree remains unstayed and in effect for 60 consecutive days.
SECTION 4.21. DISPOSITIONS OF ETC AND NON-CORE ASSETS.
Notwithstanding Section 4.07 and Section 4.10 of this Indenture, in the
event that the 110 Acquisition has been consummated, the requirements set forth
in Section 4.18 of this Indenture have been satisfied and the Indebtedness to
Cash Flow Ratio of the Company would not have exceeded 6.0 to 1 on a pro forma
basis after giving effect to the sale of all of the Company's Equity Interests
in or
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assets of ETC, then (1) the payment of any dividend or distribution consisting
of Equity Interests or assets of ETC or the proceeds of a sale, conveyance or
other disposition of such Equity Interests or assets or the sale, conveyance or
other disposition of Equity Interests or assets of ETC or the proceeds of a
sale, conveyance or other disposition of such Equity Interests or assets shall
not constitute a Restricted Payment and (2) the sale, conveyance or other
disposition of the Equity Interests or assets of ETC or the proceeds of a sale,
conveyance or other disposition of such Equity Interests or assets shall not
constitute an Asset Sale and (3) upon delivery of an Officers' Certificate to
the Trustee evidencing satisfaction of the conditions to such release and a
written request to the Trustee requesting such a release, ETC shall be
discharged and released from its Guarantee and, PROVIDED that the Company
designates ETC as an Unrestricted Subsidiary, from all covenants and
restrictions contained in this Indenture; PROVIDED that no such payment,
dividend, distribution, sale, conveyance or other disposition of any kind
(collectively, a "Payout") described in clauses (1) and (2) above shall be
permitted if at the time of such Payout (1) after giving pro forma effect to
such Payout, the Company would not have been permitted under Section 4.07 of
this Indenture to make a Restricted Payment in an amount equal to the total (the
"ETC Amount Due") of (x) the amount of all Investments (other than the
contribution of (i) title to the headquarters building of ETC in Inverness,
Colorado and the tangible assets therein to the extent used by ETC as of the
date of this Indenture and (ii) patents, trademarks and copyrights applied for
or granted as of the date of this Indenture to the extent used by ETC or result
from the business of ETC, in each case, to ETC) made in ETC by the Company or
its Restricted Subsidiaries since the date of this Indenture (which, in the case
of Investments in exchange for assets, shall be valued at the fair market value
of each such asset at the time each such Investment was made) minus (y) the
amount of the after-tax value of all cash returns on such Investments paid to
the Company or its Wholly Owned Restricted Subsidiaries (or, in the case of a
non-Wholly Owned Restricted Subsidiary, the pro rata portion thereof
attributable to the Company) minus (z) $25 million and (2) any contract,
agreement or understanding between ETC and the Company or any Restricted
Subsidiary of the Company and any loan or advance to or guarantee with, or for
the benefit of, ETC issued or made by the Company or one of its Restricted
Subsidiaries, is on terms that are less favorable to the Company or its
Restricted Subsidiaries than those that would have been obtained in a comparable
transaction by the Company or such Restricted Subsidiaries with an unrelated
Person, all as evidenced by a resolution of the Board of Directors of the
Company set forth in an Officers' Certificate delivered to the Trustee
certifying that each such contract, agreement, understanding, loan, advance and
guarantee has been approved by a majority of the members of such Board. In the
event that at the time of such Payout, the condition set forth in clause (1) of
the proviso of the preceding sentence cannot be satisfied, ETC may seek to have
a Person other than the Company or one of its Restricted Subsidiaries pay in
cash an amount to the Company or its Restricted Subsidiaries such that after
taxes, such amount is greater than or equal to the ETC Amount Due or the portion
of the ETC Amount Due which would not have been permitted to be made as a
Restricted Payment by the Company; PROVIDED that such payment shall be treated
for purposes of this Section 4.21 as a cash return on the Investments made
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in ETC and provided further that for all purposes under this Indenture, such
payment shall not be included in any calculation under clauses (iii)(A) through
(iii)(E) of the first paragraph of Section 4.07 of this Indenture. To the
extent that the ETC Amount Due or any portion thereof would have been permitted
to be made as a Restricted Payment by the Company and was not paid by another
Person as permitted by the preceding sentence, the Company shall be deemed to
have made a Restricted Payment in the amount of such ETC Amount Due or portion
thereof, as the case may be. It shall be a condition to any Payout pursuant to
the first paragraph of this Section 4.21 that, commencing with the quarter
commencing July 1, 1999, the Company shall have caused ETC to maintain, in
accordance with GAAP, consolidated financial statements for ETC and its
Subsidiaries on a "stand-alone" basis.
Notwithstanding Section 4.07 and Section 4.10 of this Indenture, (1) the
payment of any dividend or distribution consisting of Equity Interests or assets
of any Non-Core Asset or the proceeds of a sale, conveyance or other disposition
of such Equity Interests or assets or the sale, conveyance or other disposition
of Equity Interests in or assets of any Non-Core Asset or the proceeds of a
sale, conveyance or other disposition of such Equity Interests or assets shall
not constitute a Restricted Payment and (2) the sale, conveyance or other
disposition of the Equity Interests or assets of any Non-Core Asset or the
proceeds of a sale, conveyance or other disposition of such Equity Interests or
assets shall not constitute an Asset Sale; and (3) upon delivery of an Officers'
Certificate to the Trustee evidencing satisfaction of the conditions to such
release and a written request to the Trustee requesting such a release, any such
Non-Core Asset that is a Guarantor shall be discharged and released from its
Guarantee and, provided the Company designates such Non-Core Asset as an
Unrestricted Subsidiary, from all covenants and restrictions contained in this
Indenture; PROVIDED that no Payout of any Non-Core Asset shall be permitted such
as described in clauses (1) and (2) above if at the time of such Payout
(1) after giving pro forma effect to such Payout, the Company would not have
been permitted under Section 4.07 of this Indenture to make a Restricted Payment
in an amount equal to the total (the "Non-Core Asset Amount Due") of (x) the
amount of all Investments made in such Non-Core Asset by the Company or its
Restricted Subsidiaries since the date of this Indenture (which, in the case of
Investments in exchange for assets, shall be valued at the fair market value of
each such asset at the time each such Investment was made) minus (y) the amount
of the after-tax value of all cash returns on such Investments paid to the
Company or its Wholly Owned Restricted Subsidiaries (or, in the case of a
non-Wholly Owned Restricted Subsidiary, the pro rata portion thereof
attributable to the Company) minus (z) $25 million in the aggregate for all such
Payouts and $5 million for any single such Payout and (2) any contract,
agreement or understanding between or relating to a Non-Core Asset and the
Company or a Restricted Subsidiary of the Company and any loan or advance to or
guarantee with, or for the benefit of, a Restricted Subsidiary which is a
Non-Core Asset issued or made by the Company or one of its Restricted
Subsidiaries, is on terms that are less favorable to the Company or its
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Restricted Subsidiaries than those that would have been obtained in a comparable
transaction by the Company or such Restricted Subsidiaries with an unrelated
Person, all as evidenced by a resolution of the Board of Directors of the
Company set forth in an Officers' Certificate delivered to the Trustee
certifying that each such contract, agreement, understanding, loan, advance and
guarantee has been approved by a majority of such Board. In the event that at
the time of such Payout, the condition set forth in clause (1) of the proviso of
the preceding sentence cannot be satisfied, such Restricted Subsidiary which is
a Non-Core Asset may seek to have a Person other than the Company or one of its
Restricted Subsidiaries pay in cash an amount to the Company such that after
taxes, such amount, is greater than or equal to the Amount Due or the portion of
the Non-Core Asset Amount Due which would not have been permitted to be made as
a Restricted Payment by the Company; PROVIDED that such payment shall be treated
for purposes of this Section 4.21 as a cash return on the Investments made in a
Non-Core Asset and provided further that for all purposes under this Indenture,
such payment shall not be included in any calculation under clauses (iii)(A)
through (iii)(E) of the first paragraph of Section 4.07 of this Indenture. To
the extent that the Non-Core Asset Amount Due or any portion thereof would have
been permitted to be made as a Restricted Payment by the Company and was not
paid by another Person as permitted by the preceding sentence, the Company shall
be deemed to have made a Restricted Payment in the amount of such Non-Core Asset
Amount Due or portion thereof, as the case may be.
Promptly after any Payout pursuant to the terms of this Section 4.21, the
Company shall deliver an Officers' Certificate to the Trustee setting forth the
Investments made by the Company or its Restricted Subsidiaries in ETC or a
Non-Core Asset, as the case may be, and certifying that the requirements of this
Section 4.21 have been satisfied in connection with the making of such Payout.
SECTION 4.22. PAYMENTS FOR CONSENT.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any holder of a Note for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
or agreed to be paid to all holders of the Notes that consent, waive or agree to
amend in the time frame set forth in the solicitation documents relating to such
consent, waiver or agreement.
ARTICLE 5.
SUCCESSORS
SECTION 5.1. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company may not consolidate or merge with or into (whether or not the
Company is the surviving entity), or sell, assign, transfer, lease, convey or
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otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions to, another Person unless (a) the Company is the
surviving Person or the Person formed by or surviving any such consolidation or
merger (if other than the Company) or 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 Person formed by or surviving any such
consolidation or merger (if other than the Company) or the Person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall 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; (c) immediately after such transaction no Default or Event of
Default exists; and (d) the Company or the Person formed by or surviving any
such consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (i) shall have Consolidated Net Worth immediately after the transaction
(but prior to any purchase accounting adjustments or accrual of deferred tax
liabilities resulting from the transaction) not less than the Consolidated Net
Worth of the Company immediately preceding the transaction and (ii) would, at
the time of such transaction after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Indebtedness to Cash Flow Ratio test set forth in the first paragraph of
Section 4.09.
Notwithstanding the foregoing, the Company may merge with another Person if
(a) the Company is the surviving Person; (b) the consideration issued or paid by
the Company in such merger consists solely of Equity Interests (other than
Disqualified Stock) of the Company or Equity Interests of EchoStar; and (c)
immediately after giving effect to such merger, the Company's Indebtedness to
Cash Flow Ratio does not exceed the Company's Indebtedness to Cash Flow Ratio
immediately prior to such merger.
SECTION 5.2. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company in
accordance with Section 5.01, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such sale,
lease, conveyance or other disposition is made shall succeed to, and be
substituted for (so that from and after the date of such consolidation, merger,
sale, lease, conveyance or other disposition, the provisions of this Indenture
referring to the Company shall refer instead to the successor corporation and
not to the Company), 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.
ARTICLE 6.
DEFAULTS AND REMEDIES
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SECTION 6.1. EVENTS OF DEFAULT.
Each of the following constitutes an "EVENT OF DEFAULT":
(a) default for 30 days in the payment when due of interest on
the Notes;
(b) default in the payment when due of principal of the Notes
at maturity, upon redemption or otherwise;
(c) failure to comply with the provisions of Section 4.10,
Section 4.11, Section 4.15 or, Section 4.16;
(d) default under Section 4.07 or Section 4.09, which default
remains uncured for 30 days, or the breach of any representation or
warranty, or the making of any untrue statement, in any certificate
delivered by the Company pursuant to this Indenture;
(e) failure by the Company for 60 days after notice from the
Trustee or the Holders of at least 25% in principal amount of the
Notes then outstanding to comply with any of its other agreements in
this Indenture or the Notes;
(f) 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 Restricted Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Restricted Subsidiaries), which default is
caused by a failure to pay when due principal or interest on such
Indebtedness within the grace period provided in such Indebtedness (a
"PAYMENT DEFAULT"), and 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, aggregates $20.0 million
or more;
(g) 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 Restricted Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Restricted Subsidiaries), which default
results in the acceleration of such Indebtedness prior to its express
maturity and the principal amount of any such Indebtedness, together
with the principal amount of any other Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $20.0 million or more; provided that any
acceleration (other than an acceleration which is the result of a
Payment Default under clause (f) above) of Indebtedness under the
Outstanding Deferred Payments in aggregate
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principal amount not to exceed $50 million shall be deemed not to
constitute an acceleration pursuant to this clause (g);
(h) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments (other than any judgment as to
which a reputable insurance company has accepted full liability)
aggregating in excess of $20.0 million, which judgments are not stayed
within 60 days after their entry;
(i) any Guarantee of the Notes or this Indenture shall be held
in a judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect, or any Guarantor, or
any Person acting on behalf of any Guarantor, shall deny or disaffirm
its obligations under its Guarantee of any Notes or this Indenture;
(j) EchoStar, the Company, any Guarantor or any Significant
Subsidiary of the Company pursuant to or within the meaning of
Bankruptcy Law: (i) commences a voluntary case; (ii) consents to the
entry of an order for relief against it in an involuntary case;
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property; or (iv) makes a general assignment
for the benefit of its creditors; and
(k) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (i) is for relief
against EchoStar, the Company, any Guarantor or any Significant
Subsidiary of the Company in an involuntary case; (ii) appoints a
Custodian of EchoStar, the Company, any Guarantor or any Significant
Subsidiary of the Company or for all or substantially all of the
property of EchoStar, the Company, any Guarantor or any Significant
Subsidiary of the Company; or (iii) orders the liquidation of
EchoStar, the Company, any Guarantor or any Significant Subsidiary of
the Company, and the order or decree remains unstayed and in effect
for 60 consecutive days.
SECTION 6.2. ACCELERATION.
If an Event of Default (other than an Event of Default specified in clause
(j) or (k) of Section 6.01) 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 written notice to the Company and the Trustee, may
declare all the Notes to be due and payable immediately. In the case of an
Event of Default specified in clause (j) or (k) of Section 6.01, with respect to
EchoStar, the Company, any Guarantor or any Significant Subsidiary of the
Company, all outstanding Notes shall become and be immediately due and payable
without further action or notice. Holders of the Notes may not enforce this
Indenture or the Notes except as provided in this Indenture. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except
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a Default or Event of Default relating to the payment of principal or interest)
if it determines that withholding notice is in such Holders' interest. The
Holders of a majority in aggregate principal amount of the then outstanding
Notes by written notice to the Trustee may on behalf of all of the Holders
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company or its
Subsidiaries with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to Section 3.07, an equivalent premium shall also become and be
immediately due and payable to the extent permitted by law.
All powers of the Trustee under this Indenture will be subject to
applicable provisions of the Communications Act, including without limitation,
the requirements of prior approval for DE FACTO or DE JURE transfer of control
or assignment of Title III licenses.
SECTION 6.3. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes and 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 of a Note 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 6.4. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of Notes
then outstanding, by notice to the Trustee, may on behalf of the Holders of all
of the Notes waive an existing Default or Event of Default and its consequences
under this Indenture, except a continuing Default or Event of Default in the
payment of the principal of, premium, if any, or interest on, the Notes. Upon
any such waiver, such Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
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SECTION 6.5. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
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 conflicts
with the law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
SECTION 6.6. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the
then outstanding Notes make a written request to the Trustee to pursue
the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide 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 and, if requested, the
provision 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 of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
SECTION 6.7. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium, if any, 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 of
the Note.
SECTION 6.8. COLLECTION SUIT BY TRUSTEE.
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If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to 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 (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), the Company's creditors or the Company's
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder of
a Note to make such payments to the Trustee, and in the event that the Trustee
shall consent to the making of such payments directly to the Holders of the
Notes, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07. To the
extent that the payment of any such compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 out of the estate in any such proceeding, shall be
denied for any reason, payment of the same shall be secured by a Lien on, and
shall be paid out of, any and all distributions, dividends, money, securities
and other properties which the Holders of the Notes may be entitled to receive
in such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder of a Note any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder of a Note thereof,
or to authorize the Trustee to vote in respect of the claim of any Holder of a
Note in any such proceeding.
SECTION 6.10. 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, its agents and attorneys for amounts
due under Section 7.07, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and
the costs
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and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium, if any and interest,
respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes.
SECTION 6.11. 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 does
not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to
Section 6.07, or a suit by Holders of more than 10% in principal amount of the
then outstanding Notes.
ARTICLE 7.
TRUSTEE
Section 7.1. 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 their 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 duties of the Trustee shall be determined solely
by the express provisions of this Indenture and the Trustee need
perform only those duties that are specifically set forth in this
Indenture and no others, and no implied covenants or obligations shall
be read into this Indenture against the Trustee; 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
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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.
(c) The Trustee may not be relieved from liabilities 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;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible 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 6.05.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to the Trustee 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 7.2. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon 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. The Trustee may consult with
counsel and the advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection from liability in respect of any
action
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taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.
(c) The Trustee may act through its attorneys and 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 conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company or any Guarantor shall be
sufficient if signed by an Officer of the Company or such Guarantor.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
(g) Except with respect to Section 4.01, the Trustee shall have no duty to
inquire as to the performance of the Company's covenants in Article 4. In
addition, the Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) any Event of Default occurring pursuant to Sections
4.01, 6.01(a) and 6.01(b) or (ii) any Default or Event of Default of which the
Trustee shall have received written notification or obtained actual knowledge.
(h) Delivery of reports, information and documents to the Trustee under
Section 4.03 is for informational purposes only and the Trustee's receipt of the
foregoing shall not constitute constructive notice of any information contained
therein or determinable from information contained therein, including the
Company's compliance with any of its covenants hereunder.
SECTION 7.3. 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 any Affiliate of the
Company with the same rights it would have if it were not Trustee. However, in
the event that the Trustee acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue as
Trustee (if any of the Notes are registered pursuant to the Securities Act), or
resign. Any Agent may do the same with like rights and duties. The Trustee is
also subject to Sections 7.10 and 7.11.
SECTION 7.4. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as to
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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 or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.5. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders
of Notes 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 of
principal of, premium, if any, or interest on any Note, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders
of the Notes.
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, the Trustee shall mail to the Holders of the Notes a
brief report dated as of such reporting date that complies with TIA Section
313(a) (but if no event described in TIA Section 313(a) has occurred within the
twelve months preceding the reporting date, no report need be transmitted). The
Trustee also shall comply with TIA Section 313(b). 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 the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which any Notes are listed. The Company shall promptly notify the Trustee when
any Notes are listed on any stock exchange.
SECTION 7.7. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and 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 promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
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acceptance or administration of its duties under this Indenture, except any such
loss, liability or expense as may be attributable to the gross negligence,
willful misconduct or bad faith of the Trustee. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. 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 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 obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien shall survive the satisfaction and discharge of
this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(j) or (k) occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
SECTION 7.8. 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.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company and obtaining the prior written
approval of the FCC, if so required by the Communications Act, including Section
310(d) and the rules and regulations promulgated thereunder. The Holders of at
least a majority in principal amount of the then outstanding Notes may remove
the Trustee by so notifying the Trustee and the Company in writing. The Company
may remove the Trustee (subject to the prior written approval of the FCC, if
required by the Communications Act, including Section 310(d), and the rules and
regulations promulgated thereunder) if:
(a) the Trustee fails to comply with Section 7.10;
(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) the Trustee is no longer in compliance with the foreign
ownership provisions of Section 310 of the Communications Act and the
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rules and regulations promulgated thereunder.
(d) a Custodian or public officer takes charge of the Trustee
or its property; or
(e) 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 Notes 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 after written request by any Holder of a Note who has been a
Holder of a Note for at least six months fails to comply with Section 7.10, such
Holder of a Note 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 of the Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07. Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Company's obligations under Section 7.07 shall continue for the benefit of
the retiring Trustee.
SECTION 7.9. 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 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof authorized under such laws to exercise corporate
trustee power, shall be subject to supervision or examination by federal or
state
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authority and shall have a combined capital and surplus of at least $25 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section
310(b).
SECTION 7.11. 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 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.1. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, with respect to
the Notes, elect to have either Section 8.02 or 8.03 be applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article 8.
Section 8.2. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 of the option applicable to
this Section 8.02, the Company and the Guarantors shall be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "LEGAL
DEFEASANCE"). For this purpose, such Legal Defeasance means that the Company
shall be deemed to have paid and discharged the entire Indebtedness represented
by the outstanding Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest on such Notes when such payments are due, or on the
redemption date, as the case may be, (b) the Company's obligations with respect
to such Notes under Sections 2.05, 2.07, 2.08, 2.10, 2.11 and 4.02, (c) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and the
Company's obligations in connection therewith and (d) this Article 8. Subject
to compliance with this Article 8, the Company may exercise its option under
this Section 8.02 notwithstanding the prior exercise of its option under Section
8.03 with respect to the Notes.
Section 8.3. COVENANT DEFEASANCE.
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Upon the Company's exercise under Section 8.01 of the option applicable to
this Section 8.03, the Company shall be released from its obligations under the
covenants contained in Sections 3.09, 4.03, 4.04, 4.07, 4.08, 4.09, 4.10, 4.11,
4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21 and 5.01 with respect to
the outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, such Covenant
Defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01(c), but, except as specified above,
the remainder of this Indenture and such Notes shall be unaffected thereby. In
addition, upon the Company's exercise under Section 8.01 of the option
applicable to this Section 8.03, Sections 6.01(c) through 6.01(i) shall not
constitute Events of Default.
Section 8.4. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.02 or Section 8.03 to the outstanding Notes:
(a) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 who shall agree to comply with the
provisions of this Article 8 applicable to it) as trust funds in trust
for the purpose of making the following payments, specifically pledged
as security for, and dedicated solely to, the benefit of the Holders
of such Notes, (i) cash in U.S. Dollars, (ii) non-callable Government
Securities which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment,
cash in U.S. Dollars, or (iii) a combination thereof, in such amounts,
as will be sufficient in each case, in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge (A) the principal of,
premium, if any, and interest on the outstanding Notes on the stated
maturity or on the applicable redemption date, as the case may be, of
such principal or installment of principal, premium, if any, or
interest and (B) any mandatory sinking fund payments or analogous
payments applicable to the outstanding Notes on the day on
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which such payments are due and payable in accordance with the terms of
this Indenture and of such Notes; PROVIDED that the Trustee shall have been
irrevocably instructed to apply such money or the proceeds of such
non-callable Government Securities to said payments with respect to the
Notes;
(b) In the case of an election under Section 8.02, the Company
shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably satisfactory to the Trustee confirming that
(i) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (ii) since the date hereof, there
has been a change in the applicable federal income tax law, in either
case to the effect that, and based thereon such opinion shall confirm
that, the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(c) In the case of an election under Section 8.03, the Company
shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably satisfactory to the Trustee to the effect
that the Holders of the outstanding Notes will not recognize income,
gain or loss for Federal income tax purposes as a result of such
Covenant Defeasance and will be subject to Federal income tax on the
same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(d) No Default or Event of Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit or,
in so far as Section 6.01(j) or 6.01(k) is concerned, at any time in
the period ending on the 91st day after the date of such deposit (it
being understood that this condition shall not be deemed satisfied
until the expiration of such period);
(e) Such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under,
this Indenture or any other material agreement or instrument to which
the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound;
(f) The Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit made by the Company
pursuant to its election under Section 8.02 or 8.03 was not made by
the Company with the intent of preferring the Holders over any other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or others; and
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(g) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel in the United States,
each stating that all conditions precedent provided for relating to
either the Legal Defeasance under Section 8.02 or the Covenant
Defeasance under Section 8.03 (as the case may be) have been complied
with as contemplated by this Section 8.04.
SECTION 8.5. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06, all money and Government Securities (including the
proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this Section 8.05, the "Trustee") pursuant to
Section 8.04 in respect of the outstanding Notes shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company or a Guarantor, if any, acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or Government Securities
deposited pursuant to Section 8.04 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or Government Securities held by it as provided in Section
8.04 which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee (which may be the opinion delivered under Section 8.04(a)), are in
excess of the amount thereof which would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.6. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal,
and premium, if any, or interest has become due and payable shall be paid to the
Company on its request or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Note shall thereafter, as a secured creditor,
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability of the
Company as trustees thereof, shall thereupon cease; PROVIDED, HOWEVER, that the
Trustee or
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such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Company.
SECTION 8.7. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States Dollars
or Government Notes in accordance with Section 8.02 or 8.03, as the case may be,
by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
Company's obligations under this Indenture and the Notes shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03
until such time as the Trustee or Paying Agent is permitted to apply all such
money in accordance with Section 8.02 or 8.03, as the case may be; PROVIDED,
HOWEVER, that, if the Company makes any payment of principal of, premium, if
any, or interest on any Note following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.1. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the Notes or
the Guarantees without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes or Guarantees in
addition to or in place of certificated Notes or the Guarantees;
(c) to provide for the assumption of the Company's or a
Guarantor's obligations to the Holders of the Notes in the case of a
merger or consolidation pursuant to Article 5, with respect to the
Company and pursuant to Section 10.03, with respect to the Guarantors;
(d) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or the Guarantees or
that does not adversely affect the legal rights hereunder of any
Holder of the Notes or the Guarantors; or
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(e) to comply with requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of the Board of
Directors of the Company and each Guarantor authorizing the execution of any
such amended or supplemental Indenture, and upon receipt by the Trustee of the
documents described in Section 9.06, the Trustee shall join with the Company and
the Guarantors in the execution of any amended or supplemental Indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations which may be therein contained, but the
Trustee shall not be obligated to enter into such amended or supplemental
Indenture which affects its own rights, duties or immunities under this
Indenture or otherwise.
SECTION 9.2. WITH CONSENT OF HOLDERS OF NOTES.
The Company, Guarantors and the Trustee may amend or supplement this
Indenture, the Notes or the Guarantees or any amended or supplemental Indenture
with the written consent of the Holders of Notes of at least a majority in
aggregate principal amount of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange offer for the Notes), and
any existing Default and its consequences or compliance with any provision of
this Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for the Notes).
Notwithstanding the foregoing, (a) Sections 3.09, 4.10 and 4.15 of this
Indenture (including, in each case, the related definitions) may not be amended
or waived without the written consent of at least 66-2/3% in principal amount of
the Notes then outstanding (including consents obtained in connection with a
tender offer or exchange offer for the Notes) and (b) without the consent of
each Holder affected, an amendment or waiver may not (with respect to any Notes
held by a non-consenting Holder of Notes):
(i) reduce the aggregate principal amount of Notes whose
Holders must consent to an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of
any Note or alter the provisions with respect to the redemption of the
Notes;
(iii) reduce the rate of or change the time for payment of
interest on any Note;
(iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the then outstanding Notes
and a waiver of the payment default that resulted from such
acceleration);
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(v) make any Note payable in money other than that stated in
the Notes;
(vi) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders of Notes
to receive payments of principal of or interest on the Notes;
(vii) waive a redemption payment with respect to any Note; or
(viii) make any change in the foregoing amendment and waiver
provisions.
Upon the request of the Company accompanied by a resolution of the Board of
Directors of the Company and each Guarantor authorizing the execution of any
such amended or supplemental Indenture, and upon the filing with the Trustee of
evidence satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of the documents described in Section
9.06, the Trustee shall join with the Company and the Guarantors in the
execution of such amended or supplemental Indenture unless such amended or
supplemental Indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes.
SECTION 9.3. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture, the Notes or the
Guarantees shall be set forth in an amended or supplemental Indenture that
complies with the TIA as then in effect.
SECTION 9.4. 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 of a Note and
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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 of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder of a Note.
The Company may fix a record date for determining which Holders of the
Notes must consent to such amendment, supplement or waiver. If the Company
fixes a record date, the record date shall be fixed at (i) the later of 30 days
prior to the first solicitation of such consent or the date of the most recent
list of Holders of Notes furnished to the Trustee prior to such solicitation
pursuant to Section 2.05 or (ii) such other date as the Company shall designate.
SECTION 9.5. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement 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, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. Neither
the Company nor any Guarantor may sign an amendment or supplemental Indenture
until its Board of Directors approves it.
ARTICLE 10.
GUARANTEES
SECTION 10.1. GUARANTEE.
Each of the Guarantors, jointly and severally, hereby unconditionally
guarantees to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, irrespective of the validity
and enforceability of this Indenture, the Notes or the Obligations of the
Company hereunder or thereunder, that: (a) the principal of and interest on the
Notes will be promptly paid in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest on the overdue principal of
and interest on the Notes, if any, if lawful, and all other obligations of the
Company to the Holders or the
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Trustee hereunder or thereunder will be promptly paid in full or performed, all
in accordance with the terms hereof and thereof; and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due of any amount
so guaranteed or any performance so guaranteed for whatever reason, each of the
Guarantors, jointly and severally, will be obligated to pay the same
immediately. Each of the Guarantors, jointly and severally, hereby agrees that
its obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Notes or this Indenture, the absence of any
action to enforce the same, any waiver or consent by any Holder of the Notes
with respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor. Each of the Guarantors, jointly and severally, hereby waives
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require a
proceeding first aginst the Company, protest, notice (except that the Trustee
shall provide at least ten days' prior written notice to the Company on behalf
of the Guarantors before taking any action for which the Communications Act
and/or the FCC rules require such notice and which right to notice is not
waivable by any Guarantor) and all demands whatsoever and covenant that this
Guarantee will not be discharged except by complete performance of the
Obligations guaranteed hereby. If any Holder or the Trustee is required by any
court or otherwise to return to the Company or any Guarantor, or any Custodian,
Trustee, liquidator or other similar official acting in relation to either the
Company or any Guarantor, any amount paid by either to the Trustee or such
Holder, this Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each of the Guarantors, jointly and
severally, agrees that it shall not be entitled to any right of subrogation in
relation to the Holders in respect of any obligations guaranteed hereby. Each
of the Guarantors, jointly and severally, further agrees that, as between such
Guarantor, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the Obligations guaranteed hereby may be accelerated as
provided in Article 6 for the purposes of this Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6, such obligations
(whether or not due and payable) shall forthwith become due and payable by each
Guarantor for the purpose of this Guarantee.
Notwithstanding the foregoing, in the event that any Guarantee would
constitute or result in a violation of any applicable fraudulent conveyance or
similar law of any relevant jurisdiction, the liability of the applicable
Guarantor under its Guarantee shall be reduced to the maximum amount permissible
under such fraudulent conveyance or similar law. The Guarantors hereby agree as
among themselves that each Guarantor that makes a payment or distribution under
a Guarantee shall be entitled to a pro rata contribution from each other
Guarantor
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hereunder based on the net assets of each other Guarantor. The preceding
sentence shall in no way affect the rights of the Holders of Notes to the
benefits of this Indenture, the Notes or the Guarantees.
Nothing in this Section 10.01 shall apply to claims of, or payments to, the
Trustee under or pursuant to the provisions of Section 7.07.
Nothing contained in this Section 10.01 or elsewhere in this Indenture, the
Notes or the Guarantees, shall impair, as between any Guarantor and the Holder
of any Note, the obligation of such Guarantor, which is unconditional and
absolute, to pay to the Holder thereof the principal of, premium, if any, and
interest on the Notes in accordance with their terms and the terms of the
Guarantee and this Indenture, nor shall anything herein or therein prevent the
Trustee or the Holder of any Note from exercising all remedies otherwise
permitted by applicable law or hereunder or thereunder upon the occurrence of an
Event of Default.
SECTION 10.2. EXECUTION AND DELIVERY OF GUARANTEES.
To evidence its Guarantee set forth in Section 10.01, each Guarantor hereby
agrees that a notation of such Guarantee substantially in the form of Exhibit B
shall be endorsed by an officer of such Guarantor on each Note authenticated and
delivered by the Trustee and that this Indenture shall be executed on behalf of
such Guarantor by its President or one of its Vice Presidents and attested to by
an Officer.
Each of the Guarantors, jointly and severally, hereby agrees that its
Guarantee set forth in Section 10.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Guarantee.
If an officer or Officer whose signature is on this Indenture or on the
Guarantee of a Guarantor no longer holds that office at the time the Trustee
authenticates the Note on which the Guarantee of such Guarantor is endorsed, the
Guarantee of such Guarantor shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Guarantees set forth in this
Indenture on behalf of the Guarantors.
SECTION 10.3. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
Subject to 10.04, a Guarantor may not, and the Company will not cause or
permit any Guarantor to, consolidate or merge with or into (whether or not such
Guarantor is the surviving entity), or 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 Person other than the Company or
another Guarantor unless:
(a) such Guarantor is the surviving Person or the Person formed by
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or surviving any such consolidation or merger (if other than such
Guarantor) or 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 Person formed by or surviving any such consolidation or
merger (if other than such Guarantor) or the Person to which such
sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of such Guarantor,
pursuant to a supplemental indenture in form reasonably satisfactory
to the Trustee, under the Notes and this Indenture;
(c) immediately after such transaction no Default or Event of
Default exists; and
(d) (i) the Company shall have Consolidated Net Worth immediately
after the transaction (after any purchase accounting adjustments or
accrual of deferred tax liabilities resulting from the transaction)
not less than the Consolidated Net Worth of the Company immediately
preceding the transaction.
In case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor corporation, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of any
Guarantee previously signed by the Guarantor and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Guarantees to be issuable hereunder by such Guarantor
and delivered to the Trustee. All the Guarantees so issued shall in all
respects have the same legal rank and benefit under this Indenture as the
Guarantees theretofore and thereafter issued in accordance with the terms of
this Indenture as though all of such Guarantees had been issued at the date of
the execution of such Guarantee by such Guarantor.
Nothing contained in this Indenture shall prevent any consolidation or
merger of a Guarantor that is a Wholly Owned Restricted Subsidiary with or into
the Company or another Guarantor that is a Wholly Owned Restricted Subsidiary of
the Company or shall prevent any sale or conveyance of the property of a
Guarantor that is a Wholly Owned Restricted Subsidiary as an entirety or
substantially as an entirety to the Company or another Guarantor that is a
Wholly Owned Restricted Subsidiary of the Company. Except as set forth in
Articles 4 and 5, nothing contained in this Indenture shall prevent any
consolidation or merger of a Guarantor that is a Restricted Subsidiary with or
into the Company or another Guarantor that is a Restricted Subsidiary of the
Company or shall prevent
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any sale or conveyance of the property of a Guarantor that is a Restricted
Subsidiary as an entirety or substantially as an entirety to the Company or
another Guarantor that is a Restricted Subsidiary of the Company.
SECTION 10.4. RELEASES FROM GUARANTEES.
If pursuant to any direct or indirect sale of assets (including, if
applicable, all of the capital stock of any Guarantor) or other disposition by
way of merger, consolidation or otherwise the assets sold include all or
substantially all of the assets of any Guarantor or all of the capital stock of
any such Guarantor, then such Guarantor or the Person acquiring the property (in
the event of a sale or other disposition of all or substantially all of the
assets of such a Guarantor) shall be released and relieved of its obligations
under its Guarantee or Section 10.03, as the case may be; PROVIDED that in the
event of an Asset Sale, the Net Proceeds from such sale or other disposition are
applied in accordance with the provisions of Section 4.10. In addition, a
Guarantor shall be released and relieved of its obligations under its Guarantee
or Section 10.03, as the case may be (1) if such Guarantor is dissolved or
liquidated in accordance with the provisions of this Indenture; (2) if the
Company designates any such Guarantor as an Unrestricted Subsidiary in
compliance with the terms of this Indenture; or (3) without limiting the
generality of the foregoing, in the case of ETC or any Guarantor which
constitutes a Non-Core Asset, upon the sale or other disposition of any Equity
Interest of ETC or such Guarantor which constitutes a Non-Core Asset,
respectively. Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the provisions of this
Indenture, including without limitation Section 4.10 or 4.21 if applicable, the
Trustee shall execute any documents reasonably required in order to evidence the
release of any such Guarantor from its obligations under its Guarantee. Any
such Guarantor not released from its obligations under its Guarantee shall
remain liable for the full amount of principal of and interest on the Notes and
for the other obligations of such Guarantor under this Indenture as provided in
this Article 10.
ARTICLE 11.
MISCELLANEOUS
SECTION 11.1. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA Section 318(c), the imposed duties shall control.
SECTION 11.2. NOTICES.
Any notice or communication by the Company, the Guarantors or the Trustee
to the other is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
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telecopier or overnight air courier guaranteeing next day delivery, to the
other's address:
If to the Company or the Guarantors:
EchoStar DBS Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
Telecopier No.: (303) 799-1699
Attention: David K. Moskowitz, Esq.
With a copy to:
Winthrop, Stimson, Putnam & Roberts
1 Battery Park Plaza
New York, NY 10004
Telecopier No.: (212) 858-1500
Attention: David Ambrosia, Esq.
If to the Trustee:
U.S. Bank Trust National Association
180 East Fifth Street
Saint Paul, Minnesota 55101
Telecopier No: (651) 244-0711
Attention: Corporate Trust Administration
The Company, each Guarantor or the Trustee, by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders of Notes)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder of a Note shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder of a Note or any defect in
it shall not affect its sufficiency with respect to other Holders of Notes.
If a notice or communication is mailed in the manner provided above
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<PAGE>
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 of Notes, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 11.3. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF
NOTES.
Holders of the Notes may communicate pursuant to TIA Section 312(b) with
other Holders of Notes 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 11.4. 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 in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for
in this Indenture relating to the proposed action have been satisfied;
and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been
satisfied.
SECTION 11.5. 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 a certificate provided
pursuant to TIA Section 314(a)(4)) shall include:
(a) a statement that the Person making such certificate or 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, he or she has
made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person,
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such condition or covenant has been satisfied.
SECTION 11.6. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders of Notes. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 11.7. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES,
INCORPORATORS AND STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of EchoStar,
the Company, the Guarantors or any of their Affiliates, as such, shall have any
liability for any obligations of EchoStar, the Company, the Guarantors and any
of their Affiliates under the Notes, the Guarantees or this 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
issuance of the Notes.
SECTION 11.8. GOVERNING LAW.
The internal law of the State of New York shall govern and be used to
construe this Indenture, the Notes and the Guarantees.
SECTION 11.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of EchoStar, the Company or any of their respective Subsidiaries. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 11.10. SUCCESSORS.
All agreements of the Company, the Guarantors in this Indenture, the Notes
and the Guarantees shall bind the successors of the Company and the Guarantors,
respectively. All agreements of the Trustee in this Indenture shall bind its
successor.
SECTION 11.11. 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 11.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents and Headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
<PAGE>
considered a part of this Indenture and shall in no way modify or restrict any
of the terms or provisions hereof.
[Signatures on following page]
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
ECHOSTAR DBS CORPORATION,
a Colorado corporation
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
DIRECT BROADCASTING SATELLITE CORPORATION
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR SATELLITE CORPORATION
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR TECHNOLOGIES CORPORATION
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR SATELLITE BROADCASTING CORPORATION
<PAGE>
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
DISH, LTD.
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
DIRECTSAT CORPORATION
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHO ACCEPTANCE CORPORATION
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSPHERE CORPORATION
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
<PAGE>
DISH INSTALLATION NETWORK CORPORATION
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
HT VENTURES, INC.
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR INTERNATIONAL CORPORATION
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
SATELLITE SOURCE, INC.
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
HOUSTON TRACKER SYSTEMS, INC.
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
<PAGE>
ECHOSTAR NORTH AMERICA CORPORATION
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
SKY VISTA CORPORATION
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR INDONESIA, INC.
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR SPACE CORPORATION
By: /s/ David K. Moskowitz
-------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee
By: /s/ Richard Prokosch
-------------------------------
Name: Richard H. Prokosch
Title: Assistant Vice President
<PAGE>
EXHIBIT A
[Face of Note]
- --------------------------------------------------------------------------------
9 3/8% Senior Note due 2009
Cert. No.
CUSIP No. _________
EchoStar DBS Corporation
promises to pay to
_______________________
or its registered assigns
the principal sum of _____________________
Dollars on February 1, 2009.
Interest Payment Dates: February 1 and August 1, commencing August 1, 1999.
Record Dates: January 15 and July 15 (whether or not a Business Day).
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed.
Dated: ____________
ECHOSTAR DBS CORPORATION
By: ________________________________________
Title:
By: ________________________________________
Title:
(SEAL)
This is one of the Notes
referred to in the within-
mentioned Indenture:
U.S. Bank Trust National Association, as Trustee
By: ________________
A-102
<PAGE>
Authorized Signatory
Dated: _____________
(Back of Note)
Capitalized terms used herein have the meanings assigned to them in
the Indenture (as defined below) unless otherwise indicated
(a) INTEREST. EchoStar DBS Corporation, a Colorado corporation (the
"Company") promises to pay interest on the principal amount of this Note at the
rate and in the manner specified below. Interest will accrue at 9 3/8% per annum
and will be payable semi-annually in cash on each February 1 and August 1,
commencing August 1, 1999, or if any such day is not a Business Day on the next
succeeding Business Day (each an "INTEREST PAYMENT DATE") to Holders of record
of the Notes at the close of business on the immediately preceding January 15
and July 15, whether or not a Business Day. Interest will be computed on the
basis of a 360-day year consisting of twelve 30-day months. Interest shall
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from January 25, 1999. To the extent lawful, the Company
shall pay interest on overdue principal at the rate of the then applicable
interest rate on the Notes; it shall pay interest on overdue installments of
interest (without regard to any applicable grace periods) at the same rate to
the extent lawful. In addition, Holders may be entitled to the benefits of
certain provisions of the Registration Rights Agreement.
(b) 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 next preceding the Interest Payment
Date, even if such Notes are canceled after such record date and on or before
such Interest Payment Date. The Holder hereof must surrender this Note to a
Paying Agent to collect principal payments. The Company will pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. The Notes will be payable both
as to principal and interest at the office or agency of the Company maintained
for such purpose or, at the option of the Company, payment of interest may be
made by check mailed to the Holders of Notes at their respective addresses set
forth in the register of Holders of Notes. Unless otherwise designated by the
Company, the Company's office or agency will be the office of the Trustee
maintained for such purpose.
(c) PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-registrar without prior notice to any Holder of a Note. The Company may
act in any such capacity.
(d) INDENTURE. The Company issued the Notes under an Indenture, dated
as of January 25, 1999 (the "INDENTURE"), among the Company, the Guarantors and
the Trustee. The terms of the Notes include those stated in the Indenture and
those made part
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of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Sections 77aaa-77bbbb), as in effect on the date of the Indenture. The
Notes are subject to all such terms, and Holders of Notes are referred to the
Indenture and such act for a statement of such terms. The terms of the Indenture
shall govern any inconsistencies between the Indenture and the Notes. The Notes
are unsecured obligations of the Company limited to $1,625,000,000 in aggregate
principal amount.
(e) OPTIONAL REDEMPTION. Except as provided in the next paragraph, the
Notes will not be redeemable at the Company's option prior to February 1, 2004.
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)
set forth below, together with accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the 12-month period beginning on
February 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004 104.688%
2005 103.516
2006 102.344
2007 101.172
2008 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to February 1, 2002, the
Company may redeem up to 35% of the aggregate principal amount of the Notes
outstanding at a redemption price equal to 109.375% of the principal amount
thereof on the repurchase date, together with accrued and unpaid interest to
such repurchase date, with the net cash proceeds of one or more public or
private sales (including sales to EchoStar, regardless of whether EchoStar
obtained such funds from an offering of Equity Interests or Indebtedness of
EchoStar or otherwise) of Equity Interests (other than Disqualified Stock) of
the Company (other than proceeds from a sale to any Subsidiary of the Company or
any employee benefit plan in which the Company or any of its Subsidiaries
participates); PROVIDED that: (a) at least 65% in aggregate principal amount of
the Notes originally issued remain outstanding immediately after the occurrence
of such redemption; (b) such redemption occurs within 120 days of the date of
the closing of any such sale; and (c) the sale of such Equity Interests is made
in compliance with the terms of the Indenture.
(f) REPURCHASE AT OPTION OF HOLDER. Upon the occurrence of a Change of
Control, the Company will be required to offer to purchase on the Change of
Control Payment Date all outstanding Notes at a purchase price equal to 101% of
the aggregate principal amount thereof, together with accrued and unpaid
interest thereon to the date of purchase. 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 Change of Control Payment Date and may elect to have such
Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" appearing below.
A-104
<PAGE>
When the cumulative amount of Excess Proceeds that have not been applied in
accordance with Section 4.10 (Asset Sales) and 4.16 (Maintenance of Insurance)
or Section 3.09 (Offer to Purchase By Application of Excess Proceeds) of the
Indenture, exceeds $17.5 million, the Company will be required to offer to
purchase the maximum principal amount of Notes that may be purchased out of such
Excess Proceeds at an offer price in cash in an amount equal to 101% of the
principal amount thereof, together with accrued and unpaid interest thereon to
the date of purchase. To the extent the Company or a Restricted Subsidiary is
required under the terms of Indebtedness of the Company or such Restricted
Subsidiary which is PARI PASSU with, or (in the case of any secured
Indebtedness) senior with respect to such collateral to, the Notes with any
proceeds which constitute Excess Proceeds under the Indenture, the Company shall
make a pro rata offer to the holders of all other PARI PASSU Indebtedness
(including the Notes) with such proceeds. If the aggregate principal amount of
Notes and other PARI PASSU Indebtedness surrendered by holders thereof exceeds
the amount of such Excess Proceeds, the Trustee shall select the Notes and other
PARI PASSU Indebtedness to be purchased on a PRO RATA basis. Holders of Notes
that are subject to an offer to purchase will receive a Excess Proceeds Offer
from the Company prior to any related Purchase Payment Date and may elect to
have such Notes purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
(g) NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes may be redeemed
in part but only in whole multiples of $1,000, unless all of the Notes held by a
Holder of Notes are to be redeemed. On and after the redemption date, interest
ceases to accrue on Notes or portions of them called for redemption unless the
Company fails to redeem such Notes or such portions thereof.
(h) 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 and the Trustee may require a Holder of a Note,
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. Also, it need not exchange or register the
transfer of any Notes for a period of 15 days before a selection of Notes to be
redeemed.
(i) PERSONS DEEMED OWNERS. Prior to due presentment to the Trustee for
registration of the transfer of this Note, the Trustee, any Agent and the
Company may deem and treat the Person in whose name this Note is registered as
its absolute owner for the purpose of receiving payment of principal of,
premium, if any, and interest on this Note and for all other purposes
whatsoever, whether or not this Note is overdue, and neither the Trustee, any
Agent nor the Company shall be affected by notice to the contrary. The
registered Holder of a Note shall be treated as its owner for all purposes.
A-105
<PAGE>
(j) AMENDMENTS, SUPPLEMENT AND WAIVERS. Subject to certain exceptions,
the Indenture or 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 the Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for the Notes).
Notwithstanding the foregoing, (a) Sections 3.09 (Offer to Purchase by
Application of Excess Proceeds), 4.10 (Asset Sales) and 4.15 (Offer to
Repurchase Upon Change in Control) of the Indenture (including, in each case,
the related definitions) may not be amended or waived without the written
consent of at least 66 2/3% in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the Notes) and (b) without the consent of each Holder affected, an amendment
or waiver may not (with respect to any Notes held by a non-consenting Holder of
Notes) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver; reduce the principal of or change the fixed
maturity of any Note or alter the provisions with respect to the redemption of
the Notes; reduce the rate of or change the time for payment of interest on any
Note; waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal amount
of the then outstanding Notes and a waiver of the payment default that resulted
from such acceleration); make any Note payable in money other than that stated
in the Notes; make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to rceive payments of
principal of or interest on the Notes; waive a redemption payment with respect
to any Note; or make any change in the foregoing amendment and waiver
provisions. Notwithstanding the foregoing, without the consent of any Holder of
a Note, the Indenture or the Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency; to provide for uncertificated Notes in
addition to or in place of certificated Notes; to provide for the assumption of
the Company's obligations to the Holders of the Notes in case of a merger or
consolidation; to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder; or to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.
(k) DEFAULTS AND REMEDIES. Each of the following constitutes an Event
of Default:
(a) default for 30 days in the payment when due of interest on
the Notes;
(b) default in payment when due of principal of the Notes at
maturity, upon repurchase, redemption or otherwise;
(c) failure to comply with the provisions described under
Section 4.15 (Offer to Purchase Upon Change in Control), Section 4.16
(Maintenance of Insurance), Section 4.11 (Limitation on Transactions
with
A-106
<PAGE>
Affiliates) or Section 4.10 (Asset Sales) of the Indenture;
(d) default under the provisions described under Section 4.07
(Limitation on Restricted Payments) or Section 4.09 (Incurrence of
Indebtedness) of the Indenture which default remains uncured for
30 days, or the breach of any representation or warranty, or the
making of any untrue statement, in any certificate delivered by the
Company pursuant to the Indenture;
(e) failure by the Company for 60 days after notice from the
Trustee or the holders of at least 25% in principal amount of the then
outstanding Notes to comply with any of its other agreements in the
Indenture or the Notes;
(f) 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 Restricted Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Restricted Subsidiaries), which default is
caused by a failure to pay when due principal or interest on such
Indebtedness within the grace period provided in such Indebtedness (a
"Payment Default"), and 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, aggregates $20 million
or more;
(g) 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 Restricted Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Restricted Subsidiaries), which default
results in the acceleration of such Indebtedness prior to its express
maturity and 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 $20 million or more; provided that any
acceleration (other than an acceleration which is the result of a
Payment Default under clause (f) above) of Indebtedness under the
Outstanding Deferred Payments in aggregate principal amount not to
exceed $50 million shall be deemed not to constitute an acceleration
pursuant to this clause (g);
(h) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments (other than any judgment as to
which a reputable insurance company has accepted full liability)
aggregating in excess of $20 million, which judgments are not stayed
within 60 days after their entry;
(i) certain events of bankruptcy or insolvency with respect to
EchoStar, the Company or certain of the Company's Subsidiaries
(including
A-107
<PAGE>
the filing of a voluntary case, the consent to an order of relief in an
involuntary case, the consent to the appointment of a custodian, a general
assignment for the benefit of creditors or an order of a court for relief
in an involuntary case, appointing a custodian or ordering liquidation,
which order remains unstayed for 60 days); and
(j) any Guarantee of the Notes shall be held in a judicial
proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect, or any Guarantors, or any
Person acting on behalf of any Guarantor, shall deny or disaffirm its
obligations under its Guarantee of any Notes.
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 Notes may
declare all the Notes to be due and payable immediately (plus, in the case of an
Event of Default that is the result of an action by the Company or any of its
Subsidiaries intended to avoid restrictions on or premiums related to
redemptions of the Notes contained in the Indenture or the Notes, an amount of
premium that would have been applicable pursuant to the Notes or as set forth in
the Indenture). Notwithstanding the foregoing, in the case of an Event of
Default arising from the events of bankruptcy or insolvency with respect to the
Company or any of its Subsidiaries described in (i) above, all outstanding Notes
will become due and payable without further action or notice. Holders of the
Notes 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 may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from holders of the 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 such holders' interest.
The holders of a majority in aggregate principal amount of the then
outstanding Notes, by notice to the Trustee, may on behalf of the holders of all
of the Notes 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 or premium on, or principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
All powers of the Trustee under the Indenture will be subject to applicable
provisions of the Communications Act, including without limitation, the
requirements of prior approval for DE FACTO or DE JURE transfer of control or
assignment of Title III licenses.
(l) TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture, in
its
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individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not Trustee; however, if the
Trustee acquires any conflicting interest it must eliminate such conflict within
90 days, apply to the SEC for permission to continue as Trustee or resign.
(m) NO PERSONAL LIABILITIES OF DIRECTORS, OFFICERS, EMPLOYEES,
INCORPORATORS AND STOCKHOLDERS. No director, officer, employee, incorporator or
stockholder of the Company or any of its Affiliates, as such, shall have any
liability for any obligations of the Company or any of its Affiliates under this
Note 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 issuance of the Notes.
(n) GUARANTEE. Payment of principal and interest (including interest on
overdue principal and overdue interest, if lawful) is unconditionally
guaranteed, jointly and severally, by each of the Guarantors.
(o) AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
(p) ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder of a Note 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 (5 Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
(q) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Note Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Holders of Notes. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
The Company will furnish to any Holder of a Note upon written request and
without charge a copy of the Indenture. Request may be made to:
EchoStar DBS Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
Attention: David K. Moskowitz, Esq.
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<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
___________________________________
(Insert assignee's soc. sec. 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.
___________________________________
Date: ____________
Your Signature: ______________________
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee.
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by the
Company pursuant to Section 3.09 or Section 4.15 of the Indenture check the
appropriate box:
__ Section 3.09 __ Section 4.15
If you want to have only part of the Note purchased by the Company pursuant
to Section 3.09 or Section 4.15 of the Indenture, state the amount you elect to
have purchased:
$_____________
Date: ________
Your Signature: __________________
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee.
A-111
<PAGE>
[ATTACHMENT FOR GLOBAL NOTES]
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:
<TABLE>
<CAPTION>
Principal Amount Signature of
Amount of decrease Amount of Increase of this Global Note authorized officer of
in Principal Amount Principal Amount of following such Trustee or Note
Date of Exchange of this Global Note the Global Note. decrease (or Increase) Custodian
---------------- ------------------- ------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
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<PAGE>
EXHIBIT B
Guarantee
[Name of Guarantor] and its successors under the Indenture, jointly
and severally with any other Guarantors, hereby irrevocably and unconditionally
guarantees (i) the due and punctual payment of the principal of, premium, if
any, and interest on the Notes, whether at maturity, by acceleration or
otherwise, the due and punctual payment of interest on the overdue principal of
and interest, if any, on the Notes, to the extent lawful, and the due and
punctual performance of all other obligations of EchoStar DBS Corporation (the
"Company") to the Holders or the Trustee all in accordance with the terms set
forth in Article 10 of the Indenture, (ii) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise and (iii) has agreed to pay any and all costs and expenses (including
reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing
any rights under this Guarantee. Capitalized terms used herein have the meanings
assigned to them in the Indenture unless otherwise indicated.
No stockholder, officer, director or incorporator, as such, past,
present or future, of [name of Guarantor] shall have any personal liability
under this Guarantee by reason of his or its status as such stockholder,
officer, director or incorporator.
This Guarantee shall be binding upon [name of Guarantor] and its
successors and assigns and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Note upon which this Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
THE TERMS OF ARTICLE 10 OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
This Guarantee shall be governed by and construed in accordance with
the laws of the State of New York.
[NAME OF GUARANTOR]
By: _______________________
Name:
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Title:
B-114
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF TRANSFER
EchoStar DBS Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
U.S. Bank Trust National Association
180 East 5th Street
St. Paul, MN 55101
Re: 9 3/8% SENIOR NOTES DUE 2009
Reference is hereby made to the Indenture, dated as of January 25, 1999
(the "INDENTURE"), between EchoStar DBS Corporation, as issuer (the "COMPANY"),
the Guarantors named therein and U.S. Bank Trust National Association, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
________________ (the "TRANSFEROR") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $____ in such Note[s] or interests (the "TRANSFER"), to
__________ (the "TRANSFEREE"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A.
The Transfer is being effected pursuant to and in accordance with Rule 144A
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further certifies that the
beneficial interest or Definitive Note is being transferred to a Person that
the Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Note for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and
such Person and each such account is a "qualified institutional buyer" within
the meaning of Rule 144A in a transaction meeting the requirements of Rule
144A and such Transfer is in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed
on the 144A Global Note and/or the Definitive Note and in the Indenture and
the Securities Act.
2. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO
REGULATION S. The Transfer is
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being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and, accordingly, the Transferor hereby further certifies that
(i) the Transfer is not being made to a Person in the United States and (x) at
the time the buy order was originated, the Transferee was outside the United
States or such Transferor and any Person acting on its behalf reasonably
believed and believes that the Transferee was outside the United States or (y)
the transaction was executed in, on or through the facilities of a designated
offshore securities market and neither such Transferor nor any Person acting on
its behalf knows that the transaction was prearranged with a buyer in the United
States, (ii) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities
Act, (iii) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act and (iv) if the proposed
transfer is being made prior to the expiration of the Restricted Period, the
transfer is not being made to a U.S. Person or for the account or benefit of a
U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
Transfer enumerated in the Private Placement Legend printed on the Regulation S
Global Note and/or the Definitive Note and in the Indenture and the Securities
Act.
3. / / CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A
BENEFICIAL INTEREST IN A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE
SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being
effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive
Notes and pursuant to and in accordance with the Securities Act and any
applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):
(a) / / such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) / / or such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) / / such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act.
4. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
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<PAGE>
(a) / / CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under
the Securities Act and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any state of
the United States and (ii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will no longer be subject
to the restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Global Notes, on Restricted Definitive Notes and in
the Indenture.
(b) / / CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky
securities laws of any state of the United States and (ii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will no
longer be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(c) / / CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i)
The Transfer is being effected pursuant to and in compliance with an
exemption from the registration requirements of the Securities Act other than
Rule 144, Rule 903 or Rule 904 and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky
securities laws of any State of the United States and (ii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will not be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Global Notes or Restricted Definitive Notes
and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
________________________________
[Insert Name of Transferor]
By:_____________________________
Name:
Title:
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<PAGE>
Dated:____________________
C-118
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP ___________), or
(ii) / / Regulation S Global Note (CUSIP ___________), or
(b) / / a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP ___________), or
(ii) / / Regulation S Global Note (CUSIP ___________),or
(iii) / / Unrestricted Global Note (CUSIP ___________), or
(b) / / a Restricted Definitive Note; or
(c) / / an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
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<PAGE>
EXHIBIT D
FORM OF CERTIFICATE OF EXCHANGE
EchoStar DBS Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
U.S. Bank Trust National Association
180 East 5th Street
St. Paul, NlN 55101
Re: 9 3/8% SENIOR NOTES DUE 2009
(CUSIP________)
Reference is hereby made to the Indenture, dated as of January 25, 1999
(collectively, the "INDENTURE"), between EchoStar DBS Corporation, as issuer
(the "COMPANY"), the Guarantors named therein and U.S. Bank Trust National
Association, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
_______________ (the "OWNER") owns and proposes to exchange the Note[s] or
interest in such Note[s] specified herein, in the principal amount of $________
in such Note[s] or interests (the "EXCHANGE"). In connection with the Exchange,
the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE.
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE.
In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Note for a beneficial interest in an Unrestricted Global Note
in an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Global Notes and pursuant to and in accordance with the United
States Securities Act of 1933, as amended (the "Securities Act"), (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the beneficial interest in an Unrestricted Global Note is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(b) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note
is being acquired for the Owner's own account without
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<PAGE>
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Notes and pursuant to and in
accordance with the Securities Act, (iii) the restrictions on transfer contained
in the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the Definitive Note is
being acquired in compliance with any applicable blue sky securities laws of any
state of the United States.
(c) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES.
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Note and in
the Indenture and the Securities Act.
(b) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
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BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the [CHECK ONE] / / 144A Global Note, / / Regulation S Global Note with an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
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<PAGE>
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company.
________________________________
[Insert Name of Transferor]
By:_____________________________
Name:
Title:
Dated:____________________
By:
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION
BY REFERENCE 1
SECTION 1.01. Definitions 1
SECTION 1.02. Other Definitions 18
Section 1.03. Incorporation by Reference of Trust Indenture Act 18
Section 1.04. Rules of Construction 19
ARTICLE 2. THE NOTES 19
SECTION 2.01. Form and Dating 19
SECTION 2.02. FORM OF EXECUTION AND AUTHENTICATION 21
SECTION 2.03. REGISTRAR AND PAYING AGENT 22
Section 2.04. Paying Agent to Hold Money in Trust 22
Section 2.05. Lists of Holders of the Notes 23
Section 2.06. Transfer and Exchange 23
SECTION 2.07. REPLACEMENT NOTES 36
Section 2.08. Outstanding Notes 36
Section 2.09. Treasury Notes 36
SECTION 2.10. Temporary Notes. 37
SECTION 2.11. Cancellation 37
Section 2.12. Defaulted Interest 37
Section 2.13. Record Date 38
SECTION 2.14. CUSIP NUMBER 38
ARTICLE 3. REDEMPTION 38
SECTION 3.01. NOTICES TO TRUSTEE 38
SECTION 3.02. Selection of Notes to be Redeemed 38
Section 3.03. Notice of Redemption 39
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION 39
SECTION 3.05. Deposit of Redemption Price 40
SECTION 3.06. Notes Redeemed in Part 40
SECTION 3.07. Optional Redemption 40
SECTION 3.08. Mandatory Redemption 41
SECTION 3.09. Offer to Purchase by Application of Excess Proceeds 41
ARTICLE 4. COVENANTS 43
SECTION 4.01. Payment of Notes 43
<PAGE>
SECTION 4.02. Maintenance of Office or Agency 43
SECTION 4.03. Reports 44
SECTION 4.04. COMPLIANCE CERTIFICATE 44
SECTION 4.05. TAXES 45
SECTION 4.06. STAY, EXTENSION AND USURY LAWS 45
SECTION 4.07. LIMITATION ON RESTRICTED PAYMENTS 46
SECTION 4.08. LIMITATIONS CONCERNING DISTRIBUTIONS BY SUBSIDIARIES, ETC 50
SECTION 4.09. INCURRENCE OF INDEBTEDNESS 51
SECTION 4.10. ASSET SALES 54
SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES 56
SECTION 4.12. LIMITATION ON LIENS 57
SECTION 4.13. ADDITIONAL SUBSIDIARY GUARANTEES 57
SECTION 4.14. CORPORATE EXISTENCE 58
SECTION 4.15. OFFER TO PURCHASE UPON CHANGE IN CONTROL 58
SECTION 4.16. MAINTENANCE OF INSURANCE 59
SECTION 4.17. ACTIVITIES OF THE COMPANY 60
SECTION 4.18. THE 110 ACQUISITION 60
SECTION 4.19. ECHOSTAR EQUITY CONTRIBUTION 60
SECTION 4.20. ACCOUNTS RECEIVABLE SUBSIDIARY. 60
SECTION 4.21. DISPOSITIONS OF ETC AND NON-CORE ASSETS 62
SECTION 4.22. PAYMENTS FOR CONSENT 65
ARTICLE 5. SUCCESSORS 65
Section 5.01. Merger, Consolidation, or Sale of Assets 65
Section 5.02. Successor Corporation Substituted 66
ARTICLE 6. DEFAULTS AND REMEDIES 66
Section 6.01. Events of Default 66
Section 6.02. Acceleration 68
Section 6.03. Other Remedies 68
Section 6.04. Waiver of Past Defaults 69
Section 6.05. Control by Majority 69
Section 6.06. Limitation on Suits 69
Section 6.07. Rights of Holders of Notes to Receive Payment 70
Section 6.08. Collection Suit by Trustee 70
Section 6.09. Trustee May file Proofs of Claim 70
Section 6.10. Priorities 71
Section 6.11. Undertaking for Costs 71
ARTICLE 7. TRUSTEE 72
Section 7.01. Duties of Trustee 72
Section 7.02. Rights of Trustee 73
Section 7.03. Individual Rights of Trustee 74
<PAGE>
Section 7.04. Trustee's Disclaimer 74
Section 7.05. Notice of Defaults 74
Section 7.06. Reports by Trustee to Holders of the Notes 74
Section 7.07. Compensation and Indemnity 75
Section 7.08. Replacement of Trustee 75
Section 7.09. Successor Trustee by Merger, Etc 76
Section 7.10. Eligibility; Disqualification 77
Section 7.11. Preferential Collection of Claims Against Company 77
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE 77
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance 77
Section 8.02. Legal Defeasance and Discharge 78
Section 8.03. Covenant Defeasance 78
Section 8.04. Conditions to Legal or Covenant Defeasance 79
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions 80
Section 8.06. Repayment to Company 81
Section 8.07. Reinstatement 81
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER 81
Section 9.01. Without Consent of Holders of Notes 81
Section 9.02. With Consent of Holders of Notes 82
Section 9.03. Compliance with Trust Indenture Act 84
Section 9.04. Revocation and Effect of Consents 84
Section 9.05. Notation on or Exchange of Notes 84
Section 9.06. Trustee to Sign Amendments, Etc 84
ARTICLE 10. GUARANTEES 85
Section 10.01. Guarantee 85
Section 10.02. Execution and Delivery of Guarantees 86
Section 10.03. Guarantors May Consolidate, Etc., on Certain Terms 87
Section 10.04. Releases from Guarantees 88
ARTICLE 11. MISCELLANEOUS 88
Section 11.01. Trust Indenture Act Controls 88
Section 11.02. Notices 88
Section 11.03. Communication by Holders of Notes with Other Holders of Notes 90
Section 11.04. Certificate and Opinion as to Conditions Precedent 90
Section 11.05. Statements Required in Certificate or Opinion 90
Section 11.06. Rules by Trustee and Agents 90
Section 11.07. No Personal Liability of Directors, Officers, Employees,
Incorporators and Stockholders 91
<PAGE>
Section 11.08. Governing Law 91
Section 11.09. No Adverse Interpretation of Other Agreements 91
Section 11.10. Successors 91
Section 11.11. Severability 91
Section 11.12. Counterpart Originals 91
Section 11.13. Table of Contents, Headings, Etc 91
</TABLE>
<PAGE>
EXHIBITS
EXHIBIT A FORM OF NOTE
EXHIBIT B FORM OF GUARANTEE
EXHIBIT C FORM OF CERTIFICATE OF TRANSFER
EXHIBIT D FORM OF CERTIFICATE OF EXCHANGE
<PAGE>
EXHIBIT 4.5
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SENIOR NOTES DUE 2006
REGISTRATION RIGHTS AGREEMENT
Dated as of January 25, 1999
by and among
EchoStar DBS Corporation,
the Company
Direct Broadcasting Satellite Corporation;
EchoStar Satellite Corporation;
EchoStar Technologies Corporation;
Echosphere Corporation;
EchoStar International Corporation
EchoStar Satellite Broadcasting Corporation
EchoStar Space Corporation
Dish, Ltd.
DirectSat Corporation
Echo Acceptance Corporation
Dish Installation Network Corporation
HT Ventures, Inc.
Satellite Source, Inc.
Houston Tracker Systems, Inc.
EchoStar North America Corporation
Sky Vista Corporation
EchoStar Indonesia, Inc.
as Guarantors
and
Donaldson, Lufkin & Jenrette
Securities Corporation,
Bear Stearns & Co. Inc.,
Lehman Brothers Inc.,
NationsBanc Montgomery Securities LLC,
CIBC Oppenheimer Corp.
and
ING Baring Furman Selz LLC,
as Initial Purchasers
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<PAGE>
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of January 25, 1999, by and among EchoStar DBS Corporation, a
Colorado corporation (the "COMPANY"), the parties set forth on Schedule A
hereto, as guarantors (collectively, the "GUARANTORS"), and Donaldson, Lufkin
& Jenrette Securities Corporation, Bear Stearns & Co. Inc., Lehman Brothers
Inc., NationsBanc Montgomery Securities LLC, CIBC Oppenheimer Corp. and ING
Baring Furman Selz LLC (each, an "INITIAL PURCHASER" and, collectively, the
"INITIAL PURCHASERS"), each of whom has agreed to purchase an aggregate of
$375,000,000 in principal amount of 9 1/4% Senior Notes due 2006 (the
"NOTES"), of the Company, pursuant to the Purchase Agreement (as defined
below).
This Agreement is made pursuant to the Purchase Agreement, dated January
15, 1999 (the "PURCHASE AGREEMENT"), by and among the Company, the Guarantors
and the Purchasers. In order to induce the Initial Purchasers to purchase
the Notes, the Company has agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers set forth in Section 2
of the Purchase Agreement. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to them in the Indenture, dated
January 25, 1999, between the Company and U.S. Bank Trust National
Association, as Trustee, relating to the Notes and the Exchange Notes (the
"INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Exchange Offer continuously effective and the keeping of
the Exchange Offer open for a period not less than the period required
pursuant to Section 3(b) hereof, and (iii) the delivery by the Company to the
Registrar under the Indenture of Exchange Notes in the same aggregate
principal amount as the aggregate principal amount of Notes that were
tendered by Holders thereof pursuant to the Exchange Offer.
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CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
EFFECTIVENESS DEADLINE: As defined in Section 3(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE NOTES: The Company's 9 1/4% Series B Senior Notes due 2006 to
be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 6 hereof, and the guarantees thereof by each
Guarantor pursuant to the terms of the Indenture.
EXCHANGE OFFER: The exchange and issuance by the Company of a principal
amount of Exchange Notes (which shall be registered, pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Notes that are tendered by such Holders in connection with such exchange and
issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
HOLDERS: As defined in Section 2 hereof.
NASD: National Association of Securities Dealers, Inc.
PERSON: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
PROSPECTUS: The prospectus included in a Registration Statement at the
same time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated
by reference into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company and
the Guarantors relating to (a) an offering of Exchange Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case, (i)
that is filed pursuant to the provisions of this Agreement and (ii) including
the Prospectus included therein, all amendments and supplements thereto
(including post-effective amendments) and all exhibits and material
incorporated by reference therein.
REGULATION S: Regulation S promulgated under the Act.
RULE 144: Rule 144 promulgated under the Act.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
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SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for reoffering to
the public.
TRANSFER RESTRICTED SECURITIES: Each Note, until the earliest to occur
of (a) the date on which such Note is exchanged in the Exchange Offer for an
Exchange Note which is entitled to be resold to the public by the Holder
thereof without complying with the prospectus delivery requirements of the
Act, (b) the date on which such Note has been disposed of in accordance with
a Shelf Registration Statement, (c) the date on which such Note may be
distributed to the public pursuant to Rule 144(k) under the Act or (d) each
Exchange Note until the date on which such Exchange Note is disposed of by a
Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including the delivery of the
Prospectus contained therein).
SECTION 2. HOLDERS
A person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable law
or Commission policy (after the procedures set forth in Section 6(a) below
have been complied with), the Company and the Guarantors shall (i) cause the
Exchange Offer Registration Statement to be filed with the Commission as soon
as practicable after the Closing Date, but in no event later than 90 days
after the Closing Date (such 90th day being the "FILING DEADLINE"), (ii) use
their best efforts to cause such Exchange Offer Registration Statement to
become effective at the earliest possible time, but in no event later than
180 days after the Closing Date (such 180th day being the "EFFECTIVENESS
DEADLINE"), (iii) in connection with the foregoing, (A) file all
pre-effective amendments to such Exchange Offer Registration Statement as may
be necessary in order to cause it to become effective, (B) file, if
applicable, a post-effective amendment to such Exchange Offer Registration
Statement pursuant to Rule 430A under the Act, and (C) cause all necessary
filings, if any, in connection with the registration and qualification of the
Exchange Notes to be made under the Blue Sky laws of such jurisdictions as
are necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Exchange Offer Registration Statement, commence and
Consummate the Exchange Offer such that the Exchange Offer is Consummated not
later than the 210th day after the Closing Date. The Exchange Offer shall be
on the appropriate form permitting (i) registration of the Exchange Offer
Notes to be offered in exchange for the Notes that are Transfer Restricted
Securities and (ii) resales of Exchange Notes by Broker-Dealers that tendered
into the Exchange Notes that such Broker-Dealer acquired for its own account
as
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a result of market making activities or other trading activities (other than
Notes acquired directly from the Company or any of its Affiliates) as
contemplated by Section 3(c) below.
(b) The Company and the Guarantors shall use their respective best
efforts to cause the Exchange Offer Registration Statement to be effective
continuously and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; PROVIDED, HOWEVER, that in
no event shall such period be less than 20 business days. The Company and
the Guarantors shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Exchange
Notes and the Exchange Notes to be issued pursuant to the Indenture relating
to the Company's 9 3/8% Senior Notes due 2009 shall be included in the Exchange
Offer Registration Statement. The Company and the Guarantors shall use their
respective best efforts to cause the Exchange Offer to be Consummated not
later than the 210th day after the Closing Date (such 210th day being the
"CONSUMMATION DEADLINE").
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any Broker-Dealer who holds Transfer Restricted
Securities that were acquired for the account of such Broker-Dealer as a
result of market-making activities or other trading activities (other than
Notes acquired directly from the Company or any Affiliate of the Company),
may exchange such Transfer Restricted Securities pursuant to the Exchange
Offer. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales by such Broker-Dealers that the
Commission may require in order to permit such sales pursuant thereto, but
such "Plan of Distribution" shall not name any such Broker-Dealer or disclose
the amount of Transfer Restricted Securities held by any such Broker-Dealer,
except to the extent required by the Commission as a result of a change in
policy, rules or regulations after the date of this Agreement.
Because such Broker-Dealer may be deemed to be an "underwriter" within
the meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with any initial sale of any Exchange
Notes received by such Broker-Dealer in the Exchange Offer, the Company and
the Guarantors shall permit the use of the prospectus contained in the
Exchange Offer Registration Statement by such Broker-Dealer to satisfy such
Prospectus delivery requirement. To the extent necessary to ensure that the
prospectus contained in the Exchange Offer Registration Statement is
available for sales of Exchange Notes by Brokers-Dealers, the Company and the
Guarantors shall use their best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented, amended and
current as required by and subject to the provisions of Sections 6(a) and
6(c) hereof and in conformity with the requirements of this Agreement, the
Act and the policies, rules and regulations of the Commission as announced
from time to time, for a period of one year from the date on which the
Exchange Offer is Consummated or such shorter period as will terminate when
all Transfer Restricted Securities covered by such Registration Statement
have been sold pursuant thereto. The Company and the Guarantors shall
provide sufficient copies of the latest version of such Prospectus to such
Broker-Dealers, promptly upon request, and in no event later than one day
after such request, at any time during such period.
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SECTION 4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Exchange Offer is not permitted by
applicable law or Commission policy (after the Company and the Guarantors
have complied with the procedures set forth in Section 6(a) below) or (ii) if
any Holder of Transfer Restricted Securities shall notify the Company within
20 business days following the date on which the Exchange Offer is
Consummated that (A) such Holder was prohibited by applicable law or
Commission policy from participating in the Exchange Offer, or (B) such
Holder may not resell the Exchange Notes acquired by it in the Exchange Offer
to the public without delivering a prospectus and that the Prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such Holder, or (C) that such Holder is a
Broker-Dealer and holds Notes acquired directly from the Company or any of
its Affiliates, then the Company and the Guarantors shall:
(x) cause to be filed a shelf registration statement pursuant to
Rule 415 under the Act (which may be an amendment to the Exchange Offer
Registration Statement) the ("SHELF REGISTRATION STATEMENT"), relating to
all Transfer Restricted Securities, on or prior to 30 days after the
earlier of (1) the date on which the Company determines that the Exchange
Offer Registration Statement cannot be filed as a result of clause (a)(i)
above, (2) the date on which the Company receives notice specified in
clause (a)(ii) above, and (3) the 60th day after the Closing Date (such
earlier date, the "FILING DEADLINE"); and
(y) shall use their respective best efforts to cause such Shelf
Registration Statement to become effective on or prior to the 90th day
after the Filing Deadline (such 90th day the "EFFECTIVENESS DEADLINE").
To the extent necessary to ensure that the Shelf Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and other securities required to
be registered therein pursuant to Section 6(b)(ii) hereof, the Company and
the Guarantors shall use their respective best efforts to keep such Shelf
Registration Statement required by this Section 4(e) continuously effective,
supplemented, amended and current as required by and subject to the
provisions of Sections 6(b) and (c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
at least two years (as extended pursuant to Section 6(d) hereof) following
the Closing Date or such shorter period as will terminate where all Transfer
Restricted Securities covered by such Shelf Registration Statement have been
sold pursuant thereto.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless and until such
Holder furnishes to the Company in writing, within 20 days after receipt of a
request therefor, the information specified in Item 507 or 508 of Regulation
S-K, as applicable, of the Act for use in connection with any Shelf
Registration Statement or Prospectus or preliminary Prospectus included
therein. No Holder of Transfer Restricted Securities shall be entitled to
liquidated damages pursuant to Section 5 hereof unless and until such Holder
shall have used its best efforts to provide all such information. Each
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Selling Holder agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation
Deadline or (iv) any Registration Statement required by this Agreement is
filed and declared effective but shall thereafter cease to be effective or
fail to be usable for its intended purpose without being succeeded
immediately by a post-effective amendment to such Registration Statement that
cures such failure and that is itself immediately declared effective (each
such event referred to in clauses (i) through (iv), a "REGISTRATION
DEFAULT"), then the Company and the Guarantors hereby jointly and severally
agree to pay liquidated damages to each Holder of Transfer Restricted
Securities for the first 90-day period immediately following the occurrence
of such Registration Default, in an amount equal to $.05 per week per $1,000
in principal amount of Transfer Restricted Securities held by such Holder for
each week or portion thereof that the Registration Default continues. The
amount of the liquidated damages shall increase by an additional $.05 per
week per $1,000 in principal amount of Transfer Restricted Securities with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of liquidated damages of $.30 per week per
$1,000 in principal amount of Transfer Restricted Securities; PROVIDED that
the Company and the Guarantors shall in no event be required to pay
liquidated damages for more than one Registration Default at any given time.
All accrued liquidated damages shall be paid to the Holders entitled thereto,
in the manner provided for the payment of interest, on each Interest Payment
Date, as more fully set forth in the Indenture and the Notes.
Notwithstanding anything to the contrary set forth herein, (1) upon filing of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (i) above, (2) upon the effectiveness
of the Exchange Offer Registration Statement (and/or, if applicable, the
Shelf Registration Statement), in the case of (ii) above, (3) upon
Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon
the filing of a post-effective amendment to the Registration Statement or an
additional Registration Statement that causes the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement) to again
be declared effective or made usable in the case of (iv) above, the
liquidated damages payable with respect to the Transfer Restricted Securities
as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall
cease.
Notwithstanding the fact that any securities for which liquidated
damages are due cease to be Transfer Restricted Securities, all obligations
of the Company and the Guarantors to pay liquidated damages with respect to
securities shall survive until such time as such obligations with respect to
such securities shall have been satisfied in full.
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SECTION 6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the
Exchange Offer, the Company and the Guarantors shall (x) comply with all of
the provisions of Section 6(c) below, (y) use their respective best efforts
to effect such exchange and to permit the resale of Exchange Notes by
Broker-Dealers that tendered in the Exchange Offer Notes that such
Broker-Dealer acquired for its own account as a result of its market making
activities as other trading activities (other than Notes acquired directly
from the Company or any of its Affiliates) being sold in accordance with the
intended method or methods of distribution thereof, and (z) comply with all
of the following provisions:
(i) If, following the date hereof there has been announced a change
in Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company and the Guarantors hereby agree to seek a
no-action letter or other favorable decision from the Commission allowing the
Company and the Guarantors to Consummate an Exchange Offer for such Transfer
Restricted Securities. The Company and the Guarantors each hereby agrees to
pursue the issuance of such a decision to the Commission staff level. In
connection with the foregoing, the Company and the Guarantors each hereby
agrees, to take all such other actions as may be requested by the Commission
or otherwise required in connection with the issuance of such decision,
including without limitation (A) participating in telephonic conferences with
the Commission, (B) delivering to the Commission staff an analysis prepared
by counsel to the Company setting forth the legal bases, if any, upon which
such counsel has concluded that such an Exchange Offer should be permitted
and (C) diligently pursuing a resolution (which need not be favorable) by the
Commission staff.
(ii) As a condition to its participation in the Exchange Offer,
each Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker-Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company and the Guarantors (which may be contained in
the letter of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (A) it is not an Affiliate of the Company, (B)
it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the Exchange Notes to be issued in the Exchange Offer and (C)
it is acquiring the Exchange Notes in its ordinary course of business. Each
Holder using the Exchange Offer to participate in a distribution of the
Exchange Notes shall acknowledge and agree that, if the resales are of
Exchange Notes obtained by such Holder in exchange for Notes acquired by such
Holder directly from the Company or an Affiliate thereof, it (1) could not,
under Commission policy as in effect on the date of this Agreement rely on
the position of the Commission enunciated IN MORGAN STANLEY AND CO., INC.
(available June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION (available
May 13, 1988), as interpreted in the Commission's letter to SHEARMAN &
STERLING dated July 2, 1993, and similar no-action letters (including, if
applicable, any no-action letter obtained pursuant to clause (i) above), and
(2) must comply with the registration and prospectus delivery requirements of
the Act in connection with a secondary resale transaction and that such a
secondary resale transaction should be covered by an effective registration
statement
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containing the selling security holder information required by Item
507 or 508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the Guarantors are
registering the Exchange Offer in reliance on the position of the Commission
enunciated in EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988),
MORGAN STANLEY AND CO., INC. (available June 5, 1991) as interpreted in the
Commission's letter to SHEARMAN & STERLING, dated July 2, 1993, and, if
applicable, any no-action letter obtained pursuant to clause (i) above, (B)
including a representation that neither the Company nor any Guarantor has
entered into any arrangement or understanding with any Person to distribute
the Exchange Notes to be received in the Exchange Offer and that, to the
best of the Company's and each Guarantor's information and belief, each
Holder participating in the Exchange Offer is acquiring the Exchange Notes
in its ordinary course of business and has no arrangement or understanding
with any Person to participate in the distribution of the Exchange Notes
received in the Exchange Offer and (C) any other undertaking or
representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above, if applicable.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall: (i) comply with
all the provisions of Section 6(c) below and shall use their best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the
Company pursuant to Section 4(b) hereof), and pursuant thereto the Company
and the Guarantors will prepare and file with the Commission a Registration
Statement relating to the registration on any appropriate form under the Act,
which form shall be available for the sale of the Transfer Restricted
Securities in accordance with the intended method or methods of distribution
thereof within the time periods and otherwise in accordance with the
provisions hereof and (ii) issue, upon the request of any Holder or purchaser
of Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Exchange Notes having an aggregate principal amount equal to the
aggregate principal amount of Notes sold pursuant to the Shelf Registration
Statement and surrendered to the Company for cancellation; the Company shall
register Exchange Notes on the Shelf Registration Statement for this purpose
and issue the Exchange Notes to the purchasers of securities subject to the
Shelf Registration Statement in the names as such purchasers shall designate.
(c) GENERAL PROVISIONS. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their respective best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements (including, if required by the Act or any regulation thereunder,
financial statements of the Guarantors) for the period specified in Section 3
or 4 of this Agreement, as applicable. Upon the occurrence of any event that
would cause any such Registration Statement or the Prospectus contained
therein (A) to contain an untrue statement of material fact or omit to state
any material fact necessary to make the statements therein not misleading or
(B) not to be effective and usable for resale of Transfer Restricted
Securities during the period required by this Agreement,
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the Company and the Guarantors shall file promptly an appropriate amendment
to such Registration Statement, curing such defect, and if Commission review
is required, use their respective best efforts to cause such amendment to be
declared effective as soon as practicable;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary
to keep such Registration Statement effective for the applicable period set
forth in Section 3 or 4 hereof, as the case may be; cause the Prospectus to
be supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with the
applicable provisions of Rules 424 and 430A under the Act in a timely manner;
and comply with the provisions of the Act with respect to the disposition of
all securities covered by such Registration Statement during the applicable
period in accordance with the intended method or methods of distribution by
the sellers thereof set forth in such Registration Statement or supplement to
the Prospectus;
(iii) advise the underwriters, if any, and each selling Holder
promptly and, if requested by such Holder, confirm such advice in writing,
(A) when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to any Registration Statement or
any post-effective amendment thereto, when the same has become effective, (B)
of any request by the Commission for amendments to the Registration Statement
or amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act or
of the suspension by any state securities commission of the qualification of
the Transfer Restricted Securities for offering or sale in any jurisdiction,
or the initiation of any proceeding for any of the preceding purposes, and
(D) of the existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document incorporated
by reference therein untrue, or that requires the making of any additions to
or changes in the Registration Statement or the Prospectus in order to make
the statements therein not misleading, or that requires the making of any
additions to or changes in the Prospectus in order to make the statements
therein in the light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Company
and the Guarantors shall use their respective best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) furnish to each selling Holder and each of the underwriters,
if any, in connection with such exchange or sale, if any, before filing with
the Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such Registration
Statement or Prospectus (including all documents incorporated by reference
after the initial filing of such Registration Statement), which documents
will be subject to the review and comment of such Holders and underwriter(s),
if any, in connection with such sale, if any, for a period of at least five
business days, and the Company will not file any such Registration Statement
or Prospectus or any amendment
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or supplement to any such Registration Statement or Prospectus (including all
such documents incorporated by reference) to which such Holders or the
underwriters, if any, shall reasonably object within five business days after
the receipt thereof. A Holder or underwriter, if any, shall be deemed to
have reasonably objected to such filing if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be filed,
contains an untrue statement of a material fact or omits to state any
material fact necessary to make the statements therein not misleading or
fails to comply with the applicable requirements of the Act;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to each selling Holder and to the
underwriters, if any, in connection with such exchange or sale, if any, make
the Company's and the Guarantor's representatives available for discussion of
such document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such Holders or
underwriters, if any, reasonably may request;
(vi) make available, at reasonable times, for inspection by each
selling Holder, any underwriter, if any, participating in any disposition
pursuant to such Registration Statement, and any attorney or accountant
retained by such Holders or any of the underwriters, all financial and other
records, pertinent corporate documents and properties of the Company and the
Guarantors and cause the Company's and the Guarantors' officers, directors
and employees to supply all information reasonably requested by any such
Holder, underwriter, attorney or accountant in connection with such
Registration Statement or any post-effective amendment thereto subsequent to
the filing thereof and prior to its effectiveness;
(vii) if requested by any Holders or the underwriters, if any, in
connection with such exchange or sale, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective amendment
if necessary, such information as such Holders and underwriters, if any, may
reasonably request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer Restricted
Securities; and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is notified
of the matters to be included in such Prospectus supplement or post-effective
amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies, if
so requested by the Holders of a majority in aggregate principal amount of
Notes covered thereby or the underwriters, if any;
(ix) furnish to each selling Holder (and upon request, any Holder)
and each of the underwriter(s), if any, in connection with such exchange or
sale, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) deliver to each Holder and each of the underwriters, if any,
without charge, as many copies of the Prospectus (including each preliminary
prospectus) and any amendment
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or supplement thereto as such Persons reasonably may request; the Company
and the Guarantors hereby consent to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each selling Holder and
each underwriter, if any, in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any amendment
or supplement thereto;
(xi) upon the request of any selling Holder, enter into such
agreements (including underwriting agreements), and make, such
representations and warranties, and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to any Registration Statement
contemplated by this Agreement, as may be requested by any Initial Purchaser
or by any selling Holder in connection with any sale or resale pursuant to
any Registration Statement. In such connection, the Company and the
Guarantors shall:
(A) upon request of any Holder, furnish to each Initial Purchaser,
each selling Holder and each underwriter, if any, in such substance and
scope as they may request and as are customarily made by issuers to
underwriters in primary underwritten offerings, upon the Consummation of
the Exchange Offer or upon, the effectiveness of the Shelf Registration
Statement, as the case may be:
(1) a certificate, dated such date signed on behalf of the
Company and each Guarantor by (x) the President or any Vice President
and (y) a principal financial or accounting officer of the Company and
such Guarantor, confirming, as of the date thereof, the matters set
forth in Sections 6(hh), 9(a) and 9(b) of the Purchase Agreement and
such other matters as such parties may reasonably request;
(2) an opinion, dated the date of Consummation of the Exchange
Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, of counsel for the Company and the
Guarantors, covering the matters similar to those set forth in
paragraphs (e), (f) and (g) of Section 9 of the Purchase Agreement and
such other matter as such parties may reasonably request, and in any
event including a statement to the effect that such counsel has
participated in conferences with officers and other representatives of
the Company and the Guarantors, representatives of the independent
public accountants for the Company, the Initial Purchasers'
representatives and the Initial Purchasers' counsel in connection with
the preparation of such Registration Statement and the related
Prospectus and have considered the matters required to be stated
therein and the statements contained therein, although such counsel
has not independently verified the accuracy, completeness or fairness
of such statements; and that such counsel advises that, on the basis
of the foregoing (relying as to materiality to the extent such
counsel deems appropriate upon the statements of officers and other
representatives of the Company and the Guarantors and without
independent check or verification), no facts che extent such counsel
deems appropriate upon the statements of officers and other
representatives of the Company and the Guarantors and without
independent check or verification), no facts came to such counsel's
attention that caused such counsel to believe that the applicable
Registration Statement, at the time such Registratiained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
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therein not misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the opinion
dated the date of Consummation of the Exchange Offer, as of the date
of Consummation, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. Without limiting the foregoing, such
counsel may state further that such counsel assumes no responsibility
for, and has not independently verified, the accuracy, completeness or
fairness of the financial statements, notes and schedules and other
financial data included in any Registration Statement contemplated by
this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer, or as of the date of effectiveness
of the Shelf Registration Statement, as the case may be, from the
Company's independent accountants, in the customary form and covering
matters of the type customarily covered in comfort letters to
underwriters in connection with primary underwritten offerings, and
affirming the matters set forth in the comfort letters delivered
pursuant to Section 9(i) of the Purchase Agreement, without exception;
and
(B) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with the
matters covered in clause (A) above and with any customary conditions
contained in any agreement or other agreement entered into by the Company
and the Guarantors pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Company and the
Guarantors contemplated in clause (A)(1) above cease to be true and correct,
the Company or the Guarantors shall so advise the Initial Purchasers and the
underwriter(s), if any, and each selling Holder promptly and, if requested
by such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with, the selling Holders, the underwriters, if any, and their
respective counsel in connection with the registration and qualification of
the Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or underwriters may request and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities
covered by the applicable Registration Statement; PROVIDED, HOWEVER, that
neither the Company nor any Guarantor shall be required to register or
qualify as a foreign corporation where it is not now so qualified or to take
any action that would subject it to the service of process in suits or to
taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so subject;
(xiii) shall issue, upon the request of any Holder of Notes covered
by the Shelf Registration Statement, Exchange Notes, having an aggregate
principal amount equal to the aggregate principal amount of Notes
surrendered to the Company by such Holder in exchange therefor or being sold
by such Holder; such Exchange Notes to be registered in the name of such
Holder or in the name of the purchaser(s) of such Notes or Exchange
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Notes, as the case may be; in return, the Notes held by such Holder shall be
surrendered to the Company for cancellation;
(xiv) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the Holders and the underwriters, if any, to
facilitate the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any restrictive
legends; and to register such Transfer Restricted Securities in such
denominations and in such names as the selling Holders or the underwriters,
if any, may request at least two business days prior to any such sale of
Transfer Restricted Securities;
(xv) use their respective best efforts to cause the disposition of
the Transfer Restricted Securities covered by the Registration Statement to
be registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof or
the underwriters, if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xii) above;
(xvi) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6 (c)(iii)(D) above shall exist or have occurred,
prepare a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the Prospectus
will not contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration Statement
covering such Transfer Restricted Securities and provide the Trustee under
the Indenture with printed certificates for the Transfer Restricted
Securities which are in a form eligible for deposit with the Depositary Trust
Company;
(xviii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use their respective reasonable best efforts to cause such
Registration Statement to become effective and approved by such governmental
agencies or authorities as may be necessary to enable the Holders selling
Transfer Restricted Securities to consummate the disposition of such
Transfer Restricted Securities;
(xix) otherwise use their respective best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any Registration Statement,
as soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) covering a twelve-month
period, beginning after the effective date of the Registration Statement (as
such term is defined in paragraph (c) of rule 158 under the Act;
(xx) cause the Indenture to be qualified under the TIA not later than
the effective date of the first Registration Statement required by this
Agreement, and, in connection
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therewith, cooperate with the Trustee and the Holders to effect such changes
to the Indenture as may be required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute, and use its best efforts
to cause the Trustee to execute, all documents that may be required to effect
such changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner;
(xxi) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which
similar securities issued by the Company are then listed if requested by the
Holders of a majority in aggregate principal amount of Notes or the managing
underwriters, if any; and
(xxii) provide promptly to each Holder, upon request, each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of
a Transfer Restricted Security that, upon receipt of the notice referenced to
in Section 6(c)(iii)(D) or any notice from the Company of the existence of
any fact of the kind described in Section 6(c)(iii)(D) hereof (in each case,
a "SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration
Statement until (i) such Holder received copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(xvi) hereof, or (ii) such
Holder is advised in writing by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus (in each case,
the "RECOMMENCEMENT DATE"). Each Holder receiving a Suspension Notice hereby
agrees that it will either (i) destroy any Prospectuses, other than permanent
file copies then in such Holder's possession which have been replaced by the
Company with more recently dated Prospectuses, or (ii) 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 such
Transfer Restricted Securities that was current at the time of receipt of
such Suspension Notice. The time period regarding the effectiveness of such
Registration Statement set forth in Section 3 or 4 hereof, as applicable,
shall be extended by a number of days equal to the number of days in the
period from and including the date of delivery of the Suspension Notice to
the date of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors'
performance of or compliance with this Agreement will be borne by the Company
or the Guarantors, regardless of whether a Registration Statement becomes
effective, including without limitation: (i) all registration and filing fees
and expenses (including filings made by any Initial Purchaser or Holder with
the NASD (and, if applicable, the fees and expenses of any "qualified
independent underwriter" and its counsel that may be required by the rules
and regulations of the NASD)); (ii) all fees and expenses of compliance with
federal securities and state Blue Sky or securities laws; (iii) all expenses
of printing (including printing certificates for the Exchange Notes to be
issued in the Exchange Offer and printing of Prospectuses), messenger
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and delivery services and telephone; (iv) all fees and disbursements of
counsel for the Company, the Guarantors and, subject to Section 7(b), the
Holders of Transfer Restricted Securities; (v) all application and filing
fees in connection with listing Exchange Notes on a national securities
exchange or automated quotation system pursuant to the requirements hereof;
and (vi) all fees and disbursements of independent certified public
accountants of the Company and the Guarantors (including the expenses of any
special audit and comfort letters required by or incident to such
performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses
of any annual audit and the fees and expenses of any Person, including
special experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the
Guarantors will reimburse the Initial Purchasers and the Holders of Transfer
Restricted Securities who are tendering Notes in the Exchange Offer and/or
selling or reselling Notes or Exchange Notes pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or the
Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Paul, Hastings,
Janofsky & Walker LLP, unless another firm shall be chosen by the Holders of
a majority in principal amount of the Transfer Restricted Securities for
whose benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and each Guarantors agree, jointly and severally, to
indemnify and hold harmless (i) each Holder and (ii) each Person, if any, who
controls such Holder (within the meaning of Section 15 of the Act or Section
20 of the Exchange Act) any Holder (any of the persons referred to in this
clause (ii) being hereinafter referred to as a "controlling person") and
(iii) the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person, from and
against any and all losses, claims, damages, liabilities, judgments, actions
and expenses (including, without limitation, any legal or other expenses
incurred in connection with, investigating, preparing, pursuing or defending
any claim or action, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, including any action that could give
rise to any such losses, claims, damages, liabilities or judgments) directly
or indirectly caused by, related to, based upon, arising out of or in
connection with any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, preliminary prospectus
or Prospectus (or any amendment or supplement thereto), provided by the
Company to any Holder or any prospective purchaser of Exchange Notes or
registered Notes or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities, judgments, actions or expenses are caused by an untrue
statement or omission or alleged untrue statement or omission that is based
upon information relating to such Holder furnished in writing to the Company
by such Holder.
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(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and the Guarantors,
and their respective directors and officers, and each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) the Company or the Guarantors, to the same extent as the
foregoing indemnity from the Company and the Guarantors set forth in Section
8(a) above, but only with reference to information relating to such Holder
furnished in writing to the Company by such Holder expressly for use in any
Registration Statement. 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 entire amount received by
such Holder with respect to its sale of the Transfer Restricted Securities
pursuant to a 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) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b)
(the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "INDEMNIFYING PARTY")
in writing and the indemnifying party shall assume the defense of such
action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all fees and expenses of such counsel,
as incurred (except that in the case of any action in respect of which
indemnity may be sought pursuant to both Sections 8(a) and 8(b), a Holder
shall not be required to assume the defense of such action pursuant to this
Section 8(c), but may employ separate counsel and participate in the defense
thereof, but the fees and expenses of such counsel, except as provided below,
shall be at the expense of the Holder). Any indemnified party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified party unless (i) the employment of such counsel
shall have been specifically authorized in writing by the indemnifying party,
(ii) the indemnifying party shall have failed to assume the defense of such
action or employ counsel reasonably satisfactory to the indemnified party or
(iii) the named parties to any such action (including any impleaded parties)
include both the indemnified party and the indemnifying party, and the
indemnified party shall have been advised by such counsel that there may be
one or more legal defenses available to it which are different from or
additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such
action on behalf of the indemnified party). In any such case, the
indemnifying party shall not, in connection with any one action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the fees
and expenses of more than one separate firm of attorneys (in addition to any
local counsel) for all indemnified parties and all such fees and expenses
shall be reimbursed s they are incurred. Such firm shall be designated in
writing by a majority of the Holders, in the case of the parties indemnified
pursuant to Section 8(a), and by the Company and Guarantors, in the case of
parties indemnified pursuant to Section 8(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and
all losses, claims, damages, liabilities, judgments and expenses by reason of
any settlement of any action (i) effected with its written consent or (ii)
effected without its written consent if the
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settlement is entered into more than twenty business days after the
indemnifying party shall have 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 shall have
failed to comply with such reimbursement request. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with
respect to, any pending or threatened action in respect of which the
indemnified party is or could have been a party and indemnity or contribution
may be or could have been sought hereunder by the indemnified party, unless
such settlement, compromise or judgment (i) includes an unconditional release
of the indemnified party from all liability on claims that are or could have
been the subject matter of such action and (ii) 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) To the extent that the indemnification provided for in this Section
8 is unavailable to an indemnified party under Section 8(a) or Section 8(b)
hereof in respect of any losses, claims, damages, liabilities, judgements or
expenses referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages, liabilities, judgments or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantors, on the one hand, and the Holders, on the other hand, from their
sale of Transfer Restricted Securities or (ii) if the allocation provided by
clause 8(d)(i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company and the Guarantors,
on the one hand, and of the Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities, judgments or expenses, as well as any other relevant equitable
considerations. The relative fault of the Company and the Guarantors, on the
one hand, and of the Holder, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or such
Guarantor, on the one hand, or by such Holder, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company, the Guarantors and each Holder agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities, judgments or expenses
referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses incurred by such indemnified party in connection with investigating
or defending any such action or claim including any action that could have
given rise to such losses, claims, damages, liabilities, judgments or
expenses. Notwithstanding the provisions of this Section 8, no Holder shall
be required to contribute, in the aggregate, any amount in excess of the
amount by which the total received by such Holder with respect to the sale of
Transfer Restricted Securities pursuant to a Registration
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Statement exceeds (i) the amount paid by such Holder for such Transfer
Restricted Securities and (ii) the amount of any damages which such Holder
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. 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. The Holders' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective
principal amount of Transfer Restricted Securities held by each Holder
hereunder and not joint.
SECTION 9. RULE 144A
The Company and each Guarantor hereby agrees with each Holder, for so
long as any Transfer Restricted Securities remain outstanding and during any
period in which the Company or such Guarantor (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 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 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under
the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering,
the investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; PROVIDED, that such investment bankers and managers must be
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
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(a) REMEDIES. The Company and the Guarantors acknowledge and agree
that any failure by the Company and the Guarantors to comply with their
respective obligations under Section 3 and 4 hereof may result in material
irreparable injury to the Initial Purchasers or Holders for which there is no
adequate remedy at law, that it will not be possible to measure damages for
such injuries precisely and that, in the event of any of such failure, the
Initial Purchasers or any Holder may obtain such relief as may be required to
specifically enforce the Company's and the Guarantor's obligations under
Section 3 and 4 hereof. The Company and the Guarantors further agree to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Guarantor has previously entered into any
agreement granting any registration rights with respect to its securities to
any Person. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders
of the Company's and the Guarantor's securities under any agreement in effect
on the date hereof.
(c) ADJUSTMENTS AFFECTING THE NOTES OR EXCHANGE NOTES. The Company
will not take any action, or permit any change to occur, with respect to the
Notes or the Exchange Notes that would materially and adversely affect the
ability of the Holders to Consummate any Exchange Offer.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless (i) in the case
of Section 5 hereof and this Section 12(d)(i), the Company has obtained the
written consent of Holders of all outstanding Transfer Restricted Securities
and (ii) in the case of all other provisions hereof, the Company has obtained
the written consent of Holders of a majority of the outstanding principal
amount of Transfer Restricted Securities (excluding Transfer Restricted
Securities held by the Company or its Affiliates). Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose Transfer Restricted
Securities are being tendered pursuant to the Exchange Offer and that does
not affect directly or indirectly the rights of other Holders whose Transfer
Restricted Securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount
of Transfer Restricted Securities subject to such Exchange Offer.
(e) THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand,
and shall have the right to enforce such agreements directly to the extent
they may deem such enforcement necessary or advisable to protect its rights
or the rights of Holders hereunder.
(f) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail (registered or certified, return receipt requested), telex, telecopier,
or air courier guaranteeing overnight delivery:
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(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantors:
EchoStar DBS Corporation
5701 South Sante Fe Drive
Littleton, Colorado 80120
Telecopier No.: (303) 723-1699
Attention: David K. Moskowitz, Esq.
With a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004-1490
Telecopier No.: (212) 858-1500
Attention: David Ambrosia, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
receipt acknowledged, if telecopied; and on the next business day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders; PROVIDED, that nothing herein shall be deemed to permit
any assignment, transfer or other disposition of Transfer Restricted
Securities in violation of the terms hereof or of the Purchase Agreement or
the Indenture. If any transferee of any Holder shall acquire Transfer
Restricted Securities in any manner, whether by operation of law or
otherwise, such Transfer Restricted Securities shall be held subject to all
of the terms of this Agreement, and by taking and holding such Transfer
Restricted Securities such Person shall be conclusively deemed to have agreed
to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement
and, if applicable, the Purchase Agreement, and such Person shall be entitled
to receive the benefits hereof.
(h) 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.
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(i) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(k) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability
of any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(l) 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
in respect of 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.
-21-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ECHOSTAR DBS CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
DIRECT BROADCASTING SATELLITE
CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR SATELLITE CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR TECHNOLOGIES CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
-22-
<PAGE>
ECHOSTAR SATELLITE BROADCASTING CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
DISH, LTD.
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
DIRECTSAT CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHO ACCEPTANCE CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSPHERE CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
-23-
<PAGE>
DISH INSTALLATION NETWORK
CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
HT VENTURES, INC.
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR INTERNATIONAL CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
SATELLITE SOURCE, INC.
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
HOUSTON TRACKER SYSTEMS, INC.
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
-24-
<PAGE>
General Counsel and Secretary
-25-
<PAGE>
ECHOSTAR NORTH AMERICA CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
SKY VISTA CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR INDONESIA, INC.
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR SPACE CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
-26-
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
ING BARING FURMAN SELZ LLC
CIBC OPPENHEIMER CORP.
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ J. Tracy Mehr
- -------------------------------------------
Name: J. Tracy Mehr
Title: Vice President
-27-
<PAGE>
SCHEDULE A
Direct Broadcasting Satellite Corporation,
EchoStar Satellite Corporation,
EchoStar Technologies Corporation,
Echosphere Corporation,
EchoStar International Corporation,
DirectSat Corporation
Echo Acceptance Corporation
Dish Installation Network Corporation
HT Ventures, Inc.
Satellite Source, Inc.
Houston Tracker Systems, Inc.
EchoStar North America Corporation
Sky Vista Corporation
EchoStar Indonesia, Inc.
EchoStar Satellite Broadcasting Corporation
Dish, Ltd.
EchoStar Space Corporation
-28-
<PAGE>
EXHIBIT 4.6
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SENIOR NOTES DUE 2009
REGISTRATION RIGHTS AGREEMENT
Dated as of January 25, 1999
by and among
EchoStar DBS Corporation,
the Company
Direct Broadcasting Satellite Corporation;
EchoStar Satellite Corporation;
EchoStar Technologies Corporation;
Echosphere Corporation;
EchoStar International Corporation
EchoStar Satellite Broadcasting Corporation
EchoStar Space Corporation
Dish, Ltd.
DirectSat Corporation
Echo Acceptance Corporation
Dish Installation Network Corporation
HT Ventures, Inc.
Satellite Source, Inc.
Houston Tracker Systems, Inc.
EchoStar North America Corporation
Sky Vista Corporation
EchoStar Indonesia, Inc.
as Guarantors
and
Donaldson, Lufkin & Jenrette
Securities Corporation,
Bear Stearns & Co. Inc.,
Lehman Brothers Inc.,
NationsBanc Montgomery Securities LLC,
CIBC Oppenheimer Corp.
and
ING Baring Furman Selz LLC,
as Initial Purchasers
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of January 25, 1999, by and among EchoStar DBS Corporation, a
Colorado corporation (the "COMPANY"), the parties set forth on Schedule A
hereto, as guarantors (collectively, the "GUARANTORS"), and Donaldson, Lufkin
& Jenrette Securities Corporation, Bear Stearns & Co. Inc., Lehman Brothers
Inc., NationsBanc Montgomery Securities LLC, CIBC Oppenheimer Corp. and ING
Baring Furman Selz LLC (each, an "INITIAL PURCHASER" and, collectively, the
"INITIAL PURCHASERS"), each of whom has agreed to purchase an aggregate of
$1,625,000,000 in principal amount of 9M% Senior Notes due 2009 (the
"NOTES"), of the Company, pursuant to the Purchase Agreement (as defined
below).
This Agreement is made pursuant to the Purchase Agreement, dated January
15, 1999 (the "PURCHASE AGREEMENT"), by and among the Company, the Guarantors
and the Purchasers. In order to induce the Initial Purchasers to purchase
the Notes, the Company has agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers set forth in Section 2
of the Purchase Agreement. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to them in the Indenture, dated
January 25, 1999, between the Company and U.S. Bank Trust National
Association, as Trustee, relating to the Notes and the Exchange Notes (the
"INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Exchange Offer continuously effective and the keeping of
the Exchange Offer open for a period not less than the period required
pursuant to Section 3(b) hereof, and (iii) the delivery by the Company to the
Registrar under the Indenture of Exchange Notes in the same aggregate
principal amount as the aggregate principal amount of Notes that were
tendered by Holders thereof pursuant to the Exchange Offer.
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
<PAGE>
EFFECTIVENESS DEADLINE: As defined in Section 3(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE NOTES: The Company's 9 3/8% Series B Senior Notes due 2009 to be
issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 6 hereof, and the guarantees thereof by each
Guarantor pursuant to the terms of the Indenture.
EXCHANGE OFFER: The exchange and issuance by the Company of a principal
amount of Exchange Notes (which shall be registered, pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Notes that are tendered by such Holders in connection with such exchange and
issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
HOLDERS: As defined in Section 2 hereof.
NASD: National Association of Securities Dealers, Inc.
PERSON: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
PROSPECTUS: The prospectus included in a Registration Statement at the
same time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated
by reference into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company and
the Guarantors relating to (a) an offering of Exchange Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case, (i)
that is filed pursuant to the provisions of this Agreement and (ii) including
the Prospectus included therein, all amendments and supplements thereto
(including post-effective amendments) and all exhibits and material
incorporated by reference therein.
REGULATION S: Regulation S promulgated under the Act.
RULE 144: Rule 144 promulgated under the Act.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
-2-
<PAGE>
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for reoffering to
the public.
TRANSFER RESTRICTED SECURITIES: Each Note, until the earliest to occur
of (a) the date on which such Note is exchanged in the Exchange Offer for an
Exchange Note which is entitled to be resold to the public by the Holder
thereof without complying with the prospectus delivery requirements of the
Act, (b) the date on which such Note has been disposed of in accordance with
a Shelf Registration Statement, (c) the date on which such Note may be
distributed to the public pursuant to Rule 144(k) under the Act or (d) each
Exchange Note until the date on which such Exchange Note is disposed of by a
Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including the delivery of the
Prospectus contained therein).
SECTION 2. HOLDERS
A person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable law
or Commission policy (after the procedures set forth in Section 6(a) below
have been complied with), the Company and the Guarantors shall (i) cause the
Exchange Offer Registration Statement to be filed with the Commission as soon
as practicable after the Closing Date, but in no event later than 90 days
after the Closing Date (such 90th day being the "FILING DEADLINE"), (ii) use
their best efforts to cause such Exchange Offer Registration Statement to
become effective at the earliest possible time, but in no event later than
180 days after the Closing Date (such 180th day being the "EFFECTIVENESS
DEADLINE"), (iii) in connection with the foregoing, (A) file all
pre-effective amendments to such Exchange Offer Registration Statement as may
be necessary in order to cause it to become effective, (B) file, if
applicable, a post-effective amendment to such Exchange Offer Registration
Statement pursuant to Rule 430A under the Act, and (C) cause all necessary
filings, if any, in connection with the registration and qualification of the
Exchange Notes to be made under the Blue Sky laws of such jurisdictions as
are necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Exchange Offer Registration Statement, commence and
Consummate the Exchange Offer such that the Exchange Offer is Consummated not
later than the 210th day after the Closing Date. The Exchange Offer shall be
on the appropriate form permitting (i) registration of the Exchange Offer
Notes to be offered in exchange for the Notes that are Transfer Restricted
Securities and (ii) resales of Exchange Notes by Broker-Dealers that tendered
into the Exchange Notes that such Broker-Dealer acquired for its own account
as a result of market making activities or other trading activities (other
than Notes acquired directly from the Company or any of its Affiliates) as
contemplated by Section 3(c) below.
-3-
<PAGE>
(b) The Company and the Guarantors shall use their respective best
efforts to cause the Exchange Offer Registration Statement to be effective
continuously and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; PROVIDED, HOWEVER, that in
no event shall such period be less than 20 business days. The Company and
the Guarantors shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Exchange
Notes and the Exchange Notes to be issued pursuant to the Indenture relating
to the Company's 9 1/4% Senior Notes due 2006 shall be included in the
Exchange Offer Registration Statement. The Company and the Guarantors shall
use their respective best efforts to cause the Exchange Offer to be
Consummated not later than the 210th day after the Closing Date (such 210th
day being the "CONSUMMATION DEADLINE").
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any Broker-Dealer who holds Transfer Restricted
Securities that were acquired for the account of such Broker-Dealer as a
result of market-making activities or other trading activities (other than
Notes acquired directly from the Company or any Affiliate of the Company),
may exchange such Transfer Restricted Securities pursuant to the Exchange
Offer. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales by such Broker-Dealers that the
Commission may require in order to permit such sales pursuant thereto, but
such "Plan of Distribution" shall not name any such Broker-Dealer or disclose
the amount of Transfer Restricted Securities held by any such Broker-Dealer,
except to the extent required by the Commission as a result of a change in
policy, rules or regulations after the date of this Agreement.
Because such Broker-Dealer may be deemed to be an "underwriter" within
the meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with any initial sale of any Exchange
Notes received by such Broker-Dealer in the Exchange Offer, the Company and
the Guarantors shall permit the use of the prospectus contained in the
Exchange Offer Registration Statement by such Broker-Dealer to satisfy such
Prospectus delivery requirement. To the extent necessary to ensure that the
prospectus contained in the Exchange Offer Registration Statement is
available for sales of Exchange Notes by Brokers-Dealers, the Company and the
Guarantors shall use their best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented, amended and
current as required by and subject to the provisions of Sections 6(a) and
6(c) hereof and in conformity with the requirements of this Agreement, the
Act and the policies, rules and regulations of the Commission as announced
from time to time, for a period of one year from the date on which the
Exchange Offer is Consummated or such shorter period as will terminate when
all Transfer Restricted Securities covered by such Registration Statement
have been sold pursuant thereto. The Company and the Guarantors shall
provide sufficient copies of the latest version of such Prospectus to such
Broker-Dealers, promptly upon request, and in no event later than one day
after such request, at any time during such period.
-4-
<PAGE>
SECTION 4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Exchange Offer is not permitted by
applicable law or Commission policy (after the Company and the Guarantors
have complied with the procedures set forth in Section 6(a) below) or (ii) if
any Holder of Transfer Restricted Securities shall notify the Company within
20 business days following the date on which the Exchange Offer is
Consummated that (A) such Holder was prohibited by applicable law or
Commission policy from participating in the Exchange Offer, or (B) such
Holder may not resell the Exchange Notes acquired by it in the Exchange Offer
to the public without delivering a prospectus and that the Prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such Holder, or (C) that such Holder is a
Broker-Dealer and holds Notes acquired directly from the Company or any of
its Affiliates, then the Company and the Guarantors shall:
(x) cause to be filed a shelf registration statement pursuant to
Rule 415 under the Act (which may be an amendment to the Exchange Offer
Registration Statement) the ("SHELF REGISTRATION STATEMENT"), relating to all
Transfer Restricted Securities, on or prior to 30 days after the earlier of
(1) the date on which the Company determines that the Exchange Offer
Registration Statement cannot be filed as a result of clause (a)(i) above,
(2) the date on which the Company receives notice specified in clause (a)(ii)
above, and (3) the 60th day after the Closing Date (such earlier date, the
"FILING DEADLINE"); and
(y) shall use their respective best efforts to cause such Shelf
Registration Statement to become effective on or prior to the 90th day after
the Filing Deadline (such 90th day the "EFFECTIVENESS DEADLINE").
To the extent necessary to ensure that the Shelf Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and other securities required to
be registered therein pursuant to Section 6(b)(ii) hereof, the Company and
the Guarantors shall use their respective best efforts to keep such Shelf
Registration Statement required by this Section 4(e) continuously effective,
supplemented, amended and current as required by and subject to the
provisions of Sections 6(b) and (c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
at least two years (as extended pursuant to Section 6(d) hereof) following
the Closing Date or such shorter period as will terminate where all Transfer
Restricted Securities covered by such Shelf Registration Statement have been
sold pursuant thereto.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless and until such
Holder furnishes to the Company in writing, within 20 days after receipt of a
request therefor, the information specified in Item 507 or 508 of Regulation
S-K, as applicable, of the Act for use in connection with any Shelf
Registration Statement or Prospectus or preliminary Prospectus included
therein. No Holder of Transfer Restricted Securities shall be entitled to
liquidated damages pursuant to Section 5 hereof unless and until such Holder
shall have used its best efforts to provide all such information. Each
Selling Holder agrees to furnish promptly to the Company all information
required to be
-5-
<PAGE>
disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation
Deadline or (iv) any Registration Statement required by this Agreement is
filed and declared effective but shall thereafter cease to be effective or
fail to be usable for its intended purpose without being succeeded
immediately by a post-effective amendment to such Registration Statement that
cures such failure and that is itself immediately declared effective (each
such event referred to in clauses (i) through (iv), a "REGISTRATION
DEFAULT"), then the Company and the Guarantors hereby jointly and severally
agree to pay liquidated damages to each Holder of Transfer Restricted
Securities for the first 90-day period immediately following the occurrence
of such Registration Default, in an amount equal to $.05 per week per $1,000
in principal amount of Transfer Restricted Securities held by such Holder for
each week or portion thereof that the Registration Default continues. The
amount of the liquidated damages shall increase by an additional $.05 per
week per $1,000 in principal amount of Transfer Restricted Securities with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of liquidated damages of $.30 per week per
$1,000 in principal amount of Transfer Restricted Securities; PROVIDED that
the Company and the Guarantors shall in no event be required to pay
liquidated damages for more than one Registration Default at any given time.
All accrued liquidated damages shall be paid to the Holders entitled thereto,
in the manner provided for the payment of interest, on each Interest Payment
Date, as more fully set forth in the Indenture and the Notes.
Notwithstanding anything to the contrary set forth herein, (1) upon filing of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (i) above, (2) upon the effectiveness
of the Exchange Offer Registration Statement (and/or, if applicable, the
Shelf Registration Statement), in the case of (ii) above, (3) upon
Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon
the filing of a post-effective amendment to the Registration Statement or an
additional Registration Statement that causes the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement) to again
be declared effective or made usable in the case of (iv) above, the
liquidated damages payable with respect to the Transfer Restricted Securities
as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall
cease.
Notwithstanding the fact that any securities for which liquidated
damages are due cease to be Transfer Restricted Securities, all obligations
of the Company and the Guarantors to pay liquidated damages with respect to
securities shall survive until such time as such obligations with respect to
such securities shall have been satisfied in full.
-6-
<PAGE>
SECTION 6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the
Exchange Offer, the Company and the Guarantors shall (x) comply with all of
the provisions of Section 6(c) below, (y) use their respective best efforts
to effect such exchange and to permit the resale of Exchange Notes by
Broker-Dealers that tendered in the Exchange Offer Notes that such
Broker-Dealer acquired for its own account as a result of its market making
activities as other trading activities (other than Notes acquired directly
from the Company or any of its Affiliates) being sold in accordance with the
intended method or methods of distribution thereof, and (z) comply with all
of the following provisions:
(i) If, following the date hereof there has been announced a change
in Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company and the Guarantors hereby agree to seek a
no-action letter or other favorable decision from the Commission allowing the
Company and the Guarantors to Consummate an Exchange Offer for such Transfer
Restricted Securities. The Company and the Guarantors each hereby agrees to
pursue the issuance of such a decision to the Commission staff level. In
connection with the foregoing, the Company and the Guarantors each hereby
agrees, to take all such other actions as may be requested by the Commission
or otherwise required in connection with the issuance of such decision,
including without limitation (A) participating in telephonic conferences with
the Commission, (B) delivering to the Commission staff an analysis prepared
by counsel to the Company setting forth the legal bases, if any, upon which
such counsel has concluded that such an Exchange Offer should be permitted
and (C) diligently pursuing a resolution (which need not be favorable) by the
Commission staff.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation, any
Holder who is a Broker-Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company and the Guarantors (which may be contained in
the letter of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (A) it is not an Affiliate of the Company,
(B) it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the Exchange Notes to be issued in the Exchange Offer and
(C) it is acquiring the Exchange Notes in its ordinary course of business.
Each Holder using the Exchange Offer to participate in a distribution of the
Exchange Notes shall acknowledge and agree that, if the resales are of
Exchange Notes obtained by such Holder in exchange for Notes acquired by such
Holder directly from the Company or an Affiliate thereof, it (1) could not,
under Commission policy as in effect on the date of this Agreement rely on
the position of the Commission enunciated in MORGAN STANLEY AND CO., INC.
(available June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION (available
May 13, 1988), as interpreted in the Commission's letter to SHEARMAN &
STERLING dated July 2, 1993, and similar no-action letters (including, if
applicable, any no-action letter obtained pursuant to clause (i) above), and
(2) must comply with the registration and prospectus delivery requirements of
the Act in connection with a secondary resale transaction and that such a
secondary resale transaction should be covered by an effective registration
statement containing the selling security holder information required by Item
507 or 508, as applicable, of Regulation S-K.
-7-
<PAGE>
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental letter
to the Commission (A) stating that the Company and the Guarantors are
registering the Exchange Offer in reliance on the position of the Commission
enunciated in EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988),
MORGAN STANLEY AND CO., INC. (available June 5, 1991) as interpreted in the
Commission's letter to SHEARMAN & STERLING, dated July 2, 1993, and, if
applicable, any no-action letter obtained pursuant to clause (i) above, (B)
including a representation that neither the Company nor any Guarantor has
entered into any arrangement or understanding with any Person to distribute
the Exchange Notes to be received in the Exchange Offer and that, to the best
of the Company's and each Guarantor's information and belief, each Holder
participating in the Exchange Offer is acquiring the Exchange Notes in its
ordinary course of business and has no arrangement or understanding with any
Person to participate in the distribution of the Exchange Notes received in
the Exchange Offer and (C) any other undertaking or representation required
by the Commission as set forth in any no-action letter obtained pursuant to
clause (i) above, if applicable.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall: (i) comply with
all the provisions of Section 6(c) below and shall use their best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the
Company pursuant to Section 4(b) hereof), and pursuant thereto the Company
and the Guarantors will prepare and file with the Commission a Registration
Statement relating to the registration on any appropriate form under the Act,
which form shall be available for the sale of the Transfer Restricted
Securities in accordance with the intended method or methods of distribution
thereof within the time periods and otherwise in accordance with the
provisions hereof and (ii) issue, upon the request of any Holder or purchaser
of Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Exchange Notes having an aggregate principal amount equal to the
aggregate principal amount of Notes sold pursuant to the Shelf Registration
Statement and surrendered to the Company for cancellation; the Company shall
register Exchange Notes on the Shelf Registration Statement for this purpose
and issue the Exchange Notes to the purchasers of securities subject to the
Shelf Registration Statement in the names as such purchasers shall designate.
(c) GENERAL PROVISIONS. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their respective best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements (including, if required by the Act or any regulation thereunder,
financial statements of the Guarantors) for the period specified in Section 3
or 4 of this Agreement, as applicable. Upon the occurrence of any event that
would cause any such Registration Statement or the Prospectus contained
therein (A) to contain an untrue statement of material fact or omit to state
any material fact necessary to make the statements therein not misleading or
(B) not to be effective and usable for resale of Transfer Restricted
Securities during the period required by this Agreement, the Company and the
Guarantors shall file promptly an appropriate amendment to such Registration
Statement, curing such defect, and if Commission review is required, use
their
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respective best efforts to cause such amendment to be declared
effective as soon as practicable;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary
to keep such Registration Statement effective for the applicable period set
forth in Section 3 or 4 hereof, as the case may be; cause the Prospectus to
be supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with the
applicable provisions of Rules 424 and 430A under the Act in a timely manner;
and comply with the provisions of the Act with respect to the disposition of
all securities covered by such Registration Statement during the applicable
period in accordance with the intended method or methods of distribution by
the sellers thereof set forth in such Registration Statement or supplement to
the Prospectus;
(iii) advise the underwriters, if any, and each selling Holder
promptly and, if requested by such Holder, confirm such advice in writing,
(A) when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to any Registration Statement or
any post-effective amendment thereto, when the same has become effective, (B)
of any request by the Commission for amendments to the Registration Statement
or amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act or
of the suspension by any state securities commission of the qualification of
the Transfer Restricted Securities for offering or sale in any jurisdiction,
or the initiation of any proceeding for any of the preceding purposes, and
(D) of the existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document incorporated
by reference therein untrue, or that requires the making of any additions to
or changes in the Registration Statement or the Prospectus in order to make
the statements therein not misleading, or that requires the making of any
additions to or changes in the Prospectus in order to make the statements
therein in the light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Company
and the Guarantors shall use their respective best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) furnish to each selling Holder and each of the underwriters, if
any, in connection with such exchange or sale, if any, before filing with the
Commission, copies of any Registration Statement or any Prospectus included
therein or any amendments or supplements to any such Registration Statement
or Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review and comment of such Holders and underwriter(s), if any,
in connection with such sale, if any, for a period of at least five business
days, and the Company will not file any such Registration Statement or
Prospectus or any amendment or supplement to any such Registration Statement
or Prospectus (including all such documents incorporated by reference) to
which such Holders or the underwriters, if any, shall reasonably object
within five business days after the receipt thereof. A Holder or
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underwriter, if any, shall be deemed to have reasonably objected to such
filing if such Registration Statement, amendment, Prospectus or supplement,
as applicable, as proposed to be filed, contains an untrue statement of a
material fact or omits to state any material fact necessary to make the
statements therein not misleading or fails to comply with the applicable
requirements of the Act;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to each selling Holder and to the
underwriters, if any, in connection with such exchange or sale, if any, make
the Company's and the Guarantor's representatives available for discussion of
such document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such Holders or
underwriters, if any, reasonably may request;
(vi) make available, at reasonable times, for inspection by each
selling Holder, any underwriter, if any, participating in any disposition
pursuant to such Registration Statement, and any attorney or accountant
retained by such Holders or any of the underwriters, all financial and other
records, pertinent corporate documents and properties of the Company and the
Guarantors and cause the Company's and the Guarantors' officers, directors
and employees to supply all information reasonably requested by any such
Holder, underwriter, attorney or accountant in connection with such
Registration Statement or any post-effective amendment thereto subsequent to
the filing thereof and prior to its effectiveness;
(vii) if requested by any Holders or the underwriters, if any, in
connection with such exchange or sale, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective amendment
if necessary, such information as such Holders and underwriters, if any, may
reasonably request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer Restricted
Securities; and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is notified
of the matters to be included in such Prospectus supplement or post-effective
amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies, if
so requested by the Holders of a majority in aggregate principal amount of
Notes covered thereby or the underwriters, if any;
(ix) furnish to each selling Holder (and upon request, any Holder)
and each of the underwriter(s), if any, in connection with such exchange or
sale, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) deliver to each Holder and each of the underwriters, if any,
without charge, as many copies of the Prospectus (including each preliminary
prospectus) and any amendment or supplement thereto as such Persons
reasonably may request; the Company and the Guarantors hereby consent to the
use (in accordance with law) of the Prospectus and any amendment or
supplement thereto by each selling Holder and each underwriter, if any, in
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connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement thereto;
(xi) upon the request of any selling Holder, enter into such
agreements (including underwriting agreements), and make, such
representations and warranties, and take all such other actions in connection
therewith in order to expedite or facilitate the disposition of the Transfer
Restricted Securities pursuant to any Registration Statement contemplated by
this Agreement, as may be requested by any Initial Purchaser or by any
selling Holder in connection with any sale or resale pursuant to any
Registration Statement. In such connection, the Company and the Guarantors
shall:
(A) upon request of any Holder, furnish to each Initial Purchaser,
each selling Holder and each underwriter, if any, in such substance and
scope as they may request and as are customarily made by issuers to
underwriters in primary underwritten offerings, upon the Consummation of
the Exchange Offer or upon, the effectiveness of the Shelf Registration
Statement, as the case may be:
(1) a certificate, dated such date signed on behalf of the
Company and each Guarantor by (x) the President or any Vice President
and (y) a principal financial or accounting officer of the Company and
such Guarantor, confirming, as of the date thereof, the matters set
forth in Sections 6(hh), 9(a) and 9(b) of the Purchase Agreement and
such other matters as such parties may reasonably request;
(2) an opinion, dated the date of Consummation of the Exchange
Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, of counsel for the Company and the
Guarantors, covering the matters similar to those set forth in
paragraphs (e), (f) and (g) of Section 9 of the Purchase Agreement and
such other matter as such parties may reasonably request, and in any
event including a statement to the effect that such counsel has
participated in conferences with officers and other representatives of
the Company and the Guarantors, representatives of the independent
public accountants for the Company, the Initial Purchasers'
representatives and the Initial Purchasers' counsel in connection with
the preparation of such Registration Statement and the related
Prospectus and have considered the matters required to be stated
therein and the statements contained therein, although such counsel
has not independently verified the accuracy, completeness or fairness
of such statements; and that such counsel advises that, on the basis
of the foregoing (relying as to materiality to the extent such
counsel deems appropriate upon the statements of officers and other
representatives of the Company and the Guarantors and without
independent check or verification), no facts came to such counsel's
attention that caused such counsel to believe that the applicable
Registration Statement, at the time such Registration Statement or any
post-effective amendment thereto became effective, and, in the case of
the Exchange Offer Registration Statement, as of the date of
Consummation of the Exchange Offer, contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such Registration
Statement as of its date and, in the case of the opinion dated the
date of Consummation of the Exchange Offer, as of the date of
Consummation, contained an untrue statement of a material fact or
omitted to state a material fact necessary
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<PAGE>
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Without
limiting the foregoing, such counsel may state further that such
counsel assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial data included
in any Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer, or as of the date of effectiveness
of the Shelf Registration Statement, as the case may be, from the
Company's independent accountants, in the customary form and covering
matters of the type customarily covered in comfort letters to
underwriters in connection with primary underwritten offerings, and
affirming the matters set forth in the comfort letters delivered
pursuant to Section 9(i) of the Purchase Agreement, without exception;
and
(B) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with the
matters covered in clause (A) above and with any customary conditions
contained in any agreement or other agreement entered into by the Company
and the Guarantors pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Company and the
Guarantors contemplated in clause (A)(1) above cease to be true and correct,
the Company or the Guarantors shall so advise the Initial Purchasers and the
underwriter(s), if any, and each selling Holder promptly and, if requested by
such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with, the selling Holders, the underwriters, if any, and their
respective counsel in connection with the registration and qualification of
the Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or underwriters may request and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities
covered by the applicable Registration Statement; PROVIDED, HOWEVER, that
neither the Company nor any Guarantor shall be required to register or
qualify as a foreign corporation where it is not now so qualified or to take
any action that would subject it to the service of process in suits or to
taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so subject;
(xiii) shall issue, upon the request of any Holder of Notes covered
by the Shelf Registration Statement, Exchange Notes, having an aggregate
principal amount equal to the aggregate principal amount of Notes surrendered
to the Company by such Holder in exchange therefor or being sold by such
Holder; such Exchange Notes to be registered in the name of such Holder or in
the name of the purchaser(s) of such Notes or Exchange Notes, as the case may
be; in return, the Notes held by such Holder shall be surrendered to the
Company for cancellation;
(xiv) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the Holders
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<PAGE>
and the underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to be
sold and not bearing any restrictive legends; and to register such Transfer
Restricted Securities in such denominations and in such names as the selling
Holders or the underwriters, if any, may request at least two business days
prior to any such sale of Transfer Restricted Securities;
(xv) use their respective best efforts to cause the disposition of
the Transfer Restricted Securities covered by the Registration Statement to
be registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof or
the underwriters, if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xii)
above;
(xvi) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6 (c)(iii)(D) above shall exist or have occurred,
prepare a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the Prospectus
will not contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture
with printed certificates for the Transfer Restricted Securities which are in
a form eligible for deposit with the Depositary Trust Company;
(xviii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by
any underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use their respective reasonable best efforts to cause such
Registration Statement to become effective and approved by such governmental
agencies or authorities as may be necessary to enable the Holders selling
Transfer Restricted Securities to consummate the disposition of such Transfer
Restricted Securities;
(xix) otherwise use their respective best efforts to comply with
all applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any Registration Statement,
as soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) covering a twelve-month
period, beginning after the effective date of the Registration Statement (as
such term is defined in paragraph (c) of rule 158 under the Act;
(xx) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by this
Agreement, and, in connection therewith, cooperate with the Trustee and the
Holders to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA; and
execute, and use its best efforts to cause the Trustee to execute, all
documents that may be required to effect such changes and all other forms and
documents required to be filed with the Commission to enable such Indenture
to be so qualified in a timely manner;
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<PAGE>
(xxi) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which
similar securities issued by the Company are then listed if requested by the
Holders of a majority in aggregate principal amount of Notes or the managing
underwriters, if any; and
(xxii) provide promptly to each Holder, upon request, each
document filed with the Commission pursuant to the requirements of Section 13
or Section 15(d) of the Exchange Act.
(d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of
a Transfer Restricted Security that, upon receipt of the notice referenced to
in Section 6(c)(iii)(D) or any notice from the Company of the existence of
any fact of the kind described in Section 6(c)(iii)(D) hereof (in each case,
a "SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration
Statement until (i) such Holder received copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(xvi) hereof, or (ii) such
Holder is advised in writing by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus (in each case,
the "RECOMMENCEMENT DATE"). Each Holder receiving a Suspension Notice hereby
agrees that it will either (i) destroy any Prospectuses, other than permanent
file copies then in such Holder's possession which have been replaced by the
Company with more recently dated Prospectuses, or (ii) 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 such
Transfer Restricted Securities that was current at the time of receipt of
such Suspension Notice. The time period regarding the effectiveness of such
Registration Statement set forth in Section 3 or 4 hereof, as applicable,
shall be extended by a number of days equal to the number of days in the
period from and including the date of delivery of the Suspension Notice to
the date of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors'
performance of or compliance with this Agreement will be borne by the Company
or the Guarantors, regardless of whether a Registration Statement becomes
effective, including without limitation: (i) all registration and filing fees
and expenses (including filings made by any Initial Purchaser or Holder with
the NASD (and, if applicable, the fees and expenses of any "qualified
independent underwriter" and its counsel that may be required by the rules
and regulations of the NASD)); (ii) all fees and expenses of compliance with
federal securities and state Blue Sky or securities laws; (iii) all expenses
of printing (including printing certificates for the Exchange Notes to be
issued in the Exchange Offer and printing of Prospectuses), messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel
for the Company, the Guarantors and, subject to Section 7(b), the Holders of
Transfer Restricted Securities; (v) all application and filing fees in
connection with listing Exchange Notes on a national securities exchange or
automated quotation system pursuant to the requirements hereof; and (vi) all
fees and disbursements of independent certified public accountants of the
Company and the Guarantors (including the expenses of any special audit and
comfort letters required by or incident to such performance).
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The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses
of any annual audit and the fees and expenses of any Person, including
special experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the
Guarantors will reimburse the Initial Purchasers and the Holders of Transfer
Restricted Securities who are tendering Notes in the Exchange Offer and/or
selling or reselling Notes or Exchange Notes pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or the
Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Paul, Hastings,
Janofsky & Walker LLP, unless another firm shall be chosen by the Holders of
a majority in principal amount of the Transfer Restricted Securities for
whose benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and each Guarantors agree, jointly and severally, to
indemnify and hold harmless (i) each Holder and (ii) each Person, if any, who
controls such Holder (within the meaning of Section 15 of the Act or Section
20 of the Exchange Act) any Holder (any of the persons referred to in this
clause (ii) being hereinafter referred to as a "controlling person") and
(iii) the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person, from and
against any and all losses, claims, damages, liabilities, judgments, actions
and expenses (including, without limitation, any legal or other expenses
incurred in connection with, investigating, preparing, pursuing or defending
any claim or action, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, including any action that could give
rise to any such losses, claims, damages, liabilities or judgments) directly
or indirectly caused by, related to, based upon, arising out of or in
connection with any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, preliminary prospectus
or Prospectus (or any amendment or supplement thereto), provided by the
Company to any Holder or any prospective purchaser of Exchange Notes or
registered Notes or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities, judgments, actions or expenses are caused by an untrue
statement or omission or alleged untrue statement or omission that is based
upon information relating to such Holder furnished in writing to the Company
by such Holder.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company or the Guarantors, to the same extent as the foregoing indemnity
from the Company and the Guarantors set forth in Section 8(a) above, but only
with reference to information relating to such Holder furnished in writing to
the Company by such Holder expressly for use in any Registration Statement. In
no event shall any Holder, its directors, officers, or any person who controls
such Holder be liable or
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responsible for any amount in excess of the amount by which the entire amount
received by such Holder with respect to its sale of the Transfer Restricted
Securities pursuant to a 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) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed s
they are incurred. Such firm shall be designated in writing by a majority of
the Holders, in the case of the parties indemnified pursuant to Section 8(a),
and by the Company and Guarantors, in the case of parties indemnified pursuant
to Section 8(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities, judgments and expenses 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 shall have 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 shall have failed to comply
with such reimbursement request. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement or
compromise of, or consent to the entry of judgment with respect to, any pending
or threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release
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of the indemnified party from all liability on claims that are or could have
been the subject matter of such action and (ii) 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) To the extent that the indemnification provided for in this Section
8 is unavailable to an indemnified party under Section 8(a) or Section 8(b)
hereof in respect of any losses, claims, damages, liabilities, judgements or
expenses referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages, liabilities, judgments or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantors, on the one hand, and the Holders, on the other hand, from their
sale of Transfer Restricted Securities or (ii) if the allocation provided by
clause 8(d)(i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company and the Guarantors,
on the one hand, and of the Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities, judgments or expenses, as well as any other relevant equitable
considerations. The relative fault of the Company and the Guarantors, on the
one hand, and of the Holder, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or such
Guarantor, on the one hand, or by such Holder, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company, the Guarantors and each Holder agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities, judgments or expenses
referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses incurred by such indemnified party in connection with investigating
or defending any such action or claim including any action that could have
given rise to such losses, claims, damages, liabilities, judgments or
expenses. Notwithstanding the provisions of this Section 8, no Holder shall
be required to contribute, in the aggregate, any amount in excess of the
amount by which the total received by such Holder with respect to the sale of
Transfer Restricted Securities pursuant to a Registration Statement exceeds
(i) the amount paid by such Holder for such Transfer Restricted Securities
and (ii) the amount of any damages which such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. 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. The Holders' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective
principal amount of Transfer Restricted Securities held by each Holder
hereunder and not joint.
SECTION 9. RULE 144A
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The Company and each Guarantor hereby agrees with each Holder, for so
long as any Transfer Restricted Securities remain outstanding and during any
period in which the Company or such Guarantor (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 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 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under
the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering,
the investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; PROVIDED, that such investment bankers and managers must be
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) REMEDIES. The Company and the Guarantors acknowledge and agree
that any failure by the Company and the Guarantors to comply with their
respective obligations under Section 3 and 4 hereof may result in material
irreparable injury to the Initial Purchasers or Holders for which there is no
adequate remedy at law, that it will not be possible to measure damages for
such injuries precisely and that, in the event of any of such failure, the
Initial Purchasers or any Holder may obtain such relief as may be required to
specifically enforce the Company's and the Guarantor's obligations under
Section 3 and 4 hereof. The Company and the Guarantors further agree to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts
-18-
<PAGE>
with the provisions hereof. Neither the Company nor any Guarantor has
previously entered into any agreement granting any registration rights with
respect to its securities to any Person. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Company's and the Guarantor's securities
under any agreement in effect on the date hereof.
(c) ADJUSTMENTS AFFECTING THE NOTES OR EXCHANGE NOTES. The Company
will not take any action, or permit any change to occur, with respect to the
Notes or the Exchange Notes that would materially and adversely affect the
ability of the Holders to Consummate any Exchange Offer.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless (i) in the case
of Section 5 hereof and this Section 12(d)(i), the Company has obtained the
written consent of Holders of all outstanding Transfer Restricted Securities
and (ii) in the case of all other provisions hereof, the Company has obtained
the written consent of Holders of a majority of the outstanding principal
amount of Transfer Restricted Securities (excluding Transfer Restricted
Securities held by the Company or its Affiliates). Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose Transfer Restricted
Securities are being tendered pursuant to the Exchange Offer and that does
not affect directly or indirectly the rights of other Holders whose Transfer
Restricted Securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount
of Transfer Restricted Securities subject to such Exchange Offer.
(e) THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand,
and shall have the right to enforce such agreements directly to the extent
they may deem such enforcement necessary or advisable to protect its rights
or the rights of Holders hereunder.
(f) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail (registered or certified, return receipt requested), telex, telecopier,
or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantors:
EchoStar DBS Corporation
5701 South Sante Fe Drive
Littleton, Colorado 80120
Telecopier No.: (303) 723-1699
Attention: David K. Moskowitz, Esq.
With a copy to:
-19-
<PAGE>
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004-1490
Telecopier No.: (212) 858-1500
Attention: David Ambrosia, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
receipt acknowledged, if telecopied; and on the next business day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders; PROVIDED, that nothing herein shall be deemed to permit
any assignment, transfer or other disposition of Transfer Restricted
Securities in violation of the terms hereof or of the Purchase Agreement or
the Indenture. If any transferee of any Holder shall acquire Transfer
Restricted Securities in any manner, whether by operation of law or
otherwise, such Transfer Restricted Securities shall be held subject to all
of the terms of this Agreement, and by taking and holding such Transfer
Restricted Securities such Person shall be conclusively deemed to have agreed
to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement
and, if applicable, the Purchase Agreement, and such Person shall be entitled
to receive the benefits hereof.
(h) 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.
(i) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(k) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability
of any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(l) 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 in respect of
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
-20-
<PAGE>
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
-21-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ECHOSTAR DBS CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
DIRECT BROADCASTING SATELLITE
CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR SATELLITE CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR TECHNOLOGIES CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
-22-
<PAGE>
ECHOSTAR SATELLITE BROADCASTING CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
DISH, LTD.
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
DIRECTSAT CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHO ACCEPTANCE CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSPHERE CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
-23-
<PAGE>
DISH INSTALLATION NETWORK
CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
HT VENTURES, INC.
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR INTERNATIONAL CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
SATELLITE SOURCE, INC.
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
HOUSTON TRACKER SYSTEMS, INC.
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
-24-
<PAGE>
ECHOSTAR NORTH AMERICA CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
SKY VISTA CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR INDONESIA, INC.
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
ECHOSTAR SPACE CORPORATION
By: /s/ David K. Moskowitz
------------------------------------------
Name: David K. Moskowitz
Title: Senior Vice President,
General Counsel and Secretary
-25-
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
ING BARING FURMAN SELZ LLC
CIBC OPPENHEIMER CORP.
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ J. Tracy Mehr
------------------------------------------
Name: J. Tracy Mehr
Title: Vice President
-26-
<PAGE>
SCHEDULE A
Direct Broadcasting Satellite Corporation,
EchoStar Satellite Corporation,
EchoStar Technologies Corporation,
Echosphere Corporation,
EchoStar International Corporation,
DirectSat Corporation
Echo Acceptance Corporation
Dish Installation Network Corporation
HT Ventures, Inc.
Satellite Source, Inc.
Houston Tracker Systems, Inc.
EchoStar North America Corporation
Sky Vista Corporation
EchoStar Indonesia, Inc.
EchoStar Satellite Broadcasting Corporation
Dish, Ltd.
EchoStar Space Corporation
-27-
<PAGE>
EXHIBIT 5.1
[WSP&R LETTERHEAD]
January 28, 1999
EchoStar DBS Corporation
DirectSat Corporation
Echo Acceptance Corporation
EchoSphere Corporation
Dish Installation Network Corporation
EchoStar Technologies Corporation
HT Ventures, Inc.
EchoStar International Corporation
Satellite Source, Inc.
EchoStar Satellite Corporation
Houston Tracker Systems, Inc.
EchoStar North America Corporation
Sky Vista Corporation
EchoStar Indonesia, Inc.
Direct Broadcasting Satellite Corporation
EchoStar Satellite Broadcasting Corporation
Dish, Ltd.
EchoStar Space Corporation
5701 South Santa Fe Drive
Littleton, CO 80120
RE: 9 1/4% SENIOR NOTES DUE 2006 AND 9 3/8% SENIOR NOTES DUE 2009
Ladies and Gentlemen:
We have acted as special outside counsel for EchoStar DBS Corporation, a
Colorado corporation (the "Issuer"), Dish, Ltd., a Nevada corporation,
DirectSat Corporation, a Delaware corporation, EchoStar Technologies
Corporation, a Texas corporation, and EchoStar Space Corporation Echo
Acceptance Corporation, EchoSphere Corporation, Dish Installation Network
Corporation, HT Ventures, Inc., EchoStar International Corporation, Satellite
Source, Inc., EchoStar Satellite Corporation, Houston Tracker Systems, Inc.,
EchoStar North America Corporation, Sky Vista Corporation, EchoStar
Indonesia, Inc., Direct Broadcasting Satellite Corporation, and EchoStar
Satellite Broadcasting Corporation, all Colorado corporations (collectively,
the "Guarantors"), and are familiar with the Issuer's and the Guarantors'
Registration Statement on Form S-4 (the "Registration Statement"), filed
today with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"), relating to the Issuer's
proposed offer to exchange up to $375,000,000 in aggregate
<PAGE>
principal amount of its new 9 1/4% Senior Notes due 2006 (the "New Seven Year
Notes") and $1,625,000,000 in aggregate principal amount of its new 9 3/8%
Senior Notes due 2009 (the "New Ten Year Notes" and, together with the New
Seven Year Notes, the "Exchange Notes") for up to $375,000,000 in aggregate
principal amount of its outstanding 9 1/4% Senior Notes due 2006 (the "Old
Seven Year Notes") and $1,625,000,000 in aggregate principal amount of its
outstanding 9 3/8% Senior Notes due 2009 (together with the Old Seven Year
Notes, the "Old Notes") and the related guarantees of the Exchange Notes by
the Guarantors (the "Guarantees").
In so acting, we have reviewed originals (or copies certified or
otherwise identified to our satisfaction) of:
(i) the Registration Statement;
(ii) the Indenture relating to the Old Seven Year Notes between the Issuer,
the Guarantors and U.S. Bank Trust National Association, as trustee, dated
as of January 25, 1999;
(iii) the Indenture relating to the Old Ten Year Notes between the Issuer,
the Guarantors and U.S. Bank Trust National Association, as trustee, dated
as of January 25, 1999;
(iv) such board resolutions, corporate documents, records and other
instruments as we have deemed necessary for the purposes of this opinion.
As to any facts material to this opinion, we have relied upon statements
and representations of the Issuer, EchoStar Communications Corporation, the
Guarantors and public officials. We have assumed that each of the Issuer and
the Guarantors are validly existing and in good standing under the laws of
their respective jurisdiction of organization, that each has the corporate
power and authority to enter into and perform its obligations under the
Indentures, the Exchange Notes and the Guarantees and that the Trustee under
the Indentures has the corporate power and authority to enter into and
perform its obligations under the Indentures and each Indenture constitutes
the valid, binding and enforceable obligations of the Trustee.
On the basis of our review, it is our opinion that when (i) the
Registration Statement has become effective, (ii) the Exchange Notes and the
Guarantees endorsed thereon are duly authorized, executed and delivered on
behalf of the Issuer and the Guarantors in accordance with the applicable
Indenture in exchange for the applicable Old Notes pursuant to the terms of
the offer to exchange set forth in the Prospectus forming a part of the
Registration Statement and the accompanying letter of transmittal and (iii)
the Exchange Notes are duly authenticated by the Trustee pursuant to the
terms of the applicable Indenture, (x) the Exchange Notes will constitute
valid and binding obligations of the Issuer, enforceable against the Issuer
in accordance with their terms, subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other laws relating to
or affecting generally the enforcement of creditors' rights, to general
principles of equity and to implied covenants of good faith and fair dealing
and (y) the Guarantees will constitute valid and binding obligations of the
Guarantors, enforceable against each Guarantor in accordance with their
terms, subject to bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium and other laws relating to or affecting generally the
enforcement of creditors' rights, to general principles of equity and to
implied covenants of good faith and fair dealing.
We are members of the bar of the State of New York and do not express
any opinion herein as to any laws other than the laws of the State of New
York and the federal laws of the United States of America. Insofar as the
opinions expressed herein relate to or are dependent upon matters governed by
the laws of the State of Colorado, we have relied upon the opinion of
Friedlob Sanderson Raskin Paulson & Tourtillott, LLC, which is being
delivered to you and filed with the
<PAGE>
Commission as an exhibit to the Registration Statement.
We express no opinion herein on the Federal Communications Act, as
amended, or the rules and regulations thereunder or the policies of the
Federal Communications Commission or the staff thereof pursuant to delegated
authority.
We consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus that is a part of the Registration Statement. In
giving consent to the use of our name under the heading "Legal Matters", 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 Commission.
Very truly yours,
<PAGE>
EXHIBIT 5.2
[FSRP&T LETTERHEAD]
January 28, 1999
EchoStar DBS Corporation
5701 South Santa Fe Drive
Littleton, CO 80120
RE: 9 1/4% SENIOR NOTES DUE 2006 AND 9 3/8% SENIOR NOTES DUE 2009
Ladies and Gentlemen:
As special outside counsel for EchoStar DBS Corporation, a Colorado
corporation (the "Issuer"), we are familiar with the Issuer's Registration
Statement on Form S-4 (the "Registration Statement"), filed today with the
Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"), relating to the Issuer's proposed offer
to exchange up to $375,000,000 in aggregate principal amount of its new 9 1/4%
Senior Notes due 2006 and $1,625,000,000 in aggregate principal amount
of its new 9 3/8% Senior Notes due 2009 (the "Exchange Notes") for up to
$375,000,000 in aggregate principal amount of its outstanding 9 1/4% Senior
Notes due 2006 and $1,625,000,000 in aggregate principal amount of its
outstanding 9 3/8% Senior Notes due 2009.
In so acting, we have reviewed originals (or copies certified or
otherwise identified to our satisfaction) of:
(i) the Registration Statement;
(ii) the Indenture relating to the 9 1/4% Senior Notes due 2006 between the
Issuer, the guarantors thereof and U.S. Bank Trust National Association, as
trustee, dated as of January 25, 1999 (the "Seven Year Notes Indenture");
(iii) the Indenture relating to the 9 3/8% Senior Notes due 2009 between
the Issuer, the guarantors thereof and U.S. Bank Trust National
Association, as trustee, dated as of January 25, 1999 (the "Ten Year Notes
Indenture");
(iv) such board resolutions, corporate documents, records and other
instruments as we have deemed necessary for the purposes of this opinion.
In rendering this opinion, we have 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, assuming the
due execution and delivery threof by the parties thereto and when the
Exchange Notes are executed and authenticated in accordance with the
provisions of the applicable indenture in accordance with the provisions
thereof, the Exchange
<PAGE>
Notes will be valid and binding obligations of the Issuer.
We are members of the bar of the State of Colorado and do not express
any opinion herein as to any laws other than the laws of the State of
Colorado and the federal laws of the United States of America. Insofar as the
opinions expressed herein relate to or are dependent upon matters governed by
the laws of the State of New York, we have relied upon the opinion of
Winthrop, Stimson, Putnam & Roberts, which is being delivered to you and
filed with the Commission as an exhibit to the Registration Statement.
We consent to the filing of this opinion as Exhibit 5.2 to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus that is a part of the Registration Statement. In
giving consent to the use of our name under the heading "Legal Matters", 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 Commission.
Very truly yours,
<PAGE>
EXHIBIT 12
Page 1 of 1
ECHOSTAR DBS CORPORATION AND SUBSIDIARIES AND AFFILIATES
COMPUTATION OF RATIOS
(IN THOUSANDS)
(UNAUDITED)
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------------------------------------------- ------------------------
1993 1994 1995 1996 1997 1997 1998
-------- ---------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before taxes $ 18,734 $ 489 $ (18,552) $(156,529) $(323,278) $(248,873) $(170,740)
Interest expense 632 21,408 23,985 62,430 110,003 79,056 122,219
Capitalized interest 370 5,695 25,763 31,818 43,169 27,861 21,619
Interest component of rent 78 94 71 84 64 37 40
expense (1)
-------- ---------- --------- --------- -------- --------- ---------
Total fixed charges 1,080 27,197 49,819 94,332 153,236 106,954 143,878
Earnings before fixed charges $ 19,444 $ 21,991 $ 5,504 $ (94,015) $(213,211) $(169,780) $ (48,481)
Ratio of earnings to fixed 18.00 0.81 0.11 (1.00) (1.39) (1.59) (0.34)
charges
-------- ---------- --------- --------- -------- --------- ---------
-------- ---------- --------- --------- -------- --------- ---------
Deficiency of available earnings - $ (5,206) $ (44,315) $(188,347) $(366,447) $(276,734) $(192,359)
to fixed charges
-------- ---------- --------- --------- -------- --------- ---------
-------- ---------- --------- --------- -------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------------------
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
------------------- ------------------
<S> <C> <C>
Income (loss) before taxes $(310,532) $(148,097)
Interest expense 97,257 99,576
Capitalized interest 30,120 16,455
Interest component of rent expense (2) 48 23
------------------- ------------------
Total fixed charges 127,426 116,054
Earnings before fixed charges $(213,227) $ (48,498)
Ratio of earnings to fixed charges (1.67) (0.42)
------------------- ------------------
------------------- ------------------
Deficiency of available earnings to fixed $(340,653) $(164,552)
charges
------------------- ------------------
------------------- ------------------
</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%.
This cost of capital is representative of the Company's outstanding secured
borrowings.
(2) 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 pro forma, annualized cost of capital of approximately
9.6% for the year ended December 31, 1997 and for the nine months ended
September 30, 1998.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
NAME OF COMPANY STATE OF INCORPORATION
- --------------- ----------------------
<S> <C>
1. Echosphere Corporation Colorado
2. Dish Installation Network Corporation Colorado
3. EchoStar Technologies Corporation Texas
4. HT Ventures, Inc. Colorado
5. EchoStar International Corporation Colorado
6. Satellite Source, Inc. Colorado
7. EchoStar Satellite Corporation Colorado
8. Houston Tracker Systems, Inc. Colorado
9. EchoStar North America Corporation Colorado
10. Sky Vista Corporation Colorado
11. EchoStar Indonesia, Inc. Colorado
12. EchoStar Satellite Broadcasting Corporation Colorado
13. Dish, Ltd. Nevada
14. DirectSat Corporation Delaware
15. Echo Acceptance Corporation Colorado
</TABLE>
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report and to all references to our Firm included in or made part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Denver, Colorado
JANUARY 28, 1999
<PAGE>
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 DBS CORPORATION
AFFILIATE GUARANTORS LISTED ON SCHEDULE ATTACHED HERETO
(Exact name of Registrant as specified in its charter)
Colorado 84-1328967
(State of Incorporation) (I.R.S. Employer
Identification No.)
5701 South Santa Fe Drive
Littleton, Colorado 80120
(Address of Principal Executive Offices) (Zip Code)
9 1/4% SENIOR NOTES DUE 2009
(Title of the Indenture Securities)
<PAGE>
SCHEDULE OF ADDITIONAL REGISTRANT GUARANTORS
EXACT NAME OF GUARANTOR REGISTRANTS AS SPECIFIED STATE OF
IN THEIR RESPECTIVE CHARTERS FORMATION
- ---------------------------- ---------
DIRECTSAT CORPORATION DELAWARE
ECHO ACCEPTANCE CORPORATION COLORADO
ECHOSPHERE CORPORATION COLORADO
DISH INSTALIATION NETWORK COLORADO
ECHOSTAR TECHNOLOGIES CORPORATION TEXAS
HT VENTURES, INC. COLORADO
ECHOSTAR INTERNATIONAL CORPORATION COLORADO
SATELLITE SOURCE, INC. COLORADO
ECHOSTAR SATELLITE CORPORATION COLORADO
HOUSTON TRACKER SYSTEMS, INC. COLORADO
ECHOSTAR NORTH AMERICA CORPORATION COLORADO
SKY VISTA CORPORATION COLORADO
ECHOSTAR INDONESIA, INC. COLORADO
DIRECT BROADCASTING SATELLITE CORPORATION COLORADO
ECHOSTAR SATELLITE BROADCASTING CORPORATION COLORADO
DISH, LTD. NEVADA
ECHOSTAR SPACE CORPORATION COLORADO
<PAGE>
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>
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 26th day of
January, 1999.
U.S. BANK TRUST NATIONAL ASSOCIATION
--------------------------------
S. Christopherson
Vice President
- --------------------------------
Judith M. Zuzek
Assistant Secretary
<PAGE>
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
26th day of January, 1999.
U.S. BANK TRUST NATIONAL ASSOCIATION
/s/ S. Christopherson
--------------------------------
S. Christopherson
Vice President
/s/ Judith M. Zuzek
- --------------------------------
Judith M. Zuzek
Assistant Secretary
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned, U.S. BANK TRUST NATIONAL ASSOCITION 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: January 26, 1999
U.S. BANK TRUST NATIONAL ASSOCIATION
--------------------------------
S. Christopherson
Vice President
<PAGE>
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: January 26, 1999
U.S. BANK TRUST NATIONAL ASSOCIATION
/s/ S. Christopherson
--------------------------------
S. Christopherson
Vice President
<PAGE>
EXHIBIT 25.2
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 DBS CORPORATION
AFFILIATE GUARANTORS LISTED ON SCHEDULE ATTACHED HERETO
(Exact name of Registrant as specified in its charter)
Colorado 84-1328967
(State of Incorporation) (I.R.S. Employer
Identification No.)
5701 South Santa Fe Drive
Littleton, Colorado 80120
(Address of Principal Executive Offices) (Zip Code)
9 3/8% SENIOR NOTES DUE 2009
(Title of the Indenture Securities)
<PAGE>
SCHEDULE OF ADDITIONAL REGISTRANT GUARANTORS
EXACT NAME OF GUARANTOR REGISTRANTS AS SPECIFIED STATE OF
IN THEIR RESPECTIVE CHARTERS FORMATION
- ------------------------------------------------ ---------
DIRECTSAT CORPORATION DELAWARE
ECHO ACCEPTANCE CORPORATION COLORADO
ECHOSPHERE CORPORATION COLORADO
DISH INSTALIATION NETWORK COLORADO
ECHOSTAR TECHNOLOGIES CORPORATION TEXAS
HT VENTURES, INC. COLORADO
ECHOSTAR INTERNATIONAL CORPORATION COLORADO
SATELLITE SOURCE, INC. COLORADO
ECHOSTAR SATELLITE CORPORATION COLORADO
HOUSTON TRACKER SYSTEMS, INC. COLORADO
ECHOSTAR NORTH AMERICA CORPORATION COLORADO
SKY VISTA CORPORATION COLORADO
ECHOSTAR INDONESIA, INC. COLORADO
DIRECT BROADCASTING SATELLITE CORPORATION COLORADO
ECHOSTAR SATELLITE BROADCASTING CORPORATION COLORADO
DISH, LTD. NEVADA
ECHOSTAR SPACE CORPORATION COLORADO
<PAGE>
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>
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
26th day of January, 1999.
U.S. BANK TRUST NATIONAL ASSOCIATION
--------------------------------
S. Christopherson
Vice President
- --------------------------------
Judith M. Zuzek
Assistant Secretary
<PAGE>
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
26th day of January, 1999.
U.S. BANK TRUST NATIONAL ASSOCIATION
/s/ S. CHRISTOPHERSON
--------------------------------
S. Christopherson
Vice President
/s/ Judith M. Zuzek
- --------------------------------
Judith M. Zuzek
Assistant Secretary
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned, U.S. BANK TRUST NATIONAL ASSOCITION 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: January 26, 1999
U.S. BANK TRUST NATIONAL ASSOCIATION
--------------------------------
S. Christopherson
Vice President
<PAGE>
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: January 26, 1999
U.S. BANK TRUST NATIONAL ASSOCIATION
/s/ S. Christopherson
--------------------------------
S. Christopherson
Vice President
<PAGE>
EXHIBIT 99.1
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN DAYLIGHT TIME, ON
[_________], 1999, UNLESS EXTENDED (THE "EXPIRATION DATE").
TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., EASTERN DAYLIGHT TIME, ON THE
EXPIRATION DATE.
- -------------------------------------------------------------------------------
ECHOSTAR DBS CORPORATION
5701 South Santa Fe Drive
Littleton, Colorado 80120
LETTER OF TRANSMITTAL
To Exchange 9 1/4% Senior Notes due 2006
and 9 3/8% Senior Notes due 2009
Exchange Agent:
U.S. BANK TRUST NATIONAL ASSOCIATION
- ---------------
To: U.S. Bank Trust National Association
- ---------------
FACSIMILE TRANSMISSION:
(651) 244-1537
CONFIRM BY TELEPHONE TO:
(651) 244-8162
- ---------------
BY MAIL/HAND DELIVERY/OVERNIGHT DELIVERY:
U.S. Bank Trust National Association
Attn: Specialized Finance Group
180 East Fifth Street
St. Paul, Minnesota 55101
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
<PAGE>
The undersigned acknowledges receipt of the Prospectus dated [________],
1999 (the Prospectus") of EchoStar DBS Corporation, a Colorado corporation
(the "Issuer"), and this Letter of Transmittal for 9 1/4% Senior Notes due
2006 and 9 3/8% Senior Notes due 2009 which may be amended from time to time
(this "Letter"), which together constitute the Issuer's offer (the Exchange
Offer") to exchange $1,000 principal amount of its 9 1/4% Senior Notes due
2006 and $1,000 principal amount of its 9 3/8% Senior Notes due 2009
(collectively, the "Exchange Notes") for each $1,000 in principal amount of
its outstanding 9 1/4% Senior Notes due 2006 and each $1,000 in principal
amount of its 9 3/8% Senior Notes due 2009, respectively (collectively, the
"Old Notes") that were issued and sold in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act").
The undersigned has completed, executed and delivered this Letter to
indicate the action he or she desires to take with respect to the Exchange
Offer.
All holders of Old Notes who wish to tender their Old Notes must, prior
to the Expiration Date: (1) complete, sign, date and deliver this Letter, or
a facsimile thereof, to the Exchange Agent, in person or to the address set
forth above; and (2) tender his or her Old Notes or, if a tender of Old Notes
is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer
Facility"), confirm such book-entry transfer (a "Book-Entry Confirmation"),
in each case in accordance with the procedures for tendering described in the
Instructions to this Letter. Holders of Old Notes whose certificates are not
immediately available, or who are unable to deliver their certificates or
Book-Entry Confirmation and all other documents required by this Letter to be
delivered to the Exchange Agent on or prior to the Expiration Date, must
tender their Old Notes according to the guaranteed delivery procedures set
forth under the caption "The Exchange Offer--How to Tender" in the
Prospectus. (See Instruction 1).
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Old Notes validly tendered and not withdrawn and
the issuance of the Exchange Notes will be made on the Exchange Date. For
the purposes of the Exchange Offer, the Issuer shall be deemed to have
accepted for exchange validly tendered Old Notes when, as and if the Issuer
has given written notice thereof to the Exchange Agent.
The Instructions included with this Letter must be followed in their
entirety. Questions and requests for assistance or for additional copies of
the Prospectus or this Letter may be directed to the Exchange Agent, at the
address listed above, or David K. Moskowitz, Senior Vice President, General
Counsel and Secretary, EchoStar Communications DBS Corporation, 5701 South
Santa Fe Drive, Littleton, Colorado 80120, at (303) 723-1000
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING
THE INSTRUCTIONS TO THIS LETTER, CAREFULLY
BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall have
the respective meanings ascribed to them in the Prospectus. List in Box 1
below the Old Notes of which you are the holder. If the space provided in
Box 1 is inadequate, list the certificate numbers and principal amount of Old
Notes on a separate signed schedule and affix that schedule to this Letter.
<PAGE>
BOX 1
TO BE COMPLETED BY ALL TENDERING HOLDERS
<TABLE>
<S><C>
- ----------------------------------------------------------------------------------------------------------
Name(s) and Address(es) Certificate Principal Amount Principal Amount
of Registered Holder(s) Number(s) (1) of Old Notes of Old Notes Tendered (2)
(Please fill in if blank)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Totals:
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Need not be completed if Old Notes are being tendered by book-entry
transfer.
(2) Unless otherwise indicated, the entire principal amount of Old Notes
represented by a certificate or Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered.
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned tenders to the Issuer the principal amount of Old Notes indicated
above. Subject to, and effective upon, the acceptance for exchange of the
Old Notes tendered with this Letter, the undersigned exchanges, assigns and
transfers to, or upon the order of, the Issuer all right, title and interest
in and to the Old Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his or
her agent and attorney-in-fact (with full knowledge that the Exchange Agent
also acts as the agent of the Issuer) with respect to the tendered Old Notes,
with full power of substitution, to: (a) deliver certificates for such Old
Notes; (b) deliver Old Notes and all accompanying evidence of transfer and
authenticity to or upon the order of the Issuer upon receipt by the Exchange
Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon the acceptance by the Issuer of the Old Notes
tendered under the Exchange Offer; and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Old Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney
granted in this paragraph shall be deemed irrevocable and coupled with an
interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and that the Issuer will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Issuer to be
necessary or desirable to complete the assignment and transfer of the Old
Notes tendered.
The undersigned agrees that acceptance of any tendered Old Notes by the
Issuer and the issuance of Exchange Notes (together with the guarantees of
the Guarantors (as defined in the Prospectus) with respect thereto) in
exchange therefor shall constitute performance in full by the Issuer and the
Guarantors of their obligations under the Registration Rights Agreement (as
defined in the Prospectus) and that, upon the issuance of the Exchange Notes,
the Issuer and the Guarantors will have no further obligations or liabilities
thereunder (except in certain limited circumstances). By tendering Old
Notes, the undersigned certifies (a) that it is not an "affiliate" of the
Issuer within the meaning of the Securities Act (an "Affiliate"), that it is
not a broker-dealer that owns Old Notes acquired directly from the Issuer or
an Affiliate, that it is acquiring the Exchange Notes acquired directly from
the Issuer or an Affiliate, that it is acquiring the Exchange Notes offered
hereby in the ordinary course of the undersigned's business and that the
undersigned has no arrangement with any person to participate in the
distribution of such Exchange Notes; (b) that it is an Affiliate of the
Issuer or of any of the initial purchasers of the Old Notes in the Old Notes
Offering and that it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable to it;
or (c) that it is a Participating Broker-Dealer (as defined in the
Registration Rights Agreement) and that it will deliver a prospectus in
connection with any resale of the Exchange Notes.
If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account, it will deliver a prospectus in connection with any
resale of such Exchange Notes. By so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Issuer may accept the undersigned's tender by delivering written
notice of acceptance to the
<PAGE>
Exchange Agent, at which time the undersigned's right to withdraw such tender
will terminate.
All authority conferred or agreed to be conferred by this Letter shall
survive the death or incapacity of the undersigned, and every obligation of
the undersigned under this Letter shall be binding upon the undersigned's
heirs, personal representatives, successors and assigns. Tenders may be
withdrawn only in accordance with the procedures set forth in the
Instructions contained in this Letter.
Unless otherwise indicated under "Special Delivery Instructions" below,
the Exchange Agent will deliver Exchange Notes (and, if applicable, a
certificate for any Old Notes not tendered but represented by a certificate
also encompassing Old Notes which are tendered) to the undersigned at the
address set forth in Box 1.
The Exchange Offer is subject to the more detailed terms set forth in
the Prospectus and, in case of any conflict between the terms of the terms of
the Prospectus and this Letter, the Prospectus shall prevail.
<PAGE>
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ___________________________________________
Account Number: __________________________________________________________
Transaction Code Number: _________________________________________________
______________________________________________________________________________
______________________________________________________________________________
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s): __________________________________________
Date of Execution of Notice of Guaranteed Delivery: ______________________
Window Ticket Number (if available): _____________________________________
Name of Institution which Guaranteed Delivery: ___________________________
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
- -------------------------------------------------------------------------------
BOX 2
PLEASE SIGN HERE
WHETHER OR NOT OLD NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
This box must be signed by registered holder(s) of Old Notes as their name(s)
appear(s) on certificate(s) for Old Notes, or by person(s) authorized to
become registered holder(s) by endorsement and documents transmitted with
this Letter. If signature is by a trustee, executor, administrator, guardian,
officer or other person acting in a fiduciary or representative capacity,
such person must set forth his or her full title below. (See Instruction 3)
X
---------------------------------------------------------------------------
X
---------------------------------------------------------------------------
Signature(s) of Owner(s) or Authorized Signatory
Date: ________________, 1999
Name(s)
------------------------------------------------------------------------
(Please Print)
Capacity:
--------------------------------------------------------------------
Address:
--------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone No.:
------------------------------------------------
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (SEE INSTRUCTIONS 3 BELOW)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
- -------------------------------------------------------------------------------
(Name of Eligible Institution Guaranteeing Signatures)
- -------------------------------------------------------------------------------
(Address (including zip code) and Telephone Number (including area code) of
Firm)
- -------------------------------------------------------------------------------
<PAGE>
(Authorized Signature)
- -------------------------------------------------------------------------------
(Title)
- -------------------------------------------------------------------------------
(Printed Name)
Date: ________________, 1999
<PAGE>
BOX 3
TO BE COMPLETED BY ALL TENDERING HOLDERS
PAYOR'S NAME:___________________
<TABLE>
<S><C>
- -----------------------------------------------------------------------------------------------------------------------------------
Part 1 Social Security Number
or Employer Identification Number
PLEASE PROVIDE YOUR TIN
IN THE BOX AT RIGHT AND
CERTIFY BY SIGNING AND
DATING BELOW
- -----------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part 2 / /
Form W-9
Department of the Treasury, Internal Check the box if you are NOT subject to back-up withholding under the provisions of
Revenue Service Section 2406(a)(1)(C) of the Internal Revenue Code because (1) you have not been notified
that you are subject to back-up withholding as a result of failure to report all interest
or dividends or (2) the Internal Revenue Service has notified you that you are no longer
subject to back-up withholding.
- -----------------------------------------------------------------------------------------------------------------------------------
Payor's Request for Txpayer Part 3 / /
Identification Number (TIN)
Check if awaiting TIN
- -----------------------------------------------------------------------------------------------------------------------------------
CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION PROVIDED ON
THIS FORM IS TRUE, CORRECT AND COMPLETE
Signature ________________________ Date ______________
Name_______________________________________________
(Please Print)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S><C>
- -----------------------------------------------------------------------------------------------------------------------------------
BOX 4 BOX 4
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4) (See Instructions 3 and 4)
- -----------------------------------------------------------------------------------------------------------------------------------
To be completed ONLY if certificates for Old Notes in a To be completed ONLY if certificates for Old Notes in a principal
principal amount not exchanged, or Exchange Notes, are amount not exchanged, or Exchange Notes, are to be sent to someone
to be issued in the name of someone other than the other than the person whose signature appears in Box 2 or to an
person whose signatures appear in Box 2, or if Old Notes address other than that shown in Box 1.
delivered by book-entry transfer which are not accepted
for exchange are to be returned by credit to an account Deliver:
maintained at the Book-Entry Transfer facility other
than the account indicated above. (check appropriate boxes)
Issue and deliver: / / Old Notes not tendered
(check appropriate boxes) / / Exchange Notes, to:
/ / Old Notes not tendered Name: ________________________________
/ / Exchange Notes, to: Address: _____________________________
(Please Print) _____________________________
Name: ________________________________ _____________________________
Address: ______________________________ Please complete the Substitute Form W-9 at Box 3.
______________________________ Tax I,D. or Social Security Number:
______________________________ _____________________________
Please complete the Substitute Form W-9 at Box 3.
Tax I.D. or Social Security Number:
____________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Old Notes or
a Book-Entry Confirmation, as the case may be, as well as a properly
completed and duly executed copy of this Letter and any other documents
required by this Letter, must be received by the Exchange Agent at one of its
addresses set forth herein on or before the Expiration Date. The method of
delivery of this Letter, certificates for Old Notes or a Book-Entry
Confirmation, as the case may be, and any other required documents is at the
election and risk of the tendering holder, but except as otherwise provided
below, the delivery will be deemed made when actually received by the
Exchange Agent. If delivery is by mail, the use of registered mail with
return receipt requested, properly insured, is suggested.
If tendered Old Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange
therefor are to be issued (and any untendered Old Notes are to be reissued)
in the name of the registered holder, the signature of such signer need not
be guaranteed. In any other case, the tendered Old Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to the
Issuer and duly executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a bank, broker,
dealer, credit union, savings association, clearing agency or other
institution (each an "Eligible Institution") that is a member of a recognized
signature guarantee medallion program within the meaning of Rule 17Ad-15
under the Exchange Act. If the Exchange Notes and/or Old Notes not exchanged
are to be delivered to an address other than that of the registered holder
appearing on the note registerfor the Old Notes, the signature on the Letter
of Transmittal must be guaranteed by an Eligible Institution.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender Old Notes should contact such holder promptly and instruct
such holder to tender Old Notes on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Old Notes himself, such beneficial
owner must, prior to completing and executing the Letter of Transmittal and
delivering such Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such beneficial owner's name or follow the
procedures described in the immediately preceding paragraph. The transfer of
record ownership may take considerable time.
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes or a Book-Entry Confirmation, as the case may be, and
all other required documents to the Exchange Agent on or before the
Expiration Date may tender their Old Notes pursuant to the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such procedure:
(i) tender must be made by or through an Eligible Institution; (ii) prior to
the Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by telegram, telex, facsimile transmission, mail or hand delivery)
(x) setting forth the name and address of the holder, the description of the
Old Notes and the principal amount of Old Notes tendered, (y) stating that
the tender is being made thereby and (z) guaranteeing that, within five New
York Stock Exchange trading days after the date of execution of such Notice
of Guaranteed Delivery, this Letter together with the certificates
representing the Old Notes or a Book-Entry Confirmation, as the case may be,
and any other documents required by this Letter will be deposited by the
Eligible Institution with the Exchange
<PAGE>
Agent; and (iii) the certificates for all tendered Old Notes or a Book-Entry
Confirmation, as the case may be, as well as all other documents required by
this Letter, must be received by the Exchange Agent within five New York
Stock Exchange trading days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in the Prospectus under the caption "The
Exchange Offer--How to Tender."
The method of delivery of Old Notes and all other documents is at the
election and risk of the holder. If sent by mail, it is recommended that
registered mail, return receipt requested, be used, proper insurance be
obtained, and the mailing be made sufficiently in advance of the Expiration
Date to permit delivery to the Exchange Agent on or before the Expiration
Date.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent
will be required to withhold, and will withhold, 31% of the gross proceeds
otherwise payable to a holder pursuant to the Exchange Offer if the holder
does not provide his or her taxpayer identification number (social security
number or employer identification number) and certify that such number is
correct. Each tendering holder should complete and sign the main signature
form and the Substitute Form W-9 included as part of the Letter of
Transmittal, so as to provide the information and certification necessary to
avoid backup withholding, unless an applicable exemption exists and is proved
in a manner satisfactory to the Issuer and the Exchange Agent.
If a holder desires to accept the Exchange Offer and time will not
permit a Letter of Transmittal or Old Notes to reach the Exchange Agent
before the Expiration Date, a tender may be effected if the Exchange Agent
has received at its office listed on the back cover hereof on or prior to the
Expiration Date a letter, telegram or facsimile transmission from an Eligible
Institution setting forth the name and address of the tendering holder, the
principal amount of the Old Notes being tendered, the names in which the Old
Notes are registered and, if possible, the certificate numbers of the Old
Notes to be tendered, and stating that the tender is being made thereby and
guaranteeing that within five New York Stock Exchange trading days after the
date of execution of such letter, telegram or facsimile transmission by the
Eligible Institution, the Old Notes, in proper form for transfer, will be
delivered by such Eligible Institution together with a properly completed and
duly executed Letter of Transmittal (and any other required documents).
Unless Old Notes being tendered by the above-described method (or a timely
Book-Entry Confirmation) are deposited with the Exchange Agent within the
time period set forth above (accompanied or preceded by a properly completed
Letter of Transmittal and any other required documents), the Issuer may, at
its option, reject the tender. Copies of a Notice of Guaranteed Delivery
which may be used by Eligible Institutions for the purposes described in this
paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a timely Book-Entry Confirmation) is
received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Old Notes tendered pursuant to a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmission to similar effect (as provided above) by
an Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Old Notes (or
a timely Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined
by the Issuer, whose determination will be final and binding. The Issuer
reserves the absolute right to reject any or all tenders that are not in
proper form or the acceptance of which, in the opinion of the Issuer's
counsel, would be unlawful. The Issuer also
<PAGE>
reserves the right to waive any irregularities or conditions of tender as to
particular Old Notes. All tendering holders, by execution of this Letter,
waive any right to receive notice of acceptance of their Old Notes. The
Issuer's interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) will be
final and binding.
Neither the Issuer, the Exchange Agent nor any other person shall be
obligated to give notice of defects or irregularities in any tender, nor
shall any of them incur any liability for failure to give any such notice.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount
of any Old Note evidenced by a submitted certificate or by a Book-Entry
Confirmation is tendered, the tendering holder must fill in the principal
amount tendered in the fourth column of Box 1 above. All of the Old Notes
represented by a certificate or by a Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
indicated. A certificate for Old Notes not tendered will be sent to the
holder, unless otherwise provided in Box 5, as soon as practicable after the
Expiration Date, in the event that less than the entire principal amount of
Old Notes represented by a submitted certificate is tendered (or, in the case
of Old Notes tendered by book-entry transfer, such non-exchanged Old Notes
will be credited to an account maintained by the holder with the Book-Entry
Transfer Facility).
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date. To be effective with respect to the
tender of Old Notes, a notice of withdrawal must: (i) be received by the
Exchange Agent before the Issuer notifies the Exchange Agent that it has
accepted the tender of Old Notes pursuant to the Exchange Offer; (ii) specify
the name of the person who tendered the Old Notes; (iii) contain a
description of the Old Notes to be withdrawn, the certificate numbers shown
on the particular certificates evidencing such Old Notes and the principal
amount of Old Notes represented by such certificates; and (iv) be signed by
the holder in the same manner as the original signature on this Letter
(including any required signature guarantee).
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at its
address set forth on the back cover of the Prospectus prior to the Expiration
Date. Any such notice of withdrawal must specify the person named in the
Letter of Transmittal as having tendered Old Notes to be withdrawn, the
certificate numbers of Old Notes to be withdrawn, the principal amount of Old
Notes to be withdrawn, a statement that such holder is withdrawing his
election to have such Old Notes exchanged, and the name of the registered
holder of such Old Notes, and must be signed by the holder in the same manner
as the original signature on the Letter of Transmittal (including any
required signature guarantees) or be accompanied by evidence satisfactory to
the Issuer that the person withdrawing the tender has succeeded to the
beneficial ownership of the Old Notes being withdrawn. The Exchange Agent
will return the properly withdrawn Old Notes promptly following receipt of
notice of withdrawal. All questions as to the validity of notices of
withdrawals, including time of receipt, will be determined by the Issuer, and
such determination will be final and binding on all parties.
3. SIGNATURES ON THIS LETTER; ASSIGNMENTS; GUARANTEE OF SIGNATURES. If
this Letter is signed by the holder(s) of Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the
certificate(s) for such Old Notes, without alteration, enlargement or any
change whatsoever.
If any of the Old Notes tendered hereby are owned by two or more joint
owners, all owners must sign this Letter. If any tendered Old Notes are held
in different names on several certificates, it will be
<PAGE>
necessary to complete, sign and submit as many separate copies of this Letter
as there are names in which certificates are held.
If this Letter is signed by the holder of record and (i) the entire
principal amount of the holder's Old Notes are tendered; and/or (ii)
untendered Old Notes, if any, are to be issued to the holder of record, then
the holder of record need not endorse any certificates for tendered Old
Notes, nor provide a separate bond power. In any other case, the holder of
record must transmit a separate bond power with this Letter.
If this Letter or any certificate or assignment is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and proper evidence satisfactory to
the Issuer of their authority to so act must be submitted, unless waived by
the Issuer.
Signatures on this Letter must be guaranteed by an Eligible Institution,
unless Old Notes are tendered: (i) by a holder who has not completed the Box
entitled "Special Issuance Instructions" or "Special Delivery Instructions"
on this Letter; or (ii) for the account of an Eligible Institution. In the
event that the signatures in this Letter or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantees must be by an
eligible guarantor institution which is a member of The Securities Transfer
Agents Medallion Program (STAMP), The New York Stock Exchanges Medallion
Signature Program (MSP) or The Stock Exchanges Medallion Program (SEMP). If
Old Notes are registered in the name of a person other than the signer of
this Letter, the Old Notes surrendered for exchange must be endorsed by, or
be accompanied by a written instrument or instruments of transfer or
exchange, in satisfactory form as determined by the Issuer, in its sole
discretion, duly executed by the registered holder with the signature thereon
guaranteed by an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in Box 4 or 5, as applicable, the name and address to which the
Exchange Notes or certificates for Old Notes not exchanged are to be issued
or sent, if different from the name and address of the person signing this
Letter. In the case of issuance in a different name, the tax identification
number of the person named must also be indicated. Holders tendering Old
Notes by book-entry transfer may request that Old Notes not exchanged be
credited to such account maintained at the Book-Entry Transfer Facility as
such holder may designate.
5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder whose tendered Old Notes are accepted for exchange must provide the
Exchange Agent (as payor) with his or her correct taxpayer identification
number ("TIN"), which, in the case of a holder who is an individual, is his
or her social security number. If the Exchange Agent is not provided with
the correct TIN, the holder may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, delivery to the holder of the
Exchange Notes pursuant to the Exchange Offer may be subject to back-up
withholding. (If withholding results in overpayment of taxes, a refund may
be obtained.) Exempt holders (including, among others, all corporations and
certain foreign individuals) are not subject to these back-up withholding and
reporting requirements. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
Under federal income tax laws, payments that may be made by the Issuer
on account of Exchange Notes issued pursuant to the Exchange Offer may be
subject to back-up withholding at a rate of 31%. In order to prevent back-up
withholding, each tendering holder must provide his or her correct TIN by
completing the "Substitute Form W-9" referred to above, certifying that the
TIN provided is correct (or that the holder is awaiting a TIN) and that: (i)
the holder has not been notified by the Internal
<PAGE>
Revenue Service that he or she is subject to back-up withholding as a result
of failure to report all interest or dividends; (ii) the Internal Revenue
Service has notified the holder that he or she is no longer subject to
back-up withholding; or (iii) in accordance with the Guidelines, such holder
is exempt from back-up withholding. If the Old Notes are in more than one
name or are not in the name of the actual owner, consult the enclosed
Guidelines for information on which TIN to report.
6. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the transfer of Old Notes to it or its order pursuant to the
Exchange Offer. If, however, the Exchange Notes or certificates for Old Notes
not exchanged are to be delivered to, or are to be issued in the name of, any
person other than the record holder, or if tendered certificates are recorded
in the name of any person other than the person signing this Letter, or if a
transfer tax is imposed by any reason other than the transfer of Old Notes to
the Issuer or its order pursuant to the Exchange Offer, then the amount of
such transfer taxes (whether imposed on the record holder or any other
person) will be payable by the tendering holder. If satisfactory evidence of
payment of taxes or exemption from taxes is not submitted with this Letter,
the amount of transfer taxes will be billed directly to the tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter.
7. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to amend
or waive any of the specified conditions in the Exchange Offer in the case of
any Old Notes tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above, for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus or this Letter, may be directed to the Exchange Agent.
IMPORTANT: THIS LETTER (TOGETHER WITH CERTIFICATES REPRESENTING TENDERED OLD
NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS) MUST BE
RECEIVED BY THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE (AS DEFINED
IN THE PROSPECTUS).
<PAGE>
EXHIBIT 99.2
ECHOSTAR DBS CORPORATION
NOTICE OF GUARANTEED DELIVERY
of 9 1/4% Senior Notes due 2006
and 9 3/8% Senior Notes due 2009
As set forth in the Prospectus dated ________, 1999 (the "Prospectus") of
EchoStar DBS Corporation (the "Issuer") and its subsidiaries under "The
Exchange Offer--How to Tender" and in the Letter of Transmittal for 9 1/4%
Senior Notes due 2006 and 9 3/8% Senior Notes due 2009 (the "Letter of
Transmittal"), this form or one substantially equivalent hereto must be used
to accept the Exchange Offer (as defined below) of the Issuer if: (i)
certificates for the above-referenced Notes (the "Old Notes") are not
immediately available, (ii) time will not permit all required documents to
reach the Exchange Agent (as defined below) on or prior to the Expiration
Date (as defined in the Prospectus) or (iii) the procedures for book-entry
transfer cannot be completed on or prior to the Expiration Date (as defined
below). Such form may be delivered by hand or transmitted by telegram,
telex, facsimile transmission or letter to the Exchange Agent.
To: U.S. Bank Trust National Association
(the "Exchange Agent")
BY FACSIMILE:
(651) 244-1537
CONFIRM BY TELEPHONE TO:
(651) 244-8162
- ---------------
BY MAIL/HAND DELIVERY/OVERNIGHT DELIVERY:
U.S. Bank Trust National Association
Attn: Specialized Finance Group
180 East Fifth Street
St. Paul, Minnesota 55101
Delivery of this instrument to an address other than
as set forth above or transmittal of this instrument to
a facsimile or telex number other than as set forth
above does not constitute a valid delivery.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuer, upon the terms and
conditions set forth in the Prospectus and the Letter of Transmittal (which
together constitute the "Exchange Offer"), receipt of which are hereby
acknowledged, the principal amount of Old Notes set forth below pursuant to
the guaranteed delivery procedures described in the Prospectus and the Letter
of Transmittal.
The Exchange Offer will expire at 5:00 p.m., New York City time, on
[___________], 1999, unless extended by the Issuer. With respect to the
Exchange Offer, "Expiration Date" means such time and date, or if the
Exchange Offer is extended, the latest time and date to which the Exchange
Offer is so extended by the Issuer.
All authority herein conferred or agreed to be conferred by this Notice
of Guaranteed Delivery shall survive the death or incapacity of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal
representatives, executors, administrators, successors, assigns, trustees in
bankruptcy and other legal representatives of the undersigned.
- -------------------------------------------------------------------------------
SIGNATURES
- --------------------------------------------------
Signature of Owner
- --------------------------------------------------
Signature of Owner (if more than one)
Dated: __________________
Name(s):
- -----------------------------------------
- -----------------------------------------
(Please Print)
Address:
- -----------------------------------------
- -----------------------------------------
- -----------------------------------------
(Include Zip Code)
Area Code and
Telephone No.:
- -----------------------------------
Capacity (full title), if signing in a representative
capacity:
- --------------------------------------------------
<PAGE>
Taxpayer Identification or Social Security No.:
- --------------------------------------------------
- --------------------------------------------------------------------------------
Principal amount of Old Notes Exchanged:
$
---------------------------------------------------------
Certificate Nos. of Old Notes (if available)
- ----------------------------------------------------
- ----------------------------------------------------
IF OLD NOTES WILL BE DELIVERED BY BOOK-ENTRY TRANSFER, PROVIDE THE DEPOSITORY
TRUST COMPANY ("DTC") ACCOUNT NO.:
Account No.
----------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act
of 1934, as amended, hereby guarantees (a) that the above-named person(s)
own(s) the above-described securities tendered hereby within the meaning of
Rule 10b-4 under the Securities Exchange Act of 1934, (b) that such tender of
the above-described securities complies with Rule 10b-4, and (c) that
delivery of such certificates pursuant to the procedure for book-entry
transfer, in either case with delivery of a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and any other required
documents, is being made within five New York Stock Exchange trading days
after the date of execution of a Notice of Guaranteed Delivery of the
above-named person.
- -------------------------------------------------------------------------------
Name of Firm:
- -----------------------------------------------------------
- -----------------------------------------------------------
Number and Street or P.O. Box
- -----------------------------------------------------------
City State Zip Code
Tel. No.
--------------------------------------------------
Fax No.:
--------------------------------------------------
- -----------------------------------------------------------
(Authorized Signature)
Title:
- --------------------------------------------------------------------------------
Date:
- -----------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES REPRESENTING NOTES WITH THIS NOTICE. NOTES
SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND
DULY EXECUTED LETTER OF TRANSMITTAL.
