SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
EchoStar Communications Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement Number:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
[ECHOSTAR LOGO]
March 23, 1999
DEAR SHAREHOLDER:
It is a pleasure for me to extend to you an invitation to attend the
1999 Annual Meeting of Shareholders of EchoStar Communications Corporation
("EchoStar"). The Annual Meeting will be held on Friday, April 16, 1999, at
11:00 a.m. at EchoStar's headquarters located at 5701 South Santa Fe Drive,
Littleton, Colorado 80120.
The enclosed Notice of Meeting and Proxy Statement describes the
proposals to be considered and voted upon at the Annual Meeting. At the Annual
Meeting, we will ask you to elect five Directors. We will also ask you to
consider and vote upon proposals (i) to issue shares of our Class A Common Stock
as consideration for the acquisition of certain satellite broadcasting assets,
(ii) to amend our Amended and Restated Articles of Incorporation to clarify
certain voting provisions set forth therein, (iii) to approve the EchoStar
Communications Corporation 1999 Stock Incentive Plan and (iv) to ratify the
appointment of Arthur Andersen LLP as our independent public accountants. During
the Annual Meeting, we also will review EchoStar's operations and other items of
general interest regarding EchoStar.
We hope that all shareholders will be able to attend the Annual
Meeting. Whether or not you plan to attend the Annual Meeting personally, it is
important that you be represented. To ensure that your vote will be received and
counted, please promptly complete, date and return your proxy card in the
enclosed return envelope.
On behalf of the Board of Directors and Management, I would like to
express our appreciation for your support and interest in EchoStar. I look
forward to seeing you at the Annual Meeting.
/s/ Charles W. Ergen
CHARLES W. ERGEN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
5701 SOUTH SANTA FE DRIVE--LITTLETON, COLORADO 80121
TEL: (303)723-1000 - FAX - (303)723-1999
[ECHOSTAR LOGO]
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF ECHOSTAR COMMUNICATIONS CORPORATION:
Please take notice that the 1999 Annual Meeting of Shareholders of
EchoStar Communications Corporation ("EchoStar") will be held on Friday, April
16, 1999, at 11:00 a.m. at EchoStar's headquarters located at 5701 South Santa
Fe Drive, Littleton, Colorado 80120, to consider and vote upon:
1. The election of five Directors of EchoStar.
2. A proposal to issue shares of EchoStar's Class A Common Stock as
consideration for the acquisition of certain satellite broadcasting assets
pursuant to the Purchase Agreement dated as of November 30, 1998, by and among
American Sky Broadcasting, LLC, The News Corporation Limited, MCI
Telecommunications Corporation and EchoStar.
3. A proposal to amend EchoStar's Amended and Restated Articles of
Incorporation to clarify certain voting provisions set forth therein.
4. A proposal to approve the EchoStar Communications Corporation 1999
Stock Incentive Plan.
5. A proposal to ratify the appointment of Arthur Andersen LLP as the
independent public accountants of EchoStar for the fiscal year ending December
31, 1999.
6. Any other business as may properly come before the meeting or any
adjournment thereof.
Only shareholders of record at the close of business on March 19, 1999
will be entitled to notice of, and to vote at, the Annual Meeting or any
adjournment thereof.
By Order of the Board of Directors
/s/ David K. Moskowitz
DAVID K. MOSKOWITZ,
SENIOR VICE PRESIDENT, GENERAL COUNSEL,
CORPORATE SECRETARY AND DIRECTOR
March 23, 1999
5701 SOUTH SANTA FE DRIVE--LITTLETON, COLORADO 80121
TEL: (303)723-1000 - FAX - (303)723-1999
PROXY STATEMENT
OF
ECHOSTAR COMMUNICATIONS CORPORATION
GENERAL
This Proxy Statement is being furnished to the shareholders of EchoStar
Communications Corporation ("EchoStar") in connection with the 1999 Annual
Meeting of Shareholders of EchoStar (the "Annual Meeting"), to be held on
Friday, April 16, 1999, at 11:00 a.m. at EchoStar's headquarters located at 5701
South Santa Fe Drive, Littleton, Colorado 80120.
At the Annual Meeting, EchoStar's shareholders will elect five
Directors. The shareholders will also consider and vote upon a proposal to issue
shares of EchoStar's Class A Common Stock, $0.01 par value ("Class A Shares"),
as consideration for the acquisition of certain satellite broadcasting assets
(the "110 Acquisition"). As described herein, the number of Class A Shares to be
issued is subject to adjustment based on the current trading prices of the Class
A Shares at the time the 110 Acquisition is consummated. If the 110 Acquisition
had been consummated on March 15, 1999, EchoStar would have been required to
issue 22,918,707 Class A Shares, constituting approximately 31.7% of EchoStar's
fully-diluted equity and 6.7% of EchoStar's total voting power. Shareholders
will also consider and vote upon proposals (i) to amend EchoStar's Amended and
Restated Articles of Incorporation (the "Articles"), (ii) to adopt the EchoStar
Communications Corporation 1999 Stock Incentive Plan (the "1999 Stock Incentive
Plan") and (iii) to ratify the appointment of Arthur Andersen LLP as EchoStar's
independent public accountants for the fiscal year ending December 31, 1999.
The mailing address of EchoStar is 5701 South Santa Fe Drive,
Littleton, Colorado 80120. This Proxy Statement and the accompanying proxy are
first being sent or given to shareholders on or about March 24, 1999 to
shareholders of record on March 19, 1999 of the Class A Shares and EchoStar's
Class B Common Stock, $0.01 par value ("Class B Shares" and, together with the
Class A Shares, the "Shares").
The accompanying proxy is being solicited by the Board of Directors of
EchoStar. It may be revoked by written notice given to the Corporate Secretary
at any time before being voted. Proxies, which are attached to this form,
properly executed, duly sent to EchoStar and not revoked will be voted for the
proposals described in this Proxy Statement, in accordance with the instructions
set forth in the proxy. The Board of Directors is not aware of any other matters
proposed to be presented at the Annual Meeting. If any other proposal is
properly presented, the persons named in the accompanying form of proxy will
have discretionary authority to vote thereon in accordance with their best
judgment. Presence at the Annual Meeting does not of itself revoke the proxy.
SECURITIES ENTITLED TO VOTE
Shareholders of record on March 19, 1999 are entitled to notice of the
Annual Meeting and to vote their Shares at the Annual Meeting. On that date,
15,521,732 Class A Shares and 29,804,401 Class B Shares were issued and
outstanding. Each of the Class A Shares is entitled to one vote per share on
each proposal to be considered by shareholders. Each of the Class B Shares is
entitled to ten votes per share on each proposal to be considered by
shareholders.
VOTE REQUIRED
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the total voting power of all classes of voting stock
of EchoStar taken together shall constitute a quorum for the transaction of
business at the Annual Meeting.
The affirmative votes of a plurality of the total votes cast are
necessary to elect a Director. No cumulative voting is permitted. In the case of
the proposals to issue Class A Shares, to approve the 1999 Stock Incentive Plan
and to ratify the appointment of Arthur Andersen LLP as EchoStar's independent
public accountants for the fiscal year ending December 31, 1999, the affirmative
votes of a majority of the total votes cast at the Annual Meeting on
1
each proposal in person or by proxy are required to approve such proposal. In
the case of the proposal to amend the Articles, the affirmative votes of a
majority of the voting power of EchoStar entitled to vote are required to
approve such proposal.
The total number of votes cast "for" will be counted for purposes of
determining whether sufficient affirmative votes have been cast to approve each
proposal. Abstentions from voting on a proposal by a shareholder at the Annual
Meeting, as well as broker non-votes, will be considered for purposes of
determining the number of total votes present at the Annual Meeting. Abstentions
will have the same effect as votes against the proposals, but will not affect
the election of Directors. Broker non-votes will not be considered as votes
"for" or "against" the proposals, and will therefore not be considered in
determining the election of Directors or whether the proposals to issue Class A
Shares, adopt the 1999 Stock Incentive Plan or ratify the appointment of Arthur
Andersen LLP have passed, but will have the same effect as votes against the
proposal to amend the Articles.
Through his ownership of Class B Shares, Charles W. Ergen, the
Chairman, Chief Executive Officer and President of EchoStar, possesses more than
93.4% of the total voting power of EchoStar. Pursuant to the voting agreement
described below, Mr. Ergen has agreed to vote in favor of the proposal to issue
the Class A Shares. Mr. Ergen has also indicated his intention to vote in favor
of each other proposal to be considered at the Annual Meeting and for the
election of each of the nominee Directors named herein. Accordingly, approval of
the proposals and election of each of the nominee Directors named herein is
assured notwithstanding a negative vote by shareholders other than Mr. Ergen.
NASDAQ SHAREHOLDER APPROVAL REQUIREMENTS.
Shareholder approval of the issuance of the Class A Shares and related
actions in connection with the 110 Acquisition and the approval of the 1999
Stock Incentive Plan is not required under the Nevada Business Corporation Act
(the "Nevada Act"), the Articles or EchoStar's Bylaws. However, the rules of the
NASDAQ Stock Market (where EchoStar's Class A Shares are traded ) require
shareholder approval of certain substantial issuances of stock and adoption of
certain stock option plans.
Shareholder approval of the proposed amendment to the Articles is
required under the Nevada Act, the Articles and EchoStar's Bylaws, but is not
required by NASDAQ rules.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting, shareholders of EchoStar will elect five
Directors, in each case to hold office until the next annual meeting of
shareholders of EchoStar or until their respective successors shall be duly
elected and qualified. The affirmative vote of a plurality of the total votes
cast is necessary to elect a Director. Each nominee has consented to his
nomination and has advised EchoStar that he intends to serve the entire term, if
elected.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION
OF THE NOMINEES NAMED HEREIN (ITEM NO. 1 ON THE ENCLOSED PROXY CARD).
The nominees for Director of EchoStar are as follows:
FIRST BECAME
NAME AGE DIRECTOR POSITION WITH ECHOSTAR
--------------------------------------------------------------------------------------------------
Charles W. Ergen................. 46 1980 Chairman of the Board of Directors, Chief
Executive Officer and President
James DeFranco................... 46 1980 Director and Executive Vice President
David K. Moskowitz............... 40 1998 Director, Senior Vice President, General
Counsel and Secretary
Raymond L. Friedlob.............. 54 1995 Director
O. Nolan Daines.................. 39 1998 Director
2
The following sets forth the business experience of each of the
nominees over the last five years:
CHARLES W. ERGEN. Mr. Ergen has been Chairman of the Board of
Directors, Chief Executive Officer and President of EchoStar since its formation
and, during the past five years, has held various executive officer and director
positions with EchoStar's subsidiaries. Mr. Ergen, along with his spouse and
James DeFranco, was a co-founder of EchoStar in 1980.
JAMES DEFRANCO. Mr. DeFranco, currently the Executive Vice President of
EchoStar, has been a Vice President and a Director of EchoStar since its
formation and, during the past five years, has held various executive officer
and director positions with EchoStar's subsidiaries. Mr. DeFranco, along with
Mr. Ergen and Mr. Ergen's spouse, was a co-founder of EchoStar in 1980.
DAVID K. MOSKOWITZ. Mr. Moskowitz is the Senior Vice President,
Secretary and General Counsel of EchoStar. Mr. Moskowitz joined EchoStar in
March 1990 and is responsible for all legal and regulatory affairs of EchoStar
and its subsidiaries. In March 1998, Mr. Moskowitz was appointed to EchoStar'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 EchoStar's subsidiaries.
RAYMOND L. FRIEDLOB. Mr. Friedlob has been a Director of EchoStar and a
member of its Audit and Executive Compensation Committees since October 1995.
Mr. Friedlob has been a member of the law firm of Friedlob Sanderson Raskin
Paulson & Tourtillott, LLC since 1995. Prior to 1995, Mr. Friedlob was a partner
of Raskin & Friedlob, P.C., where he had practiced since 1970. Mr. Friedlob
specializes in federal securities law, corporate law, transportation and
taxation.
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 EchoStar's Board of
Directors to fill the vacancy created by the resignation of Mr. Alan M.
Angelich.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors currently has an Executive Compensation
Committee and an Audit Committee, both of which were established in October
1995. Mr. Angelich and Mr. Friedlob were the sole members of both the Audit and
Executive Compensation Committees through March 1998. In March 1998, Mr.
Angelich resigned from the Board of Directors of EchoStar. Upon appointment as a
Director in March 1998, Mr. Daines became a member of the Executive Compensation
and Audit Committees. The principal functions of the Audit Committee are to (i)
recommend to the Board of Directors the selection of independent public
accountants; (ii) review management's plan for engaging EchoStar'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
EchoStar'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 functions of the Executive Compensation Committee are to approve
compensation of Executive Officers of EchoStar and to award grants to Executive
Officers under and administer EchoStar's 1995 Stock Incentive Plan (the "1995
Incentive Plan").
The Board of Directors held thirteen meetings during the fiscal year
ended December 31, 1998. The Executive Compensation Committee held five meetings
during 1998 and the Audit Committee held one meeting during 1998. Each Director
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board of Directors held during the period in which he was a Director and
(ii) the total number of meetings held by all committees of the Board of
Directors on which he served during the periods that he served.
3
Directors are elected annually and serve until their successors are
duly elected and qualified. Officers serve at the discretion of the Board of
Directors.
EQUITY SECURITY OWNERSHIP
The following table sets forth, to the best knowledge of EchoStar, the
beneficial ownership of EchoStar's voting securities as of February 28, 1999 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.
PRO FORMA PRO FORMA
NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF
NAME(1) SHARES CLASS SHARES (2) CLASS (2)
- -----------------------------------------------------------------------------------------------------------
CLASS A COMMON STOCK (3):
Charles W. Ergen (4), (5), (19), (20), (21).... 30,050,398 61.9% 30,050,398 42.0%
The News Corporation Limited (6)............... - - 18,357,884 25.7%
MCI WorldCom, Inc. (6)......................... - - 4,560,823 6.4%
FMR Corp. (7).................................. 2,172,864 4.5% 2,172,864 3.0%
Wellington Management Company, LLP (8)......... 1,657,481 3.4% 1,657,481 2.3%
AMVESCAP, PLC (9).............................. 1,276,050 2.6% 1,276,050 1.8%
Montgomery Asset Management, LLC (10).......... 1,202,100 2.5% 1,202,100 1.7%
James DeFranco (11), (19), (20)................ 1,156,345 2.4% 1,156,345 1.6%
Equitable Companies Inc. (12).................. 836,861 1.7% 836,861 1.2%
David K. Moskowitz (13), (19), (20)............ 84,140 * 84,140 *
Michael T. Dugan (14), (19), (20).............. 73,979 * 73,979 *
Steven B. Schaver (15), (19), (20)............. 48,503 * 48,503 *
O. Nolan Daines (16), (20)..................... 10,000 * 10,000 *
Raymond L. Friedlob (17), (20)................. 11,000 * 11,000 *
All Directors and Executive Officers as a Group
(12 persons) (18), (19), (20)................ 31,463,534 64.8% 31,463,534 44.0%
NUMBER OF PERCENTAGE OF
SHARES CLASS
--------------------------
CLASS B COMMON STOCK:
Charles W. Ergen.............................................. 29,804,401 100.0%
All Directors and Executive Officers as a Group (12 persons).. 29,804,401 100.0%
- -------------------
* Less than 1%.
(1) Except as otherwise noted, the address of each such person is 5701 Santa
Fe Drive, Littleton, Colorado 80120.
(2) Gives effect to the 110 Acquisition, assuming it had been consummated on
March 15, 1999 (see Note (6)). Also includes Class A Shares issuable upon
conversion of Mr. Ergen's Class B Shares.
(3) The following table sets forth, to the best knowledge of EchoStar, the
actual ownership of Class A Shares (including options exercisable within
60 days) as of February 28, 1999 by (i) each person known by EchoStar to
be the beneficial owner of more than five percent of any class of
EchoStar's voting shares; (ii) each Director or nominee of EchoStar;
(iii) each Named Executive Officer; and (iv) all Directors and Executive
Officers as a group:
4
NUMBER OF PERCENTAGE OF
NAME SHARES CLASS
- ----------------------------------------------------------------------------------------------
CLASS A COMMON STOCK:
FMR Corp................................................ 2,172,864 13.2%
Wellington Management Company, LLP...................... 1,657,481 10.1%
AMVESCAP, PLC........................................... 1,276,050 7.7%
Montgomery Asset Management, LLC........................ 1,202,100 7.3%
James DeFranco.......................................... 1,156,345 7.0%
Equitable Companies Inc................................. 836,861 5.1%
Charles W. Ergen........................................ 245,996 1.5%
David K. Moskowitz...................................... 84,140 *
Michael T. Dugan........................................ 73,979 *
Steven B. Schaver....................................... 48,503 *
O. Nolan Daines......................................... 10,000 *
Raymond L. Friedlob..................................... 11,000 *
All Directors and Executive Officers as a Group 1,659,133 10.1%
(11 persons)............................................
(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 93.4%, after
giving effect to the exercise of Mr. Ergen's options exercisable within
60 days and would be approximately 87.2% after also giving effect to the
110 Acquisition.
(6) The exact number of Class A Shares issuable to The News Corporation
Limited ("News Corporation") and MCI Telecommunications Company ("MCI"),
a subsidiary of MCI WORLDCOM, Inc., in connection with the 110
Acquisition will not be determinable until consummation of that
transaction. The number of Class A Shares that will be issued is subject
to adjustment if the 20 trading day average closing price of EchoStar's
Class A Shares is less than $15.00 or greater than $39.00. Assuming the
110 Acquisition had been consummated on March 15, 1999, the 20 trading
day average closing price of the Class A Shares would have been $51.05.
The following table illustrates, at various prices, the number of Class A
Shares issuable to News Corporation and MCI.
NEWS CORPORATION MCI
--------------------------- ---------------------------
PERCENTAGE OF PERCENTAGE OF
AVERAGE SHARE PRICE SHARES CLASS (2) SHARES CLASS (2)
- -------------------------------------------------------------------------------------------
$10.00 36,045,000 38.5% 8,955,000 9.6%
$15.00 24,030,000 30.6% 5,970,000 7.6%
$39.00 24,030,000 30.6% 5,970,000 7.6%
$40.00 23,429,250 30.1% 5,820,750 7.5%
$45.00 20,826,000 27.9% 5,174,000 6.9%
$50.00 18,743,400 26.0% 4,656,600 6.5%
$55.00 17,039,455 24.4% 4,233,273 6.1%
$60.00 15,619,500 22.9% 3,880,500 5.7%
$65.00 14,418,000 21.7% 3,582,000 5.4%
(7) The address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts
02109.
(8) The address of Wellington Management Company, LLP is 75 State Street,
Boston, Massachusetts 02109.
(9) The address of AMVESCAP, PLC is 1315 Peachtree Street, N.W., Atlanta,
Georgia 30309.
(10) The address of Montgomery Asset Management, LLC is 600 Montgomery Street,
San Francisco, California 94111.
(11) 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.
(12) The address of Equitable Companies Inc. is 1290 Avenue of the Americas,
New York, New York 10104.
(13) 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.
(14) 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.
(15) Includes: (i) 1,684 Class A Shares held in the 401(k) Plan and (ii) the
right to acquire 46,780 Class A Shares within 60 days upon the exercise
of employee stock options.
(16) Includes the right to acquire 6,000 Class A Shares within 60 days upon
the exercise of employee stock options.
(17) Includes the right to acquire 11,000 Class A Shares within 60 days upon
the exercise of employee stock options.
(18) Includes (i) 14,486 Class A Shares held in the 401(k) Plan; (ii) the
right to acquire 361,113 Class A Shares within 60 days upon the exercise
of employee stock options; (iii) 375,000 Class A Shares held in a
partnership; (iv) 29,804,401 Class A Shares issuable upon conversion of
Class B Shares; (v) 101,023 Class A Shares held in the name of, or in
trust for, minor children and other family members; and (vi) 3,947 Class
A Shares owned by or jointly with family members.
(19) Includes 162,175 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.
5
(20) 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, 66.2%; Mr. DeFranco, 7.3%; less than one
percent for Mr. Moskowitz, Mr. Dugan, Mr. Schaver, Mr. Daines and Mr.
Friedlob; and all Officers and Directors as a group, 67.0%.
(21) In connection with the 110 Acquisition, Mr. Ergen entered into a voting
agreement with News Corporation and MCI pursuant to which News
Corporation and MCI have agreed to vote their shares of EchoStar stock in
the manner recommended by the Board of Directors of EchoStar for a period
of five years following consummation of the 110 Acquisition. Mr. Ergen
disclaims beneficial ownership of the shares of Class A Shares to be
issued to News Corporation and MCI. See "Proposal No. 2 -- To Approve the
Issuance of Class A Shares Pursuant to the Purchase Agreement --
Information About the Purchase Agreement -- Voting Agreement."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires EchoStar's Executive Officers and Directors, and any
person who directly or indirectly owns more than ten percent of a registered
class of EchoStar's equity securities (collectively, "Reporting Persons"), to
file with the Securities and Exchange Commission (the "SEC") initial reports of
ownership and reports of changes in ownership of Class A Shares and other equity
securities of EchoStar. Reporting Persons are required by SEC regulations to
furnish EchoStar with copies of all Section 16(a) forms that are filed with the
SEC. Based solely on a review of the copies of such forms and amendments, if
any, thereto, furnished to EchoStar for the 1998 fiscal year and written
representations that no other reports were required, all Reporting Persons made
all required filings, except that Michael Schwimmer filed one late Form 4 report
with the SEC in March 1999 with respect to a single transaction which occurred
in December 1998.
6
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION SUMMARY
Executive Officers are compensated by certain subsidiaries of EchoStar.
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
LONG TERM
COMPENSATION
AWARDS
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1) OPTIONS (#) COMPENSATION (2)
- ---------------------------------------------------------------------------------------------------------------------
CHARLES W. ERGEN 1998 $248,082 $ - $ - 30,000 $ 21,510
CHAIRMAN, CHIEF
EXECUTIVE OFFICER 1997 190,000 - - 30,000 13,044
AND PRESIDENT
1996 190,000 - - 17,300 140,680
JAMES DEFRANCO 1998 $178,860 $ - $ - 30,000 $ 15,995
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 $ 14,235
PRESIDENT, ECHOSTAR
TECHNOLOGIES 1997 160,000 - - 138,820 13,094
CORPORATION
1996 149,615 - - 18,735 12,882
DAVID K. MOSKOWITZ 1998 $187,311 $ 500,000 $ - 30,000 $ 14,235
SENIOR VICE PRESIDENT,
SECRETARY, GENERAL 1997 157,692 - - 30,000 12,918
COUNSEL AND DIRECTOR
1996 142,692 10,000 - 7,495 12,994
STEVEN B. SCHAVER 1998 $183,081 $ - $ 15,074 39,090 $ 13,765
CHIEF OPERATING OFFICER
AND CHIEF FINANCIAL 1997 158,462 - 15,416 59,410 11,984
OFFICER
1996 142,498 11,787 14,340 - 12,516
- ----------------
(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, for each officer
such perquisites do not exceed the lesser of $50,000 or 10% of such
officer's salary and bonus.
(2) "All Other Compensation" consists of amounts contributed to the EchoStar's
401(k) Plan on behalf of the Named Executive Officers. With respect to Mr.
Ergen and Mr. DeFranco for 1996, "All Other Compensation" also includes
payments made in connection with a tax indemnification agreement between
EchoStar and such individuals.
7
The following table provides information concerning grants of options
to purchase Class A Shares of EchoStar made in 1998 to the Named Executive
Officers:
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS GRANTED EMPLOYEES IN EXERCISE PRICE GRANT DATE
NAME (#) 1998 PER SHARE ($/SH) EXPIRATION DATE PRESENT VALUE (3)
- ----------------------------------------------------------------------------------------------------------------------
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
------------------
(1) In February 1998, EchoStar adopted the 1998 Executive Bonus Plan which
provided, among other things, the Named Executive Officers with options to
purchase up to 30,000 Class A Shares each, depending upon EchoStar's
achievement of certain financial and other goals. EchoStar did not meet
any of the goals during 1998. Accordingly, all stock options granted
pursuant to the 1998 Executive Bonus Plan were cancelled. During February
1999, each of the Named Executive Officers has been granted awards under
the 1999 Executive Bonus Plan, which was recently approved by the Board of
Directors. The 1999 Executive Bonus Plan provides for corporate
performance-based bonuses, including cash and stock options, all of which
are conditioned upon the achievement of certain corporate, financial and
other goals. The 1999 Executive Bonus Plan consists of three components
for each executive covered by the plan: (i) a $75,000 cash bonus; (ii)
options to purchase up to 15,000 Class A shares at $48.00 per share; and
(iii) a long-term incentive grant of options to purchase up to 50,000
Class A shares at $48.00 per share. Each of the above components is
subject to cancellation to the extent EchoStar does not achieve certain
pre-defined corporate, financial and other goals.
(2) In March 1998, EchoStar granted options to Mr. Schaver and other key
employees to purchase Class A Shares. These options will vest 20% one year
following the date of the grant and continue to vest 20% each year
thereafter through 2003. These options expire five years from the date on
which each portion of the option first becomes exercisable, subject to
early termination in certain circumstances.
(3) Option values reflect Black-Scholes model output for options. The
Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and
are fully transferable. In addition, because option valuation models
require the input of highly subjective assumptions (including the expected
stock price characteristics) significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of
the fair value of its stock- based compensation awards. The assumptions
used in the model were expected volatility of 67%, risk free rate of
return of 5.64%, dividend yield of 0%, and time to exercise of six years.
The following table provides information as of December 31, 1998
concerning unexercised options to purchase Class A Shares:
8
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE DECEMBER 31, 1998 (#) DECEMBER 31, 1998 ($)(1)
ACQUIRED ON REALIZED ---------------------------- ------------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------------------------------------------------------------
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
- -------------------
(1) The dollar value of each exercisable and unexercisable option was
calculated by multiplying the number of Class A Shares 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 Class A Share
on December 31, 1998.
EXECUTIVE COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to October 1995, EchoStar 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
EchoStar approximately $210,000 in fees related to securities offerings in 1997.
O. Nolan Daines is the founder of DiviCom. During 1998, EchoStar purchased
approximately $15 million of equipment for its Digital Broadcast Operations
Center and for certain of its other project integration services for
international direct-to-home satellite TV ventures from DiviCom.
DIRECTOR COMPENSATION
Directors of EchoStar who are not also Executive Officers of EchoStar
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 EchoStar who are employees are not compensated for their
services as Directors. Directors of EchoStar are elected annually by the
shareholders of EchoStar. Directors who are not also employees of EchoStar are
granted options under the 1995 Non-employee Director Stock Option Plan (the
"Director Plan") to acquire 1,000 Class A Shares of EchoStar upon election to
the Board. Mr. Friedlob was granted an option to acquire 1,000 Class A Shares of
EchoStar 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. In addition, in February 1997, Mr. Friedlob was granted an option to
acquire 5,000 Class A Shares. 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 EchoStar's Board of Directors, Mr. Daines was granted an option
to acquire 1,000 Class A Shares. These options were 100% vested upon issuance,
have an exercise price of $22.00, and a term of five years. In February 1999,
Mr. Daines and Mr. Friedlob were each granted options to acquire 5,000 Class A
Shares. These options were 100% vested upon issuance, have an exercise price of
$48.00, and a term of five years.
1995 STOCK INCENTIVE PLAN
EchoStar adopted the 1995 Incentive Plan to provide incentives to
attract and retain Executive Officers and other key employees. EchoStar's
Executive Compensation Committee administers the 1995 Incentive Plan. Key
employees are eligible to receive awards under the 1995 Incentive Plan at the
Committee's discretion.
Awards available under the 1995 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. EchoStar has reserved up to 10 million Class A
shares for granting awards under the 1995 Incentive Plan. Under the terms of the
1995 Incentive Plan, the Executive Compensation
9
Committee retains discretion, subject to plan limits, to modify the terms of
outstanding awards and to reprice awards.
Pursuant to the 1995 Incentive Plan, EchoStar has granted options to
its Executive Officers and other key employees for the purchase of a total of
2,780,834 Class A Shares. Options to purchase 1,447,015 Class A Shares 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 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 Class A Share. 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 as 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 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 EchoStar had
significantly reduced the incentive those options were intended to create. It
was the expectation of the Executive Compensation Committee and the Board of
Directors that by reducing the exercise price of these options to $17.00, the
intended incentive would be restored in part.
The following table provides information concerning the repricing of
1995 Incentive Plan stock options:
TEN-YEAR OPTION REPRICING
MARKET
NUMBER OF PRICE OF EXERCISE
SECURITIES STOCK AT PRICE AT LENGTH OF
UNDERLYING TIME OF TIME OF NEW ORIGINAL OPTION
OPTIONS REPRICING REPRICING EXERCISE TERM REMAINING AT
NAME AND POSITION DATE REPRICED (#) ($) ($) PRICE ($) DATE OF REPRICING
- ----------------------------------------------------------------------------------------------------------------------
Charles W. Ergen July 1, 1997 14,705 $15.25 $18.7000 $17.00 3 years, 354 days
CHAIRMAN AND CHIEF EXECUTIVE July 1, 1997 17,030 15.25 29.3600 17.00 5 years, 31 days
OFFICER
Michael T. Dugan July 1, 1997 9,877 15.25 20.2500 17.00 4 years, 174 days
PRESIDENT, ECHOSTAR TECHNOLOGIES July 1, 1997 18,735 15.25 26.6875 17.00 5 years, 31 days
CORPORATION
Steven B. Schaver July 1, 1997 14,814 15.25 20.2500 17.00 4 years, 174 days
CHIEF OPERATING OFFICER AND CHIEF
FINANCIAL OFFICER
David K. Moskowitz July 1, 1997 14,814 15.25 20.2500 17.00 4 years, 174 days
SENIOR VICE PRESIDENT, GENERAL July 1, 1997 7,495 15.25 26.6875 17.00 5 years, 31 days
COUNSEL AND DIRECTOR
Mark W. Jackson July 1, 1997 9,877 15.25 20.2500 17.00 4 years, 174 days
SENIOR VICE PRESIDENT - SATELLITE July 1, 1997 11,240 15.25 26.6875 17.00 5 years, 31 days
SERVICES
Michael S. Schwimmer July 1, 1997 7,495 15.25 26.6875 17.00 5 years, 31 days
VICE PRESIDENT - PROGRAMMING
10
LAUNCH BONUS PLAN
Effective May 8, 1998, in connection with the launch of EchoStar's
fourth DBS satellite, EchoStar granted a performance award of ten Class A Shares
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.
EchoStar may elect to grant a performance award of up to ten Class A Shares to
all full-time employees with more than 90 days of service in connection with the
launch of future satellites during 1999, if applicable.
401(k) PLAN
In 1983, EchoStar adopted a defined contribution tax-qualified 401(k)
Plan. EchoStar's employees become eligible for participation in the 401(k) Plan
upon completing six months of service with EchoStar and reaching age 21. 401(k)
Plan participants may contribute between 1% and 15% of their compensation in
each contribution period. EchoStar may make a 50% matching contribution up to a
maximum of $1,000 per participant per calendar year. EchoStar 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. Effective February 1, 1999,
EchoStar amended the 401(k) Plan to reduce the minimum age for eligibility from
21 years to 19 years.
401(k) Plan participants 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. Effective March
31, 1999, EchoStar amended the vesting provisions of the 401(k) Plan from seven
year vesting to five year vesting. Under the amended vesting provisions, a
participant becomes 20% vested after one year of service, 40% vested after two
years of service, 60% vested after three years of service, 80% vested after four
years of service and 100% vested after five years of service.
In March 1999, EchoStar contributed 65,000 Class A Shares 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 1998 eligible compensation, are subject to the vesting
schedules previously described. Class A Shares allocated to the 401(k) Plan
accounts of the Named Executive Officers pursuant to the 1998 discretionary
employer stock contribution were as follows: (i) Charles W. Ergen, 279
shares; (ii) James DeFranco, 279 shares (iii) Michael T. Dugan, 279 shares;
(iv) David K. Moskowitz, 279 shares; (v) Steven B. Schaver, 279 shares; and
(vi) all Officers and Directors as a group, 2,386 shares.
11
PERFORMANCE GRAPH
The following graph sets forth the cumulative total shareholder return
(assuming reinvestment of dividends) to EchoStar's shareholders during the
period from June 21, 1995 to December 31, 1998. The graph assumes the investment
on June 21, 1995 (the date of EchoStar's initial public offering) of $100 in
Class A Shares of EchoStar, the Nasdaq Stock Market Index and two industry peer
groups. The peer group used in last year's Proxy Statement consisted of Adelphia
Communications Corporation, American Telecasting, Inc., Cablevision Systems
Corporation, Century Communications Corporation, CAI Wireless Systems, Inc.,
Heartland Wireless Communications, Inc., Jones Intercable, Inc., People's Choice
TV Corp., Tele-Communications, Inc., Tee-Comm Electronics, Inc., United States
Satellite Broadcasting Company, Inc., US WEST Media Group, Wireless Cable of
Atlanta, Inc. and Wireless One, Inc. ("Old Industry Peer Group"). Stock price
performance data for the Old Industry Peer Group for 1998 is presented below for
comparison purposes. In 1998, EchoStar revised its industry peer group to
include some of the larger subscription television companies in the United
States. EchoStar's 1998 peer group includes Adelphia Communications Corporation,
Cablevision Systems Corporation, Century Communications Corporation, Comcast
Corporation, Cox Communications Inc., Hughes Electronics Corporation, Jones
Intercable, Inc., Media One Group Inc., Pegasus Communications Corporation,
Tele-Communications, Inc., TCI Satellite Entertainment Inc. and United States
Satellite Broadcasting Company, Inc. ("New Industry Peer Group"). Although the
companies included in the industry peer group were selected because of similar
industry characteristics, they are not entirely representative of EchoStar's
business.
[GRAPH]
STOCK PRICE PERFORMANCE
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
TOTAL RETURN ANALYSIS 6/21/95 12/29/95 12/31/96 12/31/97 12/31/98
----------------------------------------------------------------------------------------------------------
EchoStar Communications Corporation $ 100 $ 143 $ 129 $ 98 $ 284
----------------------------------------------------------------------------------------------------------
Old Industry Peer Group $ 100 $ 87 $ 65 $ 118 $ 227
----------------------------------------------------------------------------------------------------------
New Industry Peer Group $ 100 $ 98 $ 90 $ 174 $ 320
----------------------------------------------------------------------------------------------------------
Nasdaq Composite (US) $ 100 $ 113 $ 139 $ 169 $ 237
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
12
The graph on the preceding page is not to be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the Exchange
Act, except to the extent EchoStar specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
REPORT ON EXECUTIVE COMPENSATION
GENERAL
The foundation of EchoStar's compensation policy is to offer
compensation packages to attract, retain and motivate Executive Officers over
the long-term. Since 1996, executive compensation has been reviewed and approved
by the Executive Compensation Committee (the "Committee"). The primary
components of EchoStar's executive compensation program are base salary and
bonuses, conditional incentive-based bonuses, and long-term incentive
compensation in the form of stock options and other awards offered under
EchoStar's Incentive Plans.
BASE SALARIES AND BONUSES
Annual base salaries paid to EchoStar's Executive Officers have
historically been at levels significantly below those paid to Executive Officers
with comparable experience and responsibilities at companies in the
telecommunications industry or other similarly sized companies. Because of the
levels of compensation, EchoStar may experience difficulty in attracting
Executives at the highest performance levels. The Committee reviews all
adjustments to annual base salaries paid to EchoStar's Executive Officers.
Compensation adjustments are determined based on recommendations from the
President and Chief Executive Officer. Factors considered by Mr. Ergen in making
his recommendation to the Committee are typically based on his perception of the
individual's performance, success in achieving company and personal goals, and
planned changes in responsibilities. Changes in the profitability of EchoStar
and the market value of its securities are typically not considered in setting
Executive Officer base compensation; however, an individual's extraordinary
efforts resulting in tangible increases in corporate, division or department
success are considered by Mr. Ergen in recommending increases in base salary and
annual bonuses.
CONDITIONAL INCENTIVE-BASED BONUSES
During 1998, the Board of Directors approved the 1998 Executive Bonus
Plan which provided Executive Officers a contingent incentive that would be
paid, at the executive's election, in stock options, a cash award or a
combination thereof. The payment of these incentives was contingent upon the
achievement of certain financial and other goals of EchoStar. EchoStar did not
meet any of the goals during 1998. Accordingly, no cash incentives were paid and
all stock options granted pursuant to the 1998 Executive Bonus Plan were
cancelled. During February 1999, each of the Named Executive Officers has been
granted awards under the 1999 Executive Bonus Plan, which was recently approved
by the Board of Directors. The 1999 Executive Bonus Plan provides for corporate
performance-based bonuses, including cash and stock options, all of which are
conditioned upon the achievement of certain corporate, financial and other
goals. The 1999 Executive Bonus Plan consists of three components for each
executive covered by the plan: (i) a $75,000 cash bonus; (ii) options to
purchase up to 15,000 Class A shares at $48.00 per share; and (iii) a long-term
incentive grant of options to purchase up to 50,000 Class A shares at $48.00 per
share. Each of the above components is subject to cancellation to the extent
EchoStar does not achieve certain pre-defined corporate, financial and other
goals.
LONG-TERM INCENTIVE COMPENSATION
Stock option grants under the 1995 Incentive Plan are designed to
provide an additional incentive to attract and retain Executive Officers. In
addition, stock options provide an incentive to Executive Officers to increase
shareholder value on a long-term and sustained basis. Management believes that
Executive Officers who are in a position to contribute to the long-term success
of EchoStar and build incremental shareholder value should have a stake in
EchoStar's future success. This focuses attention on managing EchoStar as an
owner with an equity position in EchoStar's business and seeks to align the
Executive Officer's interest with the long-term interests of shareholders. Stock
options represent an important part of EchoStar's compensation program for
Executive
13
Officers, and, similar to other growing technology companies, represent a
significant component of overall compensation.
Awards under the 1995 Incentive Plan follow a review of the individual
employee's performance, years of service, position in EchoStar and long-term
potential contribution to EchoStar. Historically, the number of options granted
to an employee has been based on a dollar value divided by the fair market value
per Class A Share as reported in the Nasdaq's National Market System on the date
of grant. For example, a key employee might have been granted $100,000 of stock
options, which at $20.00 per Class A Share, would have resulted in the grant of
options to purchase 5,000 Class A Shares.
The dollar value awarded has typically ranged from $25,000 to $500,000
and was generally determined based on the key employee's level of
responsibility, position in EchoStar and potential to contribute to the
long-term success of EchoStar or otherwise achieve significant corporate goals
and on the number of options previously granted to the employee. Neither
Management nor the Board of Directors assigns specific weights to these factors,
although the employee's position and a subjective evaluation of his performance
are considered most important. Awards are generally made to Director level and
above employees, although in certain circumstances grants are made to certain
other employees based on length of service or contribution to EchoStar.
To encourage Executive Officers to remain in the employ of EchoStar or
its subsidiaries, options granted under the Incentive Plan generally vest and
become exercisable over a five-year period. Options granted under the Incentive
Plan generally are not exercisable until one year after the date of grant.
Stock options were awarded under the 1995 Incentive Plan to key
employees on March 31, June 30, and September 30, 1998. In connection with these
grants, EchoStar's President and Chief Executive Officer, in consultation with
members of the Board of Directors, determined the recipients of stock options
taking into account the respective scope of accountability, strategic and
operational goals and contribution of each recipient.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee believes that the compensation paid to Charles W. Ergen,
EchoStar's President and Chief Executive Officer, has generally been at levels
that are substantially below amounts paid to Chief Executive Officers at other
companies of similar size and in comparable industries.
Mr. Ergen's base salary for 1998 was $250,000, compared to $190,000
during each of 1997 and 1996. Since 1996, changes in Mr. Ergen's base salary
have been reviewed annually by the Committee based on recommendations from the
Board of Directors. Other than stock options granted pursuant to the 1998
Executive Bonus Plan that were cancelled in December 1998, Mr. Ergen was not
granted any stock options during 1998.
The report of the Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or under the Exchange Act,
except to the extent that EchoStar specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
Respectfully submitted,
The EchoStar Executive Compensation Committee
Raymond L. Friedlob
O. Nolan Daines
14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of December 31, 1998, accrued dividends on EchoStar's Series A
Cumulative Preferred Stock (the "Series A Preferred") payable to Messrs. Ergen
and DeFranco aggregated approximately $5.5 million and $288,000, respectively.
On February 8, 1999, EchoStar repurchased all of its outstanding Series A
Preferred from Messrs. Ergen and DeFranco for approximately $90.9 million,
including cumulative accrued dividends of $5.9 million.
During 1997, the law firm of Friedlob, Sanderson, Raskin, Paulson &
Tourtillott, LLC billed EchoStar approximately $210,000 in fees related to
certain of EchoStar's 1997 securities offerings. Mr. Friedlob, a member of
EchoStar's Board of Directors, is a partner of that law firm.
O. Nolan Daines, who was appointed to EchoStar's Board of Directors in
March 1998, also is the founder of DiviCom. During 1998, EchoStar purchased
approximately $15 million of equipment for its Digital Broadcast Operations
Center and for certain of its other project integration services for
international direct-to-home satellite TV ventures from DiviCom.
PROPOSAL NO. 2 -- TO APPROVE THE ISSUANCE OF CLASS A SHARES PURSUANT
TO THE PURCHASE AGREEMENT
INTRODUCTION
EchoStar has entered into a Purchase Agreement dated as of November 30,
1998 (the "Purchase Agreement") with News Corporation, American Sky
Broadcasting, LLC ("ASkyB") and MCI (together with News Corporation and ASkyB,
the "Transferors"). Under the terms of the Purchase Agreement, EchoStar will
issue Class A Shares to the Transferors and will acquire, among other things,
MCI's license to operate 28 direct broadcast satellite ("DBS") frequencies at
the 110DEG. West Longitude orbital slot and two Space Systems/Loral-built
satellites, to be delivered in orbit and currently expected to be launched
during 1999. In addition, the parties have agreed to stay litigation stemming
from disputes under a prior agreement between them. The number of Class A Shares
to be issued is subject to adjustment based on the current trading prices of the
Class A Shares at the time the 110 Acquisition is consummated. See
"-- Information About the Purchase Agreement -- Number of Shares to be Issued."
If the 110 Acquisition had been consummated on March 15, 1999, EchoStar would
have been required under the Purchase Agreement to issue 22,918,707 Class A
Shares, constituting approximately 31.7% of EchoStar's fully-diluted equity and
6.7% of EchoStar's total voting power. By combining the capacity of the newly
acquired satellites at the 110DEG. WL orbital slot with EchoStar's current
satellites at 119DEG. WL (which is subject to FCC approval which has been
applied for), EchoStar expects that its DISH Network will have the capacity to
provide approximately 500 channels of programming, Internet and high-speed data
services and HDTV nationwide through a single 18 inch dish, and would be
positioned to become a one-dish solution for satellite-delivered local
programming to major markets across the United States. EchoStar also expects
that its DISH Network will have the capacity to serve Alaska, Hawaii, Puerto
Rico and the United States territories in the Caribbean.
Charles W. Ergen, the Chairman, Chief Executive Officer and President of
EchoStar, possesses more than 93.4% of the total voting power of EchoStar.
Pursuant to the voting agreement described below, Mr. Ergen has agreed to vote
in favor of Proposal No. 2. Accordingly, approval of Proposal No. 2 is assured
notwithstanding a negative vote by shareholders other than Mr. Ergen.
BACKGROUND OF THE ACQUISITION
PARTIES
EchoStar is a leading provider of DBS programming services in the
United States, a significant international supplier of digital satellite
receiver systems and a provider of other satellite services. EchoStar commenced
its subscription satellite television service, the DISH Network, in March 1996,
after the successful launch of its first satellite (EchoStar I) in December
1995. Since that time, EchoStar has launched three additional satellites
(EchoStar II, EchoStar III and EchoStar IV) and it now has more operational DBS
satellites than any other
15
DBS operator in the United States. As of December 31, 1998, DISH Network had
more than 1.9 million subscribers, an increase of approximately 900,000
subscribers in 1998.
EchoStar has authorizations for more United States licensed DBS
frequencies than any other DBS competitor, including 21 frequencies at an
orbital slot (119DEG. WL) that is capable of providing DBS service to the
entire continental United States (known as "full CONUS"). From that orbital
slot, EchoStar provides consumers in the continental United States with a choice
of approximately 200 channels of digital television programming and CD quality
audio programming.
News Corporation is a diversified international communications company,
of which K. Rupert Murdoch is chairman and chief executive. ASkyB is a
wholly-owned subsidiary of News Corporation formed for the purpose of
developing, owning and operating a DBS television service covering the United
States. MCI is a wholly-owned subsidiary of MCI WORLDCOM, Inc. MCI WORLDCOM,
Inc. is principally engaged in the provision of domestic and international voice
and data communications services.
BACKGROUND OF NEGOTIATIONS AND PENDING LITIGATION
During February 1997, EchoStar and News Corporation announced an
agreement (the "News Agreement") pursuant to which, among other things, News
Corporation agreed to acquire approximately 50% of the outstanding capital stock
of EchoStar. News Corporation also agreed to make available for use by EchoStar
the DBS permit for 28 frequencies at 110DEG. WL purchased by MCI for more
than $682 million following a 1996 Federal Communications Commission ("FCC")
auction. During late April 1997, substantial disagreements arose between the
parties regarding their obligations under the News Agreement. Those substantial
disagreements led the parties to litigation.
In mid-1997, EchoStar filed a complaint seeking specific performance of
the News Agreement and damages, including lost profits. News Corporation filed
an answer and counterclaims seeking unspecified damages, denying all of the
material allegations and asserting numerous defenses. Discovery commenced on
July 3, 1997, and the case was set for trial commencing March 1999.
In connection with the 110 Acquisition, the litigation between EchoStar
and News Corporation has been stayed and will be dismissed with prejudice upon
closing or if the transaction is terminated for reasons other than the breach
by, or failure to fill a condition within the control of, News Corporation or
MCI.
REGULATORY APPROVALS
The 110 Acquisition is subject to the receipt of regulatory approvals.
The Federal Trade Commission and the United States Department of Justice
provided "early termination" of Hart-Scott-Rodino antitrust review of the 110
Acquisition on December 16, 1998.
The 110 Acquisition is also conditioned on, among other things, receipt
of FCC approval of the assignment of MCI's DBS license for 28 frequency channels
at 110DEG. WL. EchoStar has requested FCC approval for the assignment to
EchoStar of all FCC authorizations involved in the 110 Acquisition. The United
States Department of Justice has filed comments in support of the application.
Several parties have opposed the application on various grounds or have
requested conditions, including arguing that alien ownership limitations and
other broadcast qualification requirements apply, requesting program access
conditions with respect to News Corporation's programming and requesting
conditions in connection with service to Alaska and Hawaii. EchoStar cannot be
sure how the FCC will rule on any of these oppositions or requests. In a 1995
rulemaking, the FCC had imposed a one-time rule which effectively prevented DBS
operators from using channels at more than one full CONUS location. If the FCC
were to reimpose this rule, EchoStar would not be able to preserve both its
requested authorization at 110DEG. WL and its existing licenses at
119DEG. WL. Although EchoStar has vigorously argued in its application for
approval that the FCC need not and should not reimpose that rule, and the
Department of Justice took the same view in its comments, EchoStar cannot be
sure how the FCC will rule.
16
The 110 Acquisition, and EchoStar's implementation of its business plan
with respect to the acquired assets, may require additional approvals, consents
and modifications.
The FCC's alien ownership requirements prohibit aliens from owning or
voting more than 25% of the equity interests of certain FCC licenses without
specific authorization from the FCC. It is possible that News Corporation, which
would be considered an "alien" for this purpose, will acquire more than 25% of
EchoStar's equity interests in connection with the 110 Acquisition. See
"Proposal No.1 -- Election of Directors -- Equity Security Ownership -- Note
(6)." EchoStar does not believe that the alien ownership restriction will be
applicable to the 110 Acquisition. If the FCC were to so apply the restriction
and the 110 Acquisition could not be restructured, the 110 Acquisition might not
be consummated.
THE ASSETS TO BE ACQUIRED
Under the Purchase Agreement, EchoStar will obtain MCI's license to
operate 28 DBS frequencies at the 110DEG. WL full CONUS orbital location;
in-orbit delivery of two Space Systems/Loral-built satellites (described below),
currently expected to be launched during 1999; a recently-constructed digital
broadcast operations center located in Gilbert, Arizona; a worldwide license
agreement to manufacture and distribute set-top boxes internationally using NDS
Limited encryption/decoding technology; a commitment by an affiliated entity of
News Corporation to purchase from EchoStar Technologies Corporation (a
wholly-owned indirect subsidiary of EchoStar) a minimum of 500,000 set-top
boxes; and a three-year no fee retransmission consent agreement for EchoStar's
DISH Network to rebroadcast Fox Broadcasting Company owned-and-operated local
station signals to their respective markets. The Transferors will bear the costs
of the construction, launch and insurance of the two Space Systems/Loral-built
satellites, including launch insurance and one year of in-orbit service
insurance. EchoStar and MCI also agreed that MCI will have the non-exclusive
right to bundle DISH Network service with MCI's telephony service offerings on
mutually agreeable terms. In addition, EchoStar agreed to carry the Fox News
Channel on the DISH Network. EchoStar received standard launch support payments
in exchange for carrying the programming.
EchoStar will acquire two DBS satellites if the 110 Acquisition is
consummated. EchoStar V and EchoStar VI each are high power Space Systems/Loral
Series FS-1300 satellites. EchoStar V is equipped with 32 Ku-band transponders
that will operate at approximately 110 watts per channel (switchable to 16
transponders operating at approximately 220 watts per channel). EchoStar VI is
also equipped with 32 Ku-band transponders that will operate at approximately
120 watts per channel (switchable to 16 transponders operating at approximately
240 watts per channel). Each transponder is capable of transmitting multiple
digital video, audio and data channels. EchoStar V and EchoStar VI each have a
minimum design life of 12 years.
The Purchase Agreement provides that EchoStar V and EchoStar VI, which
are being manufactured by Space Systems/Loral for a total purchase price of
approximately $340 million (subject to adjustment based on changes which may be
made to the spacecraft prior to launch) will be delivered in orbit at no cost to
EchoStar. Subject to certain exceptions, the satellite purchase agreement
requires delivery of EchoStar V by August 31, 1999 and EchoStar VI in the fourth
quarter of 1999. The satellite purchase agreement requires Space Systems/Loral
to pay liquidated damages for delay of $500,000 for the first day and $100,000
per day thereafter, capped at $2,000,000, if EchoStar V is not delivered on
time. The agreement provides that no damages will be payable by Space
Systems/Loral for late delivery of EchoStar VI.
EchoStar expects to launch EchoStar V this summer and EchoStar VI
during the fourth quarter of 1999. The launches could include any combination of
United States Altas launches, Ariane launches through the European Space Agency
and Proton launches from Russia.
EchoStar plans to contribute the acquired assets to EchoStar Satellite
Corporation, one of EchoStar's indirect, wholly-owned subsidiaries, promptly
following closing of the 110 Acquisition.
By combining the capacity of the newly acquired assets at the
110DEG. WL orbital slot and EchoStar's current satellites at 119DEG. WL
(which is subject to FCC approval which has been applied for), EchoStar expects
that its DISH Network will have the capacity to provide approximately 500
channels of programming, Internet and high-speed data services and HDTV
nationwide through a single 18 inch dish, and would be positioned to become a
one-dish solution for satellite-delivered local programming to major markets
across the United States. EchoStar also expects
17
that its DISH Network will have the capacity to serve Alaska, Hawaii, Puerto
Rico and the United States territories in the Caribbean.
INFORMATION ABOUT THE PURCHASE AGREEMENT
The Purchase Agreement sets forth the principal terms on which the 110
Acquisition will be consummated. The Purchase Agreement contains
representations, warranties, covenants and agreements of the parties, and also
specifies conditions to the consummation of the 110 Acquisition and terms under
which the 110 Acquisition may be terminated or abandoned.
We have outlined the important terms of the Purchase Agreement below.
The Purchase Agreement is included as Exhibit A to this Proxy Statement. You
should read the entire Purchase Agreement because the description below is only
a summary, does not purport to be complete and is qualified in its entirety by
reference to the Purchase Agreement. The parties have entered or will enter into
other agreements in connection with the 110 Acquisition, including a voting
agreement and a registration rights agreement. This section also describes the
terms of certain of these other agreements.
NUMBER OF SHARES TO BE ISSUED
The Purchase Agreement provides that EchoStar will transfer an
aggregate of 30,000,000 Class A Shares to News Corporation, ASky B and MCI, with
24,030,000 of these shares issued to ASkyB or a direct or indirect wholly-owned
subsidiary of News Corporation designated by ASkyB (the "ASkyB Buyer") and the
remaining 5,970,000 shares issued to MCI or a direct or indirect wholly-owned
subsidiary of MCI designated by MCI (the "MCI Buyer"). These share amounts will
be adjusted according to the average of the daily closing stock prices of the
Class A Shares for the 20 business days ending two days prior to the closing
date (the "Current Market Value"). If the Current Market Value is less than
$15.00 per share, then EchoStar will issue such number of additional Class A
Shares pro rata to each of the ASkyB Buyer and the MCI Buyer that will bring the
total Current Market Value of the shares issued to them up to $450,000,000
(provided that News Corporation, ASkyB and MCI do not collectively own of record
or vote shares corresponding to more than 49.9% of the total outstanding voting
power of EchoStar). If the Current Market Value is greater than $39.00 per
share, then the total number of shares issued to each of the ASkyB Buyer and the
MCI Buyer will be reduced pro rata until the Current Market Value of the shares
issued to them is not greater than $1.17 billion. See "Proposal No. 1 --
Election of Directors -- Equity Security Ownership -- Note (6)."
Based on the adjustment described above, if the 110 Acquisition had
been consummated on March 15, 1999, EchoStar would have been required under the
Purchase Agreement to issue 22,918,707 Class A Shares, constituting
approximately 31.7% of EchoStar's fully-diluted equity and 6.7% of EchoStar's
total voting power.
COVENANTS
Each of the parties has agreed to give all required notices to third
parties (and, in the case of EchoStar, to its stockholders) and to use its best
efforts to obtain all required consents in connection with the 110 Acquisition.
Each of the parties has agreed to take any additional action that may be
necessary, proper or advisable to effect to the fullest extent feasible the
consummation of the transactions contemplated by the Purchase Agreement and
related agreements in connection with any notices to, filings with and approvals
of governmental agencies and third parties that it may be required to give, make
or obtain, and shall refrain from taking any action which could reasonably be
expected to make less likely that such authorizations, consents and approvals
will be given, made or obtained on the terms provided for in the Purchase
Agreement.
Each of the Transferors has agreed during the period prior to the
closing to use commercially reasonable efforts in the ordinary course of
business to preserve the value and utility of the assets to be transferred and
the goodwill of its suppliers and others having business relations with it with
respect to any assets to be transferred and to perform and observe all terms,
conditions and consents under the satellite contracts and all licenses and
permits with respect to the assets to be transferred, except where it would not
have a material adverse effect on EchoStar's use of such assets or its benefits
therefrom. EchoStar has agreed during the period prior to the closing not to
issue
18
any common stock at a price less than the Current Market Price (as defined in
the Purchase Agreement), except for issuances pursuant to existing rights and
options.
The parties have agreed to take all reasonable steps necessary,
including the implementation of an alternate agreement that to the fullest
extent feasible in light of any regulatory constraint assures the parties as
nearly as possible the same economic results as if the transactions contemplated
by the Purchase Agreement had occurred as contemplated (with certain exceptions)
and would be reasonably expected to not require FCC consent or to result in
consent, if required.
The Transferors have agreed that until the date of an order of the FCC
(or, in the case of an order of a bureau thereof, the later of October 31, 1999
or five days from the date of such order) which conditionally grants (on
material terms unacceptable to EchoStar) or denies the FCC's consent to the
assignment of MCI's 110DEG. WL authorizations to EchoStar, they shall not,
and shall not authorize or permit any representative, to solicit, initiate,
encourage or entertain discussions, inquiries or proposals or participate in any
discussions or negotiations for the purpose or with the intention of leading to
any proposal or offer from any person which constitutes or concerns, or may
reasonably be expected to lead to, any proposal for a merger or other business
combination involving any proposal or offer to acquire any portion of the assets
to be transferred.
INDEMNIFICATION
EchoStar and the Transferors have agreed to indemnify the other for
breaches of a representation, warranty, covenant or agreement contained in the
Purchase Agreement, provided that the right to indemnification for breach of a
representation or warranty will terminate 18 months after the closing of the 110
Acquisition.
CONDITIONS TO CLOSING THE 110 ACQUISITION
Both EchoStar's and the Transferors' obligations to consummate the 110
Acquisition are subject to certain conditions. These include (among other
things) the absence of injunctions or litigation that would prevent the 110
Acquisition from closing; receipt of necessary regulatory clearance; receipt of
all consents required by the other party; execution and delivery by the other
party of the registration rights agreement (described below), the litigation
settlement and release and certain other contracts; and the accuracy in all
material respects of the representations and warranties of the other party.
TERMINATION
The parties may terminate the Purchase Agreement at any time prior to
the closing by mutual written consent. Either the Transferors or EchoStar may
terminate the agreement if (i) by the later of December 31, 1999 and 60 days
following the date of an order from an FCC bureau which conditionally approves
(on material terms unacceptable to EchoStar) the assignment of the MCI license
to EchoStar, the FCC does not release a preliminary approval, or such
preliminary approval is so released but does not become a final approval within
30 days thereafter, (ii) within 60 days following the date of an FCC order which
conditionally approves (on material terms unacceptable to EchoStar) or denies
the assignment of the MCI license to EchoStar, the FCC does not release a
preliminary approval, or such preliminary approval is so released but does not
become a final approval within 30 days thereafter or (iii) within 60 days
following the date of an FCC order or approval which conditionally approves the
assignment of the MCI license to EchoStar, the parties are unable to satisfy a
condition (with certain exceptions).
The Transferors or EchoStar may also terminate the Purchase Agreement
if the other party is in breach in any material respect of certain of the
representations or warranties set forth in the Purchase Agreement. If the breach
is curable, the breaching party has 60 days to cure. If the breach is incapable
of cure within 60 days and the breaching party has acted reasonably diligently
to cure the breach, then the Purchase Agreement will not be terminated, so long
as the breach remains subject to cure and the breaching party acts continuously
with reasonable diligence in attempting to cure.
If the Purchase Agreement is terminated for any reason other than for
breach of a representation or warranty, EchoStar will be required to purchase
EchoStar VI from the Transferors, together with related rights,
19
immediately following the later of termination or in-orbit delivery, at a
purchase price equal to the actual direct payments made under the satellite
contract, and EchoStar will assume all obligations of the Transferors under
the satellite contract relating to orbital performance incentives. In the
alternative, EchoStar may elect to purchase EchoStar V. If the Purchase
Agreement is terminated by the Transferors for breach of EchoStar's
representations or warranties, the Transferors may elect to sell either
satellite to EchoStar, and if terminated due to the Transferors' breach of
their representations or warranties, EchoStar may elect to purchase either
satellite.
If the Purchase Agreement is terminated for EchoStar's breach of its
representations or warranties or based on the above-specified FCC matters, the
Transferors will be entitled to file a litigation settlement and release with
respect to the stated litigation, except that if so terminated because of an FCC
order or approval which contains a condition within the control of the
Transferors, and such condition is not satisfied, the litigation will not be
dismissed.
RESTRICTIONS ON TRANSFER
The Purchase Agreement restricts transfer of the Class A Shares to be
issued in connection with the 110 Acquisition. The Purchase Agreement provides,
among other things, that the Transferors may not transfer more than 10% of the
shares issued at the closing until all amounts due under the satellite contract
have been paid or prepaid. The Purchase Agreement also provides that for two
years after closing, the Transferors may not transfer to third parties more than
one-third of the shares issued to them during each 365-day period. However,
shares permitted to be sold during the first 365-day period but not sold may be
added to the amounts permitted to be sold during the second such period, and the
Transferors will be permitted to sell shares in a firm underwritten offering
registered under the Securities Act of 1933, as amended, in an amount not to
exceed (i) the difference between 50% of the shares issued to the Transferors
and the number of shares disposed of during the first 365-day period or (ii) the
difference between 80% of the shares issued to the Transferors and the number of
shares sold during the first and second 365-day periods.
CLOSING DATE
The Purchase Agreement provides that the closing of the 110 Acquisition
will take place on the fifth business day following the satisfaction or waiver
of all conditions or obligations of the parties to consummate the transactions
contemplated by the Purchase Agreement, or such other date as the parties
mutually determine.
REGISTRATION RIGHTS AGREEMENT
As a condition to consummation of the 110 Acquisition, EchoStar will
enter into a registration rights agreement pursuant to which it will agree to
register the Class A Shares issuable pursuant to the Purchase Agreement and use
its best efforts to cause such registration statement to become effective as
soon as reasonably practicable and, in any event, within 90 days following the
closing date. In addition, EchoStar will grant the Transferors demand
registration rights that are exercisable if EchoStar becomes and remains
ineligible to use Form S-3 for a period of 30 days and for a period of five
years after consummation of the 110 Acquisition, "piggyback" registration rights
covering resale of the Class A Shares issued pursuant to the Purchase Agreement.
VOTING AGREEMENT
In connection with the Purchase Agreement, each of the parties thereto
and Charles W. Ergen, Chairman, President and Chief Executive Officer of
EchoStar, entered into a voting agreement dated as of November 30, 1998.
Pursuant to the voting agreement, Mr. Ergen agreed to vote any shares owned by
him in favor of the Purchase Agreement and the transactions contemplated
thereby. Mr. Ergen also agreed not to reduce his voting power in EchoStar to 50%
or less until the shareholders of EchoStar approve the Purchase Agreement and
the transactions contemplated thereby. Also pursuant to the voting agreement,
each of MCI and News Corporation agreed that for a period of five years after
the closing of the transactions contemplated by the Purchase Agreement, neither
it nor its affiliates will (i) attempt to influence the voting of EchoStar
securities (such as through a solicitation of proxies or an election contest);
(ii) participate in any way in a "group" within the meaning of section 13(d)(3)
of the Securities Exchange Act with respect to EchoStar securities; (iii)
otherwise act to control or influence the management, Board
20
of Directors or affairs of EchoStar or its affiliates or seek to effectuate a
business combination or similar transaction with respect to EchoStar or its
affiliates; (iv) deposit the securities of EchoStar in a voting trust or
similar arrangement; (v) initiate or propose, or induce another to initiate
or propose, a tender offer or shareholder proposal with respect to EchoStar
or its affiliates; or (vi) enter into any negotiation, arrangement or
understanding with any third party with respect to any of the above.
Also, pursuant to the voting agreement, each of MCI and News
Corporation has agreed that for a period of five years after the closing of
the transactions contemplated by the Purchase Agreement, it will, and will
cause its subsidiaries and affiliates to, (i) with respect to the election of
directors of EchoStar, vote as recommended by the Board of Directors of
EchoStar or abstain; and (ii) with respect to any other stockholder action,
either vote as recommended by the Board of Directors, except that such
restrictions in (ii) will not apply to actions which would discriminate
against the holders of EchoStar's Class A Shares relative to holders of any
other class of EchoStar's equity securities or News Corporation or MCI
relative to any other holder of EchoStar's equity securities.
EFFECTS OF ADOPTION OF THE PROPOSAL
Mr. Ergen has agreed in the voting agreement to vote in favor of the
proposal to issue Class A Shares. Accordingly, approval of the proposal is
assured notwithstanding a negative vote by stockholders other than Mr. Ergen.
The successful passage of the proposal will result in a large
increase in the amount of EchoStar's Class A Shares issued and outstanding.
This increase will result in the immediate dilution of the percentage
interests of EchoStar's Class A Shares currently outstanding. Adoption of the
proposal will also affect the exercise of EchoStar's voting power. See
"--Voting Agreement" and "Proposal No. 1 -- Election of Directors -- Equity
Security Ownership."
SHAREHOLDER RIGHTS
No holders of EchoStar stock have any preemptive rights relating to
the proposed issuance of Class A Shares. Dissenting shareholders also will
not have appraisal rights.
CAPITALIZATION
On January 25, 1999, EchoStar DBS Corporation, EchoStar's
wholly-owned subsidiary, consummated an offering of $375,000,000 principal
amount of its 9 1/4 % Senior Notes due 2006 and $1,625,000,000 principal
amount of its 9 3/8% Senior Notes due 2009 (the "Offering"). Concurrently
with the consummation of the Offering, EchoStar consummated tender offers for
EchoStar DBS Corporation's 12 1/2% Senior Secured Notes due 2002 (the "1997
Notes"), DISH Ltd.'s 12 7/8% Senior Secured Discount Notes due 2004 (the
"1994 Notes") and EchoStar Satellite Broadcasting Corporation's 13 1/8%
Senior Secured Discount Notes due 2004 (the "1996 Notes"), pursuant to which
more than 99% of the outstanding notes of each such series were retired. In
addition, on February 2, 1999, EchoStar consummated a tender offer for its 12
1/8% Senior Preferred Exchange Notes (the "Preferred Exchange Notes"), which
EchoStar had recently exchanged for its 12 1/8% Series B Senior Redeemable
Exchangeable Preferred Stock due 2004 (the "Series B Preferred"). On February
8, 1999, EchoStar repurchased all of its outstanding Series A Preferred from
Charles W. Ergen, Chief Executive Officer and President of EchoStar, and
James DeFranco, Executive Vice President of EchoStar, for approximately $90.9
million, including cumulative accrued dividends of $5.9 million.
The following table shows (i) the consolidated capitalization of
EchoStar on an historical basis as of December 31, 1998 and (ii) the
consolidated capitalization of EchoStar on an adjusted basis assuming
consummation of the 110 Acquisition and giving effect to the Offering and the
application of the net proceeds thereof and consummation of the tender offers
and the Series A Preferred repurchase referred to above. The historical
information in this table is derived from the Consolidated Financial
Statements of EchoStar, and should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and the notes incorporated by reference
herein.
21
AS OF DECEMBER 31, 1998
----------------------------------------
ACTUAL AS ADJUSTED
----------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Cash, cash equivalents, and marketable investment securities.... $ 324,100 $ 353,699
Restricted cash and marketable investment securities............ 77,657 - (1)
-----------------------------------------
Total cash, cash equivalents, and marketable investment
securities................................................... 401,757 353,699 (2)
-----------------------------------------
-----------------------------------------
Total assets $ 1,806,852 $ 2,932,883 (2)
-----------------------------------------
-----------------------------------------
Long-term debt (net of current portion):
Mortgages and notes payable.................................. $ 43,450 $ 43,450
1994 Notes................................................... 571,674 1,390
1996 Notes................................................... 497,955 950
1997 Notes................................................... 375,000 15
Senior Exchange Notes........................................ - 5
9 1/4% Senior Notes due 2006................................. - 375,000
9 3/8% Senior Notes due 2009................................. - 1,625,000
-----------------------------------------
Total long-term debt....................................... 1,488,079 2,045,810
12 1/8% Series B Senior Redeemable Exchangeable Preferred Stock,
$.01 par value, 900,000 shares authorized, 225,301, and none
shares issued and outstanding, respectively; subject to
mandatory redemption on July 1, 2004 at a price of $1,000 per
share plus all accumulated and unpaid dividends.............. 226,038 -
Stockholders' Equity (Deficit):
Preferred Stock, 20,000,000 shares authorized (inclusive
of 900,000 shares designated as Series B Preferred
Stock):
8% Series A Cumulative Preferred Stock, 1,616,681,
and none shares issued and outstanding, including
cumulative accrued dividends of $5,755,000 and
none, respectively................................ 20,807 -
63/4% Series C Cumulative Convertible Preferred
Stock, 2,300,000 shares issued and outstanding.... 108,666 108,666
Class A Common Stock, $.01 par value, 200,000,000 shares
authorized, 15,317,380 and 38,236,087 shares issued and
outstanding, respectively.................................. 153 382
Class B Common Stock, $.01 par value, 100,000,000 shares
authorized, 29,804,401 shares issued and outstanding....... 298 298
Class C Common Stock, $.01 par value, 100,000,000 shares
authorized, none outstanding............................... - -
Common Stock Warrants........................................ 12 12
Additional paid-in capital................................... 231,617 1,401,388
Accumulated deficit.......................................... (733,093) (1,087,948) (3)
-----------------------------------------
Total stockholders' equity (deficit)............................ (371,540) 422,798 (4)
-----------------------------------------
-----------------------------------------
Total capitalization............................................ $ 1,342,577 $ 2,468,608
-----------------------------------------
-----------------------------------------
- ----------------------------
(1) Restrictions on cash held in escrow under the terms of indentures have
been removed upon the prepayment of the applicable notes. The
restricted cash balances as of December 31, 1998 have been reclassified
and included in the "as adjusted" amount of cash, cash equivalents and
marketable investment securities.
(2) The increase in EchoStar's total assets includes $1.17 billion of
assets to be acquired by EchoStar pursuant to the 110 Acquisition
offset by an approximately $48.1 million decrease in total cash, cash
equivalents and marketable investment securities as a result of the
Tender Offers and EchoStar's redemption on February 8, 1999 of all of
its outstanding Series A Preferred Stock and related accumulated
dividends (approximately $91 million).
(3) The increase in EchoStar's additional paid-in capital consists of the
additional assets valued at $1.17 billion, to be acquired by EchoStar
in the 110 Acquisition. If the 110 Acquisition had been consummated on
March 15, 1999, EchoStar would have been required to issue 22,918,707
Class A Shares to consummate the 110 Acquisition. See "Proposal No. 1
-- Election of Directors -- Equity Security Ownership - Note (6)."
22
(4) The increase in accumulated deficit results from (a) interest expense
of approximately $13.3 million from December 31, 1998 through January
25, 1999, the date of consummation of the Tender Offers (other than
with respect to the Preferred Exchange Notes) on debt repurchased and
paid, (b) dividends on the Series B Preferred Stock for the period
between January 1, 1999 and January 4, 1999 (the date on which the
Series B Preferred Stock was exchanged into Preferred Exchange Notes)
and interest expense on the Preferred Exchange Notes for the period
between January 4, 1999 and February 2, 1999 (the closing date of that
Tender Offer) totaling approximately $2.5 million, (c) approximately
$70 million representing the excess of the $91 million redemption price
for the Series A Preferred Stock over its carrying value at December
31, 1998 and (d) the estimated extraordinary loss upon the early
retirement of the notes pursuant to the Tender Offers of approximately
$269 million that EchoStar will report in 1999.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
PROPOSAL NO. 2 (ITEM NO. 2 ON THE ENCLOSED PROXY CARD).
PROPOSAL NO. 3 -- TO AMEND THE ARTICLES TO CLARIFY CERTAIN VOTING
PROVISIONS SET FORTH THEREIN
The voting provisions of EchoStar's Bylaws provide that if a quorum
is present at a shareholder meeting, the affirmative vote of a majority of
the shares represented at the meeting and entitled to vote on the subject
matter constitutes the act of the shareholders. The Articles provide that "[n]
ot withstanding any provision contained in the Nevada corporate law requiring
the vote of shares of two-thirds of the voting power of EchoStar to take
action, absent a provision contained herein to the contrary, the affirmative
vote of a majority of the voting power shall be the act of the shareholders."
The Board of Directors believes that this provision of the Articles was
intended solely to reduce the burden of supermajority voting requirements
under Nevada law (which would apply to enumerated extraordinary corporate
actions), and not to replace the ordinary voting provisions set forth in the
Bylaws with a more onerous standard.
To clarify this intention, the Board of Directors proposes to amend
the Articles to add a voting provision parallel to that set forth in the
Bylaws. The form of the proposed amendment is set forth as Exhibit B to this
Proxy Statement. Given that the purpose of the amendment is to clarify the
provisions of the Articles, the Board of Directors does not view the proposed
amendment as having a substantial effect on the interests of shareholders.
Charles W. Ergen, the Chairman, Chief Executive Officer and President
of EchoStar, possesses more than 93.4% of the total voting power of EchoStar.
Mr. Ergen has indicated his intention to vote in favor of Proposal No. 3.
Accordingly, approval of Proposal No. 3 is assured notwithstanding a negative
vote by shareholders other than Mr. Ergen.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
PROPOSAL NO. 3 (ITEM NO. 3 ON THE ENCLOSED PROXY CARD).
PROPOSAL NO. 4 - TO APPROVE THE 1999 STOCK INCENTIVE PLAN
There will be presented to the meeting a proposal to approve the
Echostar Communications Corporation 1999 Stock Incentive Plan (the "Plan").
The Plan will supplement the 1995 Stock Incentive Plan. EchoStar's experience
with stock options has convinced the Board of Directors of the important role
of stock options and other stock-based incentives in retaining the services
of outstanding personnel and in encouraging such employees to have a greater
financial investment in EchoStar (although the Plan does not necessarily
require them to hold for investment stock received under the Plan).
The proposed Plan is set forth in Exhibit C. The principal
provisions of the Plan are summarized below. This summary, however, does not
purport to be complete and is qualified in its entirety by reference to the
provisions of the Plan.
23
GENERAL INFORMATION
The Plan would authorize the Board of Directors or a committee
appointed by the Board of Directors (the "Committee") to grant incentive
stock options under the Internal Revenue Code of 1986, as amended (the
"Code"), nonqualified stock options, stock appreciation rights, restricted
stock, restricted stock units, performance awards, dividend equivalents and
other stock-based awards (collectively, "Awards") to key employees of
EchoStar and its subsidiaries who are designated by the Committee. Under the
Plan, the Committee also has the authority to, among other things: (i) select
the key employees to whom Awards will be granted, (ii) determine the type,
size and the terms and conditions of Awards, (iii) amend the terms and
conditions of Awards, (vi) accelerate the exercisability of options or the
lapse of restrictions relating to Awards and (v) interpret and administer the
Plan and Award agreements thereunder.
As used in this summary, the term "Committee" will include the Board
of Directors in the event that it performs the functions described. If the
Committee consists of less than the entire Board, each member must be a
"non-employee director" within the meaning of Rule 16b-3 promulgated under
the Exchange Act. To the extent necessary for any Award to qualify as
performance-based compensation under Section 162(m) of the Code, each
Committee member must be an "outside director" within the meaning of Section
162(m) of the Code.
The aggregate number of Class A Shares that may be issued subject to
Awards under the Plan shall not exceed 10,000,000 shares. EchoStar may
continue to grant Awards under the 1995 Incentive Plan for shares authorized
but unissued under that plan, until the 1995 Incentive Plan expires on June
20, 2005. If there is a stock split, stock dividend or other relevant change
affecting EchoStar's shares, appropriate adjustments will be made in the
number of shares that may be issued or transferred in the future and in the
number of shares and price in all outstanding grants made before such event.
If shares under a grant are not issued or transferred, those shares would
again be available for inclusion in future grants.
GRANTS UNDER THE PLAN
STOCK OPTIONS
The Committee will determine whether any option is a nonqualified or
incentive stock option at the time of grant. The per share exercise price of
an option granted under the Plan will be determined by the Committee at the
time of grant, provided that the purchase price per share under each
incentive stock option must not be less than 100% of the fair market value of
the Class A Shares subject to the option at the date of grant (110% in the
case of an incentive stock option granted to a Ten-Percent Stockholder, as
defined in the Plan). Each option will be exercisable at such dates and in
such installments as determined by the Committee. Each option terminates at
the time determined by the Committee provided that the term of each incentive
stock option may not exceed ten years (five years in the case of an incentive
stock option granted to a Ten-Percent Stockholder, as defined in the Plan)
and the term of each nonqualified option may not exceed ten years and three
months from the date of grant.
The Committee may grant restoration options, separately or together
with another option, under which the grantee would be granted a new option
when the grantee pays the exercise price of the original option by delivery
of previously owned shares. The restoration option would permit the grantee
to purchase a number of shares not exceeding the sum of (i) the number of
shares provided as consideration upon the exercise of the previously granted
option to which such restoration option relates and (ii) the number of
shares, if any, tendered or withheld as payment of the amount to be withheld
under applicable tax laws in connection with the exercise of the option to
which the restoration option relates.
24
STOCK APPRECIATION RIGHTS
The Committee may grant stock appreciation rights ("SARs") which
confer to the grantee the right to receive upon exercise thereof the excess,
if any, of the fair market value of the shares subject thereto on the date of
exercise over the grant price of the SAR (which shall not be less than the
fair market value of such shares on the date of grant). The grant price,
term, dates and methods of exercisability and all other terms and conditions
of an SAR shall be fixed by the Committee.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
The Committee may also grant Awards of restricted stock or
restricted stock units. Each grant shall set forth a restriction period
during which the grantee must remain in the employ of EchoStar in order to
retain the shares under grant. If the grantee's employment terminates during
the restriction period, all shares subject to restriction shall be forfeited
and reacquired by EchoStar. However, the Committee may provide complete or
partial exceptions to this requirement as it deems equitable. Neither
restricted stock nor restricted stock units may be disposed of prior to the
expiration of the restriction period. All terms and conditions shall be
determined by the Committee upon grant of restricted stock or restricted
stock units. Each certificate issued would bear a legend giving notice of the
restrictions in the grant.
PERFORMANCE AWARDS
The Committee may grant performance awards under which payment may
be made in shares of the EchoStar's common stock, cash, other securities or
other Awards may be made upon achievement of certain goals established by the
Committee during an award period. The Committee would determine the goals,
the length of an award period, the maximum payment value of an award, the
minimum performance required before a payment would be made and any other
terms and conditions applicable to a performance award.
DIVIDEND EQUIVALENTS
The Committee may grant dividend equivalents which confer upon
participants the right to receive a payment (in shares, other securities or
other Awards) equal to the amount of cash dividends paid by EchoStar to
shareholders with respect to a specified number of shares determined by the
Committee. The Committee will also establish all terms and conditions
applicable to a dividend equivalent grant.
OTHER STOCK-BASED AWARDS
The Committee may also grant such other Awards that are denominated
or payable in, valued in whole or in part by reference to, or otherwise based
on or related to, the Class A Shares. The Committee shall determine the terms
and conditions of such Awards.
All Awards issued under the Plan may be paid by EchoStar in cash,
shares, promissory notes, other securities, other Awards or such other
property or combination thereof as shall be determined by the Committee. All
such Awards may paid in a single payment or transfer, or in installments or
on a deferred basis, in each case in accordance with rules and procedures
established by the Committee.
FEDERAL INCOME TAX CONSEQUENCES
STOCK OPTIONS
The grant of an incentive stock option or a nonqualified stock
option would not result in income for the grantee or in a deduction for
EchoStar.
The exercise of a nonqualified stock option would result in ordinary
income for the grantee and, subject to deduction limitations under Code
Section 162(m), a deduction for EchoStar measured by the difference between
the option price and the fair market value of the shares received at the time
of exercise. Income tax withholding would be required.
25
The exercise of an incentive stock option would not result in income
for the grantee if the grantee (i) does not dispose of the shares within two
years after the date of grant or one year after the transfer of shares upon
exercise and (ii) is an employee of EchoStar or a subsidiary of EchoStar from
the date of grant until three months before the exercise date. If these
requirements are met, the basis of the shares upon later disposition would be
the option exercise price for such shares. Any gain will be taxed to the
employee as long-term capital gain and EchoStar would not be entitled to a
deduction. The excess of the fair market value on the exercise date over the
option exercise price is an item of tax preference, potentially subject to
the alternative minimum tax.
If the grantee disposes of the shares prior to the expiration of
either of the holding periods, the grantee would recognize ordinary income
and, subject to deduction limitations under Code Section 162(m), EchoStar
would be entitled to a deduction equal to the lesser of the fair market value
of the shares on the exercise date minus the option exercise price or the
amount realized on disposition minus the option exercise price. Any gain in
excess of the ordinary income portion would be taxable as long-term or
short-term capital gain.
SARS, PERFORMANCE AWARDS AND DIVIDEND EQUIVALENTS
The grant of an SAR, a performance award or a dividend equivalent
would not result in income for the grantee or a deduction for EchoStar. Upon
the exercise of an SAR or the receipt of shares or cash under a performance
award or dividend equivalent, the grantee would recognize ordinary income
and, subject to deduction limitations under Code Section 162(m), EchoStar
would be entitled to a deduction equal to the fair market value of the shares
or the amount of any cash received. Income tax withholding would be required.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
The grant of restricted stock should not result in income for the
grantee or in a deduction for EchoStar for federal income tax purposes,
assuming the shares transferred are subject to restrictions resulting in a
"substantial risk of forfeiture" as intended by EchoStar. If there are no
such restrictions, the grantee would recognize ordinary income upon receipt
of the shares. The grant of restricted stock units would similarly not result
in income for the grantee or a deduction for EchoStar. Dividends paid to the
grantee while the stock remained subject to restriction would be treated as
compensation for federal income tax purposes. Upon the lapses of
restrictions, the grantee would receive ordinary income and, subject to
deduction limitations under Code Section 162(m), EchoStar would be entitled
to a deduction measured by the fair market value of the shares at the time of
lapse or at the time of receipt of shares or cash in respect of a restricted
stock grant. Income tax withholding would be required.
OTHER INFORMATION
Assuming approval of EchoStar's stockholders, the Plan will be
effective on April 16, 1999 and will terminate on April 16, 2009, unless
terminated earlier by the Board of Directors or extended by the Board with
approval of the stockholders. The Board may amend the Plan as it deems
advisable. During the term of the Plan (i) no employee may be granted Awards
under the Plan (other than Awards described in clause (ii) below) in the
aggregate in respect of more than 500,000 shares in any one calendar year,
and (ii) the maximum dollar amount of cash or the fair market value of shares
that any employee may receive in any one calendar year in respect of
performance awards granted under the Plan may not exceed $10,000,000.
Employees who will participate in the Plan in the future and the amounts of
their allotments are to be determined by the Committee subject to any
restrictions outlined above. Since no such determinations have yet been made,
it is not possible to state the terms of any individual options which may be
issued under the Plan or the names or positions of or respective amounts of
the allotment to any individuals who may participate.
Charles W. Ergen, the Chairman, Chief Executive Officer and President
of EchoStar, possesses more than 93.4% of the total voting power of EchoStar.
Mr. Ergen has indicated his intention to vote in favor of Proposal No. 4.
Accordingly, approval of Proposal No. 4 is assured notwithstanding a negative
vote by shareholders other than Mr. Ergen.
26
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
THE 1999 STOCK INCENTIVE PLAN (ITEM NO. 4 ON THE ENCLOSED PROXY CARD).
PROPOSAL NO. 5 - RATIFICATION OF INDEPENDENT ACCOUNTANTS
Since 1988, the firm of Arthur Andersen LLP, independent
accountants, has examined and reported on the financial statements of
EchoStar. The Board of Directors of EchoStar has appointed Arthur Andersen
LLP as the independent accountants of EchoStar for the fiscal year ending
December 31, 1999. Representatives of Arthur Andersen LLP are expected to be
present at the Annual Meeting and will have the opportunity to make any
statements they may desire. They also will be available to respond to
appropriate questions of shareholders.
If a quorum is present, the affirmative vote of a majority of the
total voting power of EchoStar present or represented by proxy and entitled
to vote at the Annual Meeting is required to ratify the appointment of Arthur
Andersen LLP as independent accountants.
Charles W. Ergen, the Chairman, Chief Executive Officer and President
of EchoStar possesses more than 93.4% of the total voting power of EchoStar.
Mr. Ergen has indicated his intention to vote in favor of Proposal No. 5.
Accordingly, approval of Proposal No. 5 is assured notwithstanding a negative
vote by shareholders other than Mr. Ergen.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF THIS APPOINTMENT (ITEM NO. 5 ON THE ENCLOSED PROXY CARD).
FORWARD-LOOKING STATEMENTS
All statements contained herein, as well as statements made in press
releases and oral statements that may be made by EchoStar or by officers,
directors or employees of EchoStar acting on its behalf, that are not
statements of historical fact constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that could cause the actual results of EchoStar to be
materially differently from historical results or from any future results
expressed or implied by such forward-looking statements. Among the factors
that could cause actual results to differ materially are the following: a
total or partial loss of a satellite due to operational failures, space
debris or otherwise; a decrease in sales of digital equipment and related
services to international service providers; a decrease in DISH Network
subscriber growth; an increase in subscriber acquisition costs; impediments
to the retransmission of local or distant broadcast network signals; lower
than expected demand for EchoStar's delivery of local broadcast network
signals; an unexpected business interruption due to the failure of third
parties to remediate year 2000 issues; the inability of EchoStar to retain or
obtain necessary authorizations from the FCC; an increase in competition from
cable, DBS, other satellite system operators and other providers of
subscription television services; the introduction of new technologies and
competitors into the subscription television business; a merger of existing
DBS competitors; a change in the regulations governing the subscription
television service industry; the outcome of any litigation in which EchoStar
or its subsidiaries may be involved; failure to consummate the 110
Acquisition pursuant to the Purchase Agreement or the failure of the
satellites to be acquired to be successfully launched or to become
operational, or a delay in such launch or operation; general business and
economic conditions; and other risk factors described from time to time in
reports filed with the Securities and Exchange Commission by EchoStar. In
addition to statements that explicitly describe such risks and uncertainties,
readers are urged to consider statements that include the terms "believes,"
"belief," "expects," "plans," "anticipates," "intends" or the like to be
uncertain and forward-looking. All cautionary statements made herein should
be read as being applicable to all forward-looking statements where they
appear. In this connection, investors should consider the risks described
herein and should not place undue reliance on such forward-looking statements.
27
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
EchoStar's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 filed with the SEC is incorporated herein by reference.
Shareholders should carefully review the Annual Report on Form 10-K prior to
deciding how to vote their shares in connection with the matters set forth in
this Proxy Statement.
All documents filed by EchoStar (file No. 0-26176) pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Proxy Statement and prior to the date of the Annual Meeting shall be
deemed to be incorporated by reference in this Proxy Statement and to be part
hereof from the date of filing of such documents. All information appearing
in this Proxy Statement is qualified in this entirety by the information and
financial statements (including notes thereto) appearing in the documents
incorporated by reference herein.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be modified or superseded, for
purposes of this Proxy Statement, to the extent that a statement contained
herein or in any subsequently filed document that is deemed to be
incorporated herein modifies or supersedes any such statement. Any statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Proxy Statement.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE THAT ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. ECHOSTAR HEREBY UNDERTAKES TO
PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO
WHOM A COPY OF THIS PROXY STATEMENT HAS BEEN DELIVERED, ON WRITTEN OR ORAL
REQUEST OF ANY SUCH PERSON, A COPY OF ANY AND ALL OF THE DOCUMENTS REFERRED
TO ABOVE THAT HAVE BEEN OR MAY BE INCORPORATED INTO THIS PROXY STATEMENT BY
REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). THESE DOCUMENTS
ARE AVAILABLE UPON REQUEST FROM ECHOSTAR COMMUNICATIONS CORPORATION, 5701
SOUTH SANTA FE DRIVE, LITTLETON, COLORADO 80120, ATTENTION: DAVID K.
MOSKOWITZ, FACSIMILE NUMBER (303) 723-1699. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE RECEIVED BY APRIL 12, 1999.
WHERE TO GET ADDITIONAL INFORMATION
EchoStar files annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information EchoStar files at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. The SEC filings of EchoStar are also available to
the public from commercial document retrieval services and on the Internet
through the website maintained by the SEC at "http://www.sec.gov." EchoStar
Class A Shares are traded on the NASDAQ National Market System and reports
and other information concerning EchoStar can also be inspected at the NASDAQ
National Market, 1735 K Street, N.W., Washington, D.C. 20546.
COST OF PROXY STATEMENT
The cost of the solicitation of proxies will be borne by EchoStar.
In addition to the use of the mails, proxies may be solicited personally, by
telephone or by a few regular employees of EchoStar without additional
compensation. EchoStar does not expect to pay any compensation for the
solicitation of proxies but will reimburse brokerage firms, custodians,
nominees, fiduciaries and other persons holding stock in their names, or in
the names of nominees, at approved rates, for their expenses in forwarding
proxy material to beneficial owners of securities held of record by such
persons and obtaining their proxies.
28
SUBMISSION OF SHAREHOLDER PROPOSALS
FOR 2000 ANNUAL MEETING
Shareholders who intend to have a proposal considered for inclusion
in EchoStar's proxy materials for presentation at the 2000 Annual Meeting of
Shareholders must submit the proposal to EchoStar no later than November 24,
1999. Shareholders who intend to present a proposal at the 2000 Annual
Meeting of Shareholders without inclusion of such proposal in EchoStar's
proxy materials are required to provide notice of such proposal to EchoStar
no later than February 8, 2000. EchoStar reserves the right to reject, rule
out of order or take other appropriate action with respect to any proposal
that does not comply with these and other applicable requirements.
OTHER BUSINESS
The Board of Directors knows of no other business that will be
presented to the Annual Meeting of Shareholders other than that which is set
forth in this Proxy Statement.
By Order of the Board of Directors
/s/ David K. Moskowitz
DAVID K. MOSKOWITZ
SENIOR VICE PRESIDENT, GENERAL COUNSEL,
CORPORATE SECRETARY AND DIRECTOR
EXHIBIT A Purchase Agreement dated as of November 30, 1998, by and
among American Sky Broadcasting, LLC, The News Corporation
Limited, MCI Telecommunications Corporation and EchoStar
Communications Corporation.
EXHIBIT B Form of Certificate of Amendment of the Amended and Restated
Articles of Incorporation of EchoStar Communications
Corporation.
EXHIBIT C EchoStar Communications Corporation 1999 Stock Incentive Plan.
29
EXHIBIT A
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PURCHASE AGREEMENT
DATED AS OF
November 30, 1998
BY AND AMONG
AMERICAN SKY BROADCASTING, LLC,
THE NEWS CORPORATION LIMITED,
MCI TELECOMMUNICATIONS CORPORATION
AND
ECHOSTAR COMMUNICATIONS CORPORATION
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
1. Definitions........................................................... 1
2. Purchase and Sale..................................................... 5
(a) Shares to be Purchased by the Transferors....................... 5
(b) Assets to be Transferred to Seller.............................. 6
(c) Assumption of Liabilities....................................... 7
(d) The Closing..................................................... 7
(e) Deliveries at Closing........................................... 7
3. Representations and Warranties of Seller.............................. 7
(a) Representations and Warranties True, Correct and Complete....... 7
(b) Organization of Seller and the Significant Subsidiaries......... 7
(c) Power and Authority of Seller................................... 8
(d) Power and Authority of Significant Subsidiaries................. 8
(e) Corporate Authorization......................................... 8
(f) Governmental Authorization...................................... 8
(g) Noncontravention................................................ 9
(h) Capitalization.................................................. 9
(i) SEC Filings.....................................................10
(j) Absence of Certain Changes......................................10
(k) Brokers'Fees....................................................10
4. Representations and Warranties of the Transferors.....................10
(a) Representations and Warranties True, Correct and Complete.......10
(b) Organization of the Transferors.................................11
(c) Power and Authority of the Transferors..........................11
(d) Corporate Authorization.........................................11
(e) Governmental Authorization......................................11
(f) Noncontravention................................................12
(g) Gilbert Property................................................12
(h) Assigned Contracts..............................................14
(i) Intellectual Property...........................................14
(j) Litigation......................................................14
(k) Legal Compliance................................................15
(l) FCC Matters.....................................................15
(m) Transferred Assets..............................................16
(n) Broker's Fees...................................................16
(o) Resale..........................................................16
5. Further Agreements of the Parties.....................................16
(a) General.........................................................16
(b) Notices and Consents............................................17
(c) Operation of Business...........................................17
(d) Assignment of the MCI FCC License...............................18
(e) Earth Station Authorizations....................................19
(f) Satellites......................................................19
(g) Sony Contract...................................................20
(h) Full Access.....................................................20
(i) Notice of Developments..........................................21
(j) NDS Equipment...................................................21
(k) Abeyance of EchoStar Litigation.................................21
(l) Transfer Taxes and Prorations...................................21
(m) Further Assurances..............................................21
A-i
(n) No Solicitation.................................................21
(o) Bundling........................................................22
(p) Casualty; Condemnation..........................................22
(q) Title Insurance.................................................22
(r) Surveys.........................................................23
6. Conditions to Obligation to Close.....................................23
(a) Conditions to Obligation of the Transferors.....................23
(b) Conditions to Obligation of Seller..............................24
7. Remedies for Breach of this Agreement.................................25
(a) Survival........................................................25
(b) Indemnification Provisions for Benefit of the Transferors.......25
(c) Indemnification Provisions for Benefit of Seller................25
(d) Notification; Rights of Parties to Settle or Defend.............26
(e) Exclusive Remedy................................................26
(f) Limitations.....................................................26
8. Termination...........................................................26
(a) Termination of Agreement........................................26
(b) Effect of Termination...........................................27
9. Miscellaneous.........................................................28
(a) Press Releases and Announcements................................28
(b) No Third-Party Beneficiaries....................................28
(c) Entire Agreement................................................28
(d) Succession and Assignment.......................................29
(e) Counterparts....................................................29
(f) Headings........................................................29
(g) Notices.........................................................29
(h) Governing Law...................................................30
(i) Amendments and Waivers..........................................30
(j) Severability....................................................30
(k) Expenses........................................................30
(l) Construction....................................................30
(m) Restrictions on Transfer........................................30
(n) Legends.........................................................31
(o) Specific Performance............................................31
(p) Incorporation of Schedules......................................31
A-ii
Schedules
- ---------
2(b)(i)(I) Gilbert Property
2(b)(i)(II) Furniture, Fixtures and Equipment
2(b)(ii) Gilbert Contracts
2(b)(v) Satellite Contracts
3(g) Noncontravention
3(h) Capitalization
3(i) SEC Filings
3(j) Absence of Certain Changes
4(f) Noncontravention
4(g)(i) Permitted Liens
4(g)(iii) Gilbert Property Improvements
4(g)(v) Insurance Policies
4(h) Assigned Contracts
4(j) Litigation
4(k) Legal Compliance
4(l)(i) FCC Matters
4(l)(ii) Earth Station Authorizations
4(l)(v) Insurance Policies
6(a)(ii) Consents
6(b)(ii) Consents
Exhibits
- --------
A Components License Agreement
B Fox News Channel Affiliation Agreement
C Registration Rights Agreement
D Retransmission Consent Agreement
E Settlement Agreement and Mutual Release
F Set Top Box Agreement
G Voting Agreement
H Abeyance Stipulation
I Special Warranty Deed
A-iii
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is entered into as of
November 30, 1998, by and among American Sky Broadcasting, LLC, a limited
liability company organized under the laws of the State of Delaware ("ASkyB");
The News Corporation Limited, a corporation organized under the laws of South
Australia ("News Corporation"); MCI Telecommunications Corporation, a
corporation organized under the laws of the State of Delaware ("MCI"); and
EchoStar Communications Corporation, a corporation organized under the laws of
the State of Nevada ("Seller"). ASkyB, News Corporation and MCI are referred to
collectively herein as the "Transferors." ASkyB, News Corporation, MCI and
Seller are referred to collectively herein as the "Parties."
RECITALS
WHEREAS, the Transferors own certain assets relating to the direct
broadcast satellite ("DBS") business;
WHEREAS, the Transferors desire to dispose of such assets, and Seller
desires to acquire such assets; and
WHEREAS, the Transferors have agreed to transfer such assets to Seller
(or one or more direct or indirect wholly owned Subsidiaries of Seller) in
consideration for, among other things, shares of Seller's Class A Common Stock,
par value $.01 per share ("Class A Common Stock"), upon the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the respective
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
"ACCEPTABLE ALTERNATIVE ARRANGEMENT" means any arrangement satisfactory
to Seller and its counsel and to the Transferors and their respective counsel
that: (a) to the fullest extent feasible in light of any regulatory constraint
assures the Parties as nearly as possible the same economic results as if the
transactions contemplated by this Agreement and the Collateral Agreements had
occurred as contemplated herein and therein; provided, however, that no Party
shall be obligated to enter into any such arrangement which would require it to
make expenditures or dispose of assets in excess of the amount of expenditures
or assets contemplated by this Agreement and the Collateral Agreements unless
compensated for such arrangement; (b) would, in the reasonable judgment of
Seller and the Transferors, be reasonably expected either not to require FCC
consent or to result in such consent, if required; and (c) would, in the
reasonable judgment of Seller and the Transferors, be reasonably expected to
result in clearance of the arrangement by the relevant antitrust enforcement
agencies, if required.
"AFFILIATE" means any person or entity controlling, controlled by, or
under common control with, an entity. Control of any entity shall mean the
possession, direct or indirect, of the powers to direct or cause the direction
of the management and policies of a person, whether through the ownership of
voting securities, by contract or otherwise.
"ASKYB BUYER" has the meaning set forth in Section 2(a)(i)(A) hereof.
"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could reasonably form the
basis for any specified consequence.
"BUREAU ORDER" means an order released by a bureau or other division or
subdivision of the FCC under delegated authority which conditionally grants (and
such condition is a Material Condition which is unacceptable to Seller) the
FCC's consent to the assignment of the MCI FCC License to Seller or Newco.
A-1
"COLLATERAL AGREEMENTS" means the Registration Rights Agreement, the
Fox News Channel Affiliation Agreement, the Settlement and Mutual Release
Agreement, the Components License Agreement, the Retransmission Consent
Agreement, the Set Top Box Agreement and the Voting Agreement.
"COMMUNICATIONS ACT" means the federal Communications Act of 1934, as
amended.
"COMPONENTS LICENSE AGREEMENT" means the Components License for NDS
MPEG 2, DVB Conformant Digital Receivers, to be entered into by and between NDS
Limited and EchoStar Technologies Corporation, containing the terms and
conditions set forth in Exhibit A annexed hereto.
"CURRENT MARKET PRICE" means the average of the daily closing prices
per share of Class A Common Stock for the 20 trading days ending on (a) with
respect to Section 2(a)(ii), the date that is two trading days prior to the
Closing Date; (b) with respect to Section 5(c)(i)(B), the date on which Seller
enters the contract governing the purchase in question; provided, however that
if such contract provides for a price which, whether or not so specified, was
based on the price reported on a national securities exchange at the time of
negotiation of the business arrangement or the execution of the agreement, then
Current Market Price means the price so provided; and provided further, that in
the case of shares issued pursuant to Seller's Employee Stock Purchase Plan,
Current Market Price means 85% of the closing price of Class A Common Stock on
the last business day of each calendar quarter in which shares were deemed sold
under such plan; and (c) with respect to 5(c)(i)(C), the date of the issuance or
grant of the rights, options or warrants in question. The closing price for each
day shall be the last reported sales price regular way or, in case no such
reported sale takes place on such day, the closing bid price regular way, in
either case on the principal national securities exchange (including, for
purposes hereof, The Nasdaq National Market ("Nasdaq")) on which the Class A
Common Stock is listed or admitted to trading or, if the Class A Common Stock is
not listed or admitted to trading on any national securities exchange, the
highest reported bid price for the Class A Common Stock as furnished by the
National Association of Securities Dealers, Inc. through Nasdaq or a similar
organization if Nasdaq is no longer reporting such information. If on any such
date the Class A Common Stock is not listed or admitted to trading on any
national securities exchange and is not quoted by Nasdaq or any similar
organization, the fair value of a share of Class A Common Stock on such date, as
determined in good faith by the Board of Directors of Seller, whose
determination shall be conclusive absent manifest error, shall be used.
"DAMAGES" means all charges, complaints, actions, suits, proceedings,
hearings, investigations, claims, demands, judgments, orders, decrees,
stipulations, injunctions, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, diminution in value, obligations, Taxes, liens,
losses, expenses, and fees, including all attorneys' fees and court costs,
whether or not arising out of a claim by a third party.
"EARTH STATION FACILITIES" means (a) the six earth station facilities
located on the Gilbert Property and corresponding to the Earth Station
Authorizations, and (b) the six additional 6.1 meter receive-only earth station
facilities also located on the Gilbert Property, with respect to which there has
been no FCC registration.
"ENVIRONMENTAL LAWS" means all foreign, federal, state and local laws,
statutes, ordinances, rules and regulations, now or hereafter in effect, and in
each case as amended or supplemented from time to time, and any permits issued
thereunder, relating to the protection of human health and safety, the
environment, or hazardous or toxic substances or wastes, pollutants or
contaminants.
"FCC" means the Federal Communications Commission and any successor
agency thereto.
"FCC APPROVAL" means an order released by the FCC (and not by a bureau
or other division or subdivision thereof pursuant to delegated authority) which
is in full force and effect and has not been reversed, reconsidered, stayed,
enjoined, set aside, annulled or suspended, and the thirty (30) day period for
any such action on the FCC's own motion has expired, and which grants, or
conditionally grants (other than subject to a Material Condition which is
unacceptable to Seller), the FCC's consent to the assignment of the MCI FCC
License to Seller or Newco; provided, however, that timely rejection of an FCC
order by Seller or Newco shall not affect the status of such order as an FCC
Approval.
A-2
"FCC ORDER" means an order released by the FCC (and not by a bureau or
other division or subdivision thereof pursuant to delegated authority) which is
in full force and effect and has not been reversed, reconsidered, stayed,
enjoined, set aside, annulled or suspended, and the thirty (30) day period for
any such action on the FCC's own motion has expired, and which conditionally
grants (and such condition is a Material Condition which is unacceptable to
Seller) or denies the FCC's consent to the assignment of the MCI FCC License to
Seller or Newco; provided, however, that timely rejection of an FCC order by
Seller or Newco shall not affect the status of such order as an FCC Order.
"FOX NEWS CHANNEL AFFILIATION AGREEMENT" means the Fox News Channel
Affiliation Agreement, entered into by and between EchoStar Satellite
Corporation and Fox News Network, LLC as of the date hereof, annexed as Exhibit
B hereto.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"INTELLECTUAL PROPERTY" means all (a) patents, patent applications,
patent disclosures and improvements thereto, (b) trademarks, service marks,
trade dress, logos, trade names and corporate names and registrations and
applications for registration thereof, (c) copyrights and registrations and
applications for registration thereof, (d) mask works and registrations and
applications for registration thereof, (e) computer software, data and
documentation, (f) trade secrets and confidential business information
(including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, (g) other proprietary rights, and (h) copies and tangible
embodiments thereof (in whatever form or medium).
"KNOWLEDGE" means actual knowledge after reasonable inquiry and
investigation.
"LIABILITY" means any liability or obligation of any nature (whether
known or unknown, whether absolute or contingent, whether liquidated or
unliquidated, and whether due or to become due), including any liability for
Taxes.
"LIBOR RATE" means relative to any interest period, the rate of
interest determined as follows: (a) on the interest determination date, the
lending party shall obtain the offered quotation(s) that appear on the Reuters'
Screen for Dollar deposits for a period comparable to such interest period. If
at least two such offered quotations appear on the Reuters' Screen, the LIBOR
Rate shall be the arithmetic average (rounded upwards, if necessary to the
nearest 1/16th of 1%) of such offered quotations, as determined by the lending
party; or (b) if the Reuters' Screen is not available or has been discontinued,
the LIBOR Rate shall be the rate per annum which the lending party in good faith
determines to be the arithmetic average (rounded as aforesaid) of the offered
quotations for Dollar deposits in an amount comparable to the lending party's
share of the relevant amount in respect of which the LIBOR Rate is being
determined for a period comparable to the relevant LIBOR Interest Period that
lending banks in New York City selected by the lending party are quoting at
11:00 A.M. on the interest determination date in New York Interbank Market to
major international banks.
"LIENS" means, with respect to any property or assets, any mortgage,
deed of trust, pledge, hypothecation, assignment, security interest, lien,
charge, easement, encumbrance, preference, priority or other security agreement
or preferential arrangement of any kind or nature with respect to such property
or assets (including, without limitation, any conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing).
"MATERIAL CONDITION" has the meaning set forth in Section 5(d) hereof.
"MCI BUYER" has the meaning set forth in Section 2(a)(i)(B) hereof.
A-3
"MCI FCC LICENSE" means MCI's FCC authorization to construct, launch
and operate satellites in the Direct Broadcast Satellite Service operating over
28 frequency channels at the 110DEG. West Longitude orbital location (FCC DA
96-2165, released December 20, 1996).
"NEWCO" has the meaning set forth in Section 2(b) hereof.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PERSON" means an individual, partnership, trust, corporation, joint
venture, limited liability company, association, government bureau or agency or
other entity of whatever kind or nature.
"PRELIMINARY FCC APPROVAL" means an order released by the FCC (and not
by a bureau or other division or subdivision thereof pursuant to delegated
authority) which grants, or conditionally grants (other than subject to a
Material Condition which is unacceptable to Seller), the FCC's consent to the
assignment of the MCI FCC License to Seller or Newco.
"REGISTRATION RIGHTS AGREEMENT," means the Registration Rights
Agreement to be entered into by and among Seller, MCI (or a direct or indirect
wholly-owned subsidiary of MCI) and ASkyB (or a direct or indirect wholly-owned
subsidiary of News Corporation), in the form of Exhibit C annexed hereto.
"REGULATORY PROVISIONS" means all applicable requirements of the
Communications Act and the published policies, rules, decisions, and regulations
of the FCC as amended from time to time.
"REQUISITE CORPORATE APPROVALS" means the approval of Seller's Board of
Directors and its stockholders and, if applicable, the Board of Directors of any
Subsidiary of Seller required pursuant to applicable law with respect to the
authorization of Seller or such Subsidiary to execute and deliver this Agreement
and the Collateral Agreements to which it is a party and to perform the
transactions contemplated hereby and thereby.
"RETRANSMISSION CONSENT AGREEMENT" means the Retransmission Consent
Agreement, to be entered into by and between Fox Television Holdings, Inc. and
Seller, in the form of Exhibit D annexed hereto.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens arising under worker's
compensation, unemployment insurance, social security, retirement, and similar
legislation, (b) liens on goods in transit incurred pursuant to documentary
letters of credit, and (c) other liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of money, the
extension of credit or default or potential default of money owed.
"SELLER MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, assets, operations, prospects or condition (financial or otherwise) of
the Seller and its Subsidiaries, taken as a whole, excluding any change or
development resulting from (a) events adversely affecting any of the principal
markets served by the business of Seller or (b) general economic conditions,
including changes in the economies of any of the jurisdictions in which Seller
or any of its Subsidiaries conduct business.
"SETTLEMENT AGREEMENT AND MUTUAL RELEASE" means the Settlement
Agreement and Mutual Release, to be entered into by and among Seller, Charles W.
Ergen, News Corporation and ASkyB, in the form of Exhibit E annexed hereto.
"SET TOP BOX AGREEMENT" means the Development and Supply Agreement for
Set Top Boxes, to be entered into by and between Seller and a DBS company in
which News Corporation has an interest, containing the terms and conditions set
forth in Exhibit F annexed hereto.
A-4
"SIGNIFICANT SUBSIDIARY" means any Subsidiary of Seller that (i) falls
within the definition of "significant subsidiary" set forth in Rule 1-02 of
Regulation S-X under the Securities Act, (ii) is subject to the periodic
reporting requirements of the Securities Exchange Act or (iii) is, or becomes, a
party to this Agreement or any of the Collateral Agreements.
"SUBSIDIARY" of a specified Person means any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the Board of Directors or other Persons performing
similar functions are directly or indirectly owned by such Person.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, however
denominated, including any interest, penalty, or addition thereto, whether
disputed or not.
"TRANSFERRED ASSET MATERIAL ADVERSE EFFECT" means a material adverse
effect on the use by or benefit to Seller of any of the Transferred Assets,
excluding any change or development resulting from (a) events adversely
affecting any of the principal markets served by the businesses of Seller or any
of its Subsidiaries, or (b) general economic conditions, including changes in
the economies of any of the jurisdictions in which Seller or any of its
Subsidiaries conduct business.
"U.S. SATELLITE BUSINESS" means any proposed or ongoing uses of
communications satellites to provide direct-to-home (including hotels, motels,
bars, restaurants, multiple dwelling units and other similar uses) video and
associated audio programming services using FSS/BSS frequencies directly to the
antennas or other reception equipment of customers or subscribers of such
business activity principally in the United States, or to multiple dwelling
units comprising such customers or subscribers.
"VOTING AGREEMENT" means the letter agreement entered into by and among
Charles W. Ergen, Seller, MCI, News Corporation and ASkyB, as of the date
hereof, annexed as Exhibit G hereto.
2. PURCHASE AND SALE.
(a) SHARES TO BE PURCHASED BY THE TRANSFERORS.
(i) At the Closing (as hereinafter defined), upon the
terms and subject to the conditions set forth in this Agreement, the
Transferors agree to purchase from Seller, and Seller agrees to issue
and sell to the Transferors, an aggregate of 30,000,000 shares (the
"Shares") of Seller's Class A Common Stock, subject to adjustment (x)
for any stock split, stock dividend, subdivision or combination of the
Common Stock (as hereinafter defined) or any other action having a
similar effect on the Common Stock, and (y) as set forth in Section
2(a)(ii) below, as follows:
(A) 24,030,000 shares of Class A Common
Stock shall be issued and sold to ASkyB or a direct or
indirect wholly-owned Subsidiary of News Corporation
designated by ASkyB (the "ASkyB Buyer"); and
(B) 5,970,000 shares of Class A Common Stock
shall be issued and sold to MCI or a direct or indirect
wholly-owned Subsidiary of MCI designated by MCI (the "MCI
Buyer").
(ii) The number of shares of Common Stock issuable to the
ASkyB Buyer and the MCI Buyer pursuant to Section 2(a)(i) shall be
subject to adjustment as follows: (A) if the Current Market Price is
less than $15.00 per share (subject to adjustment for any stock split,
stock dividend, subdivision or combination of the Common Stock or any
change in corporate structure affecting the Common Stock), then Seller
shall issue such number of additional shares of Common Stock to the
ASkyB Buyer and the MCI
A-5
Buyer, on a pro rata basis, so that the total market value of the
Shares issued to them (based on such Current Market Price) is not
less than $450,000,000; provided, however, that in no event shall
the Transferors collectively own of record or vote shares
corresponding to more than 49.9% of the total outstanding voting power
of Seller or more voting power of Seller than all other shareholders of
Seller; or (B) if the Current Market Price is greater than $39.00 per
share (subject to adjustment for any stock split, stock dividend,
subdivision or combination of the Common Stock or any change in
corporate structure affecting the Common Stock), then the number of
Shares issued to the ASkyB Buyer and the MCI Buyer shall be reduced, on
a pro rata basis, so that the total market value of the Shares issued
to them (based on such Current Market Price) is not greater than
$1,170,000,000.
(b) ASSETS TO BE TRANSFERRED TO SELLER. At the Closing, upon
the terms and subject to the conditions set forth in this Agreement, and in
consideration for the Shares to be purchased by the Transferors hereunder, each
of the Transferors agrees to assign, transfer and convey to Seller, or, at
Seller's option, one or more direct or indirect wholly owned Subsidiaries of
Seller (collectively, "Newco") all of its right, title and interest in and to
the specified assets set forth below (collectively, the "Transferred Assets"):
(i) GILBERT PROPERTY. ASkyB shall transfer and convey to
Seller or Newco all of its right, title and interest in and to certain
real property located in Gilbert, Arizona, as more particularly
described in Section 2(b)(i)(I) of the Transferor Disclosure Schedule
(as hereinafter defined), and all improvements thereon, including,
without limitation, (A) all buildings, Earth Station Facilities and
other structures, (B) the fixtures, furniture and equipment described
in Section 2(b)(i)(II) of the Transferor Disclosure Schedule, and all
instruction manuals and other personal property (including all
warranties associated therewith), and (C) keys to such property, to the
extent the foregoing are owned by the Transferors (the "Gilbert
Property").
(ii) GILBERT CONTRACTS. ASkyB shall assign all of its
right, title and interest in and to all maintenance and equipment
contracts entered into with respect to the Gilbert Property, including
all warranties set forth therein (collectively the "Gilbert
Contracts"), as set forth in Section 2(b)(ii) of the Transferor
Disclosure Schedule including, among others, the equipment contract
with Sony Electronics, Inc. (the "Sony Contract"), except that the
Transferred Assets shall not include, and the Transferors shall not
assign to Seller, any of the Gilbert Contracts that Seller designates
as "Excluded Contracts" in accordance with Section 5(c)(iii) hereof.
(iii) MCI FCC LICENSE. MCI shall assign, transfer and
convey to Seller or Newco all of its right, title and interest to (A)
the MCI FCC License and (B) the application for minor modification and
clarification of license conditions for the MCI FCC License filed by
MCI on May 5, 1997, and to any application for modification of the MCI
FCC License that may be required to be filed hereafter until Closing.
(iv) EARTH STATION AUTHORIZATIONS. ASkyB shall assign,
transfer and convey to Seller or Newco all of its right, title and
interest in and to its FCC earth station authorizations in respect of
the Gilbert Property (the "Earth Station Authorizations") under Call
Signs E980174, E980178, E980180, E970394, E970395 and E970396.
(v) SATELLITE CONTRACTS AND SATELLITE WORK IN PROCESS.
Each of the Transferors shall assign all of its respective right, title
and interest in and to the agreements and insurance policies or
arrangements set forth in Section 2(b)(v) of the Transferor Disclosure
Schedule annexed hereto, including but not limited to the satellites
and launches work in process pursuant thereto, and all deliverables
pursuant to those agreements, and including all rights to enforce such
contracts (collectively, the "Satellite Contracts" and, together with
the Gilbert Contracts, but excluding any Excluded Contracts, the
"Assigned Contracts"), in accordance with the terms of the Satellite
Contracts.
(vi) INTELLECTUAL PROPERTY. The Transferors shall assign,
transfer and convey all of their respective right, title and interest
in and to any Intellectual Property acquired from the U.S. government
or other parties to the Satellite Contracts in connection with the MCI
FCC License, the Earth Station Authorizations or the Assigned
Contracts.
A-6
It is specifically acknowledged and agreed by the Seller that the
Transferors are not assigning, transferring and conveying to Seller any assets
pursuant to this Agreement other than the Transferred Assets.
(c) ASSUMPTION OF LIABILITIES. Except as provided in Sections
5(f)(vii) and 5(g) hereof, effective as of the Closing, and upon the terms and
subject to the conditions of this Agreement, Seller agrees to assume all
liabilities and obligations of the Transferors and their Affiliates arising
under the Assigned Contracts and the other Transferred Assets, including all
obligations of the Transferors under the MCI FCC License and the Earth Station
Authorizations, including, without limitation, obligations with respect to
completion of satellite construction, system deployment and provision of
telemetry, tracking and control services.
(d) THE CLOSING. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Squadron,
Ellenoff, Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New York, New York,
commencing at 9:00 a.m. local time on the fifth business day following the
satisfaction or waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated hereby or such other date as the
Transferors and Seller may mutually determine (the "Closing Date").
(e) DELIVERIES AT CLOSING. At the Closing, (i) Seller shall
deliver to the Transferors the various certificates, instruments, agreements and
documents referred to in Section 6(a) below, (ii) the Transferors shall deliver
to Seller the various certificates, instruments, agreements and documents
referred to in Section 6(b) below and (iii) Seller shall deliver to the
Transferors duly executed and authenticated stock certificates, representing all
of the Shares to be purchased by the MCI Buyer and the ASkyB Buyer pursuant
hereto. The certificates representing the Shares shall initially bear the legend
set forth in Section 9(n) hereto.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to the Transferors as follows:
(a) REPRESENTATIONS AND WARRANTIES TRUE, CORRECT AND COMPLETE.
Seller represents and warrants to each of the Transferors that the statements
contained in this Section 3 that are qualified by reference to materiality or a
material adverse effect are true, correct and complete as of the date of this
Agreement and will be true, correct and complete as of the Closing Date, and
that all of the other statements made in this Section 3 that are not so
qualified are true, correct and complete in all material respects as of the date
of this Agreement and will be true, correct and complete in all material
respects as of the Closing Date, except, in each case, (i) for such
representations and warranties that are expressly made as of the date of this
Agreement, in which case such representations and warranties need only to be
true, correct and complete on and as of the date of this Agreement, (ii) for
such representations and warranties that are expressly made as of an earlier
date, in which case such representations and warranties need only to be true,
correct and complete on and as of such earlier date and (iii) as disclosed in a
document referring specifically to the representations and warranties in this
Section 3 which has been delivered by Seller to each of the Transferors on or
prior to the date hereof (the "Seller Disclosure Schedule"). Nothing in the
Seller Disclosure Schedule shall be deemed adequate to disclose an exception to
a representation or warranty made herein unless the Seller Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty itself solely
addresses the existence of the document or other item). The Seller Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section.
(b) ORGANIZATION OF SELLER AND THE SIGNIFICANT SUBSIDIARIES.
(i) Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada,
and each of the Significant Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation.
(ii) As of the date hereof, Seller and each of the
Significant Subsidiaries is duly qualified or licensed to do business
as a foreign corporation and is in good standing, in each jurisdiction
where the character of the property owned or leased by it, or the
nature of its activities, makes such qualification or
A-7
licensing necessary, except for those jurisdictions where the failure
to be so qualified or licensed and in good standing would not,
individually or in the aggregate, have a Seller Material Adverse
Effect.
(c) POWER AND AUTHORITY OF SELLER.
(i) Seller has all requisite corporate power and
authority to own, lease and operate its properties as now conducted and
to execute and deliver this Agreement and each Collateral Agreement to
which it is a party, including any additional documents contemplated by
this Agreement, and to perform its obligations hereunder and
thereunder.
(ii) As of the date hereof, Seller has all governmental
licenses, authorizations, consents and approvals required to own, lease
and operate its properties as now conducted, except where the failure
to have such governmental licenses, authorizations, consents and
approvals would not, individually or in the aggregate, have a Seller
Material Adverse Effect.
(d) POWER AND AUTHORITY OF SIGNIFICANT SUBSIDIARIES.
(i) As of the date hereof, each Significant Subsidiary
has all requisite corporate power and authority and all governmental
licenses, authorizations, consents and approvals required to own, lease
and operate its properties as now conducted, except where the failure
to have such governmental licenses, authorizations, consents and
approvals would not, individually or in the aggregate, have a Seller
Material Adverse Effect.
(ii) Each Significant Subsidiary which is, or will be, a
party to this Agreement or a Collateral Agreement has, or will have, as
of the date of execution of this Agreement or such Collateral
Agreement, all requisite corporate power and authority to execute and
deliver such Collateral Agreement and to perform its obligation
thereunder.
(e) CORPORATE AUTHORIZATION. The execution, delivery and
performance by Seller of this Agreement and the execution, delivery and
performance by Seller and each Significant Subsidiary of each of the Collateral
Agreements to which Seller or such Significant Subsidiary is a party, and the
consummation of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary corporate action of Seller and such Significant
Subsidiary, as the case may be, other than shareholder approval pursuant to the
rules and regulations of Nasdaq, which shall be obtained on or prior to the
Closing Date. This Agreement and each of the Collateral Agreements to which
Seller or a Significant Subsidiary is a party, including any additional
documents contemplated by this Agreement, constitutes (or when executed, will
constitute) the valid and legally binding obligation of Seller and such
Significant Subsidiary, as the case may be, enforceable against each of Seller
and such Significant Subsidiary, as the case may be, in accordance with each
document's respective terms and conditions, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equitable principles.
(f) GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Seller of this Agreement and each of the Collateral Agreements to
which it is a party, and the consummation of the transactions contemplated
hereby and thereby, do not require any consent, approval, authorization or
permit of, or filing with or notification to any governmental or regulatory
authority, except (A) for (i) compliance with any applicable requirements of the
Hart-Scott-Rodino Act, and the rules and regulations thereunder; (ii) compliance
with any applicable provisions of the Securities Act, and the rules and
regulations thereunder, state securities or "blue sky" laws and state takeover
laws, and approval of the inclusion of the Shares for trading on Nasdaq; (iii)
compliance with any applicable requirements of the Securities Exchange Act and
the rules and regulations thereunder; and (iv) compliance with any applicable
requirements of the Regulatory Provisions or (B) where the failure to obtain
such consents, approvals, authorizations and permits, or to make such filings or
notifications, would not prevent or delay in any material respect the
consummation of the transactions contemplated hereby or thereby or otherwise
prevent Seller from performing its obligations under this Agreement or any of
the Collateral Agreements to which it is a party in accordance with the terms
and subject to the conditions hereof and thereof, and would not, individually or
in the aggregate, have a Seller Material Adverse Effect.
A-8
(g) NONCONTRAVENTION. Except as set forth in Section 3(g) of
the Seller Disclosure Schedule and Section 3(f) hereof, the execution, delivery
and performance of this Agreement and each of the Collateral Agreements to which
Seller or a Significant Subsidiary is a party do not, and the consummation of
the transactions contemplated hereby and thereby will not, (A) contravene or
conflict with the certificate of incorporation, by-laws or other organizational
documents of Seller, or any Significant Subsidiary; (B) contravene, conflict
with or constitute a violation of any provision of any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court binding upon or
applicable to Seller or any Significant Subsidiary or any of their respective
properties or assets, which contravention, conflict or violation could
reasonably be expected to have a Seller Material Adverse Effect; (C) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, require any notice or give rise to a loss of any benefit under, any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest or other arrangement to which Seller or any Significant Subsidiary is a
party or by which any of them is bound or to which any of their assets is
subject or result in the creation or imposition of any Security Interests on any
assets of Seller or any Significant Subsidiary, which contravention, violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, or loss of benefit would have a Seller Material Adverse Effect or
adversely affect the ability of Seller or any Significant Subsidiary to
consummate the transactions contemplated hereby or by the Collateral Agreements;
or (D) assuming approval by Seller's shareholders in accordance with the rules
and regulations of Nasdaq, violate or conflict with the rules, regulations or
listing requirements of Nasdaq or any other exchange or trading market on which
Seller's securities may be listed or traded.
(h) CAPITALIZATION.
(i) As of the date hereof, the authorized capital stock
of Seller consists of (x) 400,000,000 shares of Common Stock, par value
$.01 per share, of which 200,000,000 shares are designated Class A
Common Stock, 100,000,000 shares are designated Class B Common Stock,
and 100,000,000 shares are designated Class C Common Stock (the Class A
Common Stock, the Class B Common Stock and the Class C Common Stock are
referred to collectively herein as the "Common Stock"), and (y)
20,000,000 shares of Preferred Stock. As of the date hereof, 15,268,708
shares of Class A Common Stock, 29,804,401 shares of Class B Common
Stock, no shares of Class C Common Stock, 1,616,681 shares of Preferred
Stock, which has been designated 8% Series A Cumulative Preferred
Stock, 225,301 shares of Preferred Stock, which has been designated
12 1/8% Series B Senior Redeemable Exchangeable Preferred Stock, par
value $.01 per share, and 2,300,000 shares of Preferred Stock, which
has been designated 6 3/4% Series C Cumulative Convertible Preferred
Stock, are issued and outstanding and no shares of any class or series
are held in treasury.
(ii) All of the issued and outstanding shares of capital
stock of Seller have been, and on the Closing Date will be, duly
authorized, validly issued, fully paid and nonassessable.
(iii) As of the Closing Date, the Shares will have been
duly authorized and, when issued to the ASkyB Buyer and the MCI Buyer,
upon payment of the consideration therefor, will be validly issued,
fully paid and non-assessable, and the issuance will not be subject to
(x) any Liens (other than those relating to the activities of the
Transferors) or (y) any preemptive or similar rights of any security
holder of Seller.
(iv) As of the date hereof, except as set forth in
Section 3(h) of the Seller Disclosure Schedule, (A) all of the issued
shares of capital stock of each Significant Subsidiary of Seller are
owned, directly or indirectly, by Seller; (B) there are no outstanding
or authorized convertible or exchangeable securities of Seller or any
Significant Subsidiary, options, warrants, rights, contracts, calls,
puts, rights to subscribe, conversion rights, or agreements or
commitments pursuant to which any Person has any rights to acquire from
Seller or any Significant Subsidiary, and neither Seller nor any
Significant Subsidiary has any obligations, contingent or otherwise, to
repurchase, redeem or otherwise acquire any shares of capital stock or
voting securities of Seller or any Significant Subsidiary; (C) there
are no outstanding or authorized stock appreciation, phantom stock or
similar rights of Seller or any Significant Subsidiary; and (D) there
are no voting trusts, proxies or any other agreements or understandings
to which Seller or any Significant
A-9
Subsidiary is a party or of which it has Knowledge with respect to the
voting of the capital stock or voting securities of Seller or any
Significant Subsidiary.
(i) SEC FILINGS.
(i) Seller has filed all forms, reports and documents
required to be filed by it with the Securities and Exchange Commission
("SEC") since January 1, 1995, and Seller has heretofore made available
to the Transferors, in the form filed with the SEC (including any
exhibits thereto), (A) the Annual Reports on Form 10-K of Seller for
the fiscal years ended December 31, 1995, December 31, 1996 and
December 31, 1997 (the "1997 Annual Report"), respectively, and the
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
1998, June 30, 1998 and September 30, 1998 (the "September Quarterly
Report"), respectively; (B) all proxy and information statements
relating to meetings of stockholders of Seller (whether annual or
special) held since January 1, 1995; and (C) all other reports and
registration statements (including all Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K) filed by Seller with the SEC since
January 1, 1995 (including all amendments to each of the foregoing, the
forms, reports and other documents referred to in clauses (A) through
(C) being referred to herein, collectively, as the "Seller Disclosure
Documents"). The Seller Disclosure Documents and other forms, reports
or other documents filed by Seller with the SEC after the date of this
Agreement but prior to the Closing Date (x) were prepared, or will be
prepared, in accordance with the Securities Act or the Securities
Exchange Act, as the case may be, and the rules and regulations
thereunder, and (y) did not at the time they were filed, or will not at
the time they are filed, with the SEC contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not
misleading.
(ii) Each of the consolidated financial statements
(including any notes thereto) contained in the Annual Reports on Form
10-K of Seller for the fiscal years ended December 31, 1995, December
31, 1996 and December 31, 1997, and Quarterly Reports on Form 10-Q of
Seller for the quarterly periods through and including September 30,
1998, was prepared in accordance with generally accepted accounting
principles and all applicable rules of the SEC and fairly presents in
all material respects the consolidated financial position, results of
operations and cash flows of each of Seller and its consolidated
Subsidiaries as at the respective dates thereof and for the respective
periods indicated therein, subject, in the case of unaudited
statements, to normal year-end adjustments.
(iii) Except as set forth in the 1997 Annual Report and
the September Quarterly Report, or as otherwise set forth in Section
3(i) of the Seller Disclosure Schedule, neither Seller nor its
consolidated Subsidiaries had, as of the respective dates thereof, any
Liability that (i) would be required under generally accepted
accounting principles to be reflected in such consolidated balance
(including the notes thereto) or (ii) would reasonably be expected to
have, individually or in the aggregate, a Seller Material Adverse
Effect.
(j) ABSENCE OF CERTAIN CHANGES. As of the date hereof, since
September 30, 1998, and except as (i) set forth in the 1997 Annual Report or in
the September Quarterly Report or (ii) disclosed in Section 3(j) of the Seller
Disclosure Schedule, or as otherwise contemplated by this Agreement or the
Collateral Agreements, there has not been any event, occurrence or development
of a state of circumstances or facts which has had or reasonably would be
expected to have a Seller Material Adverse Effect.
(k) BROKERS' FEES. Neither Seller nor any Subsidiary of Seller
has any Liability or obligation to pay any fees or commissions to any broker,
finder or agent with respect to the transactions contemplated by this Agreement
for which any of the Transferors would be liable.
4. REPRESENTATIONS AND WARRANTIES OF THE TRANSFERORS. Each of ASkyB,
News Corporation and MCI, jointly and severally, represents and warrants to
Seller as follows:
(a) REPRESENTATIONS AND WARRANTIES TRUE, CORRECT AND COMPLETE.
Each of ASkyB, News Corporation and MCI represents and warrants to Seller that
the statements contained in this Section 4 that are qualified by reference to
materiality or a material adverse effect are true, correct and complete as of
the date of this
A-10
Agreement and will be true, correct and complete as of the Closing Date and
all other statements in this Section 4 that are not so qualified are true,
correct and complete in all material respects as of the date of this
Agreement and will be true, correct and complete in all material respects as
of the Closing Date except, in each case, (i) for such representations and
warranties that are expressly made as of the date of this Agreement, in which
case such representations and warranties need only to be true, correct and
complete on and as of the date of this Agreement, (ii) for such
representations and warranties that are expressly made as of an earlier date,
in which case such representations and warranties need only to be true,
correct and complete on and as of such earlier date and (iii) as disclosed in
a document referring specifically to the representations and warranties in
this Section 4 which has been delivered by the Transferors to Seller on or
prior to the date hereof (the "Transferor Disclosure Schedule"). Nothing in
the Transferor Disclosure Schedule shall be deemed adequate to disclose an
exception to a representation or warranty made herein unless the Transferor
Disclosure Schedule identifies the exception with reasonable particularity
and describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception
to a representation or warranty made herein (unless the representation or
warranty itself solely addresses the existence of the document or other
item). The Transferor Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this
Section.
(b) ORGANIZATION OF THE TRANSFERORS. ASkyB is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware. News Corporation is a corporation duly
organized under the laws of South Australia, Australia. MCI is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
(c) POWER AND AUTHORITY OF THE TRANSFERORS.
(i) Each of the Transferors has all requisite corporate
or limited liability company power and authority to own, lease and
operate the Transferred Assets as now conducted and to execute and
deliver this Agreement and each Collateral Agreement to which it is a
party, including any additional documents contemplated by this
Agreement, and to perform its obligations hereunder and thereunder.
(ii) Each of the Transferors has all governmental
licenses, authorizations, consents and approvals required to own, lease
and operate the Transferred Assets being transferred by it, except
where the failure to have such governmental licenses, authorizations,
consents and approvals would not, individually or in the aggregate,
have a Transferred Asset Material Adverse Effect.
(d) CORPORATE AUTHORIZATION. The execution, delivery and
performance by each of the Transferors of this Agreement and each of the
Collateral Agreements to which such Transferor is a party, and the consummation
of the transactions contemplated hereby and thereby, have been duly authorized
by all necessary corporate action of each Transferor. This Agreement and each of
the Collateral Agreements to which each Transferor is a party, including any
additional documents contemplated by this Agreement, constitutes (or when
executed, will constitute) the valid and legally binding obligation of each
Transferor, enforceable against each Transferor, in accordance with each
document's respective terms and conditions, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equitable principles.
(e) GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by each Transferor of this Agreement and each of the Collateral
Agreements to which each Transferor is a party, and the consummation of the
transactions contemplated hereby and thereby, do not require any consent,
approval, authorization or permit of, or filing with or notification to any
governmental or regulatory authority, except (A) for (i) compliance with any
applicable requirements of the Hart-Scott-Rodino Act, and the rules and
regulations thereunder; (ii) compliance with any applicable provisions of the
Securities Act and the rules and regulations thereunder, state securities or
"blue sky" laws and state takeover laws; (iii) compliance with any applicable
requirements of the Securities Exchange Act, and the rules and regulations
thereunder; and (iv) compliance with any applicable requirements of the
Regulatory Provisions, and (B) where the failure to obtain such consents,
approvals, authorizations and permits, or to make such filings or notifications,
would not prevent or delay in any material respect the consummation of the
transactions contemplated hereby or thereby or otherwise prevent the Transferors
from performing their respective obligations under this Agreement or any of the
Collateral Agreements to which such Transferor is a party in accordance with the
A-11
terms and subject to the conditions hereof and thereof, and would not,
individually or in the aggregate, have a Transferred Asset Material Adverse
Effect.
(f) NONCONTRAVENTION. Except as set forth in Section 4(f) of
the Transferor Disclosure Schedule and Section 4(e) hereof, the execution,
delivery and performance of this Agreement and each of the Collateral Agreements
to which each of the Transferors is a party do not, and the consummation of the
transactions contemplated hereby and thereby will not, (A) contravene or
conflict with the certificate of incorporation, by-laws or other organizational
or charter documents of each of the Transferors; (B) contravene or conflict with
or constitute a violation of any provision of any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other restriction
of any government, governmental agency, or court binding upon or applicable to
any of the Transferors, or any of their respective properties or assets; or (C)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, require any notice or give rise to a loss of any benefit under, any
of the Transferred Assets or any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest or other arrangement to which any
of the Transferors is a party or by which any of them is bound or to which any
of the Transferred Assets, is subject or result in the creation or imposition of
any Security Interests on any of the Transferred Assets, which contravention,
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, or loss of benefit would have a Transferred Asset Material Adverse
Effect or adversely affect the ability of any Transferor to consummate the
transactions contemplated hereby or by the Collateral Agreements.
(g) GILBERT PROPERTY.
(i) ASkyB owns good and marketable title to the Gilbert
Property, free and clear of all Liens or other matters affecting
Seller's or its Subsidiaries' title to or possession of the Gilbert
Property, except for Liens (a) for taxes and other governmental
charges, assessments or fees which are not yet due and payable or (b)
set forth on Section 4(g)(i) of the Transferor Disclosure Schedule.
(ii) There are no outstanding options or rights of first
refusal to purchase the Gilbert Property, or any portion thereof or
interest therein; and there are no leases, subleases, licenses,
concessions or other agreements, written or oral, granting to any party
or parties the right of use or occupancy of any portion of the Gilbert
Property.
(iii) ASkyB and News Corporation shall keep and maintain
the Gilbert Property substantially in the same condition as it exists
on the date hereof and shall preserve the Gilbert Property from
deterioration, other than ordinary wear and tear; provided, however,
that Seller acknowledges and agrees that the Transferors are under no
obligation to continue construction of or make any additional
improvements to any of the structures, furniture, fixtures or equipment
located at the Gilbert Property, including, without limitation, the
improvements described in Section 4(g)(iii) of the Transferor
Disclosure Schedule, other than pursuant to the Gilbert Contracts.
(iv) With respect to the Gilbert Property:
(A) as of the date hereof, there are no
pending or, to the Knowledge of any of the Transferors,
threatened condemnation proceedings relating to the Gilbert
Property;
(B) there are no parties (other than ASkyB)
in possession of the Gilbert Property who are lawfully in
possession;
(C) the use and condition of and the
operations on the Gilbert Property are in compliance with
Environmental Laws, except where the failure to comply,
individually or in the aggregate, would not have a Transferred
Asset Material Adverse Effect;
(D) as of the date hereof, (i) there are no
judicial or administrative actions, proceedings or
investigations pending or, to the Knowledge of any Transferor,
currently
A-12
threatened to revoke any environmental permits required for
the current use of and the operations on the Gilbert Property,
and (ii) ASkyB has not received any written notice from any
governmental entity or written notice from any Person to the
effect that there is lacking such permit;
(E) as of the date hereof, there are no
judicial or administrative actions, proceedings, or
investigations pending or, to the Knowledge of any Transferor,
currently threatened against ASkyB alleging the violation of,
or liability pursuant to, any Environmental Law, except for
liabilities or violations which could not reasonably be
expected to have, individually or in the aggregate, a
Transferred Asset Material Adverse Effect;
(F) except as set forth in Section
4(g)(iv)(H) of the Transferor Disclosure Schedule, neither
ASkyB nor News Corporation has Knowledge of, nor has filed any
notice with respect to the Gilbert Property under any
Environmental Law indicating, past or present treatment,
storage, transfer, release, manufacture, presence or disposal
of or reporting a release or currently threatened release of
hazardous material into the environment, except for such
releases that could not reasonably be expected to have,
individually or in the aggregate, a Transferred Asset Material
Adverse Effect;
(G) neither ASkyB nor News Corporation is
subject to any outstanding order, injunction, judgment,
decree, ruling, assessment, or arbitration award or any
agreement with any governmental entity or other Person, or to
any federal, state, local or foreign investigation respecting
(i) Environmental Laws or (ii) the release or currently
threatened release of any hazardous material, except in either
case for such orders, injunctions, judgments, decrees,
rulings, assessments, arbitration awards, or agreements which
could not reasonably be expected to have, individually or in
the aggregate, a Transferred Asset Material Adverse Effect;
(H) except as set forth in Section
4(g)(iv)(H) of the Transferor Disclosure Schedule, none of the
operations on the Gilbert Property involves or, to ASkyB's
Knowledge, previously involved the generation, transportation,
treatment, storage, release, use, manufacture or disposal of
hazardous waste, as defined under 40 C.F.R. Parts 260-270 or
any state, local or foreign equivalent, except for as may be
permitted by law or as could not reasonably be expected to
have, individually or in the aggregate, a Transferred Asset
Material Adverse Effect;
(I) ASkyB will provide to Seller, as
promptly as practicable, all environmental reports the
existence of which it is aware concerning the Gilbert
Property;
(J) as of the date hereof, ASkyB has
expended to date in respect of the Gilbert Property not less
than $109 million, excluding capitalized interest;
(K) as of the date hereof, (1) the buildings
and improvements are located within the boundary lines of the
Gilbert Property, and do not encroach on any easement which
may burden the land, (2) the land does not serve any adjoining
property for any purpose inconsistent with the use of the
land, and (3) the Gilbert Property is not located within any
flood plain, wetland, or subject to any similar type of
restriction for which any permits or licenses necessary for
the use thereof have not been obtained, except where such
encroachment or restriction would not, individually or in the
aggregate, have a Transferred Asset Material Effect;
(L) as of the date hereof, all facilities
located on the Gilbert Property are supplied with utilities
and other services necessary for the current use and operation
of such facilities; and
(M) as of the date hereof, the Gilbert
Property abuts on and has direct vehicular access to a public
road.
A-13
(v) Section 4(g)(v) of the Transferor Disclosure
Schedule sets forth a listing of all insurance policies (other than
title insurance) in force associated with the Gilbert Property and the
amount of coverage thereunder. Each such insurance policy is in full
force and effect, and the rights of the parties thereunder will not be
affected in any material respect by the transactions contemplated by
this Agreement and the Collateral Agreements. ASkyB shall maintain all
such insurance policies or similar coverages until the Closing Date,
and shall obtain an endorsement to all such policies requiring the
insurer to notify Seller prior to any cancellation or termination
thereof or amendment thereto.
(h) ASSIGNED CONTRACTS.
(i) The Transferors have delivered to Seller a correct
and complete copy of each Assigned Contract, as amended to date, listed
in Sections 2(b)(ii) and (v) of the Transferor Disclosure Schedule.
(ii) Except as set forth in Section 4(h) of the
Transferor Disclosure Schedule, each of the Transferors has complied
with and performed in all material respects all of its obligations
required to be performed under each of the Assigned Contracts to which
it is a party.
(iii) Except as set forth in Section 4(h) of the
Transferor Disclosure Schedule, with respect to each Assigned Contract
so listed: (A) the arrangement or agreement is legal, valid and binding
obligation of the applicable Transferor and, to the Knowledge of such
Transferor, each of the other parties thereto, enforceable against such
parties in accordance with the terms thereof, and is in full force and
effect; (B) the arrangement or agreement will continue to be legal,
valid, binding and enforceable and in full force and effect on
identical terms immediately following the Closing; (C) none of the
Transferors is in breach or default under any Assigned Contract to
which it is a party, and no event has occurred which, with notice or
lapse of time, or both, would constitute a breach or default by any of
the Transferors, or permit termination, modification, or acceleration,
under the arrangement or agreement; (D) to the Knowledge of the
Transferors, no third party is in breach or default under any Assigned
Contract, and no event has occurred which, with notice or lapse of
time, or both, would constitute a breach or default by such party
thereunder or permit termination, modification, or acceleration, under
the arrangement or agreement; (E) none of the Transferors has received
written notice canceling, terminating or repudiating or exercising any
option to cancel, terminate or repudiate under any of the Assigned
Contracts to which it is a party and none of the Transferors has any
Knowledge that any party has failed to comply with or perform all of
its obligations required to be performed under any of the Assigned
Contracts; (F) none of the Transferors has any Knowledge that the
validity of any of the Assigned Contracts to which it is a party is
being contested by a third party; (G) neither Sky I nor Sky II (as
hereinafter defined) have been delivered into storage; and (H) as of
the date hereof, the Transferors know of no reason why the launch
vehicle will not be available by the August 31, 1999 date with respect
to Sky I or the fourth quarter of 1999 date with respect to Sky II,
specified in Sections 5(f)(ii) and 5(f)(iii), respectively, other than
as set forth in the letter dated September 18, 1998 from James Dongog
of International Launch Services to an employee of Loral.
(iv) Subject to the receipt of necessary consents, the
execution and delivery by the Transferors of this Agreement and the
Collateral Agreements to which a Transferor is a party and the
consummation of the transactions contemplated hereby and thereby have
not resulted and will not result in a breach or default under, or
permit any party to modify any obligation under, or cause or permit any
termination, cancellation or loss of benefits under, any of the
Assigned Contracts.
(i) INTELLECTUAL PROPERTY. Each of the Transferors owns or has
the right to use pursuant to license, sublicense, agreement or permission all
Intellectual Property currently necessary for the construction, use or operation
of the Transferred Assets. The Transferors have no Knowledge of any condition or
event that would prevent Seller from obtaining in a timely manner all
Intellectual Property necessary to complete the construction and launch of Sky I
and Sky II at no cost to Seller, or to use or operate any of the Transferred
Assets.
(j) LITIGATION. Sections 4(j), 4(l)(i) and 4(l)(ii) of the
Transferor Disclosure Schedule sets forth each instance in which any Transferor
(i) is subject to any unsatisfied judgment, order, decree, stipulation,
injunction, or charge or (ii) is a party or, to the Knowledge of such Transferor
and the directors and officers (and employees with responsibility for litigation
matters) of such Transferor or any Subsidiary of such Transferor, is
A-14
threatened to be made a party to any charge, complaint, action, suit,
proceeding, hearing, or investigation of or in any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction
or before any arbitrator, other than any judgment, order, decree,
stipulation, injunction, charge, complaint, action, suit, proceeding, hearing
or investigation that, individually or in the aggregate, would not reasonably
be expected to have a Transferred Asset Material Adverse Effect.
(k) Legal Compliance. Except as set forth in Sections 4(k),
4(l)(i) and 4(l)(ii) of the Transferor Disclosure Schedule, as of the date
hereof, and, with respect to the Satellite Contracts and the MCI FCC License, as
of the Closing Date as well, each of the Transferors has complied in all
material respects, and the Transferred Assets, including the operations thereof,
are in compliance in all material respects, with all laws (including, without
limitation, all Environmental Laws), including rules and regulations thereunder,
of federal, state, local and foreign governments (and all agencies thereof),
except for failures which would not, individually or in the aggregate,
reasonably be expected to have a Transferred Asset Material Adverse Effect or a
material adverse effect on the consummation of the transactions contemplated by
this Agreement and the Collateral Agreements, and no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, demand, or notice has been
filed or commenced against any Transferor alleging any failure to comply with
any such law or regulation which, individually or in the aggregate, could
reasonably be expected to have a Transferred Asset Material Adverse Effect.
(l) FCC MATTERS.
(i) Except as set forth in Section 4(l)(i) of the
Transferor Disclosure Schedule, the MCI FCC License is valid; MCI
controls and has always controlled the MCI FCC License and the system
authorized thereunder; MCI has timely and completely performed all
obligations required to date under the MCI FCC License; MCI has timely
submitted all filings and reports required thereunder; MCI has taken
all actions required of MCI to date to achieve international
coordination of the authorized system, including, without limitation,
all actions required to date to achieve (a) all necessary modifications
to the International Telecommunication Union's Region 2
Broadcasting-Satellite Service Plan and associated feeder link plan set
forth at Appendices 30 and 30A to the International Radio Regulations
and (b) coordination of the system's Telemetry, Tracking and Control
functions; and has proceeded with the construction of the DBS system
with "diligence" (as such term is used in the Regulatory Provisions);
and such DBS system has been designed and is being constructed to
comply with, and when so constructed will be in compliance with, all
obligations required to date under the MCI FCC License and the
applicable Regulatory Provisions, including without limitation the
geographic service requirements currently imposed on DBS permittees.
(ii) Except as set forth in Section 4(l)(ii) of the
Transferor Disclosure Schedule, ASkyB's Earth Station Authorizations
are valid and in full force and effect, ASkyB has performed to date all
obligations required to be performed thereunder, and the Gilbert
Property includes Earth Station Facilities that are fully capable of
operating in accordance thereto.
(iii) MCI has delivered to Seller a true, correct and
complete copy of the MCI FCC License. The MCI FCC License is in full
force and effect and is unimpaired by any materially adverse condition.
MCI has delivered to Seller true, correct and complete copies of all
material correspondence from the FCC to MCI relating to the MCI FCC
License and all material correspondence, submissions and/or other
filings from MCI to the FCC relating thereto sent to or received by MCI
subsequent to the auction of 28 frequency channels at the 110DEG. West
Longitude orbital location. Except as set forth in Section 4(l)(i) of
the Transferor Disclosure Schedule, no application, action or
proceeding is pending for the renewal or modification of the MCI FCC
License, and no application, complaint, action or proceeding is pending
or, to the Knowledge of MCI, threatened, that may result in the
revocation, modification, non-renewal or suspension of the license or
the imposition of any administrative or judicial sanction with respect
to MCI. MCI has no Knowledge of any failure of MCI to comply (whether
or not known by or disclosed to the FCC or any other Person) in all
material respects with all Regulatory Provisions applicable to the U.S.
Satellite Business, and with the terms and conditions of the MCI FCC
License, including, but not limited to, any due diligence obligations
or reporting requirements associated with the MCI FCC License.
A-15
(iv) Except for the Earth Station Authorizations, neither
ASkyB nor News Corporation holds or controls any license in connection
with the U.S. Satellite Business contemplated to be operated by MCI,
News Corporation and ASkyB.
(v) Section 4(l)(v) of the Transferor Disclosure
Schedule sets forth a listing of all insurance policies in force
associated with any satellite or other facility related to the
Transferred Assets. Each such insurance policy is in full force and
effect, and the rights of the parties thereunder will not be affected
in any material respect by the transactions contemplated by this
Agreement or any Collateral Agreement.
(vi) Except as contemplated by Section 5(b) hereof, no
consent, approval, authorization, order or waiver of, or filing with,
the FCC is required under the applicable Regulatory Provisions to be
obtained or made by MCI in connection with the transactions
contemplated by this Agreement, except such as may already have been
obtained and made.
(m) TRANSFERRED ASSETS.
(i) No Person other than the Transferors and their
respective Affiliates has any right, title or interest in, or with
respect to, the MCI FCC License, and the rights being transferred by
MCI hereunder with regard to the MCI FCC License, constitute all of the
rights, including contractual rights, held by the Transferors and their
respective Affiliates with regard to the MCI FCC License. Any rights of
News Corporation or ASkyB or any of their Affiliates relating to the
MCI FCC License are either included in the Transferred Assets or will
be terminated prior to the Closing.
(ii) No Person, other than ASkyB, has any right, title or
interest in, or with respect to, the Earth Station Authorizations, and
the rights being transferred by ASkyB hereunder with regard to the
Earth Station Authorizations constitute all of the rights, including
contractual rights, held by ASkyB with regard to the Earth Station
Authorizations. The Satellite Contracts include all of the contracts,
agreements, understandings, rights, insurance policies and arrangements
necessary for the construction, launch or insurance of Sky I and Sky
II. The Gilbert Contracts include all of the maintenance and equipment
contracts, agreements, understandings, rights, warranties and
arrangements of ASkyB with respect to the Gilbert Property.
(n) BROKER'S FEES. The Transferors do not have any Liability
or obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which the Seller
would be liable.
(o) RESALE. Each of the ASkyB Buyer and the MCI Buyer is
acquiring the Shares under this Agreement for its own account solely for the
purpose of investment and not with a view to, or for offer or sale in connection
with, any distribution thereof in violation of the Securities Act. Each of the
ASkyB Buyer and the MCI Buyer has such knowledge and experience in financial and
business matters as to be capable of evaluating the risks and merits of an
investment in the Shares and is able to bear the economic risk of such
investment. Each of the ASkyB Buyer and the MCI Buyer acknowledges and agrees
that none of the Shares have been registered under the Securities Act and such
Shares may be sold or disposed of in the absence of such registration only
pursuant to an exemption from such registration and in accordance with the terms
of this Agreement and Seller's transfer agent is authorized to place stop
transfer instructions on the Seller's stock transfer records and may refuse to
transfer any Shares not transferred in compliance therewith or in compliance
with the restrictions on transfer set forth in Section 9(m).
5. FURTHER AGREEMENTS OF THE PARTIES.
(a) GENERAL. Each of the Parties will cooperate to its fullest
extent and use its respective best efforts to take all action and to do all
things necessary, proper, or advisable to consummate and make effective the
transactions contemplated by this Agreement (including satisfying the closing
conditions set forth in Section 6 below) as soon as practicable following the
date of this Agreement.
A-16
(b) NOTICES AND CONSENTS. Seller shall give all required
notices to its stockholders and to third parties, and shall use its best
efforts to obtain all required consents, including, without limitation, all
Requisite Corporate Approvals and all required consents of Seller's
bondholders, all consents required by Nasdaq or any other exchange where
Seller's securities may be listed or trading and any other material
third-party consents that may be required or that the Transferors reasonably
may request, in connection with the transactions contemplated by this
Agreement. Each of the Transferors shall give all required notices to third
parties, and shall use its best efforts to obtain all required consents,
including, without limitation, all consents required by counterparties to the
Satellite Contracts, regulatory authorities and any other material
third-party consents that may be required or that Seller reasonably may
request, in connection with the transactions contemplated by this Agreement.
Within five (5) calendar days following the date of this Agreement, each of
the Parties shall file any Notification and Report Forms and related
materials that it may be required to file with the Federal Trade Commission
("FTC") and the Antitrust Division of the United States Department of Justice
(the "Antitrust Division") under the Hart-Scott-Rodino Act, and shall make
any further filings pursuant thereto that may be necessary, proper or
advisable. Within five (5) calendar days following the date of this
Agreement, each of the Parties shall make all notifications and file all
applications and related materials that it may be required to file with the
FCC or any other federal, state or foreign government or governmental agency
having authority with respect to licenses, permits or authorizations for the
use of orbital slots or the provision of communications services or other
communications licenses, permits or authorizations in connection with the
transactions contemplated hereby, and shall use its best efforts to obtain at
the earliest practicable date all necessary consents, authorizations and
approvals, including FCC Approval for assignment of the MCI FCC License. As
promptly as is practicable after the date of this Agreement, each of the
Parties shall take any additional action, including, without limitation, the
implementation of an Acceptable Alternative Arrangement, and any additional
filings, submissions or applications required by the FCC, the FTC and the
Antitrust Division, that may be necessary, proper or advisable to effect to
the fullest extent feasible the consummation of the transactions contemplated
by this Agreement and the Collateral Agreements in connection with any other
notices to, filings with, and authorizations, consents and approvals of,
governments, governmental agencies and third parties that it may be required
to give, make or obtain and shall refrain from taking any action the purpose
or effect of which could reasonably be expected to make less likely that such
authorizations, consents and approvals will not be given, made or obtained on
the terms provided for in this Agreement. Without limiting the generality of
the foregoing, each party shall: (i) use all reasonable efforts to cooperate
in all respects with each other in connection with any filing, submission,
adversarial proceeding or the timing thereof; (ii) in connection with any
investigation or other inquiry, including any proceeding initiated by a
private party, keep the other parties informed on a timely basis of any
material communication received by such party from, or given by such party
to, the FTC, the Antitrust Division, the FCC or any other governmental
authority and of any material communication received or given in connection
with any proceeding by a private party, in each case regarding any of the
transactions contemplated by this Agreement, and permit any other party to
preview any material communication given by or to it; and (iii) consult with
each other, in advance of any meeting or conference with such governmental
authorities or, in connection with any proceeding by a private party. The
Parties will use their best efforts to obtain such approvals as promptly as
possible and, in this regard, provide all information reasonably requested,
assist and cooperate with one another to make the necessary filings and take
such steps as may be necessary to secure the non-objection of the relevant
antitrust and regulatory authorities, including FCC Approval for assignment
of the MCI FCC License.
(c) OPERATION OF BUSINESS.
(i) During the period between the date hereof and the
Closing Date, (A) each of the Transferors shall use commercially
reasonable efforts in the Ordinary Course of Business, (1) to preserve
the value and utility of the Transferred Assets, (2) to preserve the
goodwill of its suppliers and others having business relations with
such Transferor with respect to any Transferred Assets and (3) to
perform and observe all the terms, covenants and conditions required to
be performed and observed by it under the Satellite Contracts and all
FCC and other governmental permits, licenses and other authorizations
with respect to the Transferred Assets, in each case, except to the
extent that a failure to do so would not result in a Transferred Asset
Material Adverse Effect; provided, however, that timely requests for
extension of operation or certification deadlines applicable to Earth
Station Authorizations shall be deemed to be a commercially reasonable
effort required by this paragraph; (B) except as contemplated by this
Agreement, the Transferors shall not agree to materially modify the
deliverables pursuant to, or waive any material performance under, any
of the Assigned Contracts without the consent of Seller, which consent
shall not be unreasonably withheld; (C) except for the issuance of
shares of Common Stock pursuant to the exercise of
A-17
outstanding rights, warrants, options, convertible securities or
exchangeable securities (including any of the foregoing that are
assumed in connection with the acquisition of any Person), Seller
shall not issue any shares of Common Stock (or securities
convertible into or exchangeable for Common Stock) at a price per
share (or having a conversion or exchange price per share, if a
security convertible into or exchangeable for Common Stock) less
than the Current Market Price per share of Common Stock; (D) Seller
shall not issue or fix a record date for the issuance to holders of
Common Stock of rights, options, or warrants to subscribe for or
purchase Common Stock (or securities convertible into or
exchangeable for Common Stock) at a price per share (or having a
conversion or exchange price per share, if a security convertible
into or exchangeable for Common Stock) less than the Current Market
Price per share of Common Stock (excluding any of the foregoing that
are assumed or issued in connection with the acquisition of any
Person); and (E) MCI shall take all actions reasonably necessary to
keep the MCI FCC License in full force and effect until the Closing.
(ii) If it comes to the attention of any of the
Transferors that any events or circumstances regarding the Transferred
Assets require the taking of any action to preserve the value and
utility of the Transferred Assets, such Transferor will (A) promptly
notify Seller of such events or circumstances and of any potential
responses to such events and circumstances of which such Transferor is
aware and (B) take such actions as shall be requested by Seller and
reasonably required to preserve such value and utility.
(iii) At any time after the date hereof, until the date
that is 30 days prior to the Closing Date, Seller may notify the
Transferors in writing that it does not require the assignment of one
or more of the Gilbert Contracts. In such case, the Transferors shall
be permitted to terminate any such contract, and it shall be designated
an "Excluded Contract" for purposes of this Agreement and shall no
longer be included in the Transferred Assets.
(d) ASSIGNMENT OF THE MCI FCC LICENSE. In accordance with
Section 5(b), upon execution of this Agreement, ASkyB, News Corporation, MCI
and Seller shall seek FCC Approval of the assignment of the MCI FCC License
to Seller or Newco. Each of the Transferors and Seller shall take all
reasonable steps necessary, and shall supply to the other parties and/or to
the FCC all information reasonably necessary, to obtain such FCC Approval,
and shall take all reasonable steps necessary, including the implementation
of an Acceptable Alternative Arrangement, to effect to the fullest extent
feasible the consummation of the transactions contemplated in this Agreement
and the Collateral Agreements , and shall cooperate with respect to any
required submission to the FCC and/or the International Telecommunication
Union, including any submission required to allow use of the 110DEG. and
119DEG. West Longitude orbital locations in conjunction with a single consumer
satellite receive antenna; provided, however, that nothing contained in this
Agreement shall create any obligation on the part of Seller to accept (as a
condition to receipt of such FCC Approval or otherwise): (i) any restriction
(other than a restriction imposed in respect of the identity of the owners of
Seller's outstanding voting securities) on the right of Seller to operate
pursuant to the MCI FCC License or the DBS authorizations held by
Subsidiaries of Seller with respect to frequency channels at 61.5DEG.
West Longitude, 119DEG. West Longitude and 148DEG. West Longitude
orbital locations, including, without limitation, the right to use all
assigned frequency channels authorized thereunder to provide high-powered DBS
services, other than any such restrictions generally imposed on operators of
high-powered DBS services, by applicable Regulatory Provisions and
restrictions of the types generally and customarily imposed by the FCC on
operators of high-powered DBS services and such other restrictions, which,
individually or in the aggregate, do not have a Transferred Asset Material
Adverse Effect or a Seller Material Adverse Effect; (ii) any change in the
management or ownership (other than as contemplated hereunder) of Seller, or
in any voting or other rights of any shareholder of Seller other than the
Transferors; or (iii) a requirement that Seller dispose of all or any part of
the 21 frequency channels at 119DEG. West Longitude, the 11 frequency channels
at 61.5DEG. West Longitude or the 24 frequency channels at 148DEG. West
Longitude owned by Subsidiaries of Seller, other than any such restrictions
generally imposed on operators of high-powered DBS services, by applicable
regulatory provisions and restrictions of the types generally and customarily
imposed by the FCC on operators of high-powered DBS services and such other
restrictions, which, individually or in the aggregate, do not have a Seller
Material Adverse Effect (each of the conditions contained in the foregoing
Sections 5(d)(i), (ii) and (iii), which Seller is under no obligation to
accept, are referred to herein as a "Material Condition"). If the parties
implement an Acceptable Alternative Arrangement in lieu of assigning the MCI
FCC License to Seller as provided herein, Seller shall have the continuing
right and option, exercisable in its sole discretion, and for no additional
consideration to the Transferors beyond that contemplated by this Agreement,
to require the Transferors to immediately assign the MCI FCC License to
Seller,
A-18
upon receipt of FCC Approval, in which case the Acceptable Alternative
Arrangement shall be canceled concurrently with the effectiveness of such
assignment. MCI shall continue to perform all of its material obligations
under the MCI FCC License until the earlier of the Closing Date or the date
of termination of this Agreement, and shall continue to remain in "diligence"
(as the term is used in the FCC's rules and as defined in the Regulatory
Provisions), and to hold a valid authorization for its DBS System, until the
earlier of the Closing Date or the date of termination of this Agreement. If
the Closing Date shall not have occurred by December 20, 2000, MCI shall
confirm to Seller completion of construction of the first satellite on its
proposed DBS system by December 20, 2000.
(e) EARTH STATION AUTHORIZATIONS. Subject to Section
4(l)(ii) of the Transferor Disclosure Schedule, until the earlier of the
Closing Date or termination date of this Agreement, ASkyB shall continue to
perform all of its obligations under its Earth Station Authorizations and to
hold valid authorizations (including through seeking the extension of
deadlines for construction and certification contained in the existing
authorizations).
(f) SATELLITES.
(i) From the date of this Agreement until the Closing
Date, the Transferors agree to continue to perform their respective
obligations under the Satellite Contracts.
(ii) The Transferors hereby confirm that, pursuant to the
Contract dated February 26, 1996 between MCI and Space Systems Loral,
Inc. ("Loral"), as amended by Amendment No. 1 dated March 26, 1996, and
Amendment No. 2 dated as of November 25, 1998 (as amended, the "Loral
Contract"), the acceptance on-orbit of Satellite No. 1 (as defined in
the Loral Contract) ("Sky I") is scheduled to occur no later than
August 31, 1999 (subject to launch vehicle availability, as set forth
in Amendment No. 2 to said Contract). The Transferors agree to attempt
to integrate satellite construction and launch preparation as
expeditiously as possible so as to provide for the potential to move up
the launch dates for each of Sky I and Sky II in the event that earlier
launch dates become available. Notwithstanding anything to the contrary
in this Section 5(f)(ii), the Transferors shall have no obligation to
approve the launch of Sky I for a date prior to the Closing Date;
provided, however, that the Transferors shall use their best efforts to
ensure that the launch shall occur at the earliest practicable date
following the Closing in accordance with the terms and provisions of
the Loral Contract, including, to the extent permitted under the Loral
Contract, delaying the launch date for the shortest incremental periods
of time possible which are consistent with the then reasonably
anticipated Closing Date.
(iii) Transferors hereby agree to direct Loral to resume
work immediately after the date hereof on Satellite No. 2 (as defined
in the Loral Contract) ("Sky II") by exercising Option No. 3 of the
Loral Contract (as defined in Amendment No. 2 of the Loral Contract).
Transferors hereby confirm that Loral has agreed to use its best
efforts to ship and launch Sky II by the fourth quarter of 1999.
(iv) As soon as reasonably practicable following the
Closing Date, the Transferors agree to provide to Seller, at no cost to
Seller, the consulting services of Romulo Pontual with respect to the
construction and launch of Sky I and Sky II, which services shall be
provided on an "as needed" basis, up to the full time and efforts of
Mr. Pontual.
(v) Prior to the Closing Date, the Transferors shall use
commercially reasonable efforts consistent with past practice to
provide that Loral will continue to perform under the Satellite
Contracts in accordance with their terms in order to achieve completion
of construction and launch of each of Sky I and Sky II at the earliest
practicable date.
(vi) On or prior to the Closing Date, the Transferors
shall provide for policies of insurance covering Sky I and Sky II,
which policies shall either name Seller or a wholly owned Subsidiary of
Seller designated by Seller as the named insured, or cause such
policies to be issued in the name of Seller or such Subsidiary,
providing for insurance in the amount of $225 million per satellite and
continuing for one year following launch, regardless of the actual date
of launch, and which shall otherwise contain such customary terms and
conditions as Seller reasonably requests; provided, however, that to
the extent the Transferors are able to terminate existing policies and
receive a full refund in respect thereof, Seller may request the
A-19
Transferors to procure, and if requested the Transferors shall procure,
from such insurance companies or brokers as Seller directs, insurance
("Seller's Launch Insurance") in the amount of $225 million per
satellite, per launch plus one year in orbit, containing such customary
industry terms and conditions as Seller shall reasonably request.
(vii) Subject to Section 8(b) of this Agreement, from and
after the Closing Date, the Transferors shall continue to pay, on
behalf of Seller, as and when due, all amounts due under the Satellite
Contracts, as such obligations to pay arise pursuant to the Satellite
Contacts in existence as of the Closing Date, or, in the event of a
breach or termination of any Satellite Contract for any reason, as such
obligations to pay would reasonably be expected to have arisen pursuant
to the Satellite Contracts in existence as of the Closing Date had
there been no such breach or termination; provided, however, that if
Seller agrees to a modification of any of the Satellite Contracts and
as a result is entitled to a reduction in the purchase price therein,
the Transferors shall be only obligated to pay the purchase price as so
reduced. In the event the Transferors fail to make such payments within
the time periods provided in the Satellite Contracts, the Transferors
shall either (x) pay, in addition to the amounts due, any penalties
that become due under the Satellite Contracts as a result of such
failure or (y) in the event that Seller elects to make such payments,
promptly pay to Seller an amount equal to such payments, together with
interest thereon at a rate of 17.5% per annum from the date of Seller's
payment until the date of the Transferors' repayment.
(viii) In the event the Transferors are unable to procure
the necessary consents to assignment of any of the Satellite Contracts,
from and after the Closing Date the Transferors shall use their
respective best efforts to provide to Seller all of the benefits
received or to be received under such Satellite Contracts, and the
Transferors shall assign to Seller all of their right, title and
interest in and to each of Sky I and Sky II immediately following their
receipt of title thereto from Loral pursuant to Section 12.1 of the
Loral Contract. In addition, from and after the Closing Date, if the
Transferors have not assigned all of the Satellite Contracts pursuant
to this Agreement, Seller shall have the right to direct all actions to
be taken in connection with such unassigned Satellite Contracts.
(g) SONY CONTRACT.
(i) From and after the Closing Date, the Transferors
shall continue to pay, on behalf of Seller, as and when due, all
amounts due under the Sony Contract as such obligations to pay arise
pursuant to the Sony Contract in existence as of the Closing Date, or,
in the event of a breach or termination of the Sony Contract for any
reason, as such obligations to pay would reasonably be expected to have
arisen pursuant to the Sony Contract in existence as of the Closing
Date hereof had there been no such breach or termination; provided,
however, if Seller agrees to a modification of the Sony Contract and as
a result is entitled to a reduction in the purchase price therein, the
Transferors shall be only obligated to pay the purchase price as so
reduced. In the event the Transferors fail to make such payments within
the time periods provided in the Sony Contract, the Transferors shall
either (x) pay, in addition to the amounts due, any penalties that
become due under the Sony Contract as a result of such failure or (y)
in the event that Seller elects to make such payments, promptly pay to
Seller an amount equal to such payments, together with interest thereon
at a rate of 17.5% per annum from the date of Seller's payment until
the date of the Transferors' repayment.
(ii) In the event the Transferors are unable to procure
the necessary consents to assignment of the Sony Contract, from and
after the Closing Date the Transferors shall use their respective best
efforts to provide to Seller all of the benefits received or to be
received under the Sony Contract. In addition, from and after the
Closing Date, if the Transferors have not assigned the Sony Contract
pursuant to this Agreement, Seller shall have the right to direct all
actions to be taken in connection with the Sony Contract.
(h) FULL ACCESS. From the date of this Agreement through
the Closing, each of the Transferors, on the one hand, and Seller, on the
other hand, shall afford to the other party and its representatives free and
full access at all reasonable times to the properties, personnel, books and
records relating to the Transferred Assets or of the Seller, as the case may
be (such access not to unreasonably interfere with the business of such
party), subject to compliance with all export control restrictions, to the
extent applicable, in order that the other party may have full opportunity to
make such investigations as it may reasonably desire to make of all matters
relating to the
A-20
transactions contemplated hereunder. Notwithstanding the foregoing, Seller
shall not be obligated to disclose any information that is competitively
sensitive or strategically sensitive, and if Seller shall determine to
withhold any information on such grounds, a reasonable summary of the
portions thereof that are not competitively or strategically sensitive shall
be provided to the party requesting information pursuant to this Section
5(h). Any information provided pursuant to this Section 5(h) shall be kept
confidential by the Transferors and Seller, as applicable, and shall not be
revealed to any Person other than the respective officers, directors,
employees, agents and representatives of such parties (it being agreed that
the Transferors, on the one hand, and Seller, on the other hand, shall be
liable for any breach of this Section 5(h) by any of their respective
officers, directors, employees, agents and representatives), except to the
extent such information (i) is or becomes generally available to the public
(other than as a result of a breach of this Section 5(h) by the recipient of
such information) or (ii) is required to be disclosed under any applicable
law or under subpoena or other legal process. No such investigation shall
diminish in any respect any of the representations or warranties of the
Parties. The Parties shall be entitled to seek injunctive relief or such
other remedy as may be available at law or in equity for any breach by
another Party of this Section.
(i) NOTICE OF DEVELOPMENTS. Each Party will give prompt
written notice to the others of any material development affecting the
ability of the Parties to consummate the transactions contemplated by this
Agreement or any of the Collateral Agreements, including, but not limited to,
a breach of a representation, warranty or covenant of this Agreement. No
disclosure by any Party pursuant to this Section 5(i) shall, however, be
deemed to amend or supplement the Seller Disclosure Schedule or Transferor
Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
(j) NDS EQUIPMENT. The Parties agree that all equipment
previously delivered by any Affiliate of News Corporation to Seller or its
Subsidiaries (the "NDS Equipment") at its broadcast operations center at
Cheyenne, Wyoming or elsewhere, will be removed by News Corporation or an
Affiliate at the expense of News Corporation or such Affiliate. The Parties
further agree that any agreements related to the acquisition and delivery of
the NDS Equipment are terminated as of the date of this Agreement and shall
be of no further force or effect. News Corporation, on the one hand, and the
Seller, on the other hand, on behalf of themselves and their respective
Affiliates, agree to fully, finally and forever release and discharge Seller
or News Corporation, as the case may be, and their respective Affiliates,
officers, directors, employees, representatives and agents from and against
any and all claims, actions, damages, liabilities, costs or expenses arising
out of or relating to the NDS Equipment.
(k) ABEYANCE OF ECHOSTAR LITIGATION. Seller, News
Corporation and ASkyB shall promptly as practicable following the date of
this Agreement file the Stipulation annexed as Exhibit H hereto with the
United States District Court for the District of Colorado to stay all
discovery, deadlines, motions and other proceedings in EchoStar
Communications Corporation v. The News Corporation Limited, pending in the
United States District Court for the District of Colorado (the "EchoStar
Litigation").
(l) TRANSFER TAXES AND PRORATIONS. Any sales or other
transfer taxes resulting from the transfer of the Transferred Assets shall be
borne one-half by the Transferors, on the one hand, and one-half by the
Seller, on the other hand. Notwithstanding the foregoing, real estate taxes
and other customary prorations made in connection with the sale of real
property in the state of Arizona shall be made as of the Closing Date in
accordance with Arizona custom and usage.
(m) FURTHER ASSURANCES. In case at any time after the
Closing any further action is necessary or desirable to carry out the
purposes of this Agreement or the Collateral Agreements or the transactions
contemplated hereby or thereby, including, among other things, the orderly
transfer and transition of the Transferred Assets from the Transferors to
Seller or Newco, as the case may be, each of the Parties will take such
further action (including the execution and delivery of such further
instruments and documents) as any other Party reasonably may request, the
costs and expenses of such actions to be borne one-half by the Transferors,
on the one hand, and one-half by the Seller, on the other hand, except as
otherwise provided in this Agreement or any of the Collateral Agreements.
None of the Parties shall take any action or fail to take any action which
would reasonably be expected to frustrate the intent and purposes of this
Agreement and the Collateral Agreements or the transactions contemplated
hereby or thereby.
(n) NO SOLICITATION. Except for the transactions
contemplated by this Agreement, from and after the date of this Agreement,
until the date of an FCC Order or, in the case of a Bureau Order, the later
of October 31,
A-21
1999 or five days from the date of such Bureau Order, none of the Transferors
shall, nor shall they authorize or permit any officer, director or employee
of, or any investment banker, attorney, accountant, or other representative
retained by, any one of them to, directly or indirectly, solicit, initiate,
encourage or entertain (including by way of furnishing information)
discussions, inquiries, offers or proposals or participate in any discussions
or negotiations for the purpose or with the intention of leading to any
proposal or offer from any Person which constitutes or concerns, or may
reasonably be expected to lead to, any proposal for a merger or other
business combination involving any proposal or offer to acquire any portion
of the Transferred Assets. Each of the Transferors shall promptly (and in any
event within two business days) notify Seller of any inquiry it receives from
any Person with respect to the subject matter of the first sentence of this
Section 5(n).
(o) BUNDLING. Seller and MCI agree that, following the
Closing, MCI shall have the non-exclusive right to bundle Seller's DBS
service with MCI's telephony service offerings on mutually agreeable terms.
(p) CASUALTY; CONDEMNATION.
(i) The Transferors, after learning of any fire or
other casualty on or to the Gilbert Property, shall promptly notify
Seller thereof, and, as soon as reasonably practicable thereafter,
the Transferors shall provide Seller with an estimate of the cost of
repairs and the amount of insurance proceeds available to undertake
such repairs. Within ten (10) days after receipt of such notices and
estimates, Seller shall in turn notify the Transferors whether
Seller wants the Transferors to commence repair of the resultant
damage of the Gilbert Property. If Seller wants the Transferors to
so commence, or if Transferors, in the exercise of prudent business
judgment, decide to so commence, the Transferors shall proceed to
repair the Gilbert Property but shall not be obligated to expend
more than any collected insurance proceeds and the amount of any
insurance deductible. Should such fire or other casualty create an
emergency situation, the Transferors may elect to take such measures
to protect, secure and repair the Gilbert Property as the
Transferors in their own discretion determine. At the Closing Date,
the Transferors shall pay to Seller any proceeds they have received
in respect of any such fire or other casualty; provided, however,
that if the Transferors have undertaken any repairs in accordance
with this Section 5(p)(i), the Transferors shall turn over to Seller
the balance of any unused insurance proceeds in the Transferors'
possession. At the Closing, the Transferors shall also assign
(without warranty or recourse to the Transferors) to Seller all of
the Transferors' rights to any payments to be made after the Closing
Date under any hazard insurance policy then in effect with respect
to the Gilbert Property. If it is necessary to prosecute a claim to
maximize the proceeds of insurance recovery, from and after the
Closing Date the Transferors shall diligently undertake such
prosecution for the benefit of Seller. The Transferors shall not
enter into any agreement to undertake repairs with a term that
extends beyond the Closing Date without the prior written consent of
Seller, which consent shall not be unreasonably withheld. Following
the Closing Date, except as set forth above, the Transferors shall
have no further liability or responsibility with respect to any such
preceding fire or other casualty at the Gilbert Property. Following
the Closing Date, Seller shall reimburse the Transferors for the
cost of any repairs made by the Transferors prior to the Closing and
not reimbursed by the Transferors' hazard insurance company, to the
extent Seller receives any insurance proceeds from and after the
Closing Date.
(ii) At the Closing Date, the Transferors shall pay to
Seller any proceeds it has received in respect of any taking of any
part of the Gilbert Property, and shall assign to Seller without
recourse or warranty its right to any future proceeds in respect
thereof. Following the Closing Date, the Transferors shall have no
further liability or responsibility with respect to any such preceding
taking or proceeding regarding the Gilbert Property. If it is necessary
to prosecute a claim to maximize the proceeds of taking recovery, from
and after the Closing Date the Transferors shall diligently undertake
such prosecution for the benefit of Seller.
(q) TITLE INSURANCE. ASkyB will obtain, not later than thirty
(30) calendar days following the date of this Agreement with respect to the
Gilbert Property, a commitment for an extended coverage ALTA Owner's Policy of
Title Insurance Form 1992 issued by a Chicago Title Insurance Company or such
other title insurer reasonably satisfactory to Seller (and, if requested by
Seller, reinsured in whole or in part by one or more insurance companies and
pursuant to a direct access agreement reasonably acceptable to Seller), such
amount as Seller reasonably may determine to be the fair market value of such
real property (including all improvements located
A-22
thereon), insuring title to such real property to be in the name of Seller as
of the Closing (subject only to the title exceptions described above in
Section 4(g)(i) of the Transferor Disclosure Schedule) and containing in
substance such endorsements as ASkyB obtained in Chicago Title Insurance
Company Policy No. 106 0000449, a copy of which has been furnished to Seller.
The cost of such title policy shall be borne one-half by the Transferors, on
the one hand, and one-half by Seller, on the other hand.
(r) SURVEYS. With respect to the Gilbert Property, ASkyB
will procure in preparation for the Closing a current survey certified to
Seller, prepared by a licensed surveyor and conforming to current ATLA
Minimum Detail Requirements for Land Title Surveys, disclosing the location
of all improvements, easements, party walls, sidewalks, roadways, utility
lines, and other matters shown customarily on such surveys, and showing
access affirmatively to a public street or road (the "Survey"). The cost of
the Survey shall be borne one-half by the Transferors, on the one hand, and
one-half by Seller, on the other hand.
6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE TRANSFERORS. The
obligation of each of the Transferors to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of
the following conditions on or prior to the Closing, any of which may be
waived by News Corporation:
(i) The representations and warranties of Seller set
forth in Sections 3(b)(i), 3(c)(i), 3(d)(ii), 3(e), 3(g)(A), 3(g)(D)
and 3(h)(iii) that are qualified by materiality or a material adverse
effect shall be true and correct at and as of the Closing Date, and all
other representations and warranties of Seller set forth in such
sections that are not so qualified shall be true and correct in all
material respects at and as of the Closing Date, except, in each case,
(i) for such representations and warranties that are expressly made as
of an earlier date in which case such representations and warranties
shall only be true and correct on and as of such earlier date and (ii)
as disclosed in the Seller Disclosure Schedule;
(ii) Seller shall have procured all of the consents and
approvals specified in Section 6(a)(ii) of the Seller Disclosure
Schedule;
(iii) There shall be no statute, law, judgment, decree,
injunction, rule or order of any federal, state, local or foreign
government, governmental authority, governmental department,
commission, administrative or regulatory agency, instrumentality, court
or arbitrator ("Governmental Entities") outstanding that prohibits,
restricts or delays consummation of the transactions contemplated by
this Agreement;
(iv) Seller shall have delivered to the Transferors a
certificate, dated the Closing Date, in form and substance reasonably
satisfactory to the Transferors, executed by an executive officer of
Seller, to the effect that each of the conditions specified above in
Section 6(a)(i)-(iii) is satisfied in all respects;
(v) All applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated, and the Parties shall have received the FCC
Approval and other authorizations, consents and approvals of other
Governmental Entities set forth in the Seller Disclosure Schedule and
the Transferor Disclosure Schedule;
(vi) The Transferors shall have received from counsel to
Seller an opinion addressed to the Transferors and dated as of the
Closing Date in form and substance reasonably satisfactory to the
Transferors;
(vii) Seller shall have executed and delivered to the
Transferors the Registration Rights Agreement;
(viii) Seller shall have executed and delivered, and shall
have caused Charles W. Ergen to execute and deliver, to the Transferors
the Settlement Agreement and Mutual Release;
A-23
(ix) Seller shall have caused to be executed and
delivered to the Transferors the Set Top Box Agreement;
(x) Seller shall have executed and delivered to the
Transferors the Retransmission Consent Agreement; and
(xi) Seller shall have executed and delivered to the
Transferors an Assignment and Assumption Agreement with respect to the
Assigned Contracts, in a form to be mutually agreed upon by the parties
thereto (the "Contract Assignment and Assumption"), and the assumption
of the Assigned Contracts and the MCI FCC License shall be effective as
of the Closing Date.
In the event that one or more of the preceding conditions to the
Transferor's obligations to close have not been satisfied on or prior to the
Closing Date, the Transferors may nonetheless proceed to close (without
waiving such condition) and seek a purchase price adjustment from or pursue a
cause of action for damages against Seller for the failure of Seller to
satisfy such condition.
(b) CONDITIONS TO OBLIGATION OF SELLER. The obligation of
Seller to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions on or
prior to the Closing, any of which may be waived by Seller:
(i) The representations and warranties of each of the
Transferors set forth in Sections 4(b) (excluding the representations
and warranties with respect to good standing status), 4(c)(i), 4(d),
4(f)(A), 4(h)(iii)(A), 4(h)(iii)(B), 4(h)(iii)(C), 4(l)(i) and 4(m)(i)
that are qualified by reference to materiality or a material adverse
effect shall be true and correct at and as of the Closing Date, and all
other representations and warranties set forth in such sections that
are not so qualified shall be true and correct in all material respects
at and as of the Closing Date except, in each case, (i) for such
representations and warranties that are expressly made as of an earlier
date, in which case such representations and warranties shall only be
true and correct on and as of such earlier date and (ii) as disclosed
in the Transferor Disclosure Schedule;
(ii) The Transferors shall have procured all of the
consents specified in Section 6(b)(ii) of the Transferor Disclosure
Schedule; provided, however, that if the Transferors are unable to
procure a consent to the assignment of an Assigned Contract, but are
able to provide Seller with all of the benefits under such Assigned
Contract at no additional cost to Seller, then Seller shall waive this
condition with respect to such Assigned Contract;
(iii) There shall be no statute, law, judgment, decree,
injunction, rule or order of any Governmental Entity which prohibits,
restricts or delays consummation of the transactions contemplated by
this Agreement;
(iv) Each of the Transferors shall have delivered to
Seller a certificate, dated the Closing Date, in form and substance
reasonably satisfactory to Seller, executed by an executive officer of
each of the Transferors, respectively, to the effect that (A) each of
the conditions specified above in Section 6(b)(i)-(iii) is satisfied in
all respects and (B) the representations and warranties set forth in
Section 4(o) are true and correct in all material respects;
(v) All applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated, and the Parties shall have received the FCC
Approval and other authorizations, consents and approvals of other
Governmental Entities set forth in the Seller Disclosure Schedule and
the Transferor Disclosure Schedule;
(vi) Seller shall have received from counsel to MCI, an
opinion or opinions addressed to Seller and dated as of the Closing
Date in form and substance reasonably satisfactory to Seller;
(vii) The Transferors shall have executed and delivered to
Seller the Registration Rights Agreement;
A-24
(viii) The Transferors shall have executed and delivered
the Settlement Agreement and Mutual Release;
(ix) The Transferors shall have caused to be executed and
delivered to Seller the Set Top Box Agreement;
(x) The Transferors shall have caused to be executed and
delivered to Seller the Retransmission Consent Agreement;
(xi) The Transferors shall have caused to be executed and
delivered to Seller the Components License Agreement;
(xii) The Transferors shall have delivered to Seller a
Special Warranty Deed in the form of Exhibit I annexed hereto,
conveying the Gilbert Property to Seller;
(xiii) The Transferors shall have satisfied their
obligations contained in Section 5(f)(vi) hereof; and
(xiv) The Transferors shall have executed and delivered to
Seller the Contract Assignment and Assumption, and an instrument or
instruments of transfer in form and substance reasonably satisfactory
to Seller with respect to the transfer of the Earth Station
Authorizations and the Intellectual Property set forth in Section
2(b)(vi), and the assignment of all Assigned Contracts, the MCI FCC
License, the Earth Station Authorization and the Intellectual Property
shall be effective as of the Closing Date.
In the event that one or more of the preceding conditions to
Seller's obligations to close have not been satisfied on or prior to the
Closing Date, Seller may nonetheless proceed to close (without waiving such
condition) and seek a purchase price adjustment from or pursue a cause of
action for damages against the Transferors for the failure of the Transferors
to satisfy such condition.
7. REMEDIES FOR BREACH OF THIS AGREEMENT.
(a) SURVIVAL. All covenants and agreements contained in
this Agreement and the right to indemnification with respect to all
representations and warranties contained in this Agreement or in any
certificate, document or statement delivered pursuant hereto, shall survive
(and not be affected in any respect by) the Closing, any investigation
conducted by any party hereto and any information which any party may
receive. Notwithstanding anything to the contrary in the foregoing, the right
to indemnification with respect to each representation and warranty (but not
the covenants and other agreements) contained in this Agreement or made
pursuant to any certificate, document or statement delivered pursuant hereto
shall terminate on the last day of the eighteenth month after the month that
includes the Closing Date (the "Survival Date"); provided, however, that the
right to indemnification with respect to such representations and warranties,
and the Liability of any party with respect thereto, shall not terminate with
respect to any claim, whether or not fixed as to Liability or liquidated as
to amount, with respect to which such party has been given written notice
prior to the Survival Date.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE
TRANSFERORS. Seller shall indemnify each of the Transferors and their
respective shareholders, officers, directors, employees, agents and
Affiliates (collectively, "Transferor Indemnitees") and hold each of them
harmless from and against and in respect of any Damages directly or
indirectly incurred by any of them as a result of any breach of a
representation, warranty, covenant or agreement of Seller made hereunder. For
purposes of determining any such Damages incurred by the Transferor
Indemnitees, no regard shall be given to the adjustment provisions set forth
in Section 2(a)(ii) hereof.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER. Each
of News Corporation, MCI and ASkyB, jointly and severally, shall indemnify
Seller, and its shareholders, officers, directors, employees, agents and
Affiliates and hold each of them harmless from and against and in respect of
any Damages directly or indirectly incurred by any of them as a result of any
breach of a representation, warranty, covenant or agreement of News
A-25
Corporation, ASkyB, the ASkyB Buyer, MCI or the MCI Buyer made hereunder
other than Section 4(g)(i), if any Damages suffered as a result thereof are
recoverable under Seller's title insurance policy.
(d) NOTIFICATION; RIGHTS OF PARTIES TO SETTLE OR DEFEND.
Promptly after the occurrence of any event which may give rise to a claim for
indemnification under this Section 7, the party entitled to indemnification
(the "Indemnified Party") shall notify the indemnifying party (the
"Indemnitor") in writing of such claim (the "Claims Notice"). The Claims
Notice shall describe the asserted liability in reasonable detail, and shall
indicate the amount (estimated, if necessary and to the extent feasible) of
the Damages that have been or may be suffered by the Indemnified Party.
Failure by the Indemnified Party to give a Claims Notice to the Indemnitor in
accordance with the provisions of this Section 7(d) shall not relieve the
Indemnitor of its obligations hereunder except to the extent that the
Indemnitor has been actually and materially prejudiced by such failure. The
Indemnitor may elect to compromise or defend, at its own expense, by its own
counsel and to the extent an election with respect to such compromise or
defense is available to the Indemnified Party, any asserted liability. If the
Indemnitor elects to compromise or defend such asserted liability, it shall
within 30 calendar days (or sooner, if the nature of the asserted liability
so requires) notify the Indemnified Party of its intent to do so, and the
Indemnified Party shall cooperate, at the expense of the Indemnitor, in the
compromise of, or defense against, such asserted liability. If the Indemnitor
elects to defend any claim, the Indemnified Party shall make available to the
Indemnitor any books, records or other documents within its control that are
necessary or appropriate for such defense. If the Indemnitor elects not to
compromise or defend the asserted liability, fails to notify the Indemnified
Party of its election as herein provided or contests its obligation to
indemnify under this Agreement (or if counsel to the Indemnified Party
advises such party that there may be a potential conflict of interest between
the Indemnitor and the Indemnified Party, or between the Indemnified Party
and any other indemnified party, or that different or additional defenses
from those available to the Indemnified Party may be available to any other
indemnified party), the Indemnified Party may pay, compromise or defend (at
the expense of the Indemnitor) such asserted liability as the Indemnified
Party considers appropriate. The Parties agree to cooperate fully with one
another in the defense, settlement or compromise of any asserted liability.
Notwithstanding the foregoing, neither the Indemnitor nor the Indemnified
Party may settle or compromise any claim over the objection of the other;
provided, however, that consent to settlement or compromise shall not be
unreasonably withheld. In any event, the Indemnified Party and the Indemnitor
may participate, at their own expense, in the defense of such asserted
liability. For the avoidance of doubt, the rights to indemnification under
this Agreement shall arise in the event of both claims asserted directly by
one Party against the other as well as claims asserted by third parties
against a Party.
(e) EXCLUSIVE REMEDY. Except with respect to a termination
of this Agreement pursuant to Section 8(a)(ii) or Section 8(a)(iii) hereof,
the Parties acknowledge and agree that the indemnity rights set forth in this
Section 7 are to be their exclusive monetary remedies for breaches of the
representations, warranties and covenants contained herein; provided,
however, that nothing in this Section 7(e) shall limit in any way the
availability of specific performance, injunctive relief or other equitable
remedies to which a Party may otherwise be entitled or a cause of action for
fraud.
(f) LIMITATIONS. Any indemnity amounts payable by an
Indemnitor hereunder shall be net of any tax benefit received by the
Indemnified Party as a result of the claim or event giving rise to
indemnification.
8. TERMINATION.
(a) TERMINATION OF AGREEMENT. The Parties may terminate
this Agreement only as provided below:
(i) The Parties may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) The Transferors may terminate this Agreement by
giving written notice to Seller at any time prior to the Closing in the
event Seller is in breach, in any material respect, of any of the
representations and warranties set forth in Section 6(a)(i), unless
such breach shall be subject to cure, in which event termination may
only be effected if such breach shall remain uncured on the 60th day
following receipt of notice of breach; provided, however, that if any
such breach is incapable of cure within 60 days and Seller acted
reasonably diligently during such 60-day period in attempting to cure
such breach,
A-26
this Agreement shall not be terminated pursuant to this Section
8(a)(ii) for so long as the breach remains subject to cure and Seller
acts continuously with reasonable diligence in attempting to cure
such breach;
(iii) Seller may terminate this Agreement by giving
written notice to the Transferors at any time prior to the Closing in
the event any of the Transferors is in breach, in any material respect,
of any of the representations and warranties set forth in Section
6(b)(i), unless such breach shall be subject to cure, in which event,
termination may only be effected if such breach shall remain uncured on
the 60th day following receipt of notice of breach; provided, however,
that if any such breach is incapable of cure within 60 days and the
breaching party acted reasonably diligently during such 60-day period
in attempting to cure such breach, this Agreement shall not be
terminated pursuant to this Section 8(a)(iii) for so long as the breach
remains subject to cure and the breaching party acts continuously with
reasonable diligence in attempting to cure such breach; or
(iv) Either the Transferors or Seller may terminate this
Agreement by giving written notice to Seller or the Transferors, as the
case may be:
(A) if, within the later of (x) December 31,
1999 and (y) sixty (60) days following the date of a Bureau
Order, the FCC does not release a Preliminary FCC Approval, or
if such Preliminary FCC Approval is released within such sixty
(60) day period but does not become an FCC Approval within
thirty (30) days thereafter;
(B) if, within sixty (60) days following the
date of an FCC Order, the FCC does not release a Preliminary
FCC Approval, or if such Preliminary FCC Approval is released
within such sixty (60) day period but does not become an FCC
Approval within thirty (30) days thereafter; or
(C) if within sixty (60) days following the
date of an FCC Approval or FCC Order which conditionally
grants the FCC's consent to the assignment of the MCI FCC
License to Seller or Newco, the Parties are unable to satisfy
a condition other than a Material Condition.
(b) EFFECT OF TERMINATION.
(i) If any Party terminates this Agreement pursuant to
Section 8(a), this Agreement shall become null and void and all
obligations of the Parties hereunder shall terminate without any
Liability of any Party to any other Party, except for (A) any Liability
of any Party then in breach and (B) the provisions of the third
sentence of Section 5(h) relating to confidential information which
shall survive termination.
(ii) Notwithstanding the foregoing, (A) if this Agreement
is terminated for any reason other than pursuant to Section 8(a)(ii) or
Section 8(a)(iii), Seller shall purchase from the Transferors, and the
Transferors shall sell to Seller, Sky II, together with all rights
associated therewith, immediately following the later of the date of
termination or the Transferors' receipt of title to Sky II from Loral
pursuant to Article 12.1 of the Loral Contract, i.e., in-orbit
delivery, at a purchase price equal to the actual direct payments made
under the Loral Contract in respect of Sky II through the date of
purchase, and Seller shall assume all obligations of the Transferors
with respect to Sky II under Article 13 of the Loral Contract dealing
with orbital performance incentives; provided, however, that, as an
alternative to purchasing Sky II, Seller may, at its option, purchase
Sky I, together with all rights associated therewith, from the
Transferors, immediately following the later of the date of termination
or the Transferors' receipt of title to Sky I from Loral pursuant to
Article 12.1 of the Loral Contract, i.e., in-orbit delivery, at a
purchase price equal to the actual direct payments made under the Loral
Contract in respect of Sky I through the date of purchase, and Seller
shall assume all obligations of Transferors with respect to Sky I under
Article 13 of the Loral Contract dealing with orbital performance
incentives; (B) if this Agreement is terminated by the Transferors
pursuant to Section 8 (a)(ii), the Transferors may elect to sell to
Seller, and if so elected Seller shall purchase from the Transferors,
at the Transferors' option, either Sky I or Sky II, together with all
rights associated therewith, immediately following the later of the
date of termination or the Transferors' receipt of title thereto from
Loral pursuant to Article 12.1 of the Loral Contract, i.e, in-orbit
delivery, at a purchase price equal to the actual direct payments made
under the Loral Contract in respect of Sky I or Sky
A-27
II, as applicable, through the date of purchase, and Seller shall
assume all obligations of the Transferors with respect to Sky I or
Sky II, as the case may be, under Article 13 of the Loral Contract
dealing with orbital performance incentives; or (C) if this Agreement
is terminated by Seller pursuant to Section 8(a)(iii), Seller may
elect to purchase from the Transferors, and if so elected the
Transferors shall sell to Seller, at Seller's option, either Sky I or
Sky II, together with all rights associated therewith, immediately
following the later of the date of termination or the Transferors'
receipt of title thereto from Loral pursuant to Article 12.1 of the
Loral Contract, i.e, in-orbit delivery, at a purchase price equal to
the actual direct payments made under the Loral Contract in respect of
Sky I or Sky II, as applicable, through the date of purchase, and
Seller shall assume all obligations of the Transferors with respect to
Sky I or Sky II, as the case may be, under Article 13 of the Loral
Contract dealing with orbital performance incentives. As an alternative
to the foregoing provisions with respect to the Transferors' sale to
Seller of Sky I or Sky II, and subject to Loral's prior written
consent, Transferors may assign to Seller the Loral Contract as it
relates to the applicable satellite, together with all rights
associated therewith. In all events, Transferors may also assign
Seller's Launch Insurance, if any, relating to the applicable
satellite, in which event, the purchase price for such satellite, shall
include the actual direct payments made with respect to such satellite
under Seller's Launch Insurance policy. The purchase price for either
Sky I or Sky II shall be payable in cash on or prior to the 180th day
(the "Payment Date") following the assignment of the Loral Contract,
the termination of this Agreement or the Transferors' receipt of title
thereto from Loral pursuant to Article 12.1 of the Loral Contract (the
"Transfer Date"), i.e, in-orbit delivery, as applicable, together with
interest thereon at the LIBOR rate from the Transfer Date to the
payment date of such purchase price; provided, however, that if Seller
fails to pay such purchase price, together with all accrued interest
thereon, on or prior to the Payment Date, interest will accrue on such
unpaid purchase price and accrued interest at a rate of 17.5% per annum
from the 181st day following the Transfer Date to the payment date
therefor. All representations, warranties and covenants of the
Transferors in this Agreement with respect to the Satellite Contracts
shall be applicable in connection with the purchase or assignment of
either Sky I or Sky II pursuant to this paragraph.
(iii) Without limiting the generality of subsection (b)(i)
above, if this Agreement is terminated pursuant to either Section
8(a)(ii) or Section 8(a)(iv), Seller, News Corporation and ASkyB shall
promptly as practicable following the date of such termination execute
and file the Settlement Agreement and Mutual Release and the Final
Stipulation of Dismissal annexed thereto with the United States
District Court for the District of Colorado to dismiss the EchoStar
Litigation with prejudice provided, however, if this Agreement is
terminated pursuant to Section 8(a)(iv)(C) because an FCC Approval or
FCC Order contained a condition that is within the control of the
Transferors, and such condition is not satisfied, even though the
Seller acted in good faith in connection therewith, the EchoStar
Litigation shall not be dismissed.
9. MISCELLANEOUS.
(a) PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any
press release or announcement relating to the subject matter of this Agreement
prior to the Closing without the prior written approval of the other Party,
which approval shall not be unreasonably withheld; provided, however, that no
Party shall be prohibited from making any public disclosure it believes in good
faith on advice of counsel is required by law or regulation, including, the
rules and regulations of any securities exchange or inter-dealer quotation
system upon which the securities of one of the Parties are listed or admitted
for trading(in which case the disclosing Party will advise the other Parties
prior to making the disclosure). Prior to the making of any disclosure required
by law or regulation, the disclosing Party shall consult with the other Parties,
to the extent feasible, as to the content of such public announcement or press
release and provide the other Party with an opportunity to review and comment
thereon.
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the Schedules
hereto and the Collateral Agreements referred to herein), constitutes the entire
agreement among the Parties and supersedes any prior understandings, agreements,
or representations by or among the Parties, written or oral, that may have
related in any
A-28
way to the subject matter hereof (except for any contemporaneous writing signed
by Seller, on the one hand, and any of the Transferors, on the other hand, which
specifically refers to their Agreement).
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior written
approval of the Transferors and Seller, except as provided in Sections 2(a) and
(b) with respect to the designation of the ASkyB Buyer (if it is not a Party),
the MCI Buyer (if it is not a Party) and Newco and in Section 9(m)(iv) with
respect to the transfer of Shares to direct or indirect wholly-owned
Subsidiaries of News Corporation or MCI; provided, however, that as a condition
to any such designation, ASkyB, MCI Buyer and Newco, as the case may be, shall
agree in writing to be bound by all of the provisions of this Agreement
applicable to the Party making such designation; and provided further, that as a
condition to any transfer pursuant to Section 9(m)(iv), the transferee shall
agree in writing to be bound by the restrictions set forth in Section 9(m).
(e) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to Seller: EchoStar Communications Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
Attn: David K. Moskowitz, Esq.
Senior Vice President, General
Counsel and Secretary
Telecopy: (303) 723-1699
If to MCI: MCI Telecommunications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attn: Michael Salsbury, Esq.
General Counsel
Telecopy: (202) 887-3353
If to ASkyB or
News Corporation: The News Corporation Limited
c/o News America Incorporated
1211 Avenue of the Americas
New York, New York 10036
Attn: Arthur M. Siskind, Esq.
Senior Executive Vice President
and Group General Counsel
Telecopy: (212) 768-2029
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any Party may
change
A-29
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
(i) AMENDMENTS AND WAIVERS. No amendment of any provisions of
this Agreement shall be valid unless the same shall be in writing and signed by
the Parties hereto. Any Party may waive compliance by another Party with any
provision of this Agreement, which waiver must be in writing. No waiver by any
Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(j) SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
(k) EXPENSES. Except as otherwise provided in this Agreement,
each of the Parties shall bear its own costs and expenses (including legal fees
and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
(l) CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the Parties to express their mutual intent,
and no rule of strict construction shall be applied against any Party. Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. Any reference to the "transactions contemplated
hereby," the "transactions contemplated by this Agreement," the "transactions
contemplated under this Agreement" or the "transactions contemplated pursuant to
this Agreement" shall be deemed to also refer to any other document, agreement
or certificate to be executed or delivered on or prior to the Closing. The
Parties intend that each representation, warranty, and covenant contained herein
shall have independent significance. If any Party has breached any
representation, warranty, or covenant contained herein in any respect, the fact
that there exists another representation, warranty, or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(m) RESTRICTIONS ON TRANSFER. Notwithstanding anything to the
contrary set forth herein or in the Registration Rights Agreement, the ASkyB
Buyer and the MCI Buyer agree that:
(i) Until such time (the "Completion Date") as all
amounts due under the Satellite Contracts have been paid (including, at
the Transferors' option, through the payment into escrow of all amounts
scheduled to become due under the Satellite Contracts), the ASkyB Buyer
and the MCI Buyer (collectively, the "Buyers") may, directly or
indirectly, sell, assign, transfer, pledge, hypothecate or otherwise
dispose of any interest in the Shares (a "Disposition") in an amount
not to exceed 10% of the Shares issued to the Buyers on the Closing
Date (subject to adjustment for any stock split, stock dividend,
subdivision or combination of the Common Stock or any other action
having a similar effect on the Common Stock);
(ii) Subject to subsection (i) above, from and after the
Closing Date and during the two-year period commencing on the Closing
Date, Dispositions may be made by the ASkyB Buyer and the MCI Buyer in
an amount not to exceed for each 365-day period thereafter one-third
(1/3) of the Shares issued to
A-30
the Buyers on the Closing Date (subject to adjustment for any stock
split, stock dividend, subdivision or combination of the Common Stock
or any other change in corporate structure affecting the Common Stock);
provided, however, that any Shares permitted to be sold, but not sold
during the first 365-day period, shall be added to the number of Shares
permitted to be sold during the second 365-day period; and provided,
further, that the ASkyB Buyer and the MCI Buyer shall be permitted
pursuant to a firm commitment underwritten public offering pursuant to
an effective registration statement under the Securities Act, to make a
Disposition of Shares in an amount not to exceed (x) the difference
between 50% of the Shares issued to the Buyers and the number of shares
Disposed of by the Buyers in accordance with this subsection (ii)
during the first 365-day period, or (y) the difference between 80% of
the Shares issued to the buyers and the number of Shares Disposed of by
the buyers in accordance with this subsection (ii) during the first and
second 365-day periods;
(iii) Subject to subsection (i) above, from and after the
second anniversary of the Closing Date, Dispositions may be made by the
ASkyB Buyer and the MCI Buyer without regard to any restriction on the
amount of Shares sold, except as may be imposed by applicable law; and
(iv) Nothing contained in this Section 9(m) shall limit
the right of the ASkyB Buyer or the MCI Buyer to transfer any of its
Shares to a direct or indirect wholly-owned subsidiary of either MCI or
News Corporation.
(n) LEGENDS. The Transferors agree to the placement on
certificates representing the Shares purchased pursuant hereto, of a legend,
substantially as set forth below (except that such legend shall not be placed on
any Shares that have been registered under the Securities Act or if, in the
opinion of counsel (which opinion shall be in form and substance satisfactory to
Seller), such legend is no longer required under the Securities Act):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE OFFERED, SOLD, PLEDGED, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY
APPLICABLE SECURITIES LAWS OF SUCH OTHER STATE OR JURISDICTION. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS (INCLUDING THE PROVISIONS THAT RESTRICT THE TRANSFER OF SUCH
SECURITIES) OF A PURCHASE AGREEMENT, DATED AS OF NOVEMBER 30, 1998,
AMONG AMERICAN SKY BROADCASTING, LLC, THE NEWS CORPORATION LIMITED, MCI
TELECOMMUNICATIONS CORPORATION AND ECHOSTAR COMMUNICATIONS CORPORATION
(THE "COMPANY"), COPIES OF WHICH ARE ON FILE AT THE OFFICES OF THE
SECRETARY OF THE COMPANY. THE HOLDER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS."
(o) SPECIFIC PERFORMANCE. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event of any
of the provisions of this Agreement are not performed in accordance with their
specific terms or are otherwise breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of the Agreement and to enforce
specifically this Agreement and the terms and Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the Parties and the matter, in
addition to any other remedy to which they may be entitled, at law or in equity.
(p) INCORPORATION OF SCHEDULES. The Schedules identified in
this Agreement, including the Seller Disclosure Schedule and the Transferor
Disclosure Schedule, are incorporated herein by reference in their entirety and
made a part hereof.
[SIGNATURE PAGE FOLLOWS]
A-31
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
AMERICAN SKY BROADCASTING, LLC
By: /s/ Lawrence A. Jacobs
----------------------
Name: Lawrence A. Jacobs
Title: Senior Vice President
THE NEWS CORPORATION LIMITED
By: /s/ Arthur M. Siskind
---------------------
Name: Arthur M. Siskind
Title: Director
MCI TELECOMMUNICATIONS CORPORATION
By: /s/ William S. Armistead
------------------------
Name: William S. Armistead
Title: Vice President
ECHOSTAR COMMUNICATIONS
CORPORATION
By: /s/ David K. Moskowitz
----------------------
Name: David K. Moskowitz
Title: Senior Vice President
A-32
EXHIBIT B
FORM OF CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ECHOSTAR COMMUNICATIONS CORPORATION
EchoStar Communications Corporation (the "Corporation"), a corporation
organized and existing under the laws of the State of Nevada, does hereby
certify:
FIRST: That the Board of Directors of EchoStar duly adopted a
resolution setting forth the proposed amendment to EchoStar's Amended and
Restated Articles of Incorporation, declaring such amendment to be advisable and
submitting such amendment to the shareholders of EchoStar for consideration
thereof at the annual meeting of shareholders on April 16, 1999 at the principal
offices of EchoStar.
SECOND: That at such annual meeting of shareholders, such amendment was
approved by receiving the affirmative vote of a majority of the total voting
power of EchoStar entitled to vote at the meeting, in accordance with Section
78.390 of the Nevada General Corporation Law ("NGCL"). Pursuant to Article III,
Section 3.5 of EchoStar's Bylaws, and in accordance with Section 78.390 of the
NGCL, prompt written notice was given to all shareholders of record of such
annual meeting.
The resolution approving the amendment is as follows:
RESOLVED, that ARTICLE V, Paragraph 1, Subparagraph (b) of
EchoStar's Amended and Restated Articles of Incorporation is hereby
amended and restated to read as follows:
"(b) A quorum for the purpose of shareholder meetings
shall consist of a majority of the voting power of EchoStar.
If a quorum is present, the effective vote of a majority of
the voting power represented at the meeting and entitled to
vote on the subject matter shall be the act of the
shareholders, unless the vote of a greater proportion or
number is required by any provisions contained in the NGCL.
Notwithstanding any provisions contained in the NGCL requiring
the vote of shares possessing two-thirds of the voting power
of EchoStar to take action, absent a provision herein to the
contrary, in the case of such provisions the affirmative vote
of a majority of the voting power shall be the act of the
shareholders."
IN WITNESS WHEREOF, EchoStar has caused its corporate seal to be
hereunto affixed and this Certificate of Amendment of the Amended and Restated
Articles of Incorporation to be signed by its President and Corporate Secretary
this 16th day of April, 1999.
ECHOSTAR COMMUNICATIONS CORPORATION
By: _____________________________________
Charles W. Ergen, President
By: ______________________________________
David K. Moskowitz, Corporate Secretary
STATE OF COLORADO )
) ss.
COUNTY OF )
I, the undersigned, a notary public, hereby certify that on April 16,
1999, the foregoing persons appeared before me and acknowledged that they were
the President and Corporate Secretary of EchoStar Communications Corporation, a
Nevada corporation, and stated, under oath, that they executed the foregoing
Certificate of Amendment of the Amended and Restated Articles of Incorporation
and that the facts and matters stated therein are true to the best of their
knowledge, information and belief.
---------------------------------------
Notary Public
Address:
---------------------------------------
B-2
EXHIBIT C
ECHOSTAR COMMUNICATIONS CORPORATION
1999 STOCK INCENTIVE PLAN
Section 1. Purpose
The purpose of this Stock Incentive Plan (the "Plan") is to
promote the interests of EchoStar Communications Corporation (the "Company") and
its Subsidiaries by aiding the Company in attracting and retaining Key Employees
capable of assuring the future success of the Company, to offer such personnel
incentives to put forth maximum efforts for the success of the Company's
business and to afford such personnel an opportunity to acquire a proprietary
interest in the Company.
Section 2. Definitions
As used in the Plan, the following terms shall have the
meanings set forth below:
(a) "Award" shall mean an award granted to a Key Employee in
accordance with the terms of this Plan in the form of Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance
Awards, Dividend Equivalents or Other Stock-Based Awards granted under the Plan,
or any combination of the foregoing.
(b) "Award Agreement" shall mean any written agreement,
contract or other instrument or document evidencing any Award granted under the
Plan.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any regulations promulgated thereunder.
(d) "Committee" shall mean the committee described in Section
3 of the Plan.
(e) "Company" shall mean EchoStar Communications Corporation,
a Nevada corporation, and any successor corporation.
(f) "Dividend Equivalent" shall mean any right granted under
Section 6(e) of the Plan.
(g) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(h) "Key Employee" shall mean any person, including officers
and directors, in the regular full-time employment of the Company or a
Subsidiary who, in the opinion of the Committee, is, or is expected to be,
primarily responsible for the management, growth or protection of some part or
all of the business of the Company and its Subsidiaries or otherwise to
contribute substantially to the success of the Company and its Subsidiaries.
(i) "Fair Market Value" shall mean, with respect to Shares,
the final closing price, as quoted by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or any other exchange on which the
Shares are traded, for the date in question. If Fair Market Value is in
reference to property other than Shares, the Fair Market Value of such other
property shall be determined by such methods or procedures as shall be
established from time to time by the Committee.
(j) "Incentive Stock Option" shall mean an option granted
under Section 6(a) of the Plan that is intended to meet the requirements of
Section 422 of the Code or any successor provision.
(k) "Nonemployee Director" shall mean a director of the
Company who is a "nonemployee director" within the meaning of Rule 16b-3.
(l) "Non-Qualified Stock Option" shall mean an option granted
under Section 6(a) of the Plan that is not intended to be an Incentive Stock
Option.
(m) "Option" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option, and shall include Restoration Options.
(n) "Other Stock-Based Award" shall mean any right granted
under Section 6(f) of the Plan.
(o) "Outside Director" shall mean a director of the Company
who is an "outside director" within the meaning of Section 162(m) of the Code.
(p) "Participant" shall mean a Key Employee designated to be
granted an Award under the Plan.
(q) "Performance Award" shall mean any right granted under
Section 6(d) of the Plan.
(r) "Person" shall mean any individual, corporation,
partnership, association or trust.
(s) "Plan" shall mean this 1999 Stock Incentive Plan, as
amended from time to time.
(t) "Restoration Option" shall mean any Option granted under
Section 6(a)(iv) of the Plan which confers upon the Participant the right to
receive a new Option upon the payment of the exercise price of a previously held
Option by delivery of previously owned Shares.
(u) "Restricted Stock" shall mean any Share granted under
Section 6(c) of the Plan, subject to such restrictions as the Committee deems
appropriate or desirable.
(v) "Restricted Stock Unit" shall mean any unit granted under
Section 6(c) of the Plan evidencing the right to receive a Share (or a cash
payment equal to the Fair Market Value of a Share) at some future date.
(w) "Retirement" shall mean becoming eligible to receive
immediate retirement benefits under a retirement or pension plan of the Company
or any Subsidiary.
(x) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, or any successor rule or regulation.
(y) "Shares" shall mean shares of Class A Common Stock, $.01
par value, of the Company or such other securities or property as may become
subject to Awards pursuant to an adjustment made under Section 4(c) of the Plan.
(z) "Stock Appreciation Right" shall mean any right granted
under Section 6(b) of the Plan.
(aa) "Subsidiary" shall mean any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if each
of the corporations other than the last corporation in the unbroken chain owns
more than 50% of the voting stock in one of the other corporations in such
chain.
(bb) "Ten-Percent Stockholder" shall mean an individual who
owns (within the meaning of Section 422(b)(6) of the Code) stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or of a Subsidiary.
(cc) "Total Disability" shall mean the complete and permanent
inability of a Key Employee to perform the Key Employee's duties under the terms
of the Key Employee's employment with the Company or any Subsidiary, as
determined by the Committee upon the basis of such evidence, including
independent medical reports and data, as the Committee deems appropriate or
necessary.
C-2
Section 3. Administration.
(a) POWER AND AUTHORITY OF THE COMMITTEE.
(i) THE COMMITTEE. The Committee shall consist
of at least two directors of the Company and may consist of the entire Board of
Directors; PROVIDED, HOWEVER, that (i) if the Committee consists of less than
the entire Board of Directors, each member shall be a Nonemployee Director and
(ii) to the extent necessary for any Award intended to qualify as
performance-based compensation under Section 162(m) of the Code, to so qualify,
each member of the Committee, whether or not it consists of the entire Board of
Directors, shall be an Outside Director.
(ii) POWER AND AUTHORITY. Subject to the
express provisions of the Plan and to applicable law, the Committee shall have
full power and authority to: (i) designate Key Employees; (ii) determine the
type or types of Awards to be granted to each Key Employee under the Plan; (iii)
determine the number of Shares to be covered by (or with respect to which
payments, rights or other matters are to be calculated in connection with) each
Award; (iv) determine the terms and conditions of any Award or Award Agreement;
(v) amend the terms and conditions of any Award or Award Agreement and
accelerate the exercisability of Options or the lapse of restrictions relating
to Restricted Stock, Restricted Stock Units or other Awards; (vi) determine
whether, to what extent and under what circumstances Awards may be exercised in
cash, Shares, other securities, other Awards or other property, or canceled,
forfeited or suspended; (vii) determine whether, to what extent and under what
circumstances cash, Shares, other securities, other Awards, other property and
other amounts payable with respect to an Award under the Plan shall be deferred
either automatically or at the election of the holder thereof or the Committee;
(viii) interpret and administer the Plan and any instrument or agreement
relating to, or Award made under, the Plan; (ix) establish, amend, suspend or
waive such rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (x) make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations and
other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall be
final, conclusive and binding upon any Key Employee, any holder or beneficiary
of any Award and any employee of the Company or any Subsidiary. The Committee's
decisions and determinations under the Plan need not be uniform and may be made
selectively among Key Employees, whether or not such Key Employees are similarly
situated.
(b) DELEGATION. The Committee may, in its sole discretion,
delegate such powers and duties under the Plan as it deems appropriate;
PROVIDED, HOWEVER, that the Committee shall not delegate its powers and duties
under the Plan with regard to executive officers or directors of the Company or
any Subsidiary who are subject to Section 16 of the Exchange Act.
Section 4. Shares Available for Awards.
(a) SHARES AVAILABLE. Subject to adjustment as provided in
Section 4(c), the number of Shares that may be issued subject to Awards under
the Plan shall not exceed 10,000,000; PROVIDED, HOWEVER, that during the term
of the Plan (i) no Key Employee may be granted Awards (other than Awards
described in clause (ii) below) in the aggregate in respect of more than
500,000 Shares in any one calendar year and (ii) the maximum dollar amount of
cash or the Fair Market Value of Shares that any Key Employee may receive in
any one calendar year in respect of Performance Awards granted pursuant to
Section 6(d) may not exceed $10,000,000. Shares to be issued under the Plan
may be either Shares reacquired and held in the treasury or authorized but
unissued Shares. If any Shares covered by an Award or to which an Award
relates are not purchased or are forfeited, or if an Award otherwise
terminates without delivery of any Shares, then the number of Shares counted
against the aggregate number of Shares available under the Plan with respect
to such Award, to the extent of any such forfeiture or termination, shall
again be available for granting Awards under the Plan. The Company shall at
all times keep available out of authorized but unissued Shares the number of
Shares to satisfy Awards granted under the Plan.
(b) ACCOUNTING FOR AWARDS. For purposes of this Section 4, if
an Award entitles the holder thereof to receive or purchase Shares, the number
of Shares covered by such Award or to which such Award relates
C-3
shall be counted on the date of grant of such Award against the aggregate
number of Shares available under Section 4(a) above for granting Awards under
the Plan.
(c) ADJUSTMENTS. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of cash,
Shares, other securities or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and type of Shares (or other securities or other property) which
thereafter may be made the subject of Awards, (ii) the number and type of Shares
(or other securities or other property) subject to outstanding Awards and (iii)
the purchase or exercise price with respect to any Award; PROVIDED, HOWEVER,
that the number of Shares covered by any Award or to which such Award relates
shall always be a whole number.
Section 5. Eligibility.
Any Key Employee, including any Key Employee who is an officer
or director of the Company or any Subsidiary, shall be eligible to be designated
a Participant; PROVIDED, HOWEVER, a director of the Company who is not also an
employee of the Company or a Subsidiary shall not be designated as an
Participant. In determining which Key Employees shall receive an Award and the
terms of any Award, the Committee may take into account the nature of the
services rendered by the respective Key Employees, their present and potential
contributions to the success of the Company or such other factors as the
Committee, in its sole discretion, shall deem relevant. Notwithstanding the
foregoing, an Incentive Stock Option may only be granted to full or part-time
employees (which term as used herein includes, without limitation, officers and
directors who are also employees) of the Company and its Subsidiaries.
Section 6. Awards.
(a) OPTIONS. The Committee is hereby authorized to grant
Options to Participants with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the Plan
as the Committee shall determine, which terms and conditions shall be set forth
in a form approved by the Committee.
(i) EXERCISE PRICE. The exercise price per Share
purchasable under an Option shall be determined by the Committee; PROVIDED,
HOWEVER, that, in the case of an Incentive Stock Option, such exercise price
shall not be less than 100% of the Fair Market Value of a Share on the date of
grant of such Option (110% in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder); PROVIDED, FURTHER, that the aggregate Fair Market
Value, determined at the time an Incentive Stock Option is granted, of the
Shares with respect to which Incentive Stock Options may be exercisable for the
first time by a Key Employee in any calendar year under all plans of the Company
and any parent corporation of the Company and any Subsidiary shall not exceed
$100,000.
(ii) OPTION TERM. The term of each Option shall be
for a period of ten years from the date of grant of any Incentive Stock Option
(5 years in the case of an Incentive Stock Option granted to a Ten-Percent
Stockholder) and ten years and three months from the date of grant of a
Non-Qualified Stock Option, unless an earlier expiration date shall be stated in
the Option or the Option shall cease to be exercisable pursuant to this Section
6. If a Key Employee's employment with the Company and all Subsidiaries
terminates other than by reason of the Key Employee's death, Total Disability or
Retirement, the Key Employee's Option shall terminate and cease to be
exercisable upon termination of employment, unless the Committee shall determine
otherwise.
(iii) TIME AND METHOD OF EXERCISE. The Committee
shall determine the time or times at which an Option may be exercised in whole
or in part and the method or methods by which, and the form or forms (including,
without limitation, cash, Shares, promissory notes, other securities, other
Awards or other property, or any combination thereof, having a Fair Market Value
on the exercise date equal to the relevant exercise price) in which, payment of
the exercise price with respect thereto may be made or deemed to have been made.
The
C-4
Committee may also permit the holders of Options, in accordance with such
procedures as the Committee may in its sole discretion establish, including
those set forth in Section 6(g) hereof, to exercise Options and sell Shares
acquired pursuant to a brokerage or similar arrangement approved in advance by
the Committee, and to use the proceeds from such sale as payment of the exercise
price of such Options.
(iv) RESTORATION OPTIONS. The Committee may grant
Restoration Options, separately or together with another Option, pursuant to
which, subject to the terms and conditions established by the Committee and any
applicable requirements of Rule 16b-3 or any other applicable law, the
Participant would be granted a new Option when the payment of the exercise price
of the Option to which such Restoration Option relates is made by the delivery
of Shares owned by the Participant pursuant to the relevant provisions of the
Plan or agreement relating to such Option, which new Option would be an Option
to purchase the number of Shares not exceeding the sum of (A) the number of
Shares so provided as consideration upon the exercise of the previously granted
Option to which such Restoration Option relates and (B) the number of Shares, if
any, tendered or withheld as payment of the amount to be withheld under
applicable tax laws in connection with the exercise of the Option to which such
Restoration Option relates pursuant to the relevant provisions of the Plan or
agreement relating to such Option. Restoration Options may be granted with
respect to Options previously granted under the Plan or any other stock option
plan of the Company, and may be granted in connection with any Option granted
under the Plan or any other stock option plan of the Company at the time of such
grant; PROVIDED, HOWEVER, that Restoration Options may not be granted with
respect to any Option granted to a Nonemployee Director under any other stock
option plan of the Company.
(v) INCENTIVE AND NON-QUALIFIED STOCK OPTIONS.
Each Option granted pursuant to the Plan shall specify whether it is an
Incentive Stock Option or a Non-Qualified Stock Option, provided that the
Committee may in the case of the grant of an Incentive Stock Option give the
Participant the right to receive in its place a Non-Qualified Stock Option.
(b) STOCK APPRECIATION RIGHTS. The Committee is hereby
authorized to grant Stock Appreciation Rights to Participants subject to the
terms of the Plan and any applicable Award Agreement. A Stock Appreciation Right
granted under the Plan shall confer on the holder thereof a right to receive
upon exercise thereof the excess of (i) the Fair Market Value of one Share on
the date of exercise (or, if the Committee shall so determine, at any time
during a specified period before or after the date of exercise) over (ii) the
grant price of the Stock Appreciation Right as specified by the Committee, which
price shall not be less than 100% of the Fair Market Value of one Share on the
date of grant of the Stock Appreciation Right. Subject to the terms of the Plan
and any applicable Award Agreement, the grant price, term, methods of exercise,
dates of exercise, methods of settlement and any other terms and conditions of
any Stock Appreciation Right shall be as determined by the Committee. The
Committee may impose such conditions or restrictions on the exercise of any
Stock Appreciation Right as it may deem appropriate.
(c) RESTRICTED STOCK AND RESTRICTED STOCK UNITS. The Committee
is hereby authorized to grant Awards of Restricted Stock and Restricted Stock
Units to Participants with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the Plan
as the Committee shall determine:
(i) RESTRICTIONS. Shares of Restricted Stock and
Restricted Stock Units shall be subject to such restrictions as the Committee
may impose (including, without limitation, any limitation on the right to vote a
Share of Restricted Stock or the right to receive any dividend or other right or
property with respect thereto), which restrictions may lapse separately or in
combination at such time or times, in such installments or otherwise as the
Committee may deem appropriate (the "Restricted Period").
(ii) STOCK CERTIFICATES. Any Restricted Stock
granted under the Plan shall be evidenced by issuance of a stock certificate or
certificates, which certificate or certificates shall be held by the Company.
Such certificate or certificates shall be registered in the name of the
Participant and shall bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted Stock. Except as
otherwise provided in this Section 6(c), no Shares of Restricted Stock received
by a Key Employee shall be sold, exchanged, transferred, pledged, hypothecated
or otherwise disposed of during the Restricted Period. In the case of Restricted
Stock Units, no Shares shall be issued at the time such Awards are granted.
C-5
(iii) FORFEITURE; DELIVERY OF SHARES. Except as
otherwise determined by the Committee, upon termination of a Participant's
employment (as determined under criteria established by the Committee) during
the applicable Restricted Period, all Shares of Restricted Stock and all
Restricted Stock Units held by such Participant at such time subject to
restriction shall be forfeited and reacquired by the Company; PROVIDED, HOWEVER,
that in the cases of death, Total Disability or Retirement, or in circumstances
where the Committee finds that a waiver would be in the best interest of the
Company, the Committee may waive in whole or in part any or all remaining
restrictions with respect to Shares of Restricted Stock or Restricted Stock
Units. Any Share representing Restricted Stock that is no longer subject to
restrictions shall be delivered to the holder thereof promptly after the
applicable restrictions lapse or are waived. Upon the lapse or waiver of
restrictions and the restricted period relating to Restricted Stock Units
evidencing the right to receive Shares, such Shares shall be issued and
delivered to the holders of the Restricted Stock Units.
(d) PERFORMANCE AWARDS. The Committee is hereby authorized to
grant Performance Awards to Participants subject to the terms of the Plan and
any applicable Award Agreement. A Performance Award granted under the Plan (i)
may be denominated or payable in cash, Shares (including, without limitation,
Restricted Stock), other securities, other Awards or other property and (ii)
shall confer on the holder thereof the right to receive payments, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. Subject to the terms of the Plan and
any applicable Award Agreement, the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award granted, the amount of any payment or transfer to be made
pursuant to any Performance Award and any other terms and conditions of any
Performance Award shall be determined by the Committee.
(e) DIVIDEND EQUIVALENTS. The Committee is hereby authorized
to grant to Participants Dividend Equivalents under which such Participants
shall be entitled to receive payments (in cash, Shares, other securities, other
Awards or other property as determined in the discretion of the Committee)
equivalent to the amount of cash dividends paid by the Company to holders of
Shares with respect to a number of Shares determined by the Committee. Subject
to the terms of the Plan and any applicable Award Agreement, such Dividend
Equivalents may have such terms and conditions as the Committee shall determine.
(f) OTHER STOCK-BASED AWARDS. The Committee is hereby
authorized to grant to Participants such other Awards that are denominated or
payable in, valued in whole or in part by reference to, or otherwise based on or
related to, Shares (including, without limitation, securities convertible into
Shares), as are deemed by the Committee to be consistent with the purpose of the
Plan; PROVIDED, HOWEVER, that such grants must comply with applicable law and,
in the case of executive officers and directors of the Company, Rule 16b-3.
Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine the terms and conditions of such Awards. Shares or
other securities delivered pursuant to a purchase right granted under this
Section 6(f) shall be purchased for such consideration, which may be paid by
such method or methods and in such form or forms (including without limitation,
cash, Shares, promissory notes, other securities, other Awards or other property
or any combination thereof), as the Committee shall determine, the value of
which consideration, as established by the Committee, shall not be less than
100% of the Fair Market Value of such Shares or other securities as of the date
such purchase right is granted.
(g) GENERAL.
(i) NO CASH CONSIDERATION FOR AWARDS.
Awards shall be granted for no cash consideration or for such minimal cash
consideration as may be required by applicable law.
(ii) AWARDS MAY BE GRANTED SEPARATELY OR
TOGETHER. Awards may, in the discretion of the Committee, be granted either
alone or in addition to, in tandem with, or in substitution for, any other Award
or any award granted under any plan of the Company or any Subsidiary other than
the Plan. Awards granted in addition to or in tandem with other Awards or in
addition to or in tandem with awards granted under any such other plan of the
Company or any Subsidiary may be granted either at the same time as, or at a
different time from, the grant of such other Awards or awards.
(iii) FORMS OF PAYMENT UNDER AWARDS. Subject
to the terms of the Plan and of any applicable Award Agreement, payments or
transfers to be made by the Company or a Subsidiary upon the grant,
C-6
exercise or payment of an Award may be made in such form or forms as the
Committee shall determine (including, without limitation, cash, Shares,
promissory notes, other securities, other Awards or other property or any
combination thereof), and may be made in a single payment or transfer, in
installments or on a deferred basis, in each case in accordance with rules and
procedures established by the Committee. Such rules and procedures may include,
without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments or the grant or crediting of
Dividend Equivalents with respect to installment or deferred payments.
(iv) CASHLESS EXERCISE. Options may be
exercised in whole or in part upon delivery to the Secretary of the Company of
an irrevocable written notice of exercise. The date on which such notice is
received by the Secretary shall be the date of exercise of the Option, provided
that within three business days of the delivery of such notice the funds to pay
for exercise of the Option are delivered to the Company by a broker acting on
behalf of the optionee either in connection with the sale of the Shares
underlying the Option or in connection with the making of a margin loan to the
optionee to enable payment of the exercise price of the Option. In connection
with the foregoing, the Company will provide a copy of the notice of exercise of
the Option to the aforesaid broker upon receipt by the Secretary of such notice
and will deliver to such broker, within three business days of the delivery of
such notice to the Company, a certificate or certificates (as requested by the
broker) representing the number of Shares underlying the Option that have been
sold by such broker for the optionee.
(v) LIMITS ON TRANSFER OF AWARDS. No Award
and no right under any such Award shall be transferable by a Participant
otherwise than by will, the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code; PROVIDED, HOWEVER,
that, if so determined by the Committee, a Participant may, in the manner
established by the Committee, designate a beneficiary or beneficiaries to
exercise the rights of the Participant and receive any property distributable
with respect to any Award upon the death of the Participant. Each Award or right
under any Award shall be exercisable during the Participant's lifetime only by
the Participant or, if permissible under applicable law, by the Participant's
guardian or legal representative. No Award or right under any such Award may be
pledged, alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and unenforceable
against the Company or any Subsidiary.
(vi) TERM OF AWARDS. Unless otherwise
expressly set forth in the Plan, the term of each Award shall be for such period
as may be determined by the Committee.
(vii) RESTRICTIONS; SECURITIES LISTING. All
certificates for Shares or other securities delivered under the Plan pursuant to
any Award or the exercise thereof shall be subject to such stop transfer orders
and other restrictions as the Committee may deem advisable under the Plan or the
rules, regulations and other requirements of the Securities and Exchange
Commission and any applicable federal or state securities laws, and the
Committee may cause a legend or legends to be placed on any such certificates to
make appropriate reference to such restrictions. If the Shares or other
securities are traded on NASDAQ or a securities exchange, the Company shall not
be required to deliver any Shares or other securities covered by an Award unless
and until such Shares or other securities have been admitted for trading on
NASDAQ or such securities exchange.
Section 7. Amendment and Termination; Adjustments.
Except to the extent prohibited by applicable law and unless
otherwise expressly provided in an Award Agreement or in the Plan:
(a) AMENDMENTS TO THE PLAN. The Board of Directors of the
Company may amend, alter, suspend, discontinue or terminate the Plan; PROVIDED,
HOWEVER, that, notwithstanding any other provision of the Plan or any Award
Agreement, without the approval of the stockholders of the Company, no such
amendment, alteration, suspension, discontinuation or termination shall be made
that, absent such approval;
(i) would violate the rules or regulations
of NASDAQ or any securities exchange that are applicable to the Company; or
(ii) would cause the Company to be unable,
under the Code, to grant Incentive Stock Options under the Plan.
C-7
(b) AMENDMENTS TO AWARDS. The Committee may waive any
conditions of or rights of the Company under any outstanding Award,
prospectively or retroactively. The Committee may not amend, alter, suspend,
discontinue or terminate any outstanding Award, prospectively or retroactively,
without the consent of the Participant or holder or beneficiary thereof, except
as otherwise herein provided.
(c) CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem desirable to carry the Plan into effect.
Section 8. Income Tax Withholding; Tax Bonuses.
(a) WITHHOLDING. In order to comply with all applicable
federal or state income tax laws or regulations, the Company may take such
action as it deems appropriate to ensure that all applicable federal or state
payroll, withholding, income or other taxes, which are the sole and absolute
responsibility of a Participant, are withheld or collected from such
Participant. In order to assist a Participant in paying all or a portion of the
federal and state taxes to be withheld or collected upon exercise or receipt of
(or the lapse of restrictions relating to) an Award, the Committee, in its
discretion and subject to such additional terms and conditions as it may adopt,
may permit the Participant to satisfy such tax obligation by (i) electing to
have the Company withhold a portion of the Shares otherwise to be delivered upon
exercise or receipt of (or the lapse of restrictions relating to) such Award
with a Fair Market Value equal to the amount of such taxes or (ii) delivering to
the Company shares other than Shares issuable upon exercise or receipt of (or
the lapse of restrictions relating to) such Award with a Fair Market Value equal
to the amount of such taxes.
(b) TAX BONUSES. The Committee, in its discretion, shall have
the authority, at the time of grant of any Award under this Plan or at any time
thereafter, to approve cash bonuses to designated Participants to be paid upon
their exercise or receipt of (or the lapse of restrictions relating to) Awards
in order to provide funds to pay all or a portion of federal and state taxes due
as a result of such exercise or receipt (or the lapse of such restrictions). The
Committee shall have full authority in its discretion to determine the amount of
any such tax bonus.
Section 9. General Provisions
(a) NO RIGHTS TO AWARDS. No Key Employee, Participant or other
Person shall have any claim to be granted any Award under the Plan, and there is
no obligation for uniformity of treatment of Key Employees, Participants or
holders or beneficiaries of Awards under the Plan. The terms and conditions of
Awards need not be the same with respect to any Participant or with respect to
different Participants.
(b) AWARD AGREEMENTS. No Participant will have rights under an
Award granted to such Participant unless and until an Award Agreement shall have
been duly executed on behalf of the Company.
(c) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing
contained in the Plan shall prevent the Company or any Subsidiary from adopting
or continuing in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.
(d) NO RIGHT TO EMPLOYMENT. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Subsidiary, nor will it affect in any way the right of the
Company or a Subsidiary to terminate such employment at any time, with or
without cause. In addition, the Company or a Subsidiary may at any time dismiss
a Participant from employment free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.
(e) ASSIGNABILITY. No Award granted under this Plan, nor any
other rights acquired by a Participant under this Plan, shall be assignable or
transferable by a Participant, other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Code, Title I of the Employee Retirement Income Security Act, or the rules
promulgated thereunder.
C-8
(f) GOVERNING LAW. The validity, construction and effect of
the Plan or any Award, and any rules and regulations relating to the Plan or any
Award, shall be determined in accordance with the laws of the State of Colorado.
(g) SEVERABILITY. If any provision of the Plan or any Award is
or becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed or deemed amended
to conform to applicable laws, or if it cannot be so construed or deemed amended
without, in the determination of the Committee, materially altering the purpose
or intent of the Plan or the Award, such provision shall be stricken as to such
jurisdiction or Award, and the remainder of the Plan or any such Award shall
remain in full force and effect.
(h) NO TRUST OR FUND CREATED. Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Subsidiary and a Participant
or any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Subsidiary pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Subsidiary.
(i) NO FRACTIONAL SHARES. No fractional Shares shall be issued
or delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash shall be paid in lieu of any fractional Shares or whether
such fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(j) TRANSFERS AND LEAVES OF ABSENCE. Solely for the purposes
of the Plan: (a) a transfer of a Key Employee's employment without an
intervening period from the Company to a Subsidiary or vice versa, or from one
Subsidiary to another, shall not be deemed a termination of employment, and (b)
a Key Employee who is granted in writing a leave of absence shall be deemed to
have remained in the employ of the Company or a Subsidiary, as the case may be,
during such leave of absence.
(k) HEADINGS. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.
Section 10. Effective Date of the Plan.
The Plan shall be effective as of April 16, 1999, subject to
approval by the stockholders of the Company on that date within one year
thereafter.
Section 11. Term of the Plan.
Unless the Plan shall have been discontinued or terminated as
provided in Section 7(a), the Plan shall terminate on April 16, 2009. No Award
shall be granted after the termination of the Plan. However, unless otherwise
expressly provided in the Plan or in an applicable Award Agreement, any Award
theretofore granted may extend beyond the termination of the Plan, and the
authority of the Committee provided for hereunder with respect to the Plan and
any Awards, and the authority of the Board of Directors of the Company to amend
the Plan, shall extend beyond the termination of the Plan.
C-9
PROXY PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David K. Moskowitz and Steven B. Schaver,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote as designated below, all the shares of Class A Common
Stock and Class B Common Stock of EchoStar Communications Corporation
("Echostar"), held of record by the undersigned on March 19, 1999, at the Annual
Meeting of Shareholders to be held on April 16, 1999, or any adjournment
thereof.
1. ELECTION OF FIVE DIRECTORS.
/ / FOR all nominees listed below (except as marked to the contrary) / / WITHHOLD AUTHORITY to vote for
all nominees listed below
Charles W. Ergen James DeFranco David Moskowitz Raymond L. Friedlob O. Nolan
Daines
(INSTRUCTION: To withhold authority to vote for an individual nominee, cross out that nominee's name above.)
2. PROPOSAL TO ISSUE SHARES OF ECHOSTAR'S CLASS A COMMON STOCK AS CONSIDERATION FOR THE ACQUISITION OF CERTAIN SATELLITE
BROADCASTING ASSETS PURSUANT TO THE PURCHASE AGREEMENT DATED AS OF NOVEMBER 30, 1998, BY AND AMONG AMERICAN SKY
BROADCASTING, LLC, THE NEWS CORPORATION LIMITED, MCI TELECOMMUNICATIONS CORPORATION AND ECHOSTAR.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO AMEND ECHOSTAR'S AMENDED AND RESTATED ARTICLES OF INCORPORATION TO CLARIFY CERTAIN VOTING PROVISIONS SET
FORTH THEREIN.
/ / FOR / / AGAINST / / ABSTAIN
4. PROPOSAL TO APPROVE THE ECHOSTAR COMMUNICATIONS CORPORATION 1999 STOCK INCENTIVE PLAN.
/ / FOR / / AGAINST / / ABSTAIN
5. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT PUBLIC ACCOUNTANTS OF ECHOSTAR FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1999.
/ / FOR / / AGAINST / / ABSTAIN
6. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT THEREOF.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED ON REVERSE SIDE)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE THIS PROXY WILL
BE VOTED FOR THE ELECTION OF EACH OF THE FIVE DIRECTORS SET FORTH ABOVE, AND FOR
EACH OF ITEM NOS. 2, 3, 4 AND 5. THIS PROXY CONFERS DISCRETIONARY AUTHORITY WITH
RESPECT TO PROPOSALS NOT KNOWN OR DETERMINED AT THE TIME OF THE MAILING OF THE
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO THE UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders and Proxy Statement furnished herewith.
Dated: ____________________ , 1999
__________________________________
Signature
_____________________________________
Signature if held jointly
Signatures should agree with the
name(s) stenciled hereon.
Executors, administrators,
trustees, guardians and attorneys
should indicate when signing.
Attorneys should submit powers of
attorney.
PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED PRE-ADDRESSED ENVELOPE.
THE TENDER OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND
THE MEETING OR TO SUBMIT A LATER
DATED REVOCATION OR AMENDMENT TO THIS PROXY ON ANY OF THE ISSUES SET FORTH
ABOVE.
