EXHIBIT 2.1
PAGE 1 OF 9
THE NEWS CORPORATION LIMITED
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
February 19, 1997
EchoStar Communications Corporation
00 Xxxxxxxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
This letter agreement ("Agreement") confirms the conditions upon which The
News Corporation Limited or an affiliate ("News") will acquire shares of capital
stock of EchoStar Communications Corporation ("ECC").
1. THE TRANSACTION. News and ECC hereby agree to enter into a definitive
agreements (the "Definitive Agreements") containing the terms set forth on
the attached Term Sheet, and such other terms as the parties may otherwise
agree to.
2. DEFINITIVE AGREEMENTS. As soon as practicable after the date hereof, our
respective legal counsel will promptly and diligently negotiate in good
faith and use their respective best efforts to agree on the Definitive
Agreements, which will contain mutually agreeable representations and
warranties (including, with respect to ECC, Organization and
Qualifications, Capitalization, Authority, No Conflicts, Required Filings
and Consents, SEC Reports and Financial Statements (including Absence of
Certain Changes or Events from the date of the Financial Statements through
March 7, 1997), and with respect to News, Organization and Qualifications,
Authority, No Conflicts, Required Filings and Consents), mutually agreeable
provisions for indemnification and shareholder arrangements and other
appropriate terms and conditions. News and ECC shall cooperate with each
other to the fullest extent in the preparation of the Definitive Agreements
and all related documents, in the obtaining of all necessary consents and
in complying with all regulatory requirements. News and ECC shall in good
faith proceed to promptly negotiate and execute the Definitive Agreements
and all related documents with respect to this transaction. Although the
parties intend to diligently negotiate and promptly enter into the
Definitive Agreements, the parties acknowledge and agree that this
Agreement contains all of the essential terms of the transactions
contemplated hereby and, in the event that the parties do not enter into
Definitive Agreements, that this Agreement is a binding Agreement and shall
form the basis for consummation of the transactions contemplated hereby.
3. PURCHASER'S INVESTIGATION: CONFIDENTIALITY. ECC and News will permit each
other and their respective accounting and legal representatives to conduct
an investigation and evaluation of ECC and ASkyB, will provide such
assistance as is reasonably requested and will give access at reasonable
times to information related to the assets and operations of ECC and ASkyB.
Except to the extent that information provided by ECC and ASkyB is in the
public domain or is or becomes ascertainable from public sources, such
information concerning ECC and ASkyB shall be kept in strict confidence.
4. CONDUCT OF BUSINESS. During the period from the date hereof to the
execution of the Definitive Agreements, (a) the businesses of ECC and ASkyB
will be carried on in accordance with past custom and practice, (b) ECC and
ASkyB will not enter into any contract, agreement or transaction other than
in the ordinary course of business and in accordance with past custom and
practice, and (c) ECC will not remove any of its assets by way of dividend,
distribution, withdrawal or any other means without the prior written
consent of News. Following execution of the Definitive Agreements the
businesses of ECC and ASkyB will be conducted in consultation with each of
News and ECC.
5. CLOSING CONDITIONS. The closing of the transactions contemplated hereby is
conditional upon:
(a) the obtaining of all necessary governmental, shareholder, bondholder
and other third-party consents and approvals, including Xxxx-Xxxxx-
Xxxxxx and board of director approvals of ECC and News; and
EXHIBIT 2.1
PAGE 2 OF 9
(b) News being satisfied that its due diligence investigation has not
revealed (i) that ECC's public disclosure documents contain any untrue
statement of a material fact or omit to state a material fact, or (ii)
any ECC obligation or agreement (other than the Indentures) that would
prevent the consummation of the proposed transaction; provided that
News must exercise its right to terminate this Agreement pursuant to
this paragraph 5(b) on or before March 7, 1997.
(c) ECC being satisfied that its due diligence investigation has not
revealed (i) a material deviation from the ASkyB DBS Capital Budget
Summary set forth on Schedule I, or (ii) any ASkyB obligation or
agreement that would prevent the consummation of the proposed
transaction; provided that ECC must exercise its right to terminate
this Agreement pursuant to this paragraph 5(c) on or before March 7,
1997.
6. PUBLIC DISCLOSURE. Pending execution of the Definitive Agreements and,
except as required by law, no public disclosure or publicity concerning the
subject matter hereof or the transactions contemplated hereby will be made
without the joint approval of ECC and News.
7. EXPENSES. ECC and News will each pay their respective expenses (including
fees and expenses of legal counsel, investment bankers, brokers or other
representatives or consultants) in connection with the transactions
contemplated hereby (whether consummated or not).
8. REPRESENTATIONS AND WARRANTIES. Each party hereto hereby represents and
warrants that (i) it is duly organized, validly existing and in good
standing under the jurisdiction in which it was formed, (ii) it has the
full right, power and authority to consummate the transactions contemplated
herein and (iii) the execution, delivery and performance hereof will not
conflict with nor result in any breach of provisions of, or constitute a
default under, any agreement, charter, bylaw or other instrument to which
it is a party or by which it is bound.
9. FURTHER ASSURANCES. Each party hereto shall execute and deliver all
reasonably required documents and do all other acts which may be reasonably
requested by the other parties hereto to implement and carry out the terms
and conditions of the transactions contemplated herein. None of News, ECC
or Xxxxxxx Xxxxx shall take any action or fail to take any action which
would reasonably be expected to frustrate the intent and purposes of this
Agreement.
10. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telescoped
(receipt of which is confirmed by the person to whom sent) or mailed by
registered or certified mail (return receipt requested) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) If to ECC, to:
EchoStar Communications Corporation
00 Xxxxxxxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
Senior Vice President and General Counsel
(b) If to News, to:
The News Corporation Limited
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Senior Executive Vice President
and Group General Counsel
EXHIBIT 2.1
PAGE 3 OF 9
11. GOVERNING LAW. This Agreement shall be governed by the laws of the State
of New York.
If the foregoing accurately reflects our agreement, please sign the
enclosed duplicate of this Agreement in the space provided below and return the
same to the undersigned.
Very truly yours,
The News Corporation Limited
By: /s/ K. XXXXXX XXXXXXX
--------------------------------
Name:
Title:
Accepted and agreed to
this 20th day of February 1997:
EchoStar Communications Corporation
By: /s/ XXXXXXX X. XXXXX
------------------------------
Name: Xxxxxxx X. Xxxxx
Title: CEO of EchoStar Communications
Corporation
EXHIBIT 2.1
PAGE 4 OF 9
TERM SHEET
The News Corporation Limited or its designated subsidiary ("News") will
enter into an arrangement with EchoStar Communications Corporation ("ECC") to be
evidenced by a definitive agreement (the "Definitive Agreement"), as follows:
1. ECC will spin off to separate entities (a) all of its business operations,
assets and liabilities related to its international manufacturing
businesses and (b) its licenses for orbital slot frequencies. News will
cause the manufacturing business to be licensed to manufacture digital
boxes on a non-exclusive, worldwide most favored nation basis.
2. News will contribute to ECC (or in a substitute mutually agreed upon
transaction) the following assets (as of the closing of the transaction):
a) 4 satellites, uplink facility, local access distribution system,
operations center and call center, subject to existing agreements, and
free and clear of all liens and encumbrances; plus
b) $1 billion in cash less the value of the assets contributed in (a)
above which value shall be equal to the cost of such assets (excluding
G & A and other overhead) actually paid by News and excluding
capitalized interest.
c) Commencing March 10, 1997, the News DBS operation will be conducted in
consultation with and under the direction of Ergen as the Chief
Executive Officer of ECC and shall be for the account of the combined
business. News shall advance the costs of News DBS business and the
amounts paid by News shall be credited against the News cash
obligation as set forth in 2(b) above.
3. Upon the completion of the proposed transaction:
a) Xxxxxxx Xxxxx ("Ergen") and Xxxxx XxXxxxxx will convert all shares of
Preferred Stock owned by them into Class A Common Stock and shall
receive accrued dividends; and
b) News shall receive
(i) such number of shares of Class A Common Stock and Class B Common
Stock of ECC as shall represent 50% of the outstanding shares of
each class as of March 7, 1997; and
(ii) options to purchase shares of Class A Common Stock in amounts
and at exercise prices as to give News the right to maintain its
50% position as and when employee stock options outstanding as
of March 7, 1997 are exercised; and
c) The ECC Certificate of Incorporation shall be amended to provide that
upon any sales (not including assignments to Ergen family members or
similar assignments to accomplish estate planning purposes or to
affiliates of News (not less than 51% owned)) of Class B Common Stock
by Ergen or News such shares shall convert to Class A Common Stock.
4. News and the entity to which ECC shall spin off its licenses for orbital
slot frequencies shall each lease the use of their respective DBS orbital
slot frequencies to ECC for the conduct of the ECC direct broadcast
business. Each shall receive an equal payment from ECC for the use of the
frequencies in an amount to be agreed to.
5. News and Ergen will enter into a Shareholders Agreement pursuant to which
they will agree (as to shares owned or thereafter acquired):
a) Each shall have the right to nominate an equal number of directors to
the ECC Board (including independent directors) and each shall agree to
vote for the other's nominees;
b) an Executive Committee of the Board will be established with each of
News and Ergen appointing an equal number of members;
EXHIBIT 2.1
PAGE 5 OF 9
c) all significant corporate actions (as defined on Exhibit A hereto) to
be submitted to the Board shall require the vote of all members of the
Executive Committee;
d) neither News nor Ergen shall present their shares for a quorum or vote
their shares as shareholders on significant matters unless both are in
agreement;
e) Xxxxxx Xxxxxxx shall serve as Chairman of ECC and Ergen shall serve as
President and Chief Executive Officer of ECC; News shall have the right
to designate the CFO of ECC; all other appointments of senior officers
of ECC shall be subject to mutual agreement;
f) In the event News and Ergen do not agree on a significant corporate
action of the type set forth on Exhibit A as a Deadlock Event, then
either News or Ergen can cause the purchase and sale of each others
shares in ECC in the manner provided for in Exhibit A;
g) Subject to deminimus amounts, each of the Shareholders will have
rights of first refusal (based on market prices) and tag-a-long rights
in customary form; and
h) In the event Ergen shall sell 8 million or more shares of ECC
securities or News shall sell 10 million or more shares of any class
of ECC securities owned (other than as described above) then, (i) at
the option of the other Shareholder, the corporate governance
provisions set forth in this section 5 will thereupon terminate, and
(ii) the selling Shareholder shall cause its or his director nominees
(other than the independent director nominee) to resign and shall
continue to vote for the other Shareholders' director nominees and in
such manner as such other Shareholder shall direct on all other
matters presented for the vote of Shareholders so long as such other
Shareholders shall not have sold 8 million or more shares in the case
of Ergen or 10 million or more shares in the case of News.
6. ECC shall have the right to require News to buy from ECC, and News shall
have the right to require ECC to sell to News, at a price of $23 a share up
to $200 million of ECC Class A Common Stock, such rights to commence on May
1, 1997 and to terminate on April 30, 1998. To the extent that News has
purchased shares under this section 6 then the amount paid by News shall be
credited against the News' cash obligation as set forth in paragraph 2(b)
above and the number of shares of ECC stock to be received by News as set
forth in paragraph 3(b) above shall be appropriately adjusted. To the
extent that necessary regulatory approvals are not obtained at such time as
ECC shall require funds for operations, News will lend up to $200 million
on a non-interest bearing basis and such other terms as agreed to.
7. In the event that the proposed transaction is not approved by any
regulatory authorities from which approval is sought, News, ECC and Ergen
shall take such necessary and appropriate steps to alter the proposed
transaction in such manner as required to (i) obtain the necessary
approvals and, (ii) insure to News, ECC and Ergen as nearly as possible the
same economic results as if the proposed transaction occurred.
8. News, ECC and Ergen shall proceed diligently to accomplish the following:
a) negotiate the Definitive Agreement and Shareholders Agreement and
conduct necessary due diligence, the due diligence to be completed by
News and ECC on or before March 7, 1997;
b) Obtain all necessary regulatory approvals to the proposed transaction;
c) Obtain all necessary ECC shareholder and bondholder consents;
d) Obtain all necessary contract and other approvals; and
e) Obtain all necessary board of director approvals; and
f) Prepare agreed upon budget and five year business plan and technology
agreement for conduct of ECC business including agreements regarding
compression, conditional access, smart card and subscriber management
systems. ECC shall use the technology and systems of the News'
companies provided that such technology and systems are as secure and
capable, shall require no material expenditures to render the
EXHIBIT 2.1
PAGE 6 OF 9
installed base of consumer satellite receivers compatible, and shall
require no material increased expenditures when compared to the
current technology and systems utilized by ECC.
EXHIBIT 2.1
PAGE 7 OF 9
EXHIBIT A
1. "SIGNIFICANT CORPORATE ACTION" means any one of the following:
a. amending or modifying the purposes of the Company from those specified
in its Certificate of Incorporation or otherwise amending or modifying
the Certificate of Incorporation;
b. entering into any merger or consolidation in which the Company is
constituent corporation, acquiring all or substantially all of the
assets or capital stock of another Person (or a division or other
business unit of another Person), consummating any other business
combination or dissolving and winding up the Company (other than in
accordance with the terms of this Agreement), in each case whether in
a single transaction or a series of related transactions in which the
value of the transaction is in excess of $10,000,000;
c. adopting or modifying or amending in any material respect any Budget
or the Business Plan, provided that to the extent a Budget is not
agreed to for any Fiscal Year (a "Budget Deadlock") the prior year's
Budget (with cost increases not to exceed 10%) shall be the effective
Budget for such Fiscal Year;
d. selling, leasing, exchanging or otherwise disposing of any property,
asset or business with a value in excess of $10,000,000;
e. except as contemplated by the Business Plan, the then-effective Budget
or this Agreement, increasing or decreasing the Company's authorized
capital or increasing or decreasing the Company's issued and stated
capital other than pursuant to the Company's existing employee stock
option plan, Employee Referral Program or 401(K) plan;
f. changing the Fiscal Year;
g. except as contemplated by the Business Plan, the then-effective Budget
or this Agreement, entering into any transaction, agreement or
understanding with any other Person with a value in excess of
10,000,000;
h. incurring any indebtedness for borrowed money which would result in
the total outstanding Indebtedness of the Company for borrowed money
(excluding indebtedness incurred by the Company pursuant to the
Business Plan, the then-effective Budget or any Shareholder Loans
approved by the Shareholders in accordance with this Agreement)
increasing by more than $10,000,000;
i. except as contemplated by the Business Plan or the then-effective
Budget, entering into, amending, granting any waiver with respect to,
terminating or extending any agreement outside of the ordinary course
of business, which agreement provides for (or, pursuant to its terms,
could reasonably be expected to result in) the payment or receipt by
the Company of more than an aggregate amount of $10,000,000 during the
term of such agreement;
j. except as contemplated by the Business Plan or the then-effective
Budget, entering into any agreement or transaction which has a term in
excess of one (1) year and either (i) requires the payment of more
than $1 million per year, or (ii) involves programming commitments
(unless such programming commitments are immaterial);
k. except as contemplated by the Business Plan or the then-effective
Budget, entering into, amending, granting any waiver with respect to,
terminating or extending any employment or consulting agreement (or
series of related employment or consulting agreements with the same
Person) with, or hiring any officer or employee for, a term of more
than one year or which agreement or arrangement provides for (or,
pursuant to its terms, could reasonably be expected to result in)
payments to the employee or consultant, or otherwise hiring any
employee or consultant, at a rate in excess of $200,000 per annum, or
the adoption of any amendment of material compensation policies;
l. except as contemplated by the Business plan or the then-effective
Budget, entering into any transaction or agreement with a Shareholder
or any Affiliate of a Shareholder other than this Agreement or any
other agreement or transaction entered into in the ordinary course of
business on arms-length terms;
EXHIBIT 2.1
PAGE 8 OF 9
m. electing or removing any of the Company's Chairman, President, Chief
Executive Officer, Chief Operating Officer or Chief Financial Officer
(except as otherwise agreed in the Term Sheet);
n. appointing or changing the Company's independent certified public
accountants (it being agreed that the Company's initial independent
certified public accountants shall be Xxxxxx Xxxxxxxx LLP);
o. except as required by GAAP or applicable law, adopting or changing any
of the Company's material accounting principles;
p. commencing or settling any litigation, arbitration or governmental
proceeding which relates to more than $1,000,000 or is reasonably
likely to have a material impact on the Company or its business;
q. except as contemplated by the Business Plan or the then-effective
Budget, or except as permitted by the Company's 401(K) plan, making
any loans, investments or advances to, or guaranteeing the obligations
of, any Person in excess of $100,000;
r. incorporating, forming or otherwise organizing a Subsidiary or any
other Person;
s. except as contemplated by the Business Plan or the then-effective
Budget, declaring any dividend or making any other distribution to the
Shareholders;
t. filing a voluntary petition in bankruptcy or for reorganization or for
the adoption of any plan or arrangement with creditors or an admission
seeking the relief therein provided under any existing or future law
of any jurisdiction relating to bankruptcy, insolvency, reorganization
or relief of debtors; or
u. entering into any options, contingent agreements or other arrangements
which if exercised or consummated in accordance with their terms would
result in an action constituting a Significant Corporate Action as set
forth in clauses (a-t) above.
2. BUY-SELL UPON DEADLOCK EVENT.
a. Upon the occurrence of a Deadlock Event, the Shareholders shall first
use their good faith efforts during a period of forty-five (45) days
(the "Referral Period") to resolve the dispute which resulted in the
Deadlock Event in a mutually satisfactory manner. A "Deadlock Event"
shall be deemed to have occurred in the event that (i)(A) with respect
to any proposed Significant Corporate Action contained in paragraphs
(b), (d), (e), (g), (h), (i), (t) or (u) as it applies to any of the
previously listed paragraphs in the definition thereof, the Board of
Directors is unable to authorize the taking or rejection of such
Significant Corporate Action contained by a Majority Vote, PROVIDED
that, for a Deadlock Event to occur under clauses (b), (d), (g),
(h), and (i), the dollar level shall be $50,000,000 or (B) a Budget
Deadlock has occurred and continued uninterrupted for two (2)
consecutive Fiscal Years;
b. If a Deadlock Event occurs, then while such Deadlock Event shall
continue beyond the Referral Period, either Shareholder (the
"Initiating Shareholder"), by written notice (the "Notice") to the
other may initiate a buy-sell transaction as follows:
(i) Notice shall specify a price per share (for each Class of ECC
stock) which the Initiating Shareholder is willing to pay for
the shares held by the other Shareholder (the "Determining
Shareholder").
(ii) Within 20 days after receipt of the Notice from the Initiating
Shareholder, the Determining Shareholder shall by written notice
(the "Response") to the Initiating Shareholder decide whether to
buy all of the Initiating Shareholder's shares at the price set
forth in the Notice or to sell all of the Determining
Shareholder's shares to the Initiating Shareholder at the price
set forth in the Notice. The failure of the Determining
Shareholder to deliver a Response within the said 20-day period
shall be deemed to constitute the Determining Shareholder's
election to sell.
(iii) The Initiating Shareholder and Determining Shareholder shall
thereupon act promptly to accomplish the buy-sell arrangement set
forth herein; PROVIDED that the closing of such transaction shall
take place on not less than 5 days' written notice from buyer to
seller not later than 180 days following the receipt of the
EXHIBIT 2.1
PAGE 9 OF 9
Response by the Initiating Shareholder. In the event the closing
does not take place within such 180-day period on account of the
inability of the buying Shareholder to buy, then the Shareholder
that would have otherwise been the seller shall have the right,
exercisable by written notice to the other Shareholder within 20
days after the end of such 180-day period, to elect to buy the
other Shareholder's shares. In such event, the closing will take
place on not less than 5 days' written notice from buyer to
seller not later than 180 days following such election.
