Dish Network 2015 Annual Report Download - page 156

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-52
As a result of the nonpayment of those gross winning bid amounts, the FCC retained those licenses and Northstar
Wireless owed the FCC an additional interim payment of approximately $334 million (the “Northstar Interim
Payment”), which is equal to 15% of $2.226 billion. The Northstar Interim Payment is recorded in “FCC auction
expense” on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended
December 31, 2015. Northstar Wireless immediately satisfied the Northstar Interim Payment through the
application of funds already on deposit with the FCC and an additional loan from American II of approximately $69
million. As a result, the FCC will not deem Northstar Wireless to be a “current defaulter” under applicable FCC
rules.
In addition, the FCC Wireless Bureau acknowledged that Northstar Wireless’ nonpayment of those gross winning
bid amounts does not constitute action involving gross misconduct, misrepresentation or bad faith. Therefore, the
FCC concluded that such nonpayment will not affect the eligibility of Northstar Wireless, its investors (including
DISH Network) or their respective affiliates to participate in future spectrum auctions (including Auction 1000 and
any re-auction of the AWS-3 Licenses retained by the FCC). At this time, DISH Network (through itself, a
subsidiary or another entity in which it may hold a direct or indirect interest) expects to participate in any re-auction
of those AWS-3 Licenses.
If the winning bids from re-auction or other award of the AWS-3 Licenses retained by the FCC are greater than or
equal to the winning bids of Northstar Wireless, no additional amounts will be owed to the FCC. However, if those
winning bids are less than the winning bids of Northstar Wireless, then Northstar Wireless will be responsible for
the difference less any overpayment of the Northstar Interim Payment (which will be recalculated as 15% of the
winning bids from re-auction or other award) (the “Northstar Re-Auction Payment”). For example, if the winning
bids in a re-auction are $1, the Northstar Re-Auction Payment would be approximately $1.892 billion, which is
calculated as the difference between $2.226 billion (the Northstar winning bid amounts) and $1 (the winning bids
from re-auction) less the resulting $334 million overpayment of the Northstar Interim Payment. As discussed above,
at this time, DISH Network (through itself, a subsidiary or another entity in which it may hold a direct or indirect
interest) expects to participate in any re-auction. We cannot predict with any degree of certainty the timing or
outcome of any re-auction or the amount of any Northstar Re-Auction Payment.
Amendment to Northstar Wireless Credit Agreement. On October 1, 2015, American II, Northstar Wireless and
Northstar Spectrum amended the First Amended and Restated Credit Agreement dated October 13, 2014, by and
among American II, as Lender, Northstar Wireless, as Borrower, and Northstar Spectrum, as Guarantor (as
amended, the “Northstar Credit Agreement”), to provide, among other things, that: (i) the Northstar Interim
Payment and any Northstar Re-Auction Payment will be made by American II directly to the FCC and will be
deemed as loans under the Northstar Credit Agreement; (ii) the FCC is a third-party beneficiary with respect to
American II’s obligation to pay the Northstar Interim Payment and any Northstar Re-Auction Payment; (iii) in the
event that the winning bids from re-auction or other award of the AWS-3 Licenses retained by the FCC are less than
the winning bids of Northstar Wireless, the purchaser, assignee or transferee of any AWS-3 Licenses from Northstar
Wireless is obligated to pay its pro-rata share of the difference (and Northstar Wireless remains jointly and severally
liable for such pro-rata share); and (iv) during the period between the due date for the payments guaranteed under
the FCC Northstar Guaranty (as discussed below) and the date such guaranteed payments are paid, Northstar
Wireless’ payment obligations to American II under the Northstar Credit Agreement will be subordinated to such
guaranteed payments.
DISH Network Guaranty in Favor of the FCC for Certain Northstar Wireless Obligations. On October 1, 2015,
DISH Network entered into a guaranty in favor of the FCC (the “FCC Northstar Guaranty”) with respect to the
Northstar Interim Payment (which was satisfied on October 1, 2015) and any Northstar Re-Auction Payment. The
FCC Northstar Guaranty provides, among other things, that during the period between the due date for the payments
guaranteed under the FCC Northstar Guaranty and the date such guaranteed payments are paid: (i) Northstar
Wireless’ payment obligations to American II under the Northstar Credit Agreement will be subordinated to such
guaranteed payments; and (ii) DISH Network or American II will withhold exercising certain rights as a creditor of
Northstar Wireless.