Dish Network 2015 Annual Report Download - page 49

39
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.
Letters Exchanged between SNR Wireless and the FCC Wireless Bureau. As outlined in letters exchanged between SNR
Wireless and the FCC Wireless Bureau, SNR Wireless paid the gross winning bid amounts for 244 AWS-3 Licenses (the
“SNR Licenses”) totaling approximately $4.271 billion through the application of funds already on deposit with the FCC
and a portion of an additional loan from American III in an aggregate amount of approximately $344 million (which
included an additional bid withdrawal payment of approximately $3 million). SNR Wireless also notified the FCC that it
would not be paying the gross winning bid amounts for 113 AWS-3 Licenses totaling approximately $1.211 billion.
As a result of the nonpayment of those gross winning bid amounts, the FCC retained those licenses and SNR Wireless
owed the FCC an additional interim payment of approximately $182 million (the “SNR Interim Payment”), which is
equal to 15% of $1.211 billion. The SNR 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. SNR Wireless
immediately satisfied the SNR Interim Payment through a portion of an additional loan from American III in an
aggregate amount of approximately $344 million. As a result, the FCC will not deem SNR Wireless to be a “current
defaulter” under applicable FCC rules.