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SCHEDULE 14C

SCHEDULE 14C INFORMATION

Information Statement Pursuant to Section 14(c) of the Securities

Exchange Act of 1934

Check the appropriate box:

     
x  Preliminary Information Statement    
o  Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2))
o  Definitive Information Statement

ECHOSTAR COMMUNICATIONS CORPORATION


(Name of Registrant as Specified In Charter)

Payment of Filing Fee (Check the appropriate box):

x No fee required

o  Fee computed on table below per Exchange Act Rules 14c-5(g) 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:


o 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 No.:


     (3) Filing Party:


     (4) Date Filed:



 

Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such State.

PRELIMINARY DRAFT DATED MARCH 18, 2002, SUBJECT TO COMPLETION

     
Solicitation of Written Consent of
General Motors Corporation
Common Stockholders
  Information Statement for
EchoStar Communications Corporation
Common Stockholders

(GM LOGO)

The Separation of Hughes from GM

and the Merger of Hughes and EchoStar
 
  (HUGHES LOGO) (ECHOSTAR LOGO)            


GM is asking GM $1 2/3 par value common stockholders and GM Class H common stockholders to approve certain matters relating to the following transactions:

  •  the separation of Hughes Electronics from GM; and
 
  •  the combination of Hughes with EchoStar Communications by a merger immediately after the separation.

As a result of these transactions, GM Class H common stockholders will receive one share of Class C common stock of the new company in exchange for each share of GM Class H common stock they own and EchoStar Class A common stockholders will receive 1/0.73, or about 1.3699, shares of Class A common stock of the new company in exchange for each share of EchoStar Class A common stock they own.

The combination of Hughes and EchoStar will create one of the nation’s largest subscription television platforms.


The Class A common stock and Class C common stock of the new company, which is currently named “HEC Holdings, Inc.” but which will be renamed “EchoStar Communications Corporation” as part of the transactions, will be listed on either the New York Stock Exchange or the Nasdaq Stock Market under the symbols “          ” and “          ,” respectively.

WE URGE YOU TO READ THIS DOCUMENT CAREFULLY, INCLUDING

THE SECTION ENTITLED “RISK FACTORS” THAT BEGINS ON PAGE 47.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these transactions or the securities to be issued in connection with these transactions. In addition, neither the Securities and Exchange Commission nor any state securities commission has passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

This document, which is dated                     , 2002, is a combined Consent Solicitation Statement of GM and Information Statement of EchoStar, as well as a Prospectus of the new company, and is first being mailed to the stockholders of General Motors and EchoStar on or about                     , 2002.


 

                                               (GM LOGO) (HUGHES LOGO)                                             

To the GM $1 2/3 par value common stockholders and the GM Class H common stockholders:

      General Motors is proposing to split off its Hughes Electronics subsidiary to its GM Class H common stockholders. Immediately after the separation of Hughes from GM, the businesses of Hughes and EchoStar will be combined pursuant to a merger and the surviving corporation of that merger will be named “EchoStar Communications Corporation.” The new EchoStar formed by the merger will continue to provide multi-channel subscription television service under the DIRECTV brand name. The Hughes/EchoStar merger will create one of the nation’s largest subscription television platforms, with about 17 million subscribers based upon the number of subscribers of each of Hughes and EchoStar as of December 31, 2001.

      GM Class H common stockholders will receive as part of the transactions one share of the new EchoStar Class C common stock in exchange for each share of GM Class H common stock they own. Upon the completion of the transactions, based on assumptions described in this document, the former GM Class H common stockholders would hold about           % of the outstanding common stock of the new EchoStar, representing about           % of the new EchoStar’s total voting power. As a result of the transactions, the GM Class H common stock will be eliminated and GM will no longer have “tracking stock.” The GM $1 2/3 par value common stock will remain outstanding and will be GM’s only class of common stock after the transactions.

      As part of these transactions, GM will receive significant liquidity and value from its current retained economic interest of about           % in the financial performance of Hughes. Immediately before the split-off of Hughes, GM will receive a dividend of up to $4.2 billion and GM’s retained economic interest will be reduced by a commensurate amount. If GM continues to hold any retained economic interest in Hughes after the dividend, it may seek to benefit from debt reduction by distributing shares of Class C common stock of the new EchoStar in exchange for outstanding GM debt after the Hughes/ EchoStar merger. If permitted by the IRS, GM will retain any remaining ownership interest in the new EchoStar after the transactions. Based on assumptions described in this document, subject to IRS approval, after the transactions General Motors would retain shares of the new EchoStar Class C common stock equal to about           % of the outstanding common stock of the new EchoStar, representing about           % of the new EchoStar’s total voting power.

  THE BOARD OF DIRECTORS OF GENERAL MOTORS HAS UNANIMOUSLY APPROVED THE TRANSACTIONS AND RECOMMENDS THAT YOU VOTE TO APPROVE EACH OF THE PROPOSALS RELATING TO THE TRANSACTIONS BY EXECUTING AND RETURNING THE ENCLOSED CONSENT.  

      GM has already approved this merger as the sole stockholder of Hughes and a newly formed company that will hold all of the outstanding stock of Hughes immediately prior to the Hughes/EchoStar merger. However, other aspects of the transactions require GM common stockholder approval and, accordingly, none of the transactions will be completed unless such approval is obtained. If the GM $1 2/3 par value common stockholders and GM Class H common stockholders, each voting separately as a class and voting together as a single class based on their respective per share voting power, do not approve the transactions, Hughes will remain a wholly owned subsidiary of GM and neither the Hughes/EchoStar merger nor the GM/Hughes separation transactions will occur. Therefore, your vote on these matters is very important.

      This document contains important information about the GM/Hughes separation transactions and the Hughes/EchoStar merger. We urge you to read this document carefully, including the section entitled “Risk Factors” that begins on page 47.

      We strongly support the separation of Hughes from GM and the combination of Hughes and EchoStar, and we join with the board of directors of General Motors in enthusiastically recommending that you vote in favor of the transactions.

     
G. Richard Wagoner, Jr.
President and Chief Executive Officer
General Motors Corporation
  Jack A. Shaw
President and Chief Executive Officer
Hughes Electronics Corporation


 

(ECHOSTAR LOGO)

To the common stockholders of EchoStar Communications Corporation:

      We intend to combine our business with the business of Hughes Electronics pursuant to a merger that will be completed immediately following the separation of Hughes from its current parent company, General Motors. The surviving corporation in the Hughes/EchoStar merger will be named “EchoStar Communications Corporation” and will continue to provide multi-channel subscription television service under the DIRECTV brand name. The Hughes/EchoStar merger will create one of the nation’s largest subscription television platforms, with about 17 million subscribers based upon the number of subscribers of each of Hughes and EchoStar as of December 31, 2001.

      In connection with the Hughes/EchoStar merger, each of you who holds EchoStar Class A common stock will receive 1/0.73, or about 1.3699, shares of the new EchoStar Class A common stock in exchange for each share of EchoStar Class A common stock you own and EchoStar Class B common stockholders will receive 1/0.73, or about 1.3699, shares of the new EchoStar Class B common stock in exchange for each share of EchoStar Class B common stock they own. You should understand that a trust which I control currently owns all of the outstanding shares of EchoStar Class B common stock. You should also understand that you will not receive any fractional share of common stock in the new EchoStar. Instead, you will receive a cash payment for your fractional share. Upon the completion of the Hughes/EchoStar merger, based on assumptions described in this document, you, together with the other former EchoStar common stockholders, would hold about           % of the outstanding common stock of the new EchoStar, representing about           % of the new EchoStar’s total voting power.

      The boards of directors of EchoStar, Hughes and a newly formed company that will hold all of the outstanding stock of Hughes immediately prior to the Hughes/EchoStar merger have already approved the Hughes/EchoStar merger. In addition, General Motors, as the sole stockholder of Hughes and the Hughes holding company, and a trust controlled by me, as the holder of EchoStar Class B common stock representing about 90% of the voting power of EchoStar, have already approved the Hughes/EchoStar merger. As a result, no further action on your part is required to approve the Hughes/EchoStar merger. However, we believe that it is important for you to be informed about the Hughes/ EchoStar merger. Thus, this document is being sent to you for your information only.

  THE HUGHES/ECHOSTAR MERGER HAS ALREADY BEEN APPROVED BY THE STOCKHOLDERS OF ECHOSTAR. AS A RESULT, WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.  

      This document contains important information about the Hughes/EchoStar merger. We urge you to read this document carefully, including the section entitled “Risk Factors” that begins on page 47.

      I am excited about the opportunities that the Hughes/ EchoStar merger will create for us, for you and for our customers.

  Charles W. Ergen
  Chairman of the Board of Directors and
  Chief Executive Officer
  EchoStar Communications Corporation


 

ADDITIONAL INFORMATION

      This document incorporates important business and financial information about GM, Hughes, PanAmSat Corporation (which is currently approximately 81% owned by certain subsidiaries of Hughes) and EchoStar from other documents that are not included in or delivered with this document. You may obtain some of the documents about GM, Hughes, PanAmSat and EchoStar at the SEC’s website, “www.sec.gov”, or at the following websites:

  •  GM: At GM’s website, “www.gm.com” by selecting “Investor Information”, then selecting “Financial Data” and finally selecting “SEC Filings”;
 
  •  Hughes: At Hughes’ website, “www.hughes.com” by selecting “Investor Relations” and then selecting “SEC Filings”;
 
  •  PanAmSat: At PanAmSat’s website, “www.panamsat.com” by selecting “Investor Relations” and then selecting “SEC Filings/ Annual Report”; and
 
  •  EchoStar: At EchoStar’s website, “www.echostar.com” by selecting “about us”, then selecting “Investor Relations” and finally selecting “SEC Filings”.

We are not incorporating the contents of the websites of the SEC, GM, Hughes, PanAmSat, EchoStar or any other person into this document.

      This information is available to you without charge upon your written or oral request as described below. Written and telephone requests by GM common stockholders for any of the documents about GM, Hughes, PanAmSat or EchoStar should be directed to GM as indicated below:

GM Fulfillment Center

MC 480-000-FC1
30200 Stephenson Hwy.
Madison Heights, MI 48071
Telephone: (       )        -          

      Written and telephone requests by EchoStar common stockholders for any of the documents about EchoStar, GM, Hughes or PanAmSat should be directed to EchoStar as indicated below:

EchoStar Communications Corporation

5701 South Santa Fe Drive
Littleton, Colorado 80120
Attention: Kim Culig
Telephone: (       )        -          

      If you would like to request copies of any documents, please do so no later than                     , 2002 in order to ensure timely delivery.

      For additional information about where to obtain copies of documents, see “Where You Can Find More Information” that begins on page 303.


 

TABLE OF CONTENTS

           
Page

QUESTIONS AND ANSWERS ABOUT THE TRANSACTIONS
    1  
SUMMARY
    12  
 
The Companies
    12  
 
Description of the Transactions
    14  
 
Structure of the Transactions
    21  
 
Recommendation of the GM Board of Directors
    23  
 
EchoStar Board of Directors and Stockholder Approvals
    23  
 
Regulatory Matters
    24  
 
No Appraisal Rights
    25  
 
New EchoStar Common Stock
    25  
 
New EchoStar Board of Directors and Officers
    27  
 
Interests of Directors and Executive Officers of GM, Hughes and EchoStar
    28  
 
Timing
    28  
 
Conditions to Completing the Transactions
    28  
 
Considerations Relating to Time Interval Between GM Common Stockholder Approval and Completion of the Transactions
    29  
 
Required Stockholder Approvals
    30  
 
Matters To Be Approved by GM Common Stockholders
    31  
 
GM Consent Mechanics
    31  
 
Tax Consequences of the Transactions
    32  
 
Accounting Treatment
    32  
 
Comparative Market Price Data
    32  
 
Selected Historical and Pro Forma Financial Data
    34  
 
Unaudited Comparative Per Share Information
    44  
 
Recent Developments
    46  
 
RISK FACTORS
    47  
 
Risk Factors Relating to the Transactions
    47  
 
Risk Factors Relating to GM After the Transactions
    50  
 
Risk Factors Relating to New EchoStar After the Transactions
    52  
 
THE TRANSACTIONS
    71  
 
Description of the Transactions
    71  
 
GM Background and Considerations
    93  
 
EchoStar Background and Considerations
    149  
 
Regulatory Requirements
    162  
 
No Appraisal Rights
    164  
 
Stockholder Litigation Relating to the Transactions
    164  
 
Accounting Treatment
    165  
 
Material U.S. Federal Income Tax Considerations Relating to the Transactions
    165  
 
Resale Limitations
    168  

i


 

           
Page

 
DESCRIPTION OF PRINCIPAL TRANSACTION AGREEMENTS
    169  
 
Implementation Agreement
    169  
 
GM/ Hughes Separation Agreement
    183  
 
Hughes/ EchoStar Merger Agreement
    190  
 
PanAmSat Stock Purchase Agreement
    204  
 
Certain Other Ancillary Agreements
    211  
 
GM CAPITALIZATION
    213  
 
GENERAL MOTORS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    214  
 
HUGHES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    221  
 
NEW ECHOSTAR UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    225  
 
ECHOSTAR UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    232  
 
NEW ECHOSTAR DIRECTORS AND EXECUTIVE OFFICERS
    237  
 
Board of Directors
    237  
 
Committees
    239  
 
Executive Officers
    239  
 
Director and Executive Officer Compensation
    239  
 
GM CAPITAL STOCK
    241  
 
Introduction
    241  
 
GM Preferred Stock
    242  
 
GM Preference Stock
    242  
 
GM’s Dual-Class Common Stock Capital Structure
    245  
 
GM’s Board of Directors Policy Statement
    250  
 
ECHOSTAR CAPITAL STOCK
    254  
 
Introduction
    254  
 
EchoStar Class A Common Stock
    254  
 
EchoStar Class B Common Stock
    254  
 
EchoStar Class C Common Stock
    255  
 
EchoStar Preferred Stock
    255  
 
Limitation of Liability and Indemnification Matters
    256  
 
Nevada Law and Limitations on Changes in Control
    256  
 
NEW ECHOSTAR CAPITAL STOCK
    258  
 
Introduction
    258  
 
Common Stock
    258  
 
Preferred Stock
    260  
 
Stockholder Rights Plan
    261  
 
Limitation on Liability of Directors of New EchoStar
    261  
 
Section 203 of the Delaware General Corporation Law
    261  
 
Certain Governance Provisions
    262  
 
Stock Exchange Listing
    263  

ii


 

           
Page

 
Book Entry; Uncertificated Shares
    263  
 
Transfer Agent and Registrar
    263  
 
COMPARISON OF RIGHTS OF HOLDERS OF GM CLASS H COMMON STOCK, ECHOSTAR COMMON STOCK AND NEW ECHOSTAR COMMON STOCK
    264  
 
Introduction
    264  
 
Comparison
    265  
 
SHARES ELIGIBLE FOR FUTURE SALE
    282  
 
The Transactions
    282  
 
GM Employee Benefit Plans
    282  
 
Charles W. Ergen
    283  
 
General Motors
    283  
 
AOL Time Warner
    283  
 
MARKET PRICE AND DIVIDEND DATA
    285  
 
GM Class H Common Stock
    285  
 
EchoStar Class A Common Stock
    286  
 
New EchoStar Class A Common Stock and New EchoStar Class C Common Stock
    286  
 
GM CONSENT SOLICITATION MATTERS
    287  
 
Solicitation of Written Consent of GM Common Stockholders
    287  
 
Security Ownership of Certain Beneficial Owners and Management of General Motors
    291  
 
Interests of Executive Officers and Directors of GM and Hughes
    293  
 
ECHOSTAR STOCKHOLDER APPROVAL MATTERS
    295  
 
EchoStar Stockholder Approval
    295  
 
Security Ownership of Certain Beneficial Owners and Management of EchoStar
    295  
 
Interests of Executive Officers and Directors of EchoStar
    298  
 
LEGAL MATTERS
    300  
 
EXPERTS
    300  
 
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
    301  
 
WHERE YOU CAN FIND MORE INFORMATION
    303  
 
APPENDIX A: THE FIRST GM CHARTER AMENDMENT—ARTICLE FOURTH OF THE GM AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AFTER GIVING EFFECT TO THE FIRST CHARTER AMENDMENT TO EFFECT THE TRANSACTIONS
    A-1  
 
APPENDIX B: THE SECOND GM CHARTER AMENDMENT—ARTICLE FOURTH OF THE GM AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AFTER GIVING EFFECT TO THE SECOND CHARTER AMENDMENT REFLECTING THE COMPLETION OF THE TRANSACTIONS
    B-1  

iii


 

           
Page

APPENDIX C: FAIRNESS OPINIONS
    C-1  
 
Merrill Lynch, Pierce, Fenner & Smith Incorporated Fairness Opinion
    C-1  
 
Bear Stearns Fairness Opinion
    C-6  
 
Credit Suisse First Boston Fairness Opinion
    C-11  
 
Goldman Sachs Fairness Opinion
    C-15  
 
Deutsche Banc Alex. Brown Fairness Opinion
    C-19  
 
APPENDIX D: HEC HOLDINGS, INC. BALANCE SHEET
    D-1  


      You should rely only on the information contained in, or incorporated by reference into, this document. We have not authorized anyone to provide you with information different from that contained in, or incorporated by reference into, this document. This does not constitute any offer to sell, nor any solicitation of an offer to buy, the securities offered by this document in any jurisdiction where offers and sales are not permitted under the laws of such jurisdiction. In addition, this does not constitute a solicitation of a consent or vote to approve the GM/ Hughes separation transactions or any other matter in any jurisdiction where such a solicitation is not permitted under the laws of such jurisdiction. The information contained in, or incorporated by reference into, this document is accurate only as of the date of this document regardless of the time of delivery or of any sale of the securities offered by this document.


      DIRECTV®, DirecWay®, Galaxy®, NET-36™, PRIMESTAR® and SPACEWAY® are trademarks of Hughes. EchoStar™ and DISH Network™ are trademarks of EchoStar. All other trademarks are properties of their respective owners.

iv


 

QUESTIONS AND ANSWERS ABOUT THE TRANSACTIONS

Q1. What are the GM/ Hughes separation transactions?
 
A1. The GM/ Hughes separation transactions are a series of proposed transactions involving General Motors and Hughes that provide for the separation of Hughes from General Motors. As a result of these transactions, a company holding the stock of Hughes will become an independent, publicly owned company, separate from GM, and can then complete the proposed merger with EchoStar.

  There are two principal components to the GM/ Hughes separation transactions:

  •  Hughes Recapitalization. Immediately before the separation of Hughes from GM, Hughes will distribute to General Motors a dividend of up to $4.2 billion and GM’s retained economic interest in Hughes will be reduced by a commensurate amount, as explained further in Question 2 below.

  Immediately after the Hughes recapitalization and an internal reorganization that will result in the formation of a holding company above Hughes, GM will hold a number of shares of common stock of the new Hughes holding company equal to the number of then outstanding shares of GM Class H common stock plus a number of shares of the Hughes holding company common stock representing GM’s remaining retained economic interest in Hughes, if any, after the reduction pursuant to the Hughes recapitalization described above.

  •  Hughes Split-Off. Immediately after the Hughes recapitalization, General Motors will cause Hughes to be separated from GM by distributing to the GM Class H common stockholders one share of Class C common stock of the Hughes holding company in exchange for each share of GM Class H common stock they own. As a result, all outstanding shares of GM Class H common stock will be redeemed and canceled. Any shares of Class C common stock of the Hughes holding company that are not distributed to the GM Class H common stockholders in the Hughes split-off will continue to be held by General Motors upon the completion of the Hughes split-off. All or a portion of any such shares may be subject to GM debt-for-equity exchanges as described in Question 12 below and, if permitted by the IRS, any remaining portion of such shares would be retained by General Motors.

  The number of shares, if any, to be held by GM after the Hughes split-off will be based on GM’s retained economic interest in Hughes after that interest has been reduced to reflect the dividend pursuant to the Hughes recapitalization described above. Whether and to what extent GM will hold any such shares, so that it would be able to engage in any GM debt-for-equity exchanges after the transactions and/or retain any ownership interest in the new EchoStar after the transactions, will depend upon a number of factors that will not be known until the time of the completion of the transactions, including the actual amount of the Hughes dividend and the average market price of GM Class H common stock during a specified period preceding that time. If the IRS does not permit GM to retain those shares of Class C common stock of the Hughes holding company, if any, that are held by GM after the Hughes split-off, GM will distribute those shares to the GM $1 2/3 par value common stockholders on a pro rata basis to the extent required by the transaction agreements.

  The GM/ Hughes separation transactions also include certain other related transactions that generally address matters relating to the separation of Hughes from GM.
 
  GM does not currently have the ability to exchange shares of the Hughes holding company for shares of GM Class H common stock. One of the effects of the amendment to the GM restated certificate of incorporation that GM common stockholders are being asked to approve pursuant to this consent solicitation is to authorize the GM board of directors to make this exchange on the terms described in this document.
 
  For more information, see pages 76, 169 and 183.

1


 

Q2. How will the Hughes recapitalization reduce GM’s retained economic interest in Hughes?
 
A2. While GM currently owns all of the outstanding stock of Hughes, a fraction determined under the GM restated certificate of incorporation allocates Hughes’ earnings between the two classes of GM common stock: the GM Class H common stock and the GM $1 2/3 par value common stock. The percentage of Hughes’ earnings that is allocable to the GM $1 2/3 par value common stock represents what we sometimes refer to as GM’s retained economic interest in Hughes. The reduction of GM’s retained economic interest in Hughes will occur by adjusting this fraction based on the actual amount of the Hughes dividend described in Question 1 above and the average market price of GM Class H common stock during a specified period preceding the time of the completion of the proposed transactions. The GM board of directors does not currently have the ability to make this adjustment. One of the effects of the amendment to the GM restated certificate of incorporation that GM common stockholders are being asked to approve pursuant to this consent solicitation is to authorize the GM board of directors to make this adjustment on the terms described in this document.

  In order to illustrate the effect of the Hughes recapitalization on this fraction (and, as a result, on GM’s retained economic interest in Hughes), we have calculated the fraction based on the number of shares of GM Class H common stock outstanding as of                , 2002 and the number of shares of GM Class H common stock that would be issued, based on certain assumptions, upon the mandatory conversion of GM’s Series H preference stock. Based on the fraction so calculated, about           % of Hughes’ earnings would have been allocable to the GM Class H common stock for purposes of determining earnings per share and amounts available for the payment of dividends. The remaining portion of Hughes’ earnings, about           %, would have been allocable to the GM $1 2/3 par value common stock. In this example, this percentage would represent what we sometimes refer to as GM’s retained economic interest in Hughes prior to the Hughes recapitalization. After the payment of a $4.2 billion dividend from Hughes to GM and the related adjustment of the fraction pursuant to the Hughes recapitalization (based on the average market price of GM Class H common stock during a specified period ending on                     , 2002), the fraction calculated as of                     , 2002 as described above would have resulted in the allocation of about           % of Hughes’ earnings to the GM Class H common stock. The balance of about           % would have been allocated to the GM $1 2/3 par value common stock. In this example, this percentage would represent GM’s retained economic interest in Hughes after the Hughes recapitalization.
 
  Thus, as illustrated above, GM’s retained economic interest in Hughes would have been reduced by an amount commensurate with the amount of the dividend, or about           %, based on the average market price of GM Class H common stock during a specified period ending on                     , 2002. The actual amount of the Hughes dividend, as well as the reduction of GM’s retained economic interest in Hughes and the amount, if any, of GM’s retained economic interest in Hughes after the reduction, will not be known until immediately before the completion of the transactions and could vary materially from this illustrative calculation based on a number of factors, including the average market price of GM Class H common stock during a specified period preceding the time of the completion of the proposed transactions. The number of shares of Class C common stock of the new Hughes holding company, if any, that GM will hold immediately after the completion of the Hughes split-off will be based on the amount of GM’s retained economic interest in Hughes, if any, after that interest has been reduced to reflect the dividend.
 
  For more information, see page 76.

Q3. What is the Hughes/ EchoStar merger?
 
A3. The Hughes/EchoStar merger is the proposed transaction that will combine the businesses of Hughes and EchoStar. Immediately after the completion of the GM/ Hughes separation transactions, EchoStar will merge with the Hughes holding company, which will be the surviving corporation in the merger. This surviving company will be renamed “EchoStar Communications Corporation,” which we sometimes refer to as the new EchoStar.

2


 

  For more information, see pages 83 and 190.

Q4. What are the purposes of the transactions?
 
A4. There are two principal purposes of the transactions:

  First, the transactions are expected to better position the businesses of Hughes and EchoStar to compete in the multi-channel video programming distribution market and, overall, in the telecommunications industry. After the transactions, the new EchoStar will be one of the nation’s largest subscription television platforms. The transactions will provide the combined company with greater opportunities and financial resources to develop an expanded competitive business and an opportunity to realize significant economies of scale and generate substantial cost and revenue synergies. In particular, among other things, the new EchoStar will seek to:

  •  eliminate duplicate programming and utilize reclaimed broadcast spectrum to deliver more program and service offerings;
 
  •  standardize the EchoStar and DIRECTV set-top boxes, which is expected to both reduce manufacturing costs and enable improved anti-piracy protection;
 
  •  combine and improve the distribution networks of EchoStar and DIRECTV;
 
  •  consolidate customer service and other facilities and infrastructure;
 
  •  reduce subscriber acquisition costs, subscriber churn, programming costs and eliminate duplicative overhead;
 
  •  introduce local-into-local broadcast channel service in all designated market areas;
 
  •  expand two-way high-speed broadband;
 
  •  expand high-definition television, video-on-demand, pay-per-view and educational programming offerings; and
 
  •  generate new sources of local and national advertising revenue.

  We believe that the new EchoStar’s broadband offerings could play an important role in spanning the “digital divide” between urban and suburban customers with multiple choices for high-speed Internet access and rural customers with limited choices for high-speed Internet access. Furthermore, EchoStar and Hughes recently announced a new proposal that, subject to the completion of the merger, is designed to enable the new EchoStar to deliver local broadcast television channels in all 210 designated market areas in the United States as soon as 24 months following the completion of the merger.
 
  Second, the transactions are designed to provide significant liquidity and value to General Motors, which will help to support the credit position of General Motors after the transactions. This anticipated liquidity and value will result from:

  •  GM’s receipt of the dividend of up to $4.2 billion from Hughes;
 
  •  GM’s benefit from debt reduction resulting from any GM debt-for-equity exchanges as described below in Question 12; and
 
  •  GM’s retention of any shares of stock in the new EchoStar following the completion of any GM debt-for-equity exchanges.

  The actual amount and form of liquidity to be provided to GM in connection with the transactions will depend upon the value of GM’s retained economic interest in Hughes before the completion of the transactions and ownership interest, if any, in the new EchoStar after the completion of the transactions and the circumstances under which GM achieves liquidity with regard to such interest.
 
  For more information, see pages 93 and 151.

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Q5. What will I receive if the transactions occur?
 
A5.    GM Class H Common Stockholders. In the GM/ Hughes separation transactions, GM Class H common stockholders will receive one share of Class C common stock of the Hughes holding company in exchange for each share of GM Class H common stock they own. In the Hughes/ EchoStar merger, each of these shares will remain outstanding and become a share of Class C common stock of the new EchoStar. Accordingly, the former GM Class H common stockholders will no longer be holders of the Class H “tracking stock” of General Motors, which is a stock of GM designed to provide holders with financial returns based on the financial performance of GM’s Hughes subsidiary, but instead will be holders of a more conventional common stock of the new EchoStar.

  GM $1 2/3 Par Value Common Stockholders. Unless as a result of the IRS ruling GM is required under the transaction agreements to distribute to the GM $1 2/3 par value common stockholders shares of Class C common stock of the Hughes holding company, if any, that are held by GM after the Hughes split-off, GM $1 2/3 par value common stockholders will not receive any shares of the Hughes holding company or the new EchoStar. If and to the extent that, as a result of the IRS ruling, GM is required by the transaction agreements to distribute shares of Class C common stock of the Hughes holding company, GM $1 2/3 par value common stockholders would receive a pro rata distribution of such shares. After the transactions, GM $1 2/3 par value common stockholders will retain their shares of GM $1 2/3 par value common stock, which will be GM’s only class of common stock at that time. Accordingly, as a result of these transactions, GM will no longer have “tracking stock” and will be primarily focused on its core automotive and related businesses. Except to the extent of any ownership interest in the new EchoStar held by GM after the transactions (assuming that the IRS permits GM to retain such an interest), GM $1 2/3 par value common stockholders will no longer have any derivative interest in the financial performance of Hughes. However, GM $1 2/3 par value common stockholders will benefit from the significant liquidity and value that is anticipated to be provided to GM as a result of the transactions.
 
  EchoStar Common Stockholders. Common stockholders of EchoStar will receive the following in the Hughes/EchoStar merger:

  •  EchoStar Class A common stockholders will receive 1/0.73, or about 1.3699, shares of the new EchoStar Class A common stock in exchange for each share of EchoStar Class A common stock they own; and
 
  •  EchoStar Class B common stockholders will receive 1/0.73, or about 1.3699, shares of the new EchoStar Class B common stock in exchange for each share of EchoStar Class B common stock they own. A trust controlled by Charles W. Ergen, the Chairman of the Board of Directors and Chief Executive Officer of EchoStar, currently owns all of the outstanding shares of EchoStar Class B common stock.

  For more information, see pages 83 and 191.

Q6. What are the U.S. federal income tax consequences of the transactions?
 
A6. General Motors has submitted a request for an IRS ruling to the effect that the Hughes split-off will be tax-free to GM and its stockholders. If GM receives this ruling, then, for U.S. federal income tax purposes, neither GM common stockholders nor General Motors will recognize gain or loss as a result of the Hughes split-off.

  In addition, it is a condition to the completion of the Hughes/ EchoStar merger that the Hughes holding company and EchoStar receive opinions from their respective counsel to the effect that the Hughes/ EchoStar merger will be treated as a tax-free reorganization. If the Hughes/EchoStar merger qualifies as a tax-free reorganization, then neither Hughes nor EchoStar nor their respective stockholders will recognize any gain or loss for U.S. federal income tax purposes as a result of the Hughes/ EchoStar merger, except in connection with cash received by EchoStar common stockholders instead of fractional shares of Class A common stock or Class B common stock of the new EchoStar,

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  as applicable. We currently expect that the companies will receive these opinions in connection with the completion of the transactions.
 
  For more information, see page 165.

Q7. What are the terms of the common stock of the new EchoStar that I will receive in the transactions?
 
A7. The new EchoStar will issue shares of three different classes of common stock in the transactions: Class A common stock, Class B common stock and Class C common stock. Except as to voting rights, the Class A common stock and the Class C common stock of the new EchoStar will be identical. The new EchoStar Class B common stock will have special voting rights, will be convertible into Class A common stock or Class C common stock of the new EchoStar and will be subject to certain transfer restrictions. However, in all respects other than voting rights, convertibility and the transfer restrictions, the Class B common stock of the new EchoStar will be substantially the same as the Class A common stock and Class C common stock of the new EchoStar. Charles W. Ergen, the Chairman of the Board of Directors and Chief Executive Officer of EchoStar and the current beneficial owner of all of the outstanding shares of Class B common stock of EchoStar, is expected to be the beneficial owner of all of the outstanding shares of new EchoStar Class B common stock immediately after the transactions.

  The common stock of the new EchoStar will have the following voting rights:

  •  each share of the new EchoStar Class A common stock will entitle the holder to one vote in the election of directors and all other matters submitted to stockholders for their approval;
 
  •  each share of the new EchoStar Class B common stock will initially entitle the holder to 10 votes in the election of directors and all other matters submitted to stockholders for their approval; and
 
  •  each share of the new EchoStar Class C common stock will entitle the holder to a number of votes in the election of directors and all other matters submitted to stockholders for their approval that will ensure that the new EchoStar Class C common stock held by GM (other than stock that is subject to GM debt-for-equity exchanges) and the new EchoStar Class C common stock issued to certain of GM’s historical stockholders together possess 50.5% of the aggregate voting power of the new EchoStar immediately following the Hughes/EchoStar merger. The calculation of the exact number of votes per share of the new EchoStar Class C common stock will not be made until the time of the completion of the transactions because the calculation will be subject to certain variable factors that will be determined between now and that time. We estimate that the holders of the Class C common stock of the new EchoStar would be entitled to between three and five votes per share.

     Based on assumptions described elsewhere in this document, Mr. Ergen would hold about      % of the total voting power of the new EchoStar upon the completion of the transactions. As a result, Mr. Ergen will have significant influence over actions of the new EchoStar that require stockholder approval.
 
     Directors will be elected on the basis of cumulative voting. On all other matters, the shares of the new EchoStar Class A common stock, Class B common stock and Class C common stock will vote together as a single class based on their respective per share voting power. In addition, if permitted by the IRS, the approval of the new EchoStar Class B common stock voting separately as a class will be required to approve certain specified matters, including, among other things, extraordinary matters for which a stockholder vote is required under state law (such as mergers, charter amendments, including changes in the rights of the shares of the new EchoStar Class B common stock and any increase in the authorized number of shares of the new EchoStar Class B common stock or the new EchoStar Class C common stock, and dissolution) or under the rules of the NYSE or the Nasdaq, as applicable, any sale or acquisition of a significant business of the new EchoStar, any amendment by stockholders to the bylaws of the new EchoStar, certain issuances of common stock (or equivalents) of the new EchoStar and the adoption by the new EchoStar of certain equity-based benefit plans.

  For more information, see page 258.

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Q8. Why will there be three different classes of the new EchoStar common stock?
 
A8. The new EchoStar will have three different classes of common stock, with each class having different voting powers, in order to address two important objectives with respect to the transactions:

  •  to preserve the tax-free status of the Hughes split-off to GM for U.S. federal income tax purposes; and
 
  •  to preserve at least to some degree the greater voting power that the EchoStar Class B common stock currently has relative to the EchoStar Class A common stock.

  GM and Hughes would not agree to complete the transactions unless they were assured that the Hughes split-off would be tax-free to GM and its stockholders for U.S. federal income tax purposes. In fact, GM’s receipt of a ruling from the IRS confirming the tax-free nature of the Hughes split-off is a condition to the obligation of GM and Hughes to complete the transactions. The Hughes split-off will only be tax-free to GM for these purposes if, among other things, General Motors and certain of its historical stockholders hold stock possessing more than 50% of the total voting power of the stock of the new EchoStar in the transactions. Accordingly, the terms of the various classes of common stock of the new EchoStar are designed to ensure that the stock of new EchoStar held by GM (other than stock that is subject to GM debt-for-equity exchanges) and the stock of the new EchoStar issued to certain of GM’s historical stockholders together possess at least 50.5% of the voting power of the new EchoStar for at least the first two years after the Hughes split-off.
 
  At the same time, EchoStar wanted to preserve at least to some degree the greater voting power that the EchoStar Class B common stock currently has relative to the EchoStar Class A common stock. This was particularly important given that Mr. Ergen, as the beneficial owner of all of the EchoStar Class B common stock and about 90% of the total voting power of EchoStar, was required to reduce substantially his current voting power in the new EchoStar in order to address the tax objectives of GM and Hughes with respect to the transactions. Mr. Ergen agreed to such a substantial reduction of his own voting power, including giving up voting control of EchoStar, in order to provide the holders of EchoStar Class A common stock the opportunity to participate in the potential benefits expected to accrue to them as a result of the completion of the Hughes/ EchoStar merger.
 
  For more information, see page 83.

Q9. When will the transactions be completed?
 
A9. We are working diligently to complete the GM/ Hughes separation transactions and the Hughes/ EchoStar merger as soon as reasonably possible. However, we will not complete the proposed transactions unless certain important conditions are satisfied. These conditions are described in Question 10 below. Assuming that these conditions are satisfied within the time frame we currently anticipate, we expect to complete the transactions during the second half of 2002.

  For more information, see page 72.

Q10. What are the principal conditions to the transactions?
 
A10. The GM/ Hughes separation transactions and the Hughes/ EchoStar merger are subject to a number of conditions which must be satisfied before the transactions can be completed. These conditions include, among others:

  •  the receipt of the requisite GM common stockholder approval of each of the proposals relating to the transactions, as described in Question 14 below;
 
  •  the expiration or termination of the waiting periods applicable to the Hughes/ EchoStar merger under the Hart-Scott-Rodino Act and any similar law of foreign jurisdictions;
 
  •  the absence of any effective injunction or order which prevents the completion of the transactions;

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  •  the receipt of Federal Communications Commission approval for the transfer of licenses and other authorizations in connection with the Hughes/ EchoStar merger and the Hughes split-off;
 
  •  the receipt of all other approvals of, or the making of all other filings with, governmental authorities required to complete the transactions, other than approvals and filings, the absence of which, in the aggregate, are not reasonably likely to have a material adverse effect on the new EchoStar;
 
  •  the receipt by General Motors of a ruling by the IRS to the effect that the Hughes split-off will be tax-free to GM and its stockholders for U.S. federal income tax purposes;
 
  •  the availability of financing for the Hughes/ EchoStar merger;
 
  •  the approval for listing on either the NYSE or the Nasdaq of the Class A common stock and Class C common stock of the new EchoStar that will be outstanding after the transactions; and
 
  •  the ability of the new EchoStar to issue a minimum amount of equity immediately following the Hughes/ EchoStar merger without violating certain agreements with General Motors that are designed to preserve the tax-free status of the Hughes split-off to GM.

  Satisfaction of the condition relating to new EchoStar’s ability to issue a minimum amount of equity will depend upon a number of factors that will not be known until immediately before the completion of the transactions, including the average market price of GM Class H common stock during a specified period preceding such time. In addition, if necessary in order to satisfy this condition, the terms of the transaction agreements require that GM make certain reductions to the number of shares of the new EchoStar Class C common stock eligible for GM debt-for-equity exchanges after the transactions and/or to the amount of the dividend that Hughes would pay to GM in connection with the Hughes recapitalization. You should understand, however, that, as indicated in Question 1 above, the number of shares of the new EchoStar Class C common stock available for GM debt-for-equity exchanges under the terms of the transaction agreements could be reduced automatically if the value of GM’s retained economic interest in Hughes following the Hughes dividend would result in GM holding less than 100 million shares of the new EchoStar Class C common stock after the Hughes/EchoStar merger.
 
  We estimate that, were the circumstances at the time of the transactions to conform to certain assumptions described elsewhere in this document, after giving effect to the required reductions, this condition would be satisfied as long as the average price of GM Class H common stock during such specified period were to exceed $       per share.
 
  However, GM may also choose voluntarily to reduce further the number of such GM debt-for-equity shares and/or the dividend amount in order to satisfy this condition so that the transactions can be completed. Any such voluntary reductions by GM would have the effect of further reducing the average market price of GM Class H common stock necessary to satisfy this condition, but also reducing the amount of liquidity to be provided to GM in the transactions. We cannot assure you that GM would make any such voluntary reductions, and a failure by GM to make such voluntary reductions could result in the transactions not being completed.

  For more information, see pages 72, 187 and 196.

Q11. What is the PanAmSat stock sale?
 
A11. This transaction is the potential sale by certain subsidiaries of Hughes of their approximately 81% interest in PanAmSat to EchoStar. This transaction would only occur if the Hughes/ EchoStar merger does not occur because certain financing or regulatory-related conditions to complete the Hughes/ EchoStar merger have not been satisfied. GM, Hughes and EchoStar have agreed that, under these circumstances, EchoStar will be required to purchase Hughes’ indirect common stock holding in PanAmSat for a purchase price of $22.47 per share, or about $2.7 billion in the aggregate. This purchase price is payable, depending on the circumstances, either solely in cash or in a combination of cash and either debt or equity securities of EchoStar. If the Hughes/EchoStar merger does occur, the new EchoStar will indirectly hold the approximately 81% interest in PanAmSat.

  You should understand that the PanAmSat stock sale is subject to a number of conditions which must be satisfied before the transaction could be completed. These conditions include, among other things,

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  the expiration or termination of the waiting period applicable to the PanAmSat stock sale under the Hart-Scott-Rodino Act, the absence of any effective injunction or order which prevents the completion of the PanAmSat stock sale and the receipt of FCC approval for the transfer of licenses in connection with the PanAmSat stock sale.
 
  If the PanAmSat stock sale were to occur, Hughes would remain a wholly owned subsidiary of General Motors, and GM Class H common stockholders would remain stockholders of GM, but Hughes would sell its indirect interest in PanAmSat to EchoStar.
 
  For more information, see pages 92 and 204.

Q12. What are the GM debt-for-equity exchanges?
 
A12. Between now and the date that is six months after the completion of the Hughes/ EchoStar merger, GM has the ability to issue or distribute a specified number of shares of GM Class H common stock and/or shares of the new EchoStar Class C common stock that it may hold after the Hughes/ EchoStar merger by exchanging such shares for the satisfaction of GM’s outstanding liabilities to certain of GM’s creditors. Any such GM debt-for-equity exchanges would provide liquidity to GM by allowing GM to benefit from debt reduction. GM debt-for-equity exchanges occurring prior to the Hughes split-off also would have the effect of reducing GM’s retained economic interest in Hughes and increasing the number of outstanding shares of GM Class H common stock by the number of shares issued in the transaction. GM debt-for-equity exchanges occurring after the Hughes/ EchoStar merger would have the effect of reducing GM’s ownership interest in the new EchoStar by the number of shares distributed in the transaction. Whether and to what extent GM will hold any shares of the new EchoStar Class C common stock such that it would be able to engage in GM debt-for-equity exchanges after the transactions will depend upon a number of factors that will not be known until immediately before the completion of the transactions, including, among other things, the actual amount of the Hughes dividend and the average market price of GM Class H common stock during a specified period preceding that time.

  For more information, see pages 89 and 173.

Q13. Do any GM stockholders or EchoStar stockholders have appraisal rights in connection with the transactions?
 
A13. No. Under applicable corporation law and the companies’ governing documents, neither GM stockholders nor EchoStar stockholders are entitled to appraisal rights in connection with the GM/ Hughes separation transactions or the Hughes/ EchoStar merger.

  For more information, see page 164.

Q14. What stockholder approvals are needed for the transactions?
 
A14. The transactions will not be completed unless GM obtains the approval of the proposals relating to the transactions by the holders of:

  •  a majority of the outstanding shares of GM $1 2/3 par value common stock, voting as a separate class;
 
  •  a majority of the outstanding shares of GM Class H common stock, voting as a separate class; and
 
  •  a majority of the voting power of the outstanding shares of GM $1 2/3 par value common stock and GM Class H common stock, voting together as a single class, based on their respective per share voting power as set forth in the GM restated certificate of incorporation.

  Certain aspects of the GM/Hughes separation transactions require the approval of GM common stockholders under applicable corporation law. The Hughes/ EchoStar merger, however, already has received all required stockholder approvals. GM, as the sole stockholder of Hughes and the Hughes holding company, has approved the Hughes/ EchoStar merger for Hughes and Hughes Holdings. In addition, a trust controlled by Charles W. Ergen, as the holder of EchoStar Class B common stock representing about 90% of the voting power of EchoStar, has approved the Hughes/ EchoStar merger for EchoStar. Furthermore, the boards of directors of Hughes, the Hughes holding company and EchoStar have each unanimously approved the Hughes/EchoStar merger. Accordingly, the Hughes/EchoStar merger does not require any further stockholder approval under the applicable

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  corporation law. However, even though such approval is not legally required, GM is submitting all aspects of the transactions, including the Hughes/ EchoStar merger, to GM common stockholders for their approval. Thus, by voting to approve the proposals relating to the transactions, GM common stockholders will be ratifying all aspects of the transactions, including, among other things, the Hughes/ EchoStar merger.
 
  You should understand that the completion of the Hughes/ EchoStar merger is conditioned on the completion of the GM/ Hughes separation transactions. This means that if GM’s common stockholders do not approve the proposals relating to the transactions, neither the Hughes/ EchoStar merger nor the GM/ Hughes separation transactions will occur. The transactions have been structured so that, immediately after the completion of the Hughes split-off, the businesses of Hughes and EchoStar will be combined pursuant to the Hughes/ EchoStar merger.
 
  The GM board of directors has unanimously approved the GM/ Hughes separation transactions and the Hughes/EchoStar merger and recommends that GM common stockholders, including GM $1 2/3 par value common stockholders and GM Class H common stockholders, vote to approve each of the proposals described in this document by executing and returning the enclosed consent card as soon as possible.
 
  For more information, see pages 171 and 288.

Q15. What matters are being submitted to GM common stockholders for their approval?
 
A15. GM $1 2/3 par value common stockholders and GM Class H common stockholders are being asked to:

  •  approve an amendment to the GM restated certificate of incorporation to, among other things, enable the GM board of directors to reduce the denominator of the fraction in connection with the Hughes recapitalization and make the GM Class H common stock redeemable in exchange for shares of Class C common stock of the Hughes holding company; and
 
  •  ratify all other aspects of the transactions, including, among other things, the Hughes recapitalization and the Hughes dividend distribution, the Hughes split-off, the Hughes/EchoStar merger and other related transactions.

  Although these two proposals are separate matters to be voted upon by GM common stockholders, these proposals are expressly conditioned on each other. This means that BOTH of these proposals must be approved by GM $1 2/3 par value common stockholders and GM Class H common stockholders in order for GM to obtain the requisite GM common stockholder approval of the transactions.
 
  In addition to these two proposals, GM $1 2/3 par value common stockholders and GM Class H common stockholders are also being asked to approve a third proposal, which is a further amendment to the GM restated certificate of incorporation to eliminate certain provisions relating to the GM Class H common stock after the completion of the transactions. However, the completion of the transactions is not conditioned upon the requisite GM common stockholder approval of this proposal.
 
  For more information, see pages 81 and 287.

Q16. Why are EchoStar common stockholders not being asked to vote on the proposed transactions?
 
A16. Approval of the Hughes/ EchoStar merger by EchoStar requires the approval of a majority of the voting power of all outstanding shares of EchoStar common stock. A trust controlled by Charles W. Ergen, the Chairman of the Board of Directors and Chief Executive Officer of EchoStar, as the holder of all of the outstanding shares of EchoStar Class B common stock, which represents about 90% of the voting power of all outstanding shares of EchoStar common stock, has already executed a written consent approving the Hughes/ EchoStar merger. This action alone was sufficient to obtain the vote of the EchoStar common stockholders necessary to approve the Hughes/ EchoStar merger.

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  As a result, the EchoStar common stockholders are not being asked to vote on the Hughes/ EchoStar merger or any other matters and no submission of a proxy or other action is required on the part of the EchoStar common stockholders. However, we believe that it is important for EchoStar common stockholders to be informed about the Hughes/ EchoStar merger. Thus, this document is being sent to EchoStar common stockholders for their information only.
 
  For more information, see pages 154 and 295.

Q17. What should I do now?
 
A17. GM Common Stockholders. GM $1 2/3 par value common stockholders and GM Class H common stockholders should complete, date, sign and return the enclosed consent card as directed in this document and in the related materials as soon as possible. Before doing so, we urge GM common stockholders to review and carefully consider the information contained in and incorporated by reference into this document, including the factors described in the section entitled “Risk Factors” beginning on page      .

  Under the rules of the NYSE, on which GM’s common stock is listed, brokers who hold shares in street names may not consent on behalf of customers to non-routine proposals such as the approval of the transactions without specific instructions from those customers. If your shares of GM $1 2/3 par value common stock and/or GM Class H common stock are held in street name by a broker, your broker will vote your shares only if you provide instructions to your broker on how to vote. You should follow the directions provided to you by your broker regarding how to instruct your broker to vote your shares. Without your instructions, your shares of GM common stock will not be voted in connection with the transactions, which will have the same effect as voting against the transactions.
 
  EchoStar Common Stockholders. EchoStar common stockholders do not need to take any action because a trust controlled by Charles W. Ergen, as the holder of all of the outstanding shares of EchoStar Class B common stock, which represents about 90% of the voting power of EchoStar, has already executed a written consent approving the Hughes/ EchoStar merger. However, we believe that it is important for EchoStar common stockholders to be informed about the Hughes/ EchoStar merger. Thus, this document, which we urge EchoStar common stockholders to review carefully, is being sent to EchoStar common stockholders for their information only.
 
  For more information, see pages 289 and 295.

Q18. What happens if a GM common stockholder does not send in the consent card?
 
A18. If a GM $1 2/3 par value common stockholder or a GM Class H common stockholder does not send in the consent card, it will have the same effect as a vote against the proposals relating to the transactions, which approval is a condition to the completion of the Hughes/ EchoStar merger. Therefore, we urge all GM $1 2/3 par value common stockholders and GM Class H common stockholders to please complete, date, sign and return the enclosed consent card as soon as possible.

  For more information, see pages 289.

Q19.   Can GM common stockholders revoke their approval once the consent card is mailed?

A19. Yes. Any GM $1 2/3 par value common stockholder or GM Class H common stockholder can revoke his or her consent, or any withholding of consent, at any time prior to the requisite GM common stockholder approval of the transactions. GM common stockholder approval of the proposals relating to the transactions will occur as soon as consents representing the requisite GM common stockholder approval described above in Question 14 are delivered to General Motors in accordance with applicable law, but no sooner than 20 business days after the date this document is mailed to GM common stockholders. However, if General Motors does not receive the number of consents required within 60 days of the earliest dated consent delivered to General Motors in accordance with the applicable corporation law, the requisite GM common stockholder approval of the proposals relating to the transactions will not have occurred.

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  You can revoke your consent by filing with the Secretary of General Motors a written notice stating that you would like to revoke your consent. You can also revoke your consent, or any withholding of consent, by filing with the Secretary of General Motors another consent bearing a later date. You should send any revocations to the Secretary of General Motors at the following address:

General Motors Corporation

Renaissance Center
P.O. Box 300
Mail Code 482-C38-B71
Detroit, Michigan 48265-3000
Attention: Secretary

  For more information, see page 289.

Q20. Should I send in my stock certificates now?
 
A20. No. You should NOT send in your stock certificates at this time. You will receive further correspondence regarding the exchange of shares after the transactions have been completed.
 
Q21. Are there different procedures if I hold my GM shares through an employee savings plan?
 
A21. Yes. If you are a GM $1 2/3 par value common stockholder or GM Class H common stockholder and you participate in certain employee savings plans identified elsewhere in this document, your consent will serve as a voting instruction for the plan trustees, plan committees or independent fiduciaries of those plans, who will vote your shares in accordance with your instructions. Procedures differ among these employee savings plans with respect to the voting of shares for which no voting instructions are received and these procedures are explained in greater detail elsewhere in this document.

  For more information, see page 290.

Q22. What should I do if I have other questions?
 
A22. If you are a GM $1 2/3 par value common stockholder or GM Class H common stockholder and you have any questions about the GM/ Hughes separation transactions or the Hughes/ EchoStar merger, or how to complete and submit your consent card, or if you would like to request additional copies of this document, contact the GM consent solicitation agent as follows:

Morrow & Co., Inc.

445 Park Avenue
5th Floor
New York, New York 10022
(       )        -          (Toll-Free) for calls in the United States, Canada and Mexico
(       )        -          (Collect) for calls outside the United States, Canada and Mexico

  If you are an EchoStar common stockholder and have any questions about the Hughes/ EchoStar merger, or if you would like to request additional copies of this document, contact EchoStar as follows:

EchoStar Communications Corporation

Investor Relations
5701 South Santa Fe Drive
Littleton, Colorado 80120
Telephone: (       )        -          

  You may also obtain free copies of documents publicly filed by GM, Hughes, PanAmSat and EchoStar at the SEC’s website at “www.sec.gov”, at GM’s website at “www.gm.com”, at Hughes’ website at “www.hughes.com”, at PanAmSat’s website at “www.panamsat.com” or at EchoStar’s website at “www.echostar.com”. We are not incorporating the contents of the websites of the SEC, GM, Hughes, PanAmSat, EchoStar or any other person into this document, but are providing this information for your convenience.
 
  For more information on how to obtain copies of documents, see “Where You Can Find More Information” on page 303.

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SUMMARY

      In this summary, we highlight selected information which we describe in greater detail elsewhere in this document. This summary does not contain all of the important information contained in this document. You should read carefully this entire document and the other documents we refer to for a more complete understanding of the GM/ Hughes separation transactions and the Hughes/ EchoStar merger. In addition, we incorporate by reference into this document important business and financial information about GM, Hughes, PanAmSat and EchoStar that is set forth in other documents which these companies have filed publicly with the SEC. You may obtain the information incorporated by reference into this document without charge by following the instructions in the section entitled “Where You Can Find More Information” that begins on page           .

      As used in this document, unless the context requires otherwise:

  •  “General Motors” or “GM” means General Motors Corporation and its consolidated subsidiaries, including Hughes.
 
  •  “Hughes” means Hughes Electronics Corporation and its consolidated subsidiaries.
 
  •  “Hughes Holdings” means HEC Holdings, Inc., which is currently a wholly owned subsidiary of General Motors. This company will become the parent company of Hughes in connection with the GM/ Hughes separation transactions and will be merged with EchoStar in the Hughes/ EchoStar merger. Hughes Holdings will be the issuer of the securities that will be issued in these transactions and that are described in this document.
 
  •  “EchoStar” means EchoStar Communications Corporation and its consolidated subsidiaries.
 
  •  “New EchoStar” means the surviving company of the merger of Hughes Holdings and EchoStar and its consolidated subsidiaries.
 
  •  “we” means GM, Hughes, Hughes Holdings and EchoStar, as the context requires.

The Companies

     General Motors Corporation

      General Motors is primarily engaged in the automotive and, through its wholly owned Hughes subsidiary, the telecommunications industries. General Motors is the world’s largest manufacturer of automotive vehicles. GM also has financing and insurance operations and, to a lesser extent, is engaged in other industries.

      GM’s automotive operations are comprised of four regions:

      • GM North America;

      • GM Europe;

      • GM Latin America/Africa/Mid-East; and

      • GM Asia Pacific.

      GM North America designs, manufactures and markets vehicles primarily in North America under the following nameplates:

             
• Chevrolet
  • GMC   • Buick   • Saturn
• Pontiac
  • Oldsmobile   • Cadillac   • Hummer

      GM Europe, GM Latin America/Africa/Mid-East and GM Asia Pacific meet the demands of customers outside North America with vehicles designed, manufactured and marketed under the following nameplates:

                 
• Opel
  • Holden   • Saab   • GMC   • Buick
• Vauxhall
  • Isuzu   • Chevrolet   • Cadillac    

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      GM’s financing and insurance operations primarily relate to General Motors Acceptance Corporation, a wholly owned subsidiary of GM which we sometimes refer to as “GMAC,” which provides a broad range of financial services, including consumer vehicle financing, full-service leasing and fleet leasing, dealer financing, car and truck extended service contracts, residential and commercial mortgage services, commercial vehicle and homeowners’ insurance and asset-based lending.

      GM’s other operations include the designing, manufacturing and marketing of locomotives and other heavy-duty transmissions.

      GM’s principal executive offices are located at 300 Renaissance Center, Detroit, Michigan 48265-3000 and GM’s telephone number is (313) 556-5000.

     Hughes Electronics Corporation

      Hughes is a leading global provider of digital entertainment, information and communications services and satellite-based private business networks. Hughes has been a pioneer in many aspects of the satellite communications industry, and its technologies have driven the creation of new services and markets and have established Hughes as a leader in each of the markets it serves.

      Hughes provides advanced communications services on a global basis. Hughes has developed a wide range of entertainment, information and communications services for home and business use, including video, data, voice, multimedia and Internet services. Hughes’ businesses include:

  •  DIRECTV. DIRECTV includes businesses in the United States and Latin America and, with DIRECTV Broadband, Inc., formerly known as Telocity Delaware, Inc., constitutes Hughes’ direct-to-home broadcast segment. As of December 31, 2001, DIRECTV had about 10.7 million subscribers in the United States and 1.6 million subscribers in Latin America.
 
  •  Hughes Network Systems. Hughes Network Systems, which has more than a 50% share of the global market for very small aperture terminal private business networks and 101,000 DIRECWAY broadband consumer customers as of December 31, 2001, constitutes the network systems segment of Hughes. Hughes Network Systems is one of the two largest manufacturers of DIRECTV® subscriber equipment, having shipped over 8.0 million units. Hughes Network Systems is also leading the development of SPACEWAY®, a next-generation satellite-based broadband communications platform that is expected to provide customers with high-speed, two-way data communications on a more cost-efficient basis than systems that are currently available. SPACEWAY is expected to launch service in North America in 2004.
 
  •  PanAmSat. PanAmSat, a publicly held company of which subsidiaries of Hughes own approximately 81%, constitutes Hughes’ satellite services segment. PanAmSat owns and operates 21 satellites that are capable of transmitting signals to geographic areas covering a substantial portion of the world’s population. PanAmSat provides satellite capacity for the transmission of cable and broadcast television programming from the content source to the consumer’s home or to the cable operator.

      Hughes is currently a wholly owned subsidiary of General Motors.

      Hughes’ principal executive offices are located at 200 North Sepulveda Boulevard, El Segundo, California 90245 and Hughes’ telephone number is (310) 662-9688.

     EchoStar Communications Corporation

      EchoStar operates two business units:

  •  The DISH Network. The DISH Network is a direct broadcast satellite subscription television service in the United States. As of December 31, 2001, EchoStar had about 6.83 million DISH Network subscribers; and
 
  •  EchoStar Technologies Corporation. EchoStar Technologies Corporation is engaged in the design, development, distribution and sale of direct broadcast satellite set-top boxes, antennae and other digital

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  equipment for the DISH Network and the design, development and distribution of similar equipment for international satellite service providers.

      EchoStar’s principal executive offices are located at 5701 South Santa Fe Drive, Littleton, Colorado 80120 and EchoStar’s telephone number is (303) 723-1000.

     New EchoStar

      Hughes Holdings, which will become New EchoStar as a result of the Hughes/EchoStar merger, is a newly formed company that has not yet conducted any significant activities other than those relating to its formation, matters relating to the GM/ Hughes separation transactions and the Hughes/ EchoStar merger and the preparation and filing of this document. Hughes Holdings, which is currently a wholly owned subsidiary of General Motors, is the company which will eventually hold all of the capital stock of Hughes and be separated from GM pursuant to the Hughes split-off. Pursuant to the Hughes/ EchoStar merger, EchoStar will be merged with Hughes Holdings, with Hughes Holdings as the surviving corporation. As a result of the Hughes/ EchoStar merger, the name of Hughes Holdings will be changed to “EchoStar Communications Corporation” and Hughes will become a wholly owned subsidiary of New EchoStar. Immediately after the Hughes/ EchoStar merger, the business of New EchoStar will consist of the combined businesses currently conducted separately by Hughes and EchoStar.

      The combination of the businesses of Hughes and EchoStar pursuant to the Hughes/ EchoStar merger will create one of the nation’s largest subscription television platforms, with about 17 million subscribers based on the number of subscribers of each of Hughes and EchoStar as of December 31, 2001. The Hughes/ EchoStar merger is expected to provide New EchoStar with greater opportunities and financial resources to develop an expanded competitive business and an opportunity to realize significant economies of scale and generate substantial cost and revenue synergies.

      Hughes Holdings’ principal executive offices are currently located at 200 North Sepulveda Boulevard, El Segundo, California 90245 and Hughes Holdings’ phone number is currently (310) 662-9688. After the completion of the transactions, New EchoStar’s principal executive offices will be located at 5701 South Santa Fe Drive, Littleton, Colorado 80120 and New EchoStar’s telephone number will be (303) 723-1000.

Description of the Transactions

(See pages 71 and 169)

      We describe in this document certain proposed transactions relating to the separation of Hughes from GM, which we refer to as the “GM/ Hughes separation transactions.” We also describe the proposed merger of the businesses of Hughes and EchoStar, which we refer to as the “Hughes/ EchoStar merger.” These transactions are structured so that the Hughes/ EchoStar merger will occur immediately after the completion of the GM/ Hughes separation transactions. We sometimes refer to these transactions, and to the other transactions that will occur pursuant to the agreements among GM, Hughes and EchoStar in connection with the GM/Hughes separation transactions and the Hughes/ EchoStar merger, collectively as the “Transactions.” Certain matters relating to the Transactions are being submitted to GM $1 2/3 par value common stockholders and GM Class H common stockholders for their approval pursuant to this consent solicitation.

      Let us tell you more about the Transactions:

     The GM/ Hughes Separation Transactions (See pages 76, 169 and 183)

      The proposed GM/ Hughes separation transactions consist of several transactions involving General Motors and Hughes that are generally designed to prepare Hughes to complete the proposed combination with EchoStar by separating the Hughes business from General Motors. As a result of the GM/Hughes separation transactions, Hughes Holdings, which will be the parent company of Hughes at the time of the completion of the Hughes split-off, will become an independent, publicly owned company, separate from GM (except for

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any shares that may be retained or otherwise disposed of by GM, as described below), immediately prior to the Hughes/ EchoStar merger.

      The GM/ Hughes separation transactions will, among other things, provide significant liquidity and value to General Motors, which will help to support the credit position of General Motors after the Transactions. This anticipated liquidity and value will result from:

  •  GM’s receipt of a dividend of up to $4.2 billion from Hughes;
 
  •  as and to the extent applicable, GM’s benefit from debt reduction resulting from any GM debt-for-equity exchanges; and
 
  •  as and to the extent applicable, GM’s retention of shares of New EchoStar Class C common stock following the completion of any GM debt-for-equity exchanges.

You should understand that the aggregate amount of liquidity and value to be provided to GM pursuant to the Transactions will depend upon the value of GM’s retained economic interest in Hughes before the Hughes split-off or GM’s ownership interest in New EchoStar after the Hughes/EchoStar merger, as applicable, and the circumstances under which GM achieves liquidity with regard to that interest. For example, GM would have the ability to engage in GM debt-for-equity exchanges and/or hold a continuing ownership interest in New EchoStar after the Hughes/EchoStar merger only if and to the extent that the value of GM’s retained economic interest in Hughes at the time of the Hughes recapitalization were to exceed the amount of the Hughes dividend distribution and GM was not otherwise required to distribute shares to the GM $1 2/3 par value common stockholders pursuant to the transaction agreements. The value of GM’s retained economic interest at that time for this purpose will depend upon the average market price of GM Class H common stock during a specified period preceding that time.

      The GM/ Hughes separation transactions will not occur unless and until all of the conditions to the completion of the Hughes/ EchoStar merger, other than the completion of the Hughes recapitalization and the Hughes split-off, have been satisfied or waived. Unless the companies are prepared to complete the Hughes/EchoStar merger immediately thereafter, the Hughes business will not be separated from GM pursuant to the GM/Hughes separation transactions. Additionally, the GM/Hughes separation transactions are subject to the satisfaction or waiver of other conditions, including a condition that the amount of the Hughes dividend to GM may not exceed the value of GM’s retained economic interest in Hughes at the time of the dividend.

  •  Hughes Recapitalization. Immediately before the split-off of Hughes from General Motors, Hughes will declare and pay a dividend of up to $4.2 billion to General Motors in exchange for a commensurate reduction of GM’s retained economic interest in Hughes. This reduction of GM’s retained economic interest in Hughes will be effected by adjusting the GM Class H fraction, as described in greater detail elsewhere in this document. We sometimes refer to the payment of this dividend as the “Hughes dividend distribution.”
 
     After the Hughes dividend distribution, GM will contribute all of the outstanding stock of Hughes to Hughes Holdings, which will result in Hughes Holdings becoming the parent company of Hughes. After this contribution, General Motors will hold a number of shares of Hughes Holdings Class C common stock equal to the number of outstanding shares of GM Class H common stock plus a number of shares representing the remaining portion of GM’s retained economic interest in Hughes. We sometimes refer to these transactions collectively as the “Hughes recapitalization.”
 
  •  Hughes Split-Off. Immediately after the Hughes dividend distribution and the reduction of GM’s retained economic interest in Hughes pursuant to the Hughes recapitalization, General Motors will distribute to each GM Class H common stockholder one share of Hughes Holdings Class C common stock in exchange for each share of GM Class H common stock they own. As a result of this exchange, all outstanding shares of GM Class H common stock will be redeemed and canceled. Any shares of Hughes Holdings Class C common stock that are not distributed to GM Class H common stockholders will continue to be held by General Motors immediately upon the completion of the Hughes split-off. The number of shares of Hughes Holdings Class C common stock, if any, held by GM after the

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  Hughes split-off will be based upon GM’s retained economic interest in Hughes after the reduction pursuant to the Hughes recapitalization. Up to 100 million of any such shares held by General Motors may be subject to GM debt-for-equity exchanges as described below and, if and to the extent permitted by the IRS, any remaining portion of the shares held by General Motors would be retained by General Motors. If and to the extent required by the IRS and the transaction agreements, GM will distribute shares of Hughes Holdings Class C common stock, if any, that are held by GM after the Hughes split-off to the GM $1 2/3 par value common stockholders on a pro rata basis by means of a dividend. In connection with the redemption of the GM Class H common stock, any then outstanding shares of GM Series H preference stock would be exchanged for shares of Hughes Holdings preference stock. We sometimes refer to these transactions collectively as the “Hughes split-off.”
 
  •  Other Separation-Related Arrangements. Certain other related transactions are contemplated in connection with the completion of the GM/ Hughes separation transactions. As described in greater detail elsewhere in this document, these other transactions generally address matters relating to the separation of Hughes from General Motors pursuant to the Hughes split-off. Among other things, GM and Hughes have entered into arrangements with respect to indemnification matters, the allocation and sharing of taxes, intellectual property and the administration of certain employee matters.

      After the completion of the GM/ Hughes separation transactions, Hughes Holdings will be an independent, publicly owned company, separate from GM (except for any shares that may be retained or otherwise disposed of by GM, as described in this document), and ready to complete the proposed Hughes/EchoStar merger. As a result of the separation of Hughes from GM and the elimination of the GM Class H common stock, General Motors will no longer have “tracking stock” and will be primarily focused on its core automotive and related businesses.

      To accomplish the Hughes recapitalization and the Hughes split-off, General Motors is proposing to amend the GM restated certificate of incorporation:

  •  to enable the GM board of directors to reduce the denominator of the GM Class H fraction to effect the reduction of GM’s retained economic interest in Hughes in consideration of GM’s receipt of the Hughes dividend distribution; and
 
  •  to make the GM Class H common stock redeemable in exchange for Hughes Holdings Class C common stock and to ensure that the completion of the GM/ Hughes separation transactions will not result in a recapitalization of the GM Class H common stock into GM $1 2/3 par value common stock at a 120% exchange ratio as currently provided for in the GM restated certificate of incorporation under certain circumstances.

     The Hughes/ EchoStar Merger (See pages 83 and 190)

      The Transactions have been structured so that, immediately after the completion of the Hughes split-off, the businesses of Hughes and EchoStar will be combined pursuant to the Hughes/ EchoStar merger. This means that GM and Hughes must complete the GM/ Hughes separation transactions before the Hughes/ EchoStar merger can be completed. As part of the Hughes/ EchoStar merger, EchoStar will be merged with Hughes Holdings, with Hughes Holdings as the surviving corporation. As a result of the Hughes/ EchoStar merger, the name of Hughes Holdings will be changed to “EchoStar Communications Corporation.” Immediately following the Hughes/ EchoStar merger, Hughes will be a wholly owned subsidiary of New EchoStar and, as a result of the Hughes/EchoStar merger, former GM Class H common stockholders, General Motors (or the GM $1 2/3 par value common stockholders, as applicable) and former EchoStar common stockholders will be stockholders of New EchoStar.

      The Hughes/ EchoStar merger will, among other things, better position the businesses of Hughes and EchoStar to compete in the multi-channel video programming distribution market and, overall, in the telecommunications industry, and provide New EchoStar with greater opportunities and financial resources to

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develop an expanded competitive business and an opportunity to realize significant economies of scale and generate substantial cost and revenue synergies. In particular, among other things, New EchoStar will seek to:

  •  eliminate duplicate programming and utilize reclaimed broadcast spectrum to deliver more program and service offerings;
 
  •  standardize the EchoStar and DIRECTV set-top boxes, which is expected to both reduce manufacturing costs and enable improved anti-piracy protection;
 
  •  combine and improve the distribution networks of EchoStar and DIRECTV;
 
  •  consolidate customer service and other facilities and infrastructure;
 
  •  reduce subscriber acquisition costs, subscriber churn, programming costs and eliminate duplicative overhead;
 
  •  introduce local-into-local broadcast channel service in all designated market areas;
 
  •  expand two-way high-speed broadband;
 
  •  expand high-definition television, video-on-demand, pay-per-view and educational programming offerings; and
 
  •  generate new sources of local and national advertising revenue.

We believe that New EchoStar’s broadband offerings could play an important role in spanning the “digital divide” between urban and suburban customers with multiple choices for high-speed Internet access and rural customers with limited choices for high-speed Internet access. Upon the completion of the Hughes/ EchoStar merger, New EchoStar will be one of the nation’s largest subscription television platforms. Furthermore, EchoStar and Hughes recently announced a new proposal that, subject to the completion of the Hughes/ EchoStar merger, is designed to enable New EchoStar to deliver local broadcast television channels in all 210 designated market areas in the United States as soon as 24 months following the completion of the Hughes/EchoStar merger.

      In the Hughes/ EchoStar merger, EchoStar Class A common stockholders will receive 1/0.73, or about 1.3699, shares of New EchoStar Class A common stock in exchange for each share of EchoStar Class A common stock they own and EchoStar Class B common stockholders will receive 1/0.73, or about 1.3699, shares of New EchoStar Class B common stock in exchange for each share of EchoStar Class B common stock they own. A trust controlled by Charles W. Ergen, the Chairman of the Board of Directors and Chief Executive Officer of EchoStar, currently owns all of the outstanding shares of EchoStar Class B common stock. The former GM Class H common stockholders will retain the shares of Hughes Holdings Class C common stock distributed to them in the GM/ Hughes separation transactions and, if and to the extent permitted by the IRS, General Motors will retain all of its holdings of Hughes Holdings Class C common stock, if any, other than shares of Hughes Holdings Class C common stock that GM distributes in GM debt-for-equity exchanges. As described in greater detail elsewhere in this document, whether and to what extent GM will hold any shares after the Hughes split-off such that it would be able to engage in GM debt-for-equity exchanges after the Hughes/ EchoStar merger or retain any ownership interest in New EchoStar after the Transactions will depend upon a number of factors that will not be known until the time of the completion of the Transactions, including, among other things, the actual amount of the Hughes dividend distribution and the average market price of GM Class H common stock during a specified period preceding that time. In the Hughes/ EchoStar merger, Hughes Holdings Class C common stock will become New EchoStar Class C common stock.

      Immediately following the completion of the Hughes/ EchoStar merger, based on assumptions about certain variable factors described elsewhere in this document, we estimate that former GM Class H common stockholders and General Motors would together hold about           % of the outstanding common stock of New EchoStar, representing about           % of New EchoStar’s total voting power, and the former common stockholders of EchoStar would hold about           % of the outstanding common stock of New EchoStar, representing about           % of New EchoStar’s total voting power. For a description of the assumptions on

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which these percentages are based, see “The Transactions— Description of the Transactions— The Hughes/ EchoStar Merger— Assumptions Used in Minimum Hughes Recapitalization Price and Pro Forma Percentages of Outstanding Shares and Voting Power Calculations.”

     GM Debt-for-Equity Exchanges (See pages 89 and 173)

      Between now and the date that is six months after the completion of the Hughes/ EchoStar merger, the transaction agreements permit GM to issue new shares of GM Class H common stock, or distribute any shares of New EchoStar Class C common stock it holds after the Hughes/ EchoStar merger, as applicable, by exchanging such shares for the satisfaction of GM’s outstanding liabilities to certain of GM’s creditors in one or more transactions. These transactions would provide liquidity and value to GM as a result of debt reduction. We sometimes refer to these transactions as the “GM debt-for-equity exchanges.”

      Any GM debt-for-equity exchanges completed prior to the Hughes split-off would be completed by GM issuing new shares of GM Class H common stock. Any such GM debt-for-equity exchanges would have the effect of reducing GM’s retained economic interest in Hughes and increasing the number of outstanding shares of GM Class H common stock by the number of shares issued in the transaction. After the Hughes/ EchoStar merger, any GM debt-for-equity exchanges would be completed by GM distributing a portion of the shares of New EchoStar Class C common stock that GM may hold after the Hughes/ EchoStar merger. Any such GM debt-for-equity exchanges would have the effect of reducing GM’s ownership interest in New EchoStar by the number of shares distributed in the transaction. GM has agreed with EchoStar that it will not issue or distribute, as applicable, more than 100 million shares of GM Class H common stock and New EchoStar Class C common stock, in the aggregate, during the specified period. Whether and to what extent GM would hold any shares of New EchoStar Class C common stock such that it would be able to engage in GM debt-for-equity exchanges after the completion of the Hughes/ EchoStar merger will depend upon a number of factors that will not be known until immediately before the completion of the Hughes split-off, including, among other things, the actual amount of the Hughes dividend distribution and the average market price of GM Class H common stock during a specified period preceding that time. In addition, the aggregate number of shares subject to the GM debt-for-equity exchanges is subject to reduction under certain circumstances as described in greater detail elsewhere in this document.

     Financings and Related Matters (See pages 90 and 91)

      Hughes has completed certain financings, and expects to engage in additional financings and related activities, intended to enable it to pay the Hughes dividend distribution to GM and to fund its business during the period prior to the completion of the proposed Hughes split-off. In February 2002, PanAmSat repaid a $1.725 billion loan from Hughes using cash on hand at PanAmSat and debt financings. Hughes deposited $1.5 billion of the proceeds of the PanAmSat loan repayment into a segregated cash collateral account with GMAC. Hughes then borrowed $1.875 billion under a $2.0 billion aggregate credit facility provided by GMAC and repaid borrowings under certain of Hughes’ other credit facilities. Hughes’ existing revolving credit facility was amended and increased from $750 million to $1.235 billion. In addition, Hughes intends to enter into a new term loan facility in March of 2002 of about $600 million. Prior to the completion of the Hughes split-off, Hughes also plans to obtain additional financing of up to $2.7 billion and to use the proceeds from this financing, together with its financing arrangements with GMAC, to pay the Hughes dividend distribution to GM.

      The completion of the proposed Hughes/EchoStar merger and related transactions will require about $7.025 billion of cash. At the time of the signing of the Hughes/ EchoStar merger agreement, EchoStar had about $1.5 billion of available cash on hand and, accordingly, EchoStar and Hughes obtained $5.525 billion in bridge financing commitments for the Hughes/ EchoStar merger and related transactions. These bridge financing commitments have been reduced to $3.325 billion as a result of the sale of $700 million of aggregate principal amount 9 1/8% Senior Notes due 2009 issued by EchoStar’s wholly owned indirect subsidiary, EchoStar DBS Corporation on December 20, 2001, which we sometimes refer to as the “EchoStar DBS Senior Notes,” and the $1.5 billion investment by Vivendi Universal in EchoStar Series D convertible preferred stock. Any other financings that EchoStar completes prior to the completion of the Hughes/ EchoStar merger would further reduce the bridge financing commitments on a dollar-for-dollar basis. The remaining about $3.325 billion of cash required in connection with the Hughes/ EchoStar merger, which we

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refer to as the “Hughes/ EchoStar merger financing,” is expected to come from new cash to be raised by EchoStar, Hughes or a subsidiary of Hughes on or prior to the completion of the Hughes/ EchoStar merger through public or private debt or equity offerings, bank debt or a combination thereof. To the extent that such cash is not raised in these ways, the bridge financing commitments are designed to fund the amount of the shortfall. The amount of the Hughes/ EchoStar merger financing that may be raised by EchoStar prior to the Hughes/ EchoStar merger is severely restricted by the agreements among GM, Hughes and EchoStar and the terms of the bridge financing commitment.

      We currently expect that a portion of the proceeds of the Hughes/ EchoStar merger financing will be used to satisfy up to $2.7 billion of indebtedness expected to be incurred by Hughes in order to pay the Hughes dividend distribution to GM in connection with the Hughes recapitalization, and the remainder of the Hughes/EchoStar merger financing, together with about $3.7 billion or more from EchoStar’s cash reserves, will be used to pay off other obligations of Hughes and to fund the operations of New EchoStar after the completion of the Transactions. The Hughes/EchoStar merger financing is not intended or expected to be sufficient for the funding requirements of the operations of New EchoStar for any substantial period of time after the completion of the Hughes/ EchoStar merger. These funding requirements are expected to be significant. See “Risk Factors— Risk Factors Relating to New EchoStar After the Transactions— Risks Relating to Liquidity and Financing Activities of New EchoStar— We Cannot Assure You That There Will Be Sufficient Funding for New EchoStar.” In addition, the agreements among EchoStar, GM and Hughes will severely restrict New EchoStar’s ability to issue any additional equity or equity-linked securities for two years after the completion of the Hughes/ EchoStar merger absent possible favorable IRS rulings. See “Description of Principal Transaction Agreements— Implementation Agreement— Preservation of the Tax-Free Status of the Hughes Split-Off” and “Risk Factors— Risk Factors Relating to New EchoStar After the Transactions— Risks Relating to Liquidity and Financing Activities of New EchoStar— New EchoStar Will Be Subject to Potentially Significant Restrictions with Respect to Issuances of its Equity Securities for a Two-Year Period Following the Hughes/ EchoStar Merger.”

     PanAmSat Stock Sale (See pages 92 and 204)

      If the Hughes/ EchoStar merger does not occur because certain financing or regulatory-related conditions have not been satisfied, EchoStar would be required to purchase the approximately 81% interest in PanAmSat held by Hughes’ subsidiaries for a purchase price of $22.47 per share, or an aggregate amount of about $2.7 billion. This purchase price is payable, depending on the circumstances, either solely in cash or in a combination of cash and either debt or equity securities of EchoStar. If the PanAmSat stock sale were to occur, Hughes would remain a wholly owned subsidiary of General Motors, but Hughes would no longer hold its indirect interest in PanAmSat. It is currently expected that the proceeds of any PanAmSat stock sale would be used to repay outstanding debt obligations of Hughes and to fund Hughes’ operations.

      The PanAmSat stock sale is subject to a number of conditions which must be satisfied before the transaction could be completed, including, among other things, the expiration or termination of the waiting period applicable to the PanAmSat stock sale under the Hart-Scott-Rodino Act, the absence of any effective injunction or order which prevents the completion of the PanAmSat stock sale and the receipt of FCC approval for the transfer of licenses in connection with the PanAmSat stock sale. If the Hughes/ EchoStar merger does occur, New EchoStar will indirectly hold the approximately 81% interest in PanAmSat.

     EchoStar Regulatory Termination Fee (See pages 87 and 203)

      EchoStar will be required to pay Hughes a $600 million termination fee, as described in greater detail elsewhere in this document, if:

  •  EchoStar or Hughes terminates the Hughes/ EchoStar merger agreement as a result of a permanent injunction or final and nonappealable order prohibiting the Hughes/ EchoStar merger in an action brought by a federal, state or local authority under U.S. antitrust laws or FCC regulations; or
 
  •  Hughes terminates the Hughes/ EchoStar merger agreement because the waiting period applicable to the Hughes/ EchoStar merger under the Hart-Scott-Rodino Act does not expire or terminate or

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  because of a failure to obtain FCC approval, in each case by about January 2003 (subject to extension under certain circumstances).

It is currently expected that any proceeds received by Hughes in payment of this fee would be used to repay outstanding debt obligations of Hughes and to fund Hughes’ operations.

     GM/Hughes Termination Fee (See pages 87 and 203)

      Hughes will be required to pay to EchoStar a $600 million termination fee, as described in greater detail elsewhere in this document, if:

  •  EchoStar terminates the Hughes/ EchoStar merger agreement because GM fails to obtain the requisite GM common stockholder approval of the Transactions, but only under certain circumstances where GM or Hughes enters into an agreement with respect to a “competing transaction” to the Hughes/EchoStar merger, which generally refers to an alternative strategic transaction involving Hughes; or
 
  •  EchoStar or Hughes terminates the Hughes/ EchoStar merger agreement pursuant to the relevant provisions relating to the GM board of directors’ recommendation of the Transactions to GM common stockholders for their approval or pursuant to the relevant provisions relating to GM’s pursuit of a competing transaction to the Hughes/EchoStar merger.

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Structure of the Transactions

      In order to help you better understand the Transactions and how they will affect GM, Hughes and EchoStar, the charts below illustrate, in simplified form, the following:

  •  BEFORE THE TRANSACTIONS: the organizational structures of GM, Hughes Holdings, Hughes and EchoStar before the Transactions;
 
  •  THE HUGHES RECAPITALIZATION: the steps involved in and the effects of the Hughes recapitalization on GM and Hughes; and
 
  •  AFTER THE TRANSACTIONS: the organizational structures of GM, Hughes Holdings, Hughes and New EchoStar immediately after the Transactions.

BEFORE THE TRANSACTIONS

(FLOW CHART)

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THE HUGHES RECAPITALIZATION

(FLOW CHART)

AFTER THE TRANSACTIONS

(FLOW CHART)

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Recommendation of the GM Board of Directors

(See page 110)

      The GM board of directors has carefully reviewed the GM/ Hughes separation transactions and the Hughes/ EchoStar merger. An important part of that review included the oversight of the development of the terms of the Transactions by the GM capital stock committee, which consists of three independent directors of GM. Hughes participated with GM in the development of the terms of the Transactions and its board of directors has also carefully reviewed the GM/ Hughes separation transactions and the Hughes/ EchoStar merger and has approved the GM/ Hughes separation transactions and the Hughes/ EchoStar merger.

      The GM board of directors has received opinions from several investment banking firms in connection with its review of the Transactions. The GM board of directors has received opinions from two independent investment banking firms, Merrill Lynch and Bear Stearns, financial advisors to GM in connection with the Transactions, to the effect that, on the basis of and subject to the assumptions, conditions, limitations and other matters described in those opinions, as of October 28, 2001, taking into account all relevant financial aspects of the Transactions taken as a whole, the consideration to be provided to GM and its subsidiaries, to the holders of GM $1 2/3 par value common stock, if applicable, and to the holders of GM Class H common stock in the GM/ Hughes separation transactions is fair, from a financial point of view, to the holders of GM $1 2/3 par value common stock as a class and the holders of GM Class H common stock as a class, respectively.

      The GM board of directors has also received opinions from two other independent investment banking firms, Credit Suisse First Boston and Goldman Sachs, financial advisors to Hughes in connection with the Transactions, to the effect that, based upon and subject to the matters described in those opinions and other matters as Credit Suisse First Boston and Goldman Sachs considered relevant, as of October 28, 2001 and based on market conditions as of that date, the exchange ratios set forth in the Hughes/ EchoStar merger agreement are fair, from a financial point of view, to the holders of Hughes Class C common stock immediately prior to the Hughes/ EchoStar merger, including GM and holders of GM $1 2/3 par value common stock and GM Class H common stock, as applicable.

      We have included the full text of the fairness opinions received by the GM board of directors in Appendix C to this document. We urge you to read each of these opinions carefully.

      Based on the above, among other considerations, the GM board of directors has determined that the Transactions are advisable and in the best interests of General Motors and its common stockholders and that the Transactions are fair to the holders of both classes of GM common stock. The GM board of directors has unanimously approved the Transactions and recommends that the GM $1 2/3 par value common stockholders and GM Class H common stockholders vote to approve each of the proposals described in this document by executing and returning the enclosed consent card as soon as possible.

EchoStar Board of Directors and Stockholder Approvals

(See page 154)

      The EchoStar board of directors has carefully reviewed the Hughes/ EchoStar merger. The EchoStar board of directors has received an opinion from an independent investment banking firm, Deutsche Banc Alex. Brown, as to the fairness, from a financial point of view, of the exchange ratio in the Hughes/ EchoStar merger to the holders of EchoStar Class A common stock. We have included the full text of the financial advisor fairness opinion received by EchoStar in Appendix C to this document. We urge you to read this opinion carefully.

      A trust controlled by Charles W. Ergen, the Chairman of the Board of Directors and Chief Executive Officer of EchoStar, as the holder of shares of EchoStar Class B common stock representing about 90% of the voting power of EchoStar, has already approved the Hughes/ EchoStar merger. As a result, no further action is required on the part of any other EchoStar common stockholders. However, we believe that it is important for EchoStar common stockholders to be informed about the Hughes/ EchoStar merger. Thus, this document is being sent to EchoStar common stockholders for their information only.

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Regulatory Matters

(See page 162)

      Under U.S. antitrust laws, the Hughes/ EchoStar merger may not be completed until GM, Hughes and EchoStar have notified the Antitrust Division of the Department of Justice and the Federal Trade Commission of the Hughes/ EchoStar merger and filed the necessary report forms, and until the required waiting period has terminated or expired. We filed the notifications required by the Hart-Scott-Rodino Act in November 2001. The Department of Justice’s Antitrust Division is currently conducting an investigation of the Transactions, and, as anticipated, has requested additional information from the companies. We are now in the process of compiling this information. The Department of Justice’s Antitrust Division may fail to approve the Hughes/ EchoStar merger on a timely basis or it could bring an action seeking to prevent the Hughes/ EchoStar merger or impose onerous conditions in connection with its approval. The attorneys general of a number of states are also conducting an investigation of the Transactions under federal and state antitrust laws and could bring an action seeking to prevent the Hughes/ EchoStar merger or attempt to impose onerous conditions.

      To complete the Hughes/ EchoStar merger, we must also obtain the approval of the FCC for the transfer of licenses in connection with the Hughes split-off and the Hughes/ EchoStar merger. We filed an application for this FCC approval of the transfer of licenses in December 2001. Shortly following this filing, the FCC placed the application on public notice and invited petitions and other comments in respect of the application. Numerous parties have filed petitions to deny the application or comments, and EchoStar and Hughes have filed a consolidated opposition. Currently, the application remains pending before the FCC. We have updated the application to reflect the completion of the $1.5 billion investment by Vivendi Universal in EchoStar Series D convertible preferred stock. In February 2002, the FCC issued to the applicants an initial information and document request, and stated that it would appreciate receiving responses to that request no later than March 6, 2002. On March 5, 2002, the applicants requested a 15-day extension of that date. By letter released on March 7, 2002, the FCC “stopped” its self-imposed 180-day “clock” for merger review, until such time as the applicants submit the requested documents and information. We are making significant efforts to respond to the FCC requests. The FCC’s March 7, 2002 decision, however, will result in delay in its consideration of the Hughes/EchoStar merger application until we have completed our response to their request. The FCC may fail to approve the Hughes/ EchoStar merger on a timely basis. It may also agree with the views of parties opposing the application and deny its approval of the Hughes/ EchoStar merger or impose onerous conditions. Also, in February 2002, EchoStar and Hughes filed an application requesting on behalf of New EchoStar authority to launch and operate a new state-of-the-art, spot beam direct broadcast satellite. Grant of this authority would allow New EchoStar to offer local broadcast channels in all 210 designated market areas. This satellite application remains pending and has not yet been placed on notice for public comment. The FCC may fail to grant this application or may delay action on the application.

      The Transactions may be subject to certain regulatory requirements of other state, federal and foreign governmental agencies and authorities, including clearances for the Hughes/EchoStar merger from competition and telecommunications authorities in certain foreign jurisdictions and requirements relating to the regulation of the offer and sale of securities. We are currently working to evaluate and comply in all material respects with these requirements, as appropriate, and do not currently anticipate that they will hinder, delay or restrict completion of the Transactions.

      Although we currently expect to receive all governmental approvals required in order to complete the Transactions, we cannot assure you that we will obtain all such governmental approvals or that the granting of these approvals will be timely or will not involve the imposition of conditions on the completion of the Transactions or require changes to the terms of the Transactions. These conditions or changes could result in the conditions to the Transactions not being satisfied.

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No Appraisal Rights

(See page 164)

      Under applicable corporation law, GM stockholders are not entitled to appraisal rights in connection with the GM/ Hughes separation transactions because no merger transaction is involved in the GM/Hughes separation transactions . Similarly, no appraisal rights will be available to the GM stockholders in connection with the Hughes/ EchoStar merger because GM has approved the Hughes/ EchoStar merger in its capacity as the sole stockholder of Hughes and Hughes Holdings and General Motors is not a constituent corporation in the Hughes/EchoStar merger.

      Under applicable corporation law and the EchoStar articles of incorporation, EchoStar stockholders are not entitled to appraisal rights in connection with the Hughes/ EchoStar merger.

New EchoStar Common Stock

(See page 258)

      In connection with the Hughes split-off, GM Class H common stockholders and General Motors (or GM $1 2/3 par value common stockholders, as applicable) will receive shares of Hughes Holdings Class C common stock. Pursuant to the Hughes/ EchoStar merger, this stock will remain outstanding and become shares of New EchoStar Class C common stock. In addition, EchoStar’s Class A common stockholders will receive shares of New EchoStar Class A common stock, and EchoStar’s Class B common stockholders will receive shares of New EchoStar Class B common stock, pursuant to the Hughes/ EchoStar merger. As a result, based on assumptions about certain variable factors described elsewhere in this document, we estimate that immediately after the completion of the Hughes/EchoStar merger:

  •  former GM Class H common stockholders and General Motors (or GM $1 2/3 par value common stockholders, as applicable) would together hold about           % of the outstanding common stock of New EchoStar, representing about           % of New EchoStar’s total voting power; and
 
  •  the former common stockholders of EchoStar would hold about           % of the outstanding common stock of New EchoStar, representing about           % of New EchoStar’s total voting power.

For a description of the assumptions on which these percentages are based, see “The Transactions— Description of the Transactions— The Hughes/ EchoStar Merger— Assumptions Used in Minimum Hughes Recapitalization Price and Pro Forma Percentages of Outstanding Shares and Voting Power Calculations.”

      Except as to voting rights, the New EchoStar Class A common stock and New EchoStar Class C common stock will be identical. The New EchoStar Class B common stock will have special voting rights, will be convertible into New EchoStar Class A common stock or New EchoStar Class C common stock and will be subject to certain transfer restrictions. However, in all respects other than voting rights, convertibility and transfer restrictions, the New EchoStar Class B common stock will be substantially the same as the New EchoStar Class A common stock and New EchoStar Class C common stock. Charles W. Ergen, the Chairman of the Board of Directors and Chief Executive Officer of EchoStar and the current beneficial owner of all of the outstanding shares of EchoStar Class B common stock, is expected to be the beneficial owner of all of the outstanding shares of New EchoStar Class B common stock after the Transactions.

      The New EchoStar common stock will have the following voting rights:

  •  each share of New EchoStar Class A common stock will entitle the holder to one vote in the election of directors and all other matters submitted to stockholders for their approval;
 
  •  each share of New EchoStar Class B common stock will initially entitle the holder to 10 votes in the election of directors and all other matters submitted to stockholders for their approval, subject to reduction under certain circumstances during the first two years after the completion of the Hughes split-off to preserve the tax-free status to GM of the Hughes split-off; and
 
  •  each share of New EchoStar Class C common stock will entitle the holder to a number of votes in the election of directors and all other matters submitted to stockholders for their approval that will ensure

25


 

  that the shares of New EchoStar Class C common stock held by GM (other than shares that are subject to GM debt-for-equity exchanges) and the shares of New EchoStar Class C common stock that are issued to certain of GM’s historical stockholders together possess 50.5% of the aggregate voting power of New EchoStar immediately following the completion of the Hughes/ EchoStar merger.
 
     The calculation of the exact number of votes per share of New EchoStar Class C common stock will not be made until the time of the completion of the Transactions because the calculation will be subject to certain variable factors that will be determined between now and that time. We estimate that the holders of New EchoStar Class C common stock would be entitled to between three and five votes per share.

      Based on assumptions about certain variable factors described elsewhere in this document, Mr. Ergen would hold about      % of the total voting power of New EchoStar upon the completion of the Transactions. As a result, Mr. Ergen will have significant influence over actions of New EchoStar that require stockholder approval.

      Directors of New EchoStar will be elected on the basis of cumulative voting. On all other matters, the shares of New EchoStar Class A common stock, New EchoStar Class B common stock and New EchoStar Class C common stock will vote together as a single class on the basis of their respective per share voting power. In addition, if and to the extent permitted by the IRS, the approval of New EchoStar Class B common stock voting separately as a class will be required to approve certain specified matters, including, among other things:

  •  extraordinary matters for which a stockholder vote is required under applicable corporation law, such as mergers, amendments to the New EchoStar certificate of incorporation (including changes in the rights of the shares of New EchoStar Class B common stock and any increase in the authorized number of shares of New EchoStar Class B common stock or New EchoStar Class C common stock) and dissolution;
 
  •  matters for which a stockholder vote will be required by the rules of the NYSE or the Nasdaq, as applicable, including, among other things, certain issuances of stock in excess of 20% of the total voting power of New EchoStar;
 
  •  any sale or acquisition of a significant business of New EchoStar;
 
  •  any amendment by stockholders to the bylaws of New EchoStar;
 
  •  any issuance of common stock (or equivalents) of New EchoStar in excess of 10% of the average fully diluted shares over the prior 12 months; and
 
  •  the adoption by New EchoStar of any equity-based benefit plan for directors and employees.

      New EchoStar will have three different classes of common stock, with each class having different voting powers, in order to address two important objectives with respect to the transactions:

  •  to preserve the tax-free status of the Hughes split-off to GM for U.S. federal income tax purposes; and
 
  •  to preserve at least to some degree the greater voting power that the EchoStar Class B common stock currently has relative to the EchoStar Class A common stock.

      General Motors and Hughes would not agree to complete the Transactions unless they were assured that the Hughes split-off would be tax-free to GM and its stockholders for U.S. federal income tax purposes. GM’s receipt of a ruling from the IRS confirming the tax-free nature of the Hughes split-off is a condition to the obligation of GM and Hughes to complete the Transactions. The Hughes split-off will be tax-free to GM for these purposes only if, among other things, General Motors and certain of GM’s historical stockholders hold stock possessing more than 50% of the aggregate voting power of the stock of New EchoStar in the Transactions. Accordingly, the terms of the various classes of common stock of New EchoStar are designed to ensure that the shares of New EchoStar Class C common stock held by GM (other than shares that are subject to GM debt-for-equity exchanges) and the shares of New EchoStar Class C common stock that are

26


 

issued to certain of GM’s historical stockholders, which we refer to collectively as the “GM group shares,” possess at least 50.5% of the aggregate voting power of New EchoStar for at least the first two years after the Hughes split-off.

      At the same time, EchoStar wanted to preserve at least to some degree the greater voting power that the EchoStar Class B common stock currently has relative to the EchoStar Class A common stock. This was particularly important given that Mr. Ergen, as the beneficial owner of all of the EchoStar Class B common stock and about 90% of the total voting power of EchoStar, was required to reduce substantially his current voting power in New EchoStar in order to address the tax objectives of GM and Hughes with respect to the Transactions. Mr. Ergen agreed to such a substantial reduction of his own voting power, including giving up voting control of EchoStar, in order to provide the holders of EchoStar Class A common stock the opportunity to participate in the potential benefits expected to accrue to them as a result of the completion of the Hughes/ EchoStar merger.

      In order to preserve the tax-free status of the Hughes split-off to GM, the GM group shares will possess at least 50.5% of the aggregate voting power of New EchoStar for at least the first two years following the completion of the Hughes split-off. To ensure that the GM group shares possess at least 50.5% of the aggregate voting power of New EchoStar at all times during the first two years following the completion of the Hughes split-off, the number of votes per share of New EchoStar Class B common stock will be reduced as necessary during this two-year period. At the end of this two year period, the number of votes per share of New EchoStar Class B common stock generally will no longer be subject to adjustment pursuant to the immediately preceding sentence and the voting power of each share of New EchoStar Class B common stock will be fixed at the same percentage of the aggregate voting power of all of the shares of New EchoStar common stock then outstanding to which such share of New EchoStar Class B common stock is entitled as of such time.

      In order to preserve the relatively greater voting power that shares of EchoStar Class B common stock currently have compared to shares of EchoStar Class A common stock, each share of New EchoStar Class A common stock will entitle the holder thereof to one vote per share in the election of directors and on all other matters submitted to the stockholders of New EchoStar for approval and each share of New EchoStar Class B common stock initially will entitle the holder thereof to 10 votes per share on those same matters, subject to reduction during the first two years following the completion of the Hughes/EchoStar merger as described above. In addition, if and to the extent permitted by the IRS, as described above, under New EchoStar’s certificate of incorporation, certain specified matters will require a separate class vote of the holders of New EchoStar Class B common stock for approval, as described above.

New EchoStar Board of Directors and Officers

(See page 237)

      We have agreed that the New EchoStar board of directors will initially have 11 members, eight of whom are current directors and/or officers of EchoStar and three of whom are current directors and/or officers of Hughes. For the first three years following the completion of the Hughes/ EchoStar merger, at least six of the members of the New EchoStar board of directors will be independent directors as determined in accordance with NYSE or Nasdaq standards, as applicable.

      Charles W. Ergen, the current Chairman of the Board of Directors and Chief Executive Officer of EchoStar, will be the Chairman of the Board of Directors and Chief Executive Officer of New EchoStar, and David K. Moskowitz, the current Senior Vice President, General Counsel and Secretary of EchoStar will be the Senior Vice President, General Counsel and Secretary of New EchoStar. The other officers of New EchoStar will be determined by a management transition committee prior to the completion of the Hughes/ EchoStar merger.

      The management transition committee is comprised of two management personnel affiliated with EchoStar and two management personnel affiliated with Hughes and will be responsible for facilitating a smooth and fair transition of the management of Hughes and EchoStar to a combined management team. The

27


 

management transition committee will make recommendations regarding New EchoStar officers and other management team members and their responsibilities, with the objective of choosing the best person for each position while achieving a fair balance of personnel selected from each of Hughes and EchoStar. The New EchoStar board of directors will have the ultimate decision-making authority with respect to all matters referred to or discussed by the management transition committee.

Interests of Directors and Executive Officers of GM, Hughes and EchoStar

(See pages 293 and 298)

      You should be aware that some of the directors and executive officers of General Motors, Hughes and EchoStar have interests in connection with the GM/Hughes separation transactions and the Hughes/ EchoStar merger that are different from, or in addition to, the interests of other stockholders of GM and EchoStar, including, among other things, stock options held by various executive officers and directors, interests under certain employee benefit plans and membership of certain directors and/or executive officers on the New EchoStar board of directors. The GM board of directors, the Hughes board of directors and the EchoStar board of directors were aware of these interests and considered them, among other matters, in approving the GM/Hughes separation transactions and the Hughes/ EchoStar merger, as applicable.

Timing

(See page 72)

      We are working diligently to complete the GM/ Hughes separation transactions and the Hughes/ EchoStar merger as soon as reasonably possible. However, we will not complete the proposed Transactions unless certain conditions described below are satisfied or waived. Assuming that these conditions are satisfied within the time frame we currently anticipate, we expect to complete the GM/ Hughes separation transactions and the Hughes/ EchoStar merger during the second half of 2002.

Conditions to Completing the Transactions

(See pages 72, 187 and 196)

      The GM/ Hughes separation transactions and the Hughes/ EchoStar merger are subject to a number of conditions which must be satisfied or waived before the transactions can be completed. These conditions include, among others:

  •  the receipt of the requisite GM common stockholder approval of each of the proposals relating to the Transactions;
 
  •  the expiration or termination of the waiting periods applicable to the Hughes/ EchoStar merger under the Hart-Scott-Rodino Act and any similar law of foreign jurisdictions;
 
  •  the absence of any effective injunction or order which prevents the completion of the transactions;
 
  •  the receipt of FCC approval for the transfer of licenses and other authorizations in connection with the Hughes/ EchoStar merger and the Hughes split-off;
 
  •  the receipt of all other approvals of, or the making of all filings with, governmental authorities required to complete the Transactions, other than approvals and filings, the absence of which, in the aggregate, are not reasonably likely to have a material adverse effect on New EchoStar;
 
  •  the receipt by General Motors of a ruling by the IRS to the effect that the Hughes split-off will be tax-free to GM and its stockholders for U.S. federal income tax purposes;
 
  •  the availability of financing for the Hughes/ EchoStar merger;
 
  •  the approval for listing on either the NYSE or the Nasdaq of the New EchoStar Class A common stock and New EchoStar Class C common stock that will be outstanding after the Transactions; and

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  •  the ability of New EchoStar to issue a minimum amount of equity immediately following the Hughes/ EchoStar merger without violating certain agreements with General Motors that are designed to preserve the tax-free status of the Hughes split-off.
 
     For more information about this minimum equity headroom condition and how it may affect the number of shares of New EchoStar Class C common stock eligible for GM debt-for-equity exchanges and/or the amount of the Hughes dividend distribution under certain circumstances, see “The Transactions— Description of the Transactions— The Hughes/EchoStar Merger— Satisfaction of the Minimum Headroom Condition.”

Considerations Relating to Time Interval Between GM Common Stockholder

Approval and Completion of the Transactions
(See pages 88, 112 and 174)

      The consequences of the Transactions for GM $1 2/3 par value common stockholders and GM Class H common stockholders will differ in certain important respects, as described in this document. Despite these differences, the GM board of directors has determined that the Transactions are in the best interests of GM and its common stockholders as a whole and fair to the holders of both classes of GM common stock and has unanimously approved the Transactions and recommends that the GM common stockholders of each class vote to approve each of the proposals described in this document. If the proposals relating to the Transactions were to receive the requisite GM common stockholder approval but all other applicable conditions to the Transactions were not satisfied or waived as of that time, it is possible that the Transactions would not be completed for a significant period of time after the receipt of the requisite GM common stockholder approval. During any such time interval between the receipt of the requisite GM common stockholder approval and the satisfaction or waiver of all other conditions to the completion of the Transactions, it is possible that circumstances relating to the business or financial condition of EchoStar or Hughes or financial, economic or other circumstances could change significantly and in a manner not considered at the time that the GM board of directors approved the Transactions. GM common stockholders should understand that, despite any such change in circumstances that might occur during this period, it is not a condition to completion of the Transactions that the GM board of directors conclude that, at the time that the Transactions are to be completed or at any earlier time during such period, the Transactions will be fair to both classes of GM common stockholders.

      Under the terms of the transaction agreements, General Motors and Hughes have agreed not to solicit any proposals from third parties, or engage in discussions with or furnish information to any third party, with respect to a broad range of “competing transactions” to the Hughes/EchoStar merger, which generally refer to alternative strategic transactions involving Hughes. However, until the requisite GM common stockholder approval of the proposals relating to the Transactions has been received, GM and Hughes are permitted to engage in such discussions and provide such information (but not solicit proposals) with regard to a superior proposal, subject to certain conditions described at “Description of Principal Transaction Agreements— Implementation Agreement— Covenants of GM, Hughes and EchoStar— No Solicitation of Competing Transactions Involving Hughes”, if the GM board of directors determines that in order to comply with its fiduciary duties it is necessary for GM to do so. Similarly, subject to certain conditions, until the requisite GM common stockholder approval has been received, the GM board of directors may change or revoke its recommendation that GM common stockholders approve the proposals relating to the Transactions, if it determines that it is required to do so in accordance with its fiduciary duties and based on a proposed competing transaction or any other factor that may affect its views regarding the Transactions. In such event, GM, Hughes or EchoStar may terminate the transaction agreements (in which event Hughes would be required to pay EchoStar a $600 million termination fee). GM common stockholders should understand that, if they vote to approve the proposals recommended by the GM board of directors, that action will result in the termination of the ability of GM to pursue superior proposals in this manner, which would mean that GM would have no practical ability to enter into any agreement or arrangement with respect to a competing transaction without breaching the non-solicitation covenant. However, if GM stockholders fail to approve the proposals recommended by the GM board of directors, the Transactions could not be completed and GM

29


 

common stockholders would not have the opportunity to participate in the benefits of the Transactions as described in this document and, under certain circumstances in which GM or Hughes enters into or completes a competing transaction, EchoStar would be entitled to a $600 million termination fee. Further, in either case, there can be no assurance that any proposal for a competing transaction would be available to Hughes and GM or, if available, would result in any agreement or arrangement for a competing transaction. Accordingly, for all of the reasons described elsewhere in this document, the GM board recommends that GM common stockholders vote to approve each of the proposals.

      Following the receipt of the requisite GM common stockholder approval of the proposals relating to the Transactions, the key transaction agreements providing for the terms of the separation of Hughes from GM pursuant to the GM/Hughes separation transactions cannot be amended if:

  •  such amendment would alter or change the amount or kind of securities, cash, property or rights GM common stockholders will receive in the Transactions; or
 
  •  such amendment would adversely affect the GM common stockholders, unless their further approval, if required, is obtained.

Required Stockholder Approvals

(See pages 171 and 288)

      We will not complete the GM/ Hughes separation transactions or the Hughes/ EchoStar merger unless we obtain approval of specified matters relating to the Transactions by the holders of:

  •  a majority of the outstanding shares of GM $1 2/3 par value common stock, voting as a separate class;
 
  •  a majority of the outstanding shares of GM Class H common stock, voting as a separate class; and
 
  •  a majority of the voting power of the outstanding shares of GM $1 2/3 par value common stock and GM Class H common stock, voting together as a single class, based on their respective per share voting power pursuant to provisions set forth in the GM restated certificate of incorporation.

If the first two GM common stockholder approvals described above are obtained, then the third GM common stockholder approval described above will also have been obtained.

      Only GM $1 2/3 par value common stockholders and GM Class H common stockholders who held shares on the record date,                     , 2002, are entitled to vote on the Transactions. GM common stockholders should be aware that certain of the directors and officers of General Motors hold GM common stock. However, based on the number of shares outstanding on February 28, 2002, the directors and officers of General Motors, individually and the group as a whole, held less than one percent of the outstanding shares and voting power of both classes of GM common stock.

      Certain aspects of the GM/Hughes separation transactions require the approval of GM common stockholders under applicable corporation law. Neither the approval of the GM common stockholders nor any further approval of the EchoStar common stockholders is required under applicable corporation law to complete the Hughes/ EchoStar merger because it has already received all required approvals. GM, as the sole stockholder of Hughes and Hughes Holdings, has approved the Hughes/ EchoStar merger for Hughes and Hughes Holdings. In addition, a trust controlled by Charles W. Ergen, as the holder of all of the outstanding shares of EchoStar Class B common stock, which represents about 90% of the voting power of EchoStar, has approved the Hughes/ EchoStar merger for EchoStar. However, even though such approval is not legally required, GM is submitting all aspects of the Transactions, including the Hughes/ EchoStar merger, to GM common stockholders for their approval. Thus, by voting to approve the proposals being submitted to GM common stockholders pursuant to this consent solicitation, GM common stockholders will be ratifying all aspects of the Transactions, including, among other things, the Hughes/EchoStar merger.

      No vote on the GM/ Hughes separation transactions, the Hughes/ EchoStar merger or any other matters is being solicited from EchoStar common stockholders.

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Matters To Be Approved by GM Common Stockholders

(See page 287)

      GM $1 2/3 par value common stockholders and GM Class H common stockholders, each voting separately as a class and voting together as a single class based on their respective per share voting power, are being asked to approve the following two proposals in connection with the Transactions:

  •  Approval of GM Charter Amendment. This proposal consists of the approval of an amendment to Article Fourth of the GM restated certificate of incorporation which would, among other things, add a provision that will enable the GM board of directors to reduce the denominator of the GM Class H fraction in connection with the Hughes recapitalization and add a redemption feature to the terms of the GM Class H common stock to make such stock redeemable in exchange for shares of Hughes Holdings Class C common stock pursuant to the Hughes split-off. In addition, this proposal includes the approval of an amendment to Article Fourth to expressly provide that the completion of the GM/ Hughes separation transactions as described in this document will not result in a recapitalization of the GM Class H common stock into GM $1 2/3 par value common stock at a 120% exchange ratio as currently provided for under certain circumstances pursuant to provisions of the GM restated certificate of incorporation.
 
  •  Ratification of All Other Aspects of the Transactions. This proposal consists of the ratification of all other aspects of the Transactions, including, among other things, the Hughes recapitalization and the Hughes dividend distribution, the Hughes split-off, the Hughes/ EchoStar merger and other related transactions.

Although these two proposals are separate matters to be voted upon by GM common stockholders, these proposals are expressly conditioned on each other. This means that BOTH of these proposals must be approved by GM $1 2/3 par value common stockholders and GM Class H common stockholders in order for GM to obtain the requisite GM common stockholder approval of the proposals relating to the Transactions. Accordingly, if you wish to approve the proposals relating to the Transactions, you should vote to approve BOTH of these proposals.

      In addition to the two proposals relating to the Transactions described above, GM $1 2/3 par value common stockholders and GM Class H common stockholders are also being asked to approve a third proposal, which consists of the approval of a further amendment to the GM restated certificate of incorporation to eliminate certain provisions relating to the GM Class H common stock after the completion of the Hughes split-off. However, you should understand that the completion of the Transactions is NOT conditioned on the approval by GM common stockholders of this third proposal.

GM Consent Mechanics

(See pages 81 and 287)

      GM $1 2/3 par value common stockholders and GM Class H common stockholders should complete, date, sign and return the enclosed consent card as soon as possible. Your vote is important regardless of the number of shares that you own.

      GM common stockholders can revoke their consent, or any withholding of consent, at any time prior to GM common stockholder approval of the proposals relating to the Transactions. This will occur as soon as consents representing the requisite GM common stockholder approval described above are delivered to General Motors in accordance with applicable law, but no sooner than 20 business days from the date this document is mailed to stockholders. However, if General Motors does not receive the number of consents required within 60 days of the earliest dated consent delivered to General Motors, the requisite GM common stockholder approval will not have occurred.

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      You can revoke your consent by filing with the Secretary of General Motors a written notice stating that you would like to revoke your consent. You can also revoke your consent, or any withholding of consent, by filing with the Secretary of General Motors another consent bearing a later date. You should send any revocations to the Secretary of General Motors at the following address:

General Motors Corporation

Renaissance Center
P.O. Box 300
Mail Code 482-C38-B71
Detroit, Michigan 48265-3000
Attention: Secretary

      You should NOT send in your stock certificates at this time. You will receive further correspondence regarding the exchange of shares after the proposed Transactions have been completed.

Tax Consequences of the Transactions

(See page 165)

      General Motors has requested an IRS ruling to the effect that the Hughes split-off will be treated as a tax-free reorganization and distribution for U.S. federal income tax purposes. Based on this ruling, for U.S. federal income tax purposes, neither the GM common stockholders nor General Motors will recognize gain or loss as a result of the Hughes split-off.

      In addition, it is a condition to the completion of the Hughes/EchoStar merger that Hughes Holdings and EchoStar receive opinions from their respective counsel to the effect that the Hughes/ EchoStar merger will be treated as a tax-free reorganization for U.S. federal income tax purposes. Assuming such treatment, none of Hughes Holdings, EchoStar or the GM common stockholders will recognize gain or loss for U.S. federal income tax purposes as a result of the Hughes/ EchoStar merger, and the EchoStar common stockholders will recognize gain or loss only in respect of cash received instead of fractional shares of New EchoStar common stock. We currently expect that Hughes Holdings and EchoStar will receive these tax opinions in connection with the completion of the Hughes/EchoStar merger.

Accounting Treatment

(See page 165)

      GM will record the Hughes dividend distribution of up to $4.2 billion as a reduction in GM’s investment in Hughes. GM will record the Hughes split-off at fair value at the time of the Hughes split-off. Based on the closing price of EchoStar Class A common stock on December 31, 2001 and certain other assumptions, the Hughes split-off would have resulted in an after-tax gain of about $14.0 billion based on the net book value of Hughes at such date. As a result of the Hughes split-off, GM anticipates that there would be a net reduction to GM’s stockholders’ equity reflecting adjustments based on the fair value and the net book value of Hughes at that time. The Hughes/ EchoStar merger will be accounted for using the purchase method of accounting, with EchoStar having acquired Hughes Holdings.

Comparative Market Price Data

(See page 285)

      Presented below are the per share closing prices for the GM $1 2/3 par value common stock (symbol: GM), as quoted on the NYSE, GM Class H common stock (symbol: GMH), as quoted on the NYSE, and the EchoStar Class A common stock (symbol: DISH), as quoted on the Nasdaq National Market, on the following dates:

  •  October 26, 2001, the last trading day before the public announcement of the signing of the transaction agreements among GM, Hughes and EchoStar relating to the Transactions; and
 
  •  March 14, 2002, the latest practicable date before the initial filing of this document.

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      The table below also presents implied equivalent per share values for:

  •  shares of GM Class H common stock by multiplying the price per share of EchoStar Class A common stock on each of the two dates by the implied exchange ratio of 0.73, which is the inverse of the exchange ratio in the Hughes/EchoStar merger of 1/0.73; and
 
  •  shares of EchoStar Class A common stock by multiplying the price per share of GM Class H common stock on each of the two dates by the exchange ratio of 1/0.73.

                                         
Share Price Share Price
Equivalent Equivalent
GM $1 2/3 GM EchoStar (EchoStar Class A (GM Class H
Par Value Class H Class A Common Stock) for Common Stock) for
Common Stock Common Stock Common Stock GM Class H EchoStar Class A
Price Price Price Common Stock Common Stock





October 26, 2001
  $ 45.40     $ 15.35     $ 25.26     $ 18.44     $ 21.03  
March 14, 2002
  $ 59.90     $ 15.90     $ 27.55     $ 20.11     $ 21.78  

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SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

GM Selected Historical and Pro Forma Financial Data

      The following statements of operations data for each of the three years in the period ended December 31, 2001 and the balance sheet data as of December 31, 2001 and 2000 have been derived from GM’s consolidated financial statements incorporated into this document by reference, which have been audited by Deloitte & Touche LLP, independent auditors. The statement of operations data for the years ended December 31, 1998 and 1997 and the balance sheet data as of December 31, 1999, 1998 and 1997 have been derived from GM’s audited consolidated financial statements which have not been incorporated into this document by reference.

      You should read the data below in conjunction with GM’s consolidated financial statements (including the notes thereto) and Management’s Discussion and Analysis of Financial Condition and Results of Operations in the GM 2001 Form 10-K, which is incorporated into this document by reference. Certain amounts for 2000 and prior years have been reclassified to conform with the 2001 classifications.

      The column below entitled “Pro Forma 2001(a)” presents pro forma operating results information for the year ended December 31, 2001 giving effect to the GM/ Hughes separation transactions as if they had occurred on January 1, 2001 and balance sheet data as of December 31, 2001 giving effect to the GM/ Hughes separation transactions as if they had occurred as of that date.

      The column below entitled “Pro Forma 2001(b)” presents pro forma operating results information for the year ended December 31, 2001 giving effect to the PanAmSat stock sale and Hughes’ acquisition of Telocity as of April 3, 2001, as if those transactions had occurred on January 1, 2001 and balance sheet data as of December 31, 2001 giving effect to the PanAmSat stock sale as if that transaction had occurred as of that date.

      The pro forma financial data are not intended to be indicative of either future results of operations or results that might have been achieved had the GM/Hughes separation transactions or the PanAmSat stock sale occurred on the dates specified. In the opinion of GM’s management, all adjustments necessary to fairly present such pro forma condensed financial data have been made based upon the proposed terms of the GM/Hughes separation transactions or the PanAmSat stock sale.

34


 

                                                           
As of and for the years ended December 31,

Pro Forma Pro Forma
2001(a) 2001(b) 2001 2000 1999 1998 1997







(in millions except per share amounts)
Statement of Operations Data:
                                                       
Total net sales and revenues
  $ 169,039     $ 176,624     $ 177,260     $ 184,632     $ 176,558     $ 155,445     $ 172,580  
Total costs and expenses
    166,488       175,208       175,742       177,468       167,511       150,501       165,011  
     
     
     
     
     
     
     
 
Income from continuing operations before income taxes and minority interests
    2,551       1,416       1,518       7,164       9,047       4,944       7,569  
Income tax expense
    1,131       722       768       2,393       3,118       1,636       1,025  
Equity income (loss) and minority interests
    (138 )     (143 )     (149 )     (319 )     (353 )     (259 )     (61 )
     
     
     
     
     
     
     
 
Income from continuing operations
    1,282       551       601       4,452       5,576       3,049       6,483  
Income (loss) from discontinued operations
                            426       (93 )     215  
     
     
     
     
     
     
     
 
 
Net Income
    1,282       551       601       4,452       6,002       2,956       6,698  
Dividends on preference stocks
    (99 )     (99 )     (99 )     (110 )     (80 )     (63 )     (98 )
     
     
     
     
     
     
     
 
 
Earnings attributable to common stocks
  $ 1,183     $ 452     $ 502     $ 4,342     $ 5,922     $ 2,893     $ 6,600  
     
     
     
     
     
     
     
 
Earnings Per Share:
                                                       
GM $1 2/3 par value common stock(1)
                                                       
 
Basic earnings per share (EPS) from continuing operations
  $ 2.15     $ 1.76     $ 1.78     $ 6.80     $ 8.70     $ 4.40     $ 8.52  
 
Diluted EPS from continuing operations
    2.13       1.74       1.77       6.68       8.53       4.32       8.45  
 
Cash dividends declared per share
    2.00       2.00       2.00       2.00       2.00       2.00       2.00  
GM Class H common stock subsequent to the Hughes restructuring transactions(1), (2), (3)
                                                       
 
Basic EPS from continuing operations
          (0.59 )     (0.55 )     0.56       (0.26 )     0.23       0.01  
 
Diluted EPS from continuing operations
          (0.59 )     (0.55 )     0.55       (0.26 )     0.23       0.01  
GM Class H common stock prior to the Hughes restructuring transactions(1), (2), (4)
                                                       
 
Basic EPS from continuing operations
                                        0.77  
 
Diluted EPS from continuing operations
                                        0.77  
 
Cash dividends declared per share
                                        0.33  

35


 

                                                         
As of and for the years ended December 31,

Pro Forma Pro Forma
2001(a) 2001(b) 2001 2000 1999 1998 1997







(in millions except per share amounts)
Balance Sheet Data:
                                                       
Cash and cash equivalents(5)
  $ 11,932     $ 8,931     $ 8,432     $ 9,119     $ 9,730     $ 9,728     $ 9,696  
Current assets(5)
    37,923       39,185       37,063       41,147       41,909       40,399       39,326  
Total assets
    313,201       320,359       323,969       303,100       274,730       246,688       221,767  
Current liabilities(5)
    52,049       55,032       56,346       55,740       53,100       46,110       44,681  
Long-term debt(5)
    9,737       9,795       10,726       7,410       7,415       7,118       5,669  
Minority interests
    215       247       746       707       596       563       671  
Stockholders’ equity
    15,838       19,677       19,707       30,175       20,644       15,052       17,584  


(1)  Earnings per share attributable to the GM Class H common stock are determined based on the relative amounts of Hughes net income available for the payment of dividends to holders of GM Class H common stock and to holders of GM $1 2/3 par value common stock. The manner in which this allocation is made is described further at “GM Capital Stock— GM’s Dual-Class Common Stock Capital Structure— Dividends.”
 
(2)  The amounts for GM Class H common stock have been adjusted to reflect the three-for-one stock split, in the form of a 200% stock dividend, paid on June 30, 2000.
 
(3)  The amounts for GM Class H common stock subsequent to its recapitalization, as part of the Hughes restructuring transactions, present the earnings attributable to GM Class H common stock subsequent to its recapitalization on December 17, 1997 related to Hughes, consisting principally of its digital entertainment services, satellite communications services and satellite-based private business networks businesses.
 
(4)  The amounts for GM Class H common stock prior to its recapitalization, as part of the Hughes restructuring transactions, present the earnings attributable to GM Class H common stock prior to its recapitalization on December 17, 1997 related to Hughes, consisting principally of its defense electronics, automotive electronics and telecommunications and space business.
 
(5)  Amounts represent GM’s automotive, communications services and other operations only.

36


 

Hughes Selected Historical and Pro Forma Financial Data

      The following selected historical financial data have been derived from, and should be read in conjunction with Hughes’ consolidated financial statements (including the notes thereto) and Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Hughes 2001 Form 10-K, which is incorporated into this document by reference, and the “Hughes Unaudited Pro Forma Condensed Consolidated Financial Statements” section of this document. The following consolidated statements of operations data for each of the three years in the period ended December 31, 2001 and the balance sheet data as of December 31, 2001 and 2000 have been derived from Hughes’ financial statements incorporated into this document by reference, which have been audited by Deloitte & Touche LLP, independent auditors. The consolidated statement of operations data for the years ended December 31, 1998 and 1997 and the balance sheet data as of December 31, 1999, 1998 and 1997 have been derived from Hughes’ audited financial statements which have not been incorporated into this document by reference.

      On December 17, 1997, Hughes’ predecessor and GM completed the Hughes restructuring transactions, a series of transactions which restructured Hughes’ predecessor and which were designed to address strategic challenges facing Hughes’ three principal businesses. These transactions included:

  •  the tax-free spin-off of Hughes’ defense electronics business to holders of GM $1 2/3 par value common stock and old GM Class H common stock;
 
  •  the transfer of Delco Electronics Corporation, Hughes’ automotive electronics business, to GM’s Delphi Automotive Systems business sector, which is now a separate corporation; and
 
  •  the recapitalization of the old GM Class H common stock into the GM Class H common stock that is currently outstanding.

      These transactions were followed immediately by the merger of Hughes’ defense electronics business with Raytheon Company.

      In connection with the Hughes restructuring transactions, the telecommunications and space business of Hughes’ predecessor, consisting principally of its digital direct-to-home broadcast, satellite services, network systems and satellite systems manufacturing businesses, were contributed to the recapitalized Hughes. These telecommunications and space businesses, both before and after the recapitalization, are referred to as Hughes. The financial information presented for Hughes, unless otherwise noted, represents the financial information of the recapitalized Hughes.

      On October 6, 2000, Hughes completed the sale of its satellite systems manufacturing businesses to The Boeing Company. As a result, the financial results for those businesses are treated as discontinued operations for all periods presented herein through the date of sale. Consequently, revenues, operating costs and expenses, and other non-operating results for the satellite systems manufacturing businesses are excluded from Hughes’ results from continuing operations.

      The column entitled “Pro Forma 2001” presents pro forma operating results information for the year ended December 31, 2001 giving effect to the PanAmSat stock sale and Hughes’ acquisition of Telocity as of April 3, 2001, as if those transactions had occurred on January 1, 2001 and balance sheet data as of December 31, 2001 giving effect to the PanAmSat stock sale as if that transaction had occurred as of that date.

      The pro forma financial data are not intended to be indicative of either future results of operations or results that might have been achieved had the PanAmSat stock sale occurred on the dates specified. In the opinion of Hughes’ management, all adjustments necessary to fairly present such pro forma condensed financial data have been made based upon the proposed terms of the PanAmSat stock sale.

37


 

                                                   
As of and for the years ended December 31

Pro Forma
2001 2001 2000 1999 1998 1997






(in millions)
Consolidated Statements of Operations Data:
                                               
Total revenues
  $ 7,561     $ 8,262     $ 7,288     $ 5,560     $ 3,481     $ 2,839  
Total operating costs and expenses
    8,548       9,020       7,642       5,975       3,522       2,824  
     
     
     
     
     
     
 
Operating profit (loss)
    (987 )     (758 )     (354 )     (415 )     (41 )     15  
Other income (expense), net
    (106 )     (233 )     (462 )     (246 )     (62 )     359  
Income tax benefit (expense)
    372       326       406       237       142       (162 )
Minority interests in net losses of subsidiaries
    57       51       55       33       25       25  
     
     
     
     
     
     
 
Income (loss) from continuing operations before extraordinary item and cumulative effect of accounting change
    (664 )     (614 )     (355 )     (391 )     64       237  
Income from discontinued operations, net of taxes
                36       100       196       171  
Gain on sale of discontinued operations, net of taxes
                1,132                   63  
Extraordinary item, net of taxes
                                  (21 )
Cumulative effect of accounting change, net of taxes
    (7 )     (7 )                 (9 )      
     
     
     
     
     
     
 
Net income (loss)
    (671 )     (621 )     813       (291 )     251       450  
Adjustment to exclude the effect of GM purchase accounting
          3       17       21       21       21  
Preferred stock dividends
    (96 )     (96 )     (97 )     (51 )            
     
     
     
     
     
     
 
Earnings (Loss) Used for Computation of Available Separate Consolidated Net Income (Loss)
  $ (767 )   $ (714 )   $ 733     $ (321 )   $ 272     $ 471  
     
     
     
     
     
     
 
Consolidated Balance Sheet Data:
                                               
Cash and cash equivalents
  $ 1,199     $ 700     $ 1,508     $ 238     $ 1,342     $ 2,784  
Total current assets
    5,463       3,341       4,154       3,858       4,075       5,179  
Total assets
    15,600       19,210       19,279       18,597       12,617       12,142  
Total current liabilities
    3,093       4,407       2,691       2,642       1,346       1,007  
Long-term debt
    58       989       1,292       1,586       779       638  
Minority interests
    32       531       554       544       482       608  
Total stockholder’s equity
    11,042       11,072       12,326       11,681       8,412       8,340  
Other Data:
                                               
EBITDA(1)
          $ 390     $ 594     $ 264     $ 372     $ 297  
Depreciation and amortization
            1,148       948       679       413       282  
Capital expenditures
            1,744       1,716       1,665       1,329       713  
Net cash flows from:
                                               
 
Operating activities
            190       1,091       380       612       91  
 
Investing activities
            (1,741 )     2,211       (3,942 )     (2,129 )     (2,116 )
 
Financing activities
            743       (850 )     2,578       (64 )     5,014  

Certain prior period amounts have been reclassified to conform to the current year presentation.

38


 


(1) For purposes of the Hughes selected historical and pro forma financial data, Hughes defines “EBITDA” as operating profit (loss), plus depreciation and amortization. EBITDA is not presented as an alternative measure of operating results or cash flow from operations, as determined in accordance with accounting principles generally accepted in the United States of America. Hughes management believes it is a meaningful measure of performance and is commonly used by other communications, entertainment and media service providers. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect funds available for investment in the business of Hughes, dividends or other discretionary uses. EBITDA as presented herein may not be comparable to similarly titled measures reported by other companies.

39


 

EchoStar Selected Historical and Pro Forma Financial Data

      The following statements of operations data for each of the three years in the period ending December 31, 2001 and the balance sheet data as of December 31, 2001 and 2000 have been derived from EchoStar’s audited consolidated financial statements incorporated into this document by reference. The statement of operations data for the years ended December 31, 1998 and 1997 and the balance sheet data as of December 31, 1999, 1998 and 1997 have been derived from EchoStar’s audited consolidated financial statements which have not been incorporated into this document by reference.

      You should read the data below in conjunction with EchoStar’s consolidated financial statements (including the notes thereto) and Management’s Discussion and Analysis of Financial Condition and Results of Operations in the EchoStar 2001 Form 10-K, which is incorporated into this document by reference.

      The column of pro forma operating results information for the year ended December 31, 2001 gives effect to the PanAmSat stock sale as if that transaction had occurred on January 1, 2001 and balance sheet data as of December 31, 2001 gives effect to the PanAmSat stock sale as if that transaction had occurred as of that date.

      The selected unaudited condensed pro forma financial data is not intended to be indicative of future results of operations or results that might have been achieved had the PanAmSat stock sale occurred on the date specified. In the opinion of EchoStar’s management, all adjustments necessary to fairly present such selected unaudited condensed pro forma financial data have been made based upon the proposed terms of the PanAmSat stock sale.

                                                     
As of and for the years ended December 31,

Pro Forma
2001 2001 2000 1999 1998 1997






(unaudited)
(in millions)
Statements of Operations Data:
                                               
 
Revenue:
                                               
 
DISH Network
  $ 3,606     $ 3,606     $ 2,352     $ 1,353     $ 683     $ 344  
 
Operating leases, satellite services and other
    802                                
 
Outright sales and sales-type leases
    68                                
 
DTH equipment sales and integration services
    271       271       260       184       256       92  
 
Other
    124       124       103       66       44       41  
     
     
     
     
     
     
 
   
Total revenue
    4,871       4,001       2,715       1,603       983       477  
Costs and Expenses:
                                               
 
DISH Network operating expenses
    1,758       1,758       1,266       733       395       193  
 
Cost of outright sales and sales-type leases and other direct operating costs
    166                                
 
Cost of sales— DTH equipment and integration services
    188       188       195       149       173       62  
 
Cost of sales— other
    82       82       33       17       17       24  
 
Selling, general and administrative
    1,586       1,462       1,409       877       418       249  
 
Non-cash, stock-based compensation
    20       20       51       61              
 
Depreciation and amortization
    629       279       185       113       103       173  
     
     
     
     
     
     
 
   
Total costs and expenses
    4,429       3,789       3,139       1,950       1,106       701  
     
     
     
     
     
     
 
Operating income (loss)
  $ 442     $ 212     $ (424 )   $ (347 )   $ (123 )   $ (224 )
     
     
     
     
     
     
 
Net loss
  $ (179 )   $ (215 )   $ (650 )   $ (793 )   $ (261 )   $ (313 )
     
     
     
     
     
     
 

40


 

                                                   
As of and for the years ended December 31,

Pro Forma
2001 2001 2000 1999 1998 1997






(unaudited)
(in millions)
Balance Sheet Data:
                                               
Cash, cash equivalents and marketable investment securities
  $ 1,939     $ 2,828     $ 1,464     $ 1,254     $ 324     $ 421  
Cash reserved for satellite insurance
    122       122       82                    
Restricted cash and marketable investment securities
    1       1       3       3       78       188  
Total assets
    11,494       6,520       4,637       3,898       1,807       1,806  
Long-term debt (less current portion):
                                               
 
1994 Notes
                      2       572       500  
 
1996 Notes
                      1       498       439  
 
1997 Notes
                            375       375  
 
9 1/4% Senior Notes due 2006
    375       375       375       375              
 
9 3/8% Senior Notes due 2009
    1,625       1,625       1,625       1,625              
 
10 3/8% Senior Notes due 2007
    1,000       1,000       1,000                    
 
9 1/8% Senior Notes due 2009
    700       700                          
 
4 7/8% Convertible Notes due 2008
    1,000       1,000       1,000       1,000              
 
5 3/4% Convertible Notes due 2008
    1,000       1,000                          
 
Other long-term debt
    2,475                                
 
Mortgages and other notes payable, net of current portion
    6       6       15       28       43       52  
 
Series B Preferred Stock
                            226       199  
Total stockholders’ deficit
  $ (876 )   $ (777 )   $ (657 )   $ (48 )   $ (372 )   $ (89 )
                                           
As of and for the years ended December 31,

2001 2000 1999 1998 1997





(in millions, except subscriber and per subscriber data)
Other Data:
                                       
DISH Network subscribers (in thousands)
    6,830       5,260       3,410       1,940       1,040  
Average monthly revenue per subscriber
  $ 49.32     $ 45.33     $ 42.71     $ 39.25     $ 38.50  
EBITDA(1)
    511       (187 )     (173 )     (20 )     (51 )
Less amortization of subscriber acquisition costs
                      (19 )     (122 )
EBITDA, as adjusted to exclude amortization of subscriber acquisition costs
    511       (187 )     (173 )     (39 )     (173 )
Net cash flows from:
                                       
 
Operating activities
    489       (119 )     (59 )     (17 )      
 
Investing activities
    (1,279 )     (912 )     (63 )     (8 )     (597 )
 
Financing activities
    1,611       982       920       (14 )     703  


(1)  EchoStar believes it is common practice in the telecommunications industry for investment bankers and others to use various multiples of current or projected EBITDA (operating income (loss) plus depreciation and amortization, and non-cash, stock-based compensation) for purposes of estimating current or prospective enterprise value and as one of many measures of operating performance. Conceptually, EBITDA measures the amount of income generated each period that could be used to service debt, because EBITDA is independent of the actual leverage employed by the business; but EBITDA ignores funds needed for capital expenditures and expansion. Some investment analysts track the relationship of EBITDA to total debt as one measure of financial strength. However, EBITDA does

41


 

not purport to represent cash provided or used by operating activities and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles.

     EBITDA differs significantly from cash flows from operating activities reflected in the consolidated statement of cash flows. Cash flows from operating activities is net of interest and taxes paid and is a more comprehensive determination of periodic income on a cash (vs. accrual) basis, exclusive of non-cash items of income and expenses such as depreciation and amortization. In contrast, EBITDA is derived from accrual basis income and is not reduced for cash invested in working capital. Consequently, EBITDA is not affected by the timing of receivable collections or when accrued expenses are paid. EchoStar is not aware of any uniform standards for determining EBITDA and it believes presentations of EBITDA may not be calculated consistently by different entities in the same or similar businesses. EBITDA is shown before and after amortization of subscriber acquisition costs, which were deferred through September 1997 and amortized over one year. EBITDA for 1999, 2000 and 2001 also excludes approximately $61 million, $51 million and $20 million in non-cash, stock-based compensation expense resulting from significant post-grant appreciation of stock options granted to employees, respectively. In addition, EBITDA does not include the impact of amounts capitalized under EchoStar’s Digital Home Plan of approximately $65.4 million and $338 million during 2000 and 2001, respectively.

42


 

New EchoStar Selected Unaudited Pro Forma Condensed Consolidated Financial Data

      In the table below, we provide you with selected unaudited pro forma condensed consolidated financial data for New EchoStar as if the Transactions had been completed on January 1, 2001 for statement of operations purposes and on December 31, 2001 for balance sheet purposes.

      For more information about the assumptions made in determining the pro forma data, see the notes to “New EchoStar Unaudited Pro Forma Condensed Consolidated Financial Statements” appearing later in this document.

      The selected unaudited pro forma condensed consolidated financial data is derived from the more detailed unaudited pro forma financial statements appearing later in this document and should be read together with the separate historical financial statements and accompanying notes of Hughes and EchoStar, which we incorporate by reference in this document. The selected unaudited pro forma financial data is presented for comparative purposes only and is not necessarily indicative of the future financial position or results of operations of New EchoStar or of the financial position or the results of operations that would have been achieved had the Hughes/ EchoStar merger been completed during the periods or as of the dates for which the pro forma information is presented or after completion of the Hughes/ EchoStar merger. In the opinion of EchoStar’s and Hughes’ management, all adjustments necessary to fairly present such selected unaudited pro forma condensed consolidated financial data have been made based upon the proposed terms of the Hughes/EchoStar merger.

         
As of and for
the year ended
December 31,
2001

(in millions)
Statement of Operations Data:
       
Total revenues
  $ 12,271  
     
 
Total operating costs and expenses
    13,180  
Operating profit (loss)
  $ (909 )
     
 
Net loss attributable to common stockholders
  $ (1,301 )
     
 
Balance Sheet Data:
       
Total assets
  $ 46,831  
Long-term debt
    11,639  
Stockholders’ equity
    25,296  

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UNAUDITED COMPARATIVE PER SHARE INFORMATION

      We present below per common share data regarding the income, cash dividends declared and book value of General Motors and EchoStar on both historical and unaudited pro forma consolidated bases. We have derived the unaudited pro forma per share information from the unaudited pro forma financial statements presented elsewhere in this document. You should read the information below in conjunction with the financial statements and accompanying notes of GM, Hughes and EchoStar that are incorporated by reference into this document.

GM Common Stock Historical Per Share Data

      This table shows historical per share information for each of the two classes of GM common stock. Book value per share is calculated based on the liquidation rights of each class.

                 
As of and for
the year ended
December 31, 2001

GM $1 2/3 GM
Par Value Class H
Common Stock Common Stock


Basic earnings per share from continuing operations
  $ 1.78     $ (0.55 )
Diluted earnings per share from continuing operations
    1.77       (0.55 )
Cash dividends per share
    2.00        
Book value per share
    24.79       4.96  

GM Common Stock Pro Forma Per Share Data

      This table shows pro forma information for each of the two classes of GM common stock giving effect to the GM/Hughes separation transactions and the PanAmSat stock sale.

                 
As of and for
the year ended
December 31, 2001

GM $1 2/3 GM
Par Value Class H
Common Stock Common Stock


Giving Effect to the GM/ Hughes Separation Transactions:
               
Basic earnings per share from continuing operations
  $ 2.15     $  
Diluted earnings per share from continuing operations
    2.13        
Cash dividends per share
    2.00        
Book value per share
    25.65        
  
               
Giving Effect to the PanAmSat Stock Sale:
               
Basic earnings per share from continuing operations
  $ 1.76     $ (0.59 )
Diluted earnings per share from continuing operations
    1.74       (0.59 )
Cash dividends per share
    2.00        
Book value per share
    24.75       4.95  

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EchoStar Common Stock Historical Per Share Data

      This table shows historical per share information for the outstanding EchoStar common stock.

         
As of and for
the year ended
December 31, 2001

Loss per share
  $ (0.45 )
Cash dividends per share
     
Book value per share
    (1.62 )

EchoStar Common Stock Equivalent Pro Forma Per Share Data

      This table shows equivalent pro forma per share data for the outstanding EchoStar common stock calculated by multiplying the New EchoStar per share amounts by the exchange ratio in the Hughes/ EchoStar merger of 1/0.73, or about 1.3699, shares of New EchoStar Class A common stock for each share of EchoStar Class A common stock, and 1/0.73, or about 1.3699, shares of New EchoStar Class B common stock for each share of EchoStar Class B common stock.

         
As of and for
the year ended
December 31, 2001

Loss per share
  $ (0.97 )
Cash dividends per share
     
Book value per share
    18.97  

New EchoStar Common Stock Pro Forma Per Share Data

      This table shows pro forma per share information for the outstanding New EchoStar common stock giving effect to the GM/ Hughes separation transactions and the Hughes/ EchoStar merger. The pro forma book value per share at December 31, 2001 was calculated by dividing the pro forma book value of the net assets of New EchoStar by the total number of outstanding shares of New EchoStar common stock expected to be outstanding upon the completion of the Transactions.

         
As of and for
the year ended
December 31, 2001

Loss per share
  $ (0.71 )
Cash dividends per share
     
Book value per share
    13.85  

EchoStar Common Stock Pro Forma Per Share Data

      This table shows pro forma information for the outstanding EchoStar common stock giving effect to the PanAmSat stock sale.

         
As of and for
the year ended
December 31, 2001

Loss per share
  $ (0.36 )
Cash dividends per share
     
Book value per share
    (1.75 )

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Recent Developments

     “Local Channels, All Americans” Plan for New EchoStar

      On February 26, 2002, EchoStar and Hughes announced a new proposal that is designed to enable New EchoStar to deliver local broadcast television channels in all 210 designated market areas in the United States as soon as 24 months following the completion of the Hughes/ EchoStar merger. In their joint satellite application filed with the FCC, the companies detailed a technically and commercially feasible “Local Channels, All Americans” plan developed by EchoStar and DIRECTV engineers that is designed to allow New EchoStar to offer every consumer in the continental United States, Alaska and Hawaii access to satellite-delivered local television channels.

      In the filing, the companies seek authority to launch and operate a new spot-beam satellite that, when combined with four existing and under-construction EchoStar and DIRECTV spot-beam satellites and spectrum efficiencies achieved by combining frequencies from three of the companies’ orbital locations, is designed to enable New EchoStar to broadcast local television channels in all 210 designated market areas, including full compliance with federal “must carry” requirements. Currently, EchoStar and DIRECTV deliver local broadcast channels via satellite to consumers in a total of only 42 metropolitan designated market areas. The Hughes/ EchoStar merger is expected to eliminate carriage of duplicative content— a total of more than 500 identical channels— from the EchoStar and DIRECTV satellites which, when coupled with advanced spot-beam satellites and efficiencies expected to be created by the Hughes/ EchoStar merger, would enable local channel delivery in all U.S. designated market areas.

     GM Convertible Debt Offering

      On March 6, 2002, GM issued $3.75 billion of convertible debt securities as part of a comprehensive effort to improve its financial flexibility. The offering included $1.15 billion principal amount of 4.5% Series A convertible senior debentures due 2032 and $2.6 billion principal amount of 5.25% Series B convertible senior debentures due 2032. The securities mature in 30 years and are convertible into GM $1 2/3 par value common stock once specific conditions are satisfied. The proceeds of the offering, combined with other cash generation initiatives, will be used to rebuild GM’s liquidity position, reduce its underfunded pension liability and fund its post retirement health care obligations.

     Matters Pertaining to Arthur Andersen

      EchoStar’s independent certified public accountant, Arthur Andersen, has informed EchoStar that on March 14, 2002, it was indicted on federal obstruction of justice charges arising from the government’s investigation of Enron. Arthur Andersen has indicated that it intends to contest vigorously the indictment. EchoStar’s Audit Committee has been carefully monitoring this situation. As a public company, EchoStar is required to file with the SEC periodic financial statements audited or reviewed by an independent, certified public accountant. The SEC has said that it will continue accepting financial statements audited by Arthur Andersen, and interim financial statements reviewed by it, so long as Arthur Andersen is able to make certain representations to its clients. EchoStar’s access to the capital markets and its ability to make timely SEC filings could be impaired if the SEC ceases accepting financial statements audited by Arthur Andersen, if Arthur Andersen becomes unable to make the required representations to EchoStar or if for any other reason Arthur Andersen is unable to perform required audit-related services for EchoStar. In such a case, EchoStar would promptly seek to engage new independent certified public accountants or take such other actions as may be necessary to enable EchoStar to maintain access to the capital markets and timely financial reporting.

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RISK FACTORS

      In addition to the other information contained in or incorporated by reference into this document, including the risks and uncertainties relating to GM, Hughes, PanAmSat and EchoStar that are contained in their respective 2001 Forms 10-K and incorporated by reference into this document, you should carefully consider each of the factors set forth below. Certain of the following factors are relevant to both the GM $1 2/3 par value common stockholders and GM Class H common stockholders in connection with their consideration of whether to approve the Transactions. Others are relevant principally to EchoStar Class A common stockholders and GM Class H common stockholders in connection with their investment in New EchoStar Class A common stock and New EchoStar Class C common stock, respectively. The following risks and uncertainties relate principally to:

  •  the Transactions, including the GM/ Hughes separation transactions and the Hughes/ EchoStar merger, and how they will impact GM, Hughes, EchoStar and New EchoStar and your investment in these companies;
 
  •  GM after the Transactions; and
 
  •  New EchoStar after the Transactions, including with respect to its business, liquidity, financing activities, regulatory matters and capital stock.

      The risks and uncertainties described below are not the only ones facing GM, Hughes, EchoStar, New EchoStar and the GM $1 2/3 par value common stockholders’ investment in GM or the EchoStar Class A common stockholders’ and the GM Class H common stockholders’ investment in New EchoStar. You should carefully review the information set forth elsewhere in this document and in the documents incorporated by reference into this document, including the risks and uncertainties relating to GM, Hughes, PanAmSat and EchoStar that are contained in their respective 2001 Forms 10-K and incorporated by reference into this document. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also materially adversely affect GM, Hughes, EchoStar, New EchoStar and your investment.

      If any of the following risks or uncertainties develops into actual events, the business, financial condition or results of operations of GM, Hughes, EchoStar and/or New EchoStar could be materially adversely affected. If that happens, the trading prices of the GM $1 2/3 par value common stock, GM Class H common stock, EchoStar Class A common stock, New EchoStar Class A common stock and/or New EchoStar Class C common stock could decline, and you could lose all or part of your investment.

      This document contains forward-looking statements that involve risks and uncertainties. New EchoStar’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks and uncertainties faced by New EchoStar described below and elsewhere in this document.

Risk Factors Relating to the Transactions

     Risks Relating to New EchoStar

      New EchoStar May Not Realize the Benefits Expected From the Hughes/ EchoStar Merger. The success of the Hughes/ EchoStar merger will depend, in part, upon the ability of New EchoStar to develop an expanded competitive business and realize significant economies of scale and substantial cost and revenue synergies from combining the businesses of Hughes and EchoStar. New EchoStar may not be able to successfully integrate these operations and realize the cost and revenue synergies it currently anticipates. The difficulties of combining the operations of two previously separate businesses include, among other things, the necessity of:

  •  coordinating geographically separated organizations;
 
  •  integrating technologies (including the development of a cost-effective integrated receiver);
 
  •  integrating personnel with diverse business backgrounds; and
 
  •  combining different corporate cultures.

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      The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of New EchoStar’s business and the loss of key personnel. The diversion of New EchoStar management’s attention and any delays or difficulties encountered in connection with the integration of Hughes’ and EchoStar’s operations could have a material adverse effect on New EchoStar’s business, results of operations or financial condition.

      New EchoStar May Incur Significant Expenses Related to Integration and the Hughes/ EchoStar Merger. New EchoStar is expected to incur substantial expenses in connection with the integration of the businesses of Hughes and EchoStar and their policies, procedures, operations and technologies. These expenses could, particularly in the near term, exceed the savings that New EchoStar expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost and revenue synergies related to the integration of the businesses following the completion of the Hughes/ EchoStar merger. In addition, in connection with the Transactions, New EchoStar will incur certain expenses, including the fees and expenses of financial, legal and accounting advisors, a portion of the cost of the SEC registration process and other regulatory costs. These integration-related and merger-related expenses could be significant.

      Regulatory Approval of the Transactions May Require Hughes and/or EchoStar to Agree to Onerous Conditions. Under U.S. antitrust laws, the Hughes/ EchoStar merger may not be completed until the required waiting period under the Hart-Scott-Rodino Act has terminated or expired. To complete the Hughes/ EchoStar merger, the companies must also obtain the approval of the FCC for the transfer of licenses and other authorizations in connection with the GM/ Hughes separation transactions and the Hughes/ EchoStar merger. The Transactions may be subject to certain regulatory requirements of other governmental agencies and authorities, including clearances for the Hughes/ EchoStar merger from competition and telecommunications authorities in certain foreign jurisdictions and requirements relating to the regulation of the offer and sale of securities. Many of these governmental entities from which approvals and clearances are required may seek to condition their approval or clearance of the Hughes/ EchoStar merger, or of the transfer to New EchoStar of licenses and other entitlements, on the companies’ compliance with certain conditions, including the divestiture of assets or other onerous conditions, that may have the effect of imposing additional costs on New EchoStar or of limiting New EchoStar’s revenues or otherwise having a material adverse effect on the business of New EchoStar. Rather than agreeing to such onerous conditions, the companies may determine to terminate the Hughes/ EchoStar merger agreement instead. For more information, see “The Transactions— Regulatory Requirements.”

      Any Delay in Completing the Proposed Hughes/ EchoStar Merger May Reduce or Eliminate the Benefits Expected. In addition to the required regulatory clearances and approvals, the Hughes/ EchoStar merger is subject to a number of other conditions beyond the control of the companies that may prevent, delay or otherwise materially adversely affect the completion of the Transactions. We cannot predict whether and when these clearances and approvals can be obtained, and the requirement for such clearances and approvals could delay the completion of the Hughes/ EchoStar merger for a significant period of time or prevent it from occurring. Any delay in completing the Hughes/ EchoStar merger could cause New EchoStar not to realize some or all of the economies of scale and cost and revenue synergies that New EchoStar expects to achieve if EchoStar successfully completes the Hughes/ EchoStar merger and integrates its business with the Hughes business.

      New EchoStar May Have to Indemnify General Motors if It Fails to Abide by the Restrictions That It Will Be Subject to with Respect to Issuances of its Equity Securities for a Two-Year Period Following the Hughes/EchoStar Merger. Under the terms of the implementation agreement, New EchoStar has agreed to indemnify GM and its affiliates against any taxes resulting from the Hughes split-off if the taxes arise from actions or failures to act by New EchoStar that disqualify the Hughes split-off from being tax-free to GM. Specifically, New EchoStar is required to indemnify GM and its affiliates if New EchoStar enters into any transaction or series of transactions (or fails to take any action within its control) that causes the Hughes split-off to be taxable to GM by reason of the 50% limitation described at “— Risks Relating to Liquidity and Financing Activities of New EchoStar — New EchoStar Will Be Subject to Potentially Significant Restrictions with Respect to Issuances of its Equity Securities for a Two-Year Period Following the Hughes/EchoStar Merger”. As a result, if New EchoStar does not abide by these limitations, it may be subject to substantial

48


 

liabilities under the indemnification provisions of the implementation agreement. For a more detailed discussion, see “Description of Principal Transaction Agreements— Implementation Agreement— Preservation of the Tax-free Status of the Hughes Split-off.”

     Risks Relating to Hughes and EchoStar

      The Failure to Complete the Proposed Hughes/ EchoStar Merger as Planned Could Result in the Payment of a Termination Fee by either Hughes or EchoStar and Could Materially Adversely Affect the Financial Condition of Hughes or EchoStar, As the Case May Be. Under the terms of the Hughes/ EchoStar merger agreement, Hughes has agreed to pay a termination fee of $600 million to EchoStar if the Hughes/ EchoStar merger is not completed for certain reasons. In addition, if the Hughes/ EchoStar merger is not completed for certain other reasons, EchoStar has agreed to pay a termination fee of $600 million to Hughes. See “Description of Principal Transaction Agreements— Hughes/ EchoStar Merger Agreement— Termination Fees; Expense Reimbursement.” The financial burden that such a payment would have on Hughes or EchoStar could materially adversely affect that company’s ability to raise new capital, or otherwise have a material adverse effect on its financial condition, and each of Hughes and EchoStar will have incurred substantial transaction-related expenses and devoted substantial management resources to the Transactions without realizing the anticipated benefits.

      Some Credit Facilities of Hughes Mature Prior to the Termination Date of the Hughes/EchoStar Merger Agreement and Hughes May Have Difficulty Refinancing That Debt. The Hughes/EchoStar merger agreement contains a January 21, 2003 termination date, which may be extended in limited circumstances. Some credit facilities of Hughes mature at the earlier of the effective time of the Hughes/ EchoStar merger and December 2002. If the Hughes/ EchoStar merger has not been completed prior to December 2002, Hughes would likely seek to refinance, or obtain an extension of the maturity dates of, those facilities. There can be no assurance that Hughes would be able to refinance those facilities on acceptable terms or at all or that the lenders under those facilities would extend the maturity dates. In addition, Hughes would be subject to the terms of the Hughes/ EchoStar merger agreement which contains some limitations on its ability to issue certain securities prior to the termination of the Hughes/ EchoStar merger agreement. Hughes’ inability to refinance the facilities on acceptable terms or at all or to extend the maturity dates could have a material adverse effect on its business, financial condition and results of operations. For a further discussion of these facilities, see the Hughes 2001 Form 10-K, which is incorporated by reference into this document.

      EchoStar May Be Required to Acquire the Approximately 81% Interest Held by Hughes’ Subsidiaries in PanAmSat and Offer to Purchase the Remaining Minority Interest in PanAmSat under Certain Circumstances. If the Hughes/ EchoStar merger does not occur because certain financing or regulatory-related conditions have not been satisfied, EchoStar would be required to purchase the approximately 81% interest in PanAmSat held by Hughes’ subsidiaries for a purchase price of $22.47 per share, or an aggregate amount of about $2.7 billion, and will be required to offer to purchase the remaining publicly-traded shares of PanAmSat in an exchange offer at a price of $22.47 per share payable, at the option of each holder of such remaining shares, either in cash or shares of EchoStar Class A common stock, unless EchoStar has previously entered into an agreement for the acquisition of PanAmSat by merger or commenced a tender offer for all of the outstanding shares of PanAmSat at an equivalent or greater price per share. The financial burden such purchases would have on EchoStar could materially adversely affect its ability to raise new capital, or otherwise have a material adverse effect on its financial condition, and EchoStar will have incurred substantial transaction-related expenses and devoted substantial management resources to the proposed Hughes/ EchoStar merger without realizing the anticipated benefits. See “Description of Principal Transaction Agreements— PanAmSat Stock Purchase Agreement.” Moreover, EchoStar would then have business interests that would be substantially subject to those risks disclosed in PanAmSat’s 2001 Form 10-K, which is incorporated herein by reference, and those risks related to international satellite business operations. See “—Risk Factors Relating to New EchoStar After the Transactions— Risks Relating to the Business of New EchoStar— New EchoStar Will Be Subject to Other Risks Related to its International Operations.”

      EchoStar’s Obligation to Acquire the Approximately 81% Interest Held by Hughes’ Subsidiaries in PanAmSat under Certain Circumstances Is Subject to Certain Conditions and, if Not Completed, Could

49


 

Materially Adversely Affect Hughes’ Financial Condition. If the Hughes/ EchoStar merger does not occur because certain financing or regulatory-related conditions have not been satisfied, EchoStar will be required to purchase the approximately 81% interest in PanAmSat held by Hughes’ subsidiaries. However, the PanAmSat stock sale is subject to a number of conditions beyond the control of GM, Hughes and EchoStar which must be satisfied before the transaction could be completed, including, among other things:

  •  the expiration or termination of the waiting period applicable to the PanAmSat stock sale under the Hart-Scott-Rodino Act;
 
  •  the absence of any effective injunction or order which prevents the completion of the PanAmSat stock sale; and
 
  •  the receipt of FCC approval for the transfer of licenses in connection with the PanAmSat stock sale.

If these conditions were not fulfilled, EchoStar would not be obligated to complete the purchase, even though the Hughes/ EchoStar merger was not completed for the specified reasons. If this were to happen, Hughes would remain a wholly owned subsidiary of GM, and GM and Hughes would not have the benefit of the liquidity represented by the sale of Hughes’ indirect interest in PanAmSat to EchoStar. See “Description of Principal Transaction Agreements— PanAmSat Stock Purchase Agreement.”

      Hughes and EchoStar Are Each Prohibited from Pursuing Certain Other Opportunities Prior to the Termination of the Transaction Agreements. Pursuant to the terms of the Hughes/ EchoStar merger agreement, subject to certain exceptions, certain transactions involving Hughes or EchoStar are prohibited prior to the termination of the applicable transaction agreements among GM, Hughes Holdings, Hughes and EchoStar. These prohibited transactions generally include any merger or consolidation of Hughes or EchoStar, which is material to it and its subsidiaries as a whole, with an entity other than EchoStar or Hughes, respectively. These prohibitions may prevent GM, Hughes and EchoStar from pursuing attractive strategic alliances or combinations in the event that such opportunities arise before the termination of the Transaction agreements.

      The Pendency of the Hughes/ EchoStar Merger Could Negatively Affect the Stock Price of GM Class H Common Stock and EchoStar Class A Common Stock As Well As the Future Business and Operations of Each of Hughes and EchoStar. In response to the announcement of the Hughes/ EchoStar merger, the customers and strategic partners of each of Hughes and EchoStar may delay or defer decisions, which could have a material adverse effect on the businesses of each of Hughes and EchoStar, regardless of whether the Hughes/ EchoStar merger is ultimately completed. Similarly, current and prospective employees of Hughes and EchoStar may experience uncertainty about their future roles with the combined company, which may adversely affect the ability of each of Hughes and EchoStar to attract and retain key management, sales, marketing and technical personnel. In addition, some rating agencies that provide security ratings on Hughes’ debt have also downgraded their ratings on Hughes’ long-term debt since the announcement of the Hughes/EchoStar merger. A downgrade could adversely affect the ability of Hughes to finance its operations, including the cost of obtaining financing. For information regarding security ratings on Hughes’ debt, see Hughes 2001 Form 10-K, which is incorporated by reference into this document. Finally, if the Hughes/ EchoStar merger is terminated and GM and Hughes determine to seek another transaction involving Hughes, we cannot assure you that they will be able to negotiate a transaction with another company on terms comparable to the Transactions.

Risk Factors Relating to GM After the Transactions

      The Amount of Liquidity and Value To Be Provided to GM Pursuant to the Transactions Could Vary Significantly Based on a Number of Factors. The aggregate amount of liquidity and value to be provided to GM in connection with the Transactions could vary significantly. It will depend upon the value of GM’s retained economic interest in Hughes before the Hughes split-off or GM’s ownership interest in New EchoStar after the Hughes/EchoStar merger, as applicable, and the circumstances under which GM achieves liquidity with regard to that interest.

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      Depending upon certain variable factors that will not be known until immediately before the completion of the Hughes split-off, GM’s retained economic interest in Hughes may be reduced in connection with the payment of the Hughes dividend distribution to GM to such an extent that:

  •  GM would hold fewer than 100 million shares (or no shares) of New EchoStar Class C common stock after the completion of the Hughes recapitalization, which would limit GM’s ability to engage in debt-for-equity exchanges after the Hughes/ EchoStar merger to such lower number of shares, if any; and/or
 
  •  GM would retain few shares (or no shares) of New EchoStar Class C common stock after the completion of the Transactions (including the completion of any GM debt-for-equity exchanges).

The variable factors that could affect these outcomes include, among other things, the actual amount of the Hughes dividend distribution and the average market price of GM Class H common stock during a specified period preceding that time.

      In addition, the transaction agreements provide that both the aggregate number of shares subject to the GM debt-for-equity exchanges and/or the amount of the Hughes dividend distribution are subject to mandatory reduction under certain circumstances in order to satisfy the minimum equity headroom condition to the completion of the Hughes/ EchoStar merger or to satisfy a requirement that the amount of the $4.2 billion Hughes dividend distribution does not exceed the value of GM’s retained economic interest at the time of payment of the Hughes dividend distribution.

      The companies have agreed that, if and to the extent necessary in order to satisfy the minimum equity headroom condition, which is set forth in the Hughes/ EchoStar merger agreement and described elsewhere in this document, the aggregate number of shares of New EchoStar Class C common stock that General Motors may distribute pursuant to GM debt-for-equity exchanges after the completion of the Hughes/ EchoStar merger will be reduced to as few as 60 million shares. Furthermore, in order to cause the minimum equity headroom condition to be satisfied, GM may elect, but is not required, to further reduce the aggregate number of shares of New EchoStar Class C common stock subject to such GM debt-for-equity exchanges. We cannot assure you whether, or to what extent, GM would make any such voluntary reductions to the number of shares subject to such GM debt-for-equity exchanges. GM currently expects that it would make any determination regarding any such voluntary reductions immediately prior to the time of the completion of the Hughes split-off, based on factors it determines relevant as of such time.

      The companies have also agreed that if, after giving effect to any required or voluntary reductions to the number of shares subject to the GM debt-for-equity exchanges as described above, either the minimum equity headroom condition is still not satisfied or the $4.2 billion Hughes dividend distribution would otherwise exceed the value of GM’s retained economic interest in Hughes at the time of the payment of the Hughes dividend distribution, then under certain circumstances the amount of the Hughes dividend distribution would be reduced by up to $700 million. Under such circumstances, the amount of the Hughes dividend distribution could be reduced to an amount as low as $3.5 billion. See “Description of Principal Transaction Agreements— GM/Hughes Separation Agreement— The Hughes Recapitalization— Reduction in the Shares Subject to GM Debt-for-Equity Exchanges; Reduction of the Hughes Dividend Distribution.”

      In order to cause either of these conditions to be satisfied, GM may elect, but is not required, to further reduce the amount of the Hughes dividend distribution to an amount less than $3.5 billion. We cannot assure you whether, or to what extent, GM may consider any voluntary reduction to the amount of the Hughes dividend distribution. GM currently expects that it would make any determination regarding any such voluntary reduction immediately prior to completion of the GM/Hughes separation transactions, based on factors it determines relevant as of such time. If GM were to determine not to make any such voluntary reductions to the aggregate number of shares subject to the debt-for-equity exchanges and/or the amount of the Hughes dividend distribution, which determination would be within GM’s sole discretion, such that the specified conditions would not be satisfied, then the Hughes split-off and the Hughes/EchoStar merger would not occur unless such conditions were waived. Any such voluntary reductions would, however, reduce the amount of liquidity to be provided to GM in connection with the Transactions.

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      Also, depending upon the terms of the IRS ruling, GM could be required to distribute to the holders of GM $1 2/3 par value common stock shares of New EchoStar Class C common stock, if any, that GM would otherwise retain following the Hughes split-off to the extent required by the transaction agreements.

      In addition, the amount of liquidity and value, if any, that GM may realize as a result of:

  •  any issuance of shares of GM Class H common stock in GM debt-for-equity exchanges before the Hughes split-off; or
 
  •  any shares of New EchoStar Class C common stock that it holds, whether such shares are distributed in GM debt-for-equity exchanges within six months of the Hughes/EchoStar merger or are retained thereafter;

would generally depend upon, among other things, the trading prices of shares of GM Class H common stock or New EchoStar Class C common stock, as applicable, at the time of GM’s disposition of any such shares.

      The amount of liquidity and value to be provided to GM pursuant to the Transactions could vary materially as a result of the factors described above, which could under certain circumstances materially adversely affect GM’s credit position after the completion of the Transactions.

      The Assets of Hughes Will Not Support GM’s Financial Position and Credit Ratings After the GM/Hughes Separation Transactions. Following the completion of the Transactions, Hughes will no longer be a subsidiary of GM. Although the Transactions are expected to provide General Motors with significant liquidity and value as described in greater detail elsewhere in this document, after the Hughes split-off General Motors will be unable to rely upon the assets of Hughes to support its financial position and credit ratings, including in times of economic downturn or cyclical changes in the automotive industry. As a result of the Hughes split-off, GM anticipates that there would be a net reduction of GM’s stockholders’ equity, reflecting an increase based on the difference between the fair market value and the net book value of Hughes at the time of the Hughes split-off and a reduction based on the fair market value at such time of the shares distributed in the Hughes split-off. This reduction would have been about $3.9 billion based on the EchoStar Class A common stock price and the net book value of Hughes at December 31, 2001 and certain other assumptions. For additional information, see “The Transactions— Accounting Treatment” below. We cannot assure you that, after the Transactions, operating results and market conditions will not result in lower credit ratings or a weaker financial condition for GM than if the Transactions had not occurred.

      Any Appreciation or Depreciation in the Value of the New EchoStar Class C Common Stock Will Affect the Level of GM’s Pension Expense. About 21% of the outstanding GM Class H common stock is currently held by certain GM employee benefit plans. As GM Class H common stockholders, those GM employee benefit plans will receive shares of New EchoStar Class C common stock in the Transactions. In connection with the Transactions, those GM employee benefit plans agreed to some restrictions on their ability to sell their shares. See “Shares Eligible For Future Sale— GM Employee Benefit Plans.” After the completion of the Transactions, during any period in which those GM employee benefit plans continue to own New EchoStar Class C common stock, appreciation or depreciation in the value of New EchoStar Class C common stock will affect the level of GM’s pension expense, which is actuarially determined and computed in accordance with accounting principles generally accepted in the United States. We can provide no assurance as to whether the trading value of New EchoStar Class C common stock after the Transactions will be equal to or greater than the trading value of GM Class H common stock before the Transactions or if the Transactions had not occurred.

Risk Factors Relating to New EchoStar After the Transactions

     Risks Relating to the Business of New EchoStar

      New EchoStar Will Compete With Other Subscription Television Providers, Which Could Materially Adversely Affect New EchoStar’s Ability to Grow and Increase Earnings. New EchoStar will compete in the highly competitive subscription television industry against cable television and other land-based and satellite-based system operators offering video, audio and data programming and entertainment services. Many of these competitors have substantially greater financial, marketing and other resources than New EchoStar will have.

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New EchoStar’s ability to increase earnings will depend, in part, upon its ability to compete with these other operators.

      Cable television operators have a large, established customer base, and many cable operators have significant investments in, and access to, programming. Of the about 97% of U.S. television households in which cable television service is currently available, about 67% currently subscribe to cable. Cable television operators have advantages relative to EchoStar and Hughes by, among other things:

  •  providing service to multiple television sets within the same household at a lesser incremental cost to the consumer;
 
  •  providing local and other programming in a larger number of geographic areas; and
 
  •  bundling their analog video service with expanded digital video services delivered terrestrially or via satellite, efficient two-way high-speed Internet access, and telephone service on upgraded cable systems.

As a result of these and other factors, New EchoStar may not be able to continue to expand its subscriber base or compete effectively against cable television operators.

      New technologies also could have a material adverse effect on the demand for New EchoStar’s direct broadcast satellite services. For example, new and advanced local multi-point distribution services are currently being implemented. Other terrestrial wireless video and data distribution services have been proposed at the FCC. In addition, entities such as regional telephone companies, which are likely to have greater resources than New EchoStar will have, are implementing and supporting digital video compression over existing telephone lines. While these entities are not currently providing digital “wireless cable,” many have the capabilities for such services. Moreover, mergers, joint ventures, and alliances among franchise, wireless or private cable television operators, regional Bell operating companies and others may result in providers capable of offering bundled cable television and telecommunications services in competition with New EchoStar. As a result, New EchoStar may not be able to compete successfully with existing competitors or new entrants in the market for subscription television services.

      Other companies in the United States have conditional permits or have leased transponders for direct broadcast satellite assignments that can be used to provide service to portions of the United States. Also, C-band satellite providers and other low and medium power satellite operators continue to compete in the market for subscription television services, particularly in rural areas.

      In addition, the FCC has proposed to allocate additional spectrum for direct broadcast satellite services, which could create significant additional competition in the market for subscription television services.

      New EchoStar Will Depend Upon Others to Produce Programming. New EchoStar will depend upon third parties to provide it with programming services. The programming agreements of DIRECTV and EchoStar generally have remaining terms ranging from less than one and up to 10 years and contain various renewal and cancellation provisions. New EchoStar may not be able to renew these agreements on favorable terms, or at all, or these agreements may be canceled prior to expiration of their original term. If New EchoStar were unable to renew any of these agreements or the other parties cancel the agreements, we cannot assure you that New EchoStar would be able to obtain substitute programming, or that such substitute programming would be comparable in quality or cost to the existing programming of DIRECTV and EchoStar. In addition, programming costs may continue to increase. New EchoStar may be unable to pass programming costs on to its customers which could have a material adverse impact on its cash flow and operating margins. New EchoStar’s ability to compete successfully will depend upon its ability to continue to obtain desirable programming and offer it attractively to its customers at competitive prices.

      Increased Subscriber Turnover Could Harm New EchoStar’s Financial Performance. Turnover of customers, or “churn,” is a significant cost element for any subscription television provider. DIRECTV and EchoStar have historically had significant levels of churn. Any development which, among other things, increases costs to existing customers of New EchoStar, materially adversely impacts the quality of the product or service, increases the desirability of competing products or increases uncertainty about whether the Hughes/EchoStar merger will be completed may increase churn. Thus, any of the risks described in this

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document which potentially have a material adverse impact on cost or quality could also result in an increase in churn which would harm the financial performance of New EchoStar. Churn can also increase due to factors beyond the control of New EchoStar, including a slowing economy, significant signal compromise, a maturing subscriber base and competitive offers. There can be no assurance that New EchoStar will be able to manage its churn rates to achieve a reasonable level of financial performance.

      Increased Subscriber Acquisition Costs Could Affect New EchoStar’s Financial Performance. Both DIRECTV and EchoStar subsidize the cost and installation of their receiver systems in order to attract new subscribers and it is contemplated that New EchoStar will continue this practice. New EchoStar’s subscriber acquisition costs, both in the aggregate and on a per new subscriber activation basis, may materially increase to the extent that it continues or expands current sales promotion activities, or introduces other more aggressive promotions. Any material increase in subscriber acquisition costs from current levels could have a material adverse effect on New EchoStar’s business, financial condition and results of operations.

      Satellite Programming Signals Have Been Compromised, Which Could Cause New EchoStar to Lose Subscribers and Revenue. The delivery of subscription programming requires the use of encryption technology to assure that only those who pay can receive the programming. It is illegal to create, sell or otherwise distribute mechanisms or devices to circumvent that encryption. Theft of cable and satellite programming has been widely reported and DIRECTV’s and EchoStar’s signal encryption has been compromised and could be further compromised in the future. New EchoStar will respond to compromises of its encryption system with measures intended to make signal theft of its programming commercially uneconomical. We currently anticipate that New EchoStar will utilize a variety of tools to continue to accomplish this goal. Ultimately, if other measures are not successful, it could be necessary for New EchoStar to incur significant expense to replace the conditional access card that controls the security of each consumer set-top box. If New EchoStar can not promptly correct a compromise of its encryption technology, New EchoStar’s revenue and its ability to contract for video and audio services provided by programmers could be materially adversely affected.

      New EchoStar May Be Unable to Manage Rapidly Expanding Operations. If New EchoStar is unable to manage its growth effectively, its business and results of operations could be materially adversely affected. To manage its growth effectively, we believe that New EchoStar must continue to:

  •  develop its internal and external sales forces;
 
  •  develop installation capability;
 
  •  develop customer service operations and information systems;
 
  •  maintain the existing relationships of Hughes and EchoStar with third party vendors; and
 
  •  expand, train and manage its employee base.

Furthermore, its management personnel must assume even greater levels of responsibility. If New EchoStar is unable to effectively manage growth, New EchoStar may experience a decrease in subscriber growth, an increase in churn, an increase in expenses or other adverse results, any one of which could have a material adverse effect on its business.

      We Expect That New EchoStar Will Experience Net Losses For the Foreseeable Future and We Cannot Be Certain That New EchoStar Will Achieve or Sustain Profitability. Hughes and EchoStar have sustained significant losses and have significant amounts of debt. In addition, New EchoStar will need to incur even more debt in connection with the Hughes/EchoStar merger financing and related transactions, and expects to incur substantial amounts of debt after the Hughes/EchoStar merger in order to operate its business. Further, if EchoStar’s and Hughes’s application for authority to launch and operate a new spot-beam satellite in connection with the delivery of local broadcast TV channels in all 210 designated market areas in the United States is approved by the FCC, New EchoStar is expected to expend substantial resources to construct and launch this satellite. If New EchoStar does not have sufficient income or other sources of cash, it could eventually affect its ability to service its debt and pay its other obligations. Improvements in New EchoStar’s results of operations will depend largely upon its ability to successfully integrate the Hughes and EchoStar

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businesses while increasing its customer base, maintaining its price structure, effectively managing its costs and controlling churn. We cannot assure you that New EchoStar will be effective with regard to these matters. We currently anticipate that New EchoStar will continue to experience net losses for the foreseeable future.

      New EchoStar’s Future Growth Will Depend Upon its Ability to Implement its Business Strategy. New EchoStar’s business strategy will be focused on becoming a premier provider of integrated entertainment, information and communications services. We cannot assure you that the implementation of these initiatives will not be delayed, or that they will ever be fully implemented, or, if implemented, will allow New EchoStar to successfully capitalize on the emerging communications services markets it will target. Further, we cannot assure you that New EchoStar will be successful in implementing these new initiatives, or any other new initiatives.

      New EchoStar Will Be Subject to Other Risks Related to its International Operations. Hughes and, in particular, DIRECTV Latin America and PanAmSat conduct a material portion of their businesses outside the United States. On a consolidated basis, excluding revenues from Hughes’ former subsidiary, Hughes Space and Communications, for the years ended December 31, 2001, 2000 and 1999, about 20%, 18% and 21%, respectively, of Hughes’ revenues were generated from customers outside of the United States. All of DIRECTV Latin America’s revenues were generated from customers outside the United States. With respect to PanAmSat on a stand-alone basis for years ended December 31, 2001, 2000 and 1999, about 60%, 51% and 57%, respectively, of PanAmSat’s revenues were generated from customers outside of the United States. International operations are subject to risks inherent in international business activities, including:

  •  limitations and disruptions resulting from the imposition of government controls;
 
  •  difficulties meeting export license requirements;
 
  •  obtaining and/or maintaining licenses necessary to conduct its business;
 
  •  economic or political instability;
 
  •  trade restrictions;
 
  •  changes in tariffs;
 
  •  currency fluctuations;
 
  •  greater difficulty in pursuing legal remedies against foreign business partners or customers;
 
  •  greater difficulty in safeguarding intellectual property; and
 
  •  difficulties in managing overseas subsidiaries and international operations.

These risks could have a material adverse effect on New EchoStar’s business.

      New EchoStar’s New or Proposed Satellites Will Be Subject To Construction Delays. The construction and launch of satellites are subject to certain delays. Such delays can result from the delays in the construction of satellites and launch vehicles, the periodic unavailability of reliable launch opportunities, possible delays in obtaining regulatory approvals and launch failures, as discussed below. A significant delay in the future delivery of any satellite would also materially adversely affect the marketing plan for, or use of, the satellite. If satellite construction schedules are not met, there can be no assurance that a launch opportunity will be available at the time a satellite is ready to be launched. Certain delays in satellite construction could also jeopardize satellite authorizations that are conditioned on timely construction and launch of the satellite. The failure to implement the New EchoStar satellite deployment plan on schedule could have a material adverse effect on New EchoStar’s financial condition and results of operations.

      New EchoStar’s Satellites Will Be Subject to Risks Relating to Launch. Satellite launches are subject to significant risks, including launch failure, incorrect orbital placement or improper commercial operation. About 15% of all commercial geostationary satellite launches have resulted in a total or constructive total loss. Certain launch vehicles that may be used by New EchoStar have either unproven track records or have experienced launch failures in the past. The risks of launch delay and failure are usually greater when the

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launch vehicle does not have a track record of previous successful flights. Launch failures result in significant delays in the deployment of satellites because of the need both to construct replacement satellites, which can take up to 24 months, and obtain other launch opportunities. Such significant delays could materially adversely affect the operations and revenues of New EchoStar. If New EchoStar were unable to obtain launch insurance, or obtain launch insurance at rates it deemed commercially reasonable, and a significant launch failure were to occur, it could have a material adverse effect on its financial condition and results of operations. In addition, the occurrence of future launch failures may materially adversely affect the ability of New EchoStar to insure the launch of its satellites at commercially reasonable premiums, if at all. See “— New EchoStar May Not Have Traditional Commercial Insurance Coverage on Certain of its Satellites at the Time of the Completion of the Hughes/EchoStar Merger and New EchoStar May Determine to Self-Insure Additional Satellites After the Completion of the Hughes/EchoStar Merger.”

      Once Launched and Properly Deployed, New EchoStar’s Satellites Will Be Subject to Significant Operational Risks Due to Various Types of Potential Anomalies. Satellites are subject to significant operational risks while in orbit. These risks include malfunctions, commonly referred to as anomalies, that have occurred in EchoStar, Hughes and PanAmSat satellites and the satellites of other operators as a result of various factors, such as satellite manufacturer’s error, problems with the power systems or control systems of the satellites and general failures resulting from operating satellites in the harsh space environment.

      Although New EchoStar will work closely with the satellite manufacturers to determine and eliminate the cause of anomalies in new satellites and provide for redundancies of critical components in the satellites, we cannot assure you that New EchoStar will not experience anomalies in the future, whether of the types described above or arising from the failure of other systems or components.

      Any single anomaly or series of anomalies could materially adversely affect the operations and revenues of New EchoStar and its relationships with current customers, as well as its ability to attract new customers for its direct broadcast satellites and other satellite services. In particular, future anomalies may result in the loss of individual transponders on a satellite, a group of transponders on that satellite or the entire satellite, depending on the nature of the anomaly. Anomalies may also reduce the expected useful life of a satellite, thereby reducing the revenue that could be generated by that satellite, or create additional expenses due to the need to provide replacement or back-up satellites. Finally, the occurrence of anomalies may materially adversely affect the ability of New EchoStar to insure its satellites at commercially reasonable premiums, if at all. While some anomalies are currently covered by existing insurance policies, others are not now covered or may not be covered in the future.

      Meteoroid events pose a potential threat to all in-orbit satellites. The probability that meteoroids will damage those satellites increases significantly when the Earth passes through the particulate stream left behind by various comets. Due to the current peak in the 11-year solar cycle, increased solar activity is likely for the next year. Occasionally, increased solar activity poses a potential threat to all in-orbit satellites. The probability that the effects from this activity will damage New EchoStar’s satellites or cause service interruptions is generally very small.

      Some decommissioned spacecraft are in uncontrolled orbits which pass through the geostationary belt at various points, and present hazards to operational spacecraft, including New EchoStar’s satellites. New EchoStar may be required to perform maneuvers to avoid collisions which may prove unsuccessful or could reduce the useful life of the satellite through the expenditure of fuel to perform these maneuvers. The loss, damage or destruction of any of New EchoStar’s satellites as a result of an electrostatic storm, collision with space debris, malfunction or other event would have a material adverse effect on the business of New EchoStar. As is common in the industry, New EchoStar’s in-orbit insurance, if any, will not cover damage to satellites that occurs as a result of collisions with meteoroids, decommissioned spacecraft or other space debris.

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      New EchoStar’s Satellites Could Fail Earlier Than Their Expected Useful Lives. New EchoStar’s ability to earn revenue depends on the usefulness of its satellites. Each satellite has a limited useful life. A number of factors affect the useful lives of the satellites, including, among other things:

  •  the quality of their construction;
 
  •  the durability of their component parts;
 
  •  the ability to continue to maintain proper orbit and control over the satellite’s functions;
 
  •  the efficiency of the launch vehicle used; and
 
  •  the remaining on-board fuel following orbit insertion.

Generally, the minimum design life of the satellites in the New EchoStar fleet is 12 years. New EchoStar can provide no assurance, however, as to the actual useful lives of the satellites.

      In the event of a failure or loss of any of its satellites, New EchoStar may relocate another satellite and use it as a replacement for the failed or lost satellite. Such a relocation would require prior FCC approval and, among other things, a showing to the FCC that the replacement satellite would not cause additional interference compared to the failed or lost satellite. We cannot be certain that New EchoStar could obtain such FCC approval. If New EchoStar chooses to use a satellite in this manner, we cannot assure you that this use would not materially adversely affect its ability to meet the operation deadlines associated with its authorizations. Failure to meet those deadlines could result in the loss of such authorizations, which would have a material adverse effect on New EchoStar’s operations.

      New EchoStar May Not Have Traditional Commercial Insurance Coverage on Certain of its Satellites at the Time of the Completion of the Hughes/ EchoStar Merger and New EchoStar May Determine to Self-Insure Additional Satellites After the Completion of the Hughes/ EchoStar Merger. The price, terms and availability of insurance fluctuate significantly. In the last several years, the cost of obtaining launch and in-orbit policies on satellites reached historic lows but has recently begun to return to the higher levels for such policies that were common in the early 1990’s. We currently expect the cost of obtaining insurance to continue to rise and the availability to be limited as a result of recent satellite failures and general conditions in the insurance industry, including the effects of the September 11, 2001 terrorist attacks. Launch and in-orbit policies on satellites may not continue to be available on commercially reasonable terms or at all. In addition to higher premiums, insurance policies may provide for higher deductibles, shorter coverage periods and additional satellite health-related policy exclusions.

      The indentures related to certain of EchoStar’s and its subsidiaries’ outstanding notes contain restrictive covenants that require EchoStar to maintain satellite insurance with respect to specified numbers of the satellites it owns or leases. To date, EchoStar has been unable to obtain insurance on many of its satellites on terms acceptable to EchoStar. As a result, EchoStar is currently self-insuring all of its satellites. To satisfy insurance covenants related to EchoStar’s and its subsidiaries’ outstanding notes, EchoStar has reclassified an amount equal to the depreciated cost of three of its satellites from cash and cash equivalents to cash reserved for satellite insurance on its balance sheet. As of December 31, 2001, cash reserved for satellite insurance totaled about $122 million, which could be increased upon the occurrence of certain events as described in EchoStar’s 2001 Form 10-K, which is incorporated herein by reference. The reclassifications will continue until such time, if ever, as EchoStar can again insure its satellites on acceptable terms and for acceptable amounts. EchoStar believes that it has in-orbit satellite capacity sufficient to expeditiously recover transmission of most programming in the event one of its satellites fails. However, the cash reserved for satellite insurance is not adequate to fund the construction, launch and insurance for a replacement satellite in the event of a complete loss of a satellite. Programming continuity cannot be assured in the event of multiple satellite losses.

      Hughes and PanAmSat use in-orbit and launch insurance to mitigate the potential financial impact of satellite fleet in-orbit and launch failures unless the premium costs are considered uneconomic relative to the risk of satellite failure. The insurance generally covers the unamortized book value of covered satellites. Although the insurance generally does not compensate for business interruption or loss of future revenues or

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customers, Hughes relies on in-orbit spare satellites and excess transponder capacity at key orbital slots to mitigate the impact of satellite failure on Hughes’ ability to provide service. If Hughes’ insurance policies contain a coverage exclusion for a satellite with known anomalies or insurance costs for a particular satellite are prohibitively expensive, Hughes self-insures with respect to those anomalies or satellites. The book value of satellites that were insured with coverage exclusions amounted to $699.3 million and the book value of the satellites that were self-insured was $668.5 million at December 31, 2001. The instruments governing certain PanAmSat indebtedness also contain restrictive covenants that require it to maintain satellite insurance with respect to specified numbers of the satellites they own or lease.

      New EchoStar may not be able to obtain commercial insurance covering the launch and/or in-orbit operation of new satellites or renew coverage on existing satellites at rates acceptable to it and for the full amount necessary to construct, launch and insure replacement satellites. In that event, New EchoStar will be forced to self-insure all or a portion of the launch and/or in-orbit operation of each affected satellite, which could require New EchoStar to reserve material amounts of additional cash on its balance sheet, which could materially adversely affect New EchoStar’s financial condition and results of operations given the significant funding requirements New EchoStar is expected to have following the completion of the Hughes/EchoStar merger and the restrictions New EchoStar will have on its ability to engage in equity and debt financings. See “—Risks Relating to Liquidity and Financing Activities of New EchoStar— We Cannot Assure You That There Will Be Sufficient Funding For New EchoStar” and “—New EchoStar Will Be Subject to Potentially Significant Restrictions with Respect to Issuances of its Equity Securities for a Two-Year Period Following the Hughes/EchoStar Merger.” Any launch vehicle failure, or loss or destruction of any of New EchoStar’s satellites for which it does not have commercial insurance for the full replacement cost of such satellites could have a material adverse effect on its business, financial condition and results of operations and on its ability to comply with “must-carry” and other regulatory obligations. In addition, higher premiums on insurance policies would increase New EchoStar’s costs, thereby reducing its operating income.

      New EchoStar’s Ability to Maintain Leading Technological Capabilities is Uncertain. New EchoStar’s operating results will depend to a significant extent upon its ability to continue to introduce new products and services on a timely basis and to reduce costs of its existing products and services. We cannot assure you that New EchoStar will successfully identify new product or service opportunities or develop and market these opportunities in a timely or cost-effective manner. The success of new product development depends on many factors, including proper identification of customer needs, cost, timely completion and introduction, differentiation from offerings of competitors and market acceptance.

      Technology in the subscription television and satellite services industries changes rapidly as new technologies are developed, which could cause the services and products of New EchoStar to become obsolete. We cannot assure you that New EchoStar and its suppliers will be able to keep pace with technological developments. If the new technologies on which New EchoStar intends to focus its research and development investments fail to achieve acceptance in the marketplace, New EchoStar would suffer a material adverse effect on its future competitive position and, accordingly, in its financial condition and results of operations. In addition, delays in the delivery of components or other unforeseen problems in New EchoStar’s direct broadcast satellite system or other satellite services may occur that could materially adversely affect performance or operations and, thus, have a material adverse effect on its business.

      Technological innovation is important to New EchoStar’s success and depends, to a significant degree, on the work of technically skilled employees. Competition for the services of these types of employees is vigorous. We cannot assure you that New EchoStar will be able to attract and retain these employees. If New EchoStar were unable to attract and maintain technically skilled employees, its competitive position could be materially adversely affected.

      The Benefits of Hughes’ Subsidiary Relationship with GM Will Not Be Available to New EchoStar Following the Transactions. As a wholly owned subsidiary of GM, Hughes has been able to benefit from GM’s extensive network of business relationships with companies and other contacts around the world. Hughes has historically drawn upon this resource in the course of developing its own contacts and business

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relationships. After the Transactions, New EchoStar will be an independent, publicly owned company, separate from GM, and thus will no longer be able to benefit from GM’s relationships in the same manner.

      New EchoStar Will Rely on Key Personnel. New EchoStar’s future success will depend to a significant extent upon the performance of Charles W. Ergen, who will be the Chairman of the Board of Directors and Chief Executive Officer of New EchoStar. The loss of Mr. Ergen or of certain other key executives could have a material adverse effect on New EchoStar’s business. New EchoStar does not expect to maintain “key man” insurance. Although all of its executives will execute agreements limiting their ability to work for or consult with competitors if they leave New EchoStar, New EchoStar will not have any employment agreements with any of them, other than with Charles W. Ergen.

     Risks Relating to Liquidity and Financing Activities of New EchoStar

      New EchoStar Will Be Subject to Potentially Significant Restrictions with Respect to Issuances of Its Equity Securities for a Two-Year Period Following the Hughes/ EchoStar Merger. In order to preserve the tax-free status of the Hughes split-off to General Motors, New EchoStar has agreed to be subject to certain restrictions on issuances of its stock and other securities that are convertible or exchangeable into its stock. Under applicable provisions of the Internal Revenue Code of 1986, as amended, which we sometimes refer to as the “Code,” the Hughes split-off will not be tax-free to General Motors if it is part of a plan under which one or more persons, other than General Motors and, in general, its historical stockholders, acquire stock possessing at least 50% of the voting power or at least 50% of the value of the outstanding stock of New EchoStar. We sometimes refer to the shares of New EchoStar stock that will count toward this 50% limitation as “tainted” stock. The New EchoStar Class A common stock and New EchoStar Class B common stock issued in the Hughes/ EchoStar merger will be treated as tainted stock that counts toward the 50% limitation, as will shares of New EchoStar Class C common stock exchanged in the Hughes split-off for shares of GM Class H common stock issued in any GM debt-for-equity exchange and shares of New EchoStar Class C common stock distributed in any subsequent GM debt-for-equity exchange. In addition, any stock that is issued by New EchoStar, other than stock issued upon the exercise of compensatory stock options, during the two-year period following the Hughes split-off generally will be presumed to be tainted stock absent an IRS ruling or tax opinion to the contrary. Under the implementation agreement, General Motors has broad rights to prevent New EchoStar from taking any action that might jeopardize the tax-free status of the Hughes split-off. As a result, New EchoStar’s ability to issue any equity capital or other securities convertible or exchangeable into equity capital in the two-year period following the Hughes/ EchoStar merger will be severely restricted, absent possible favorable IRS rulings, which could materially adversely affect New EchoStar’s financial condition and results of operations, particularly given the fact that the funding requirements of the operations of New EchoStar after the completion of the Hughes/EchoStar merger are expected to be significant, as described at “The Transactions— Description of the Transactions — Hughes/EchoStar Merger Financings.”

      New EchoStar Will Have Substantial Indebtedness, Will Require Substantial Additional Indebtedness and Will Depend Upon Its Subsidiaries’ Earnings To Make Payments on Its Indebtedness. New EchoStar will assume substantial indebtedness of EchoStar, Hughes and PanAmSat upon the completion of the Hughes/ EchoStar merger, including the Hughes/EchoStar merger financing described at “The Transactions— Description of the Transactions— Hughes/EchoStar Merger Financings,” and will likely incur or assume substantial indebtedness in connection with financing the cash required to complete the Hughes/ EchoStar merger, which will make it vulnerable to changes in general economic conditions. In addition, New EchoStar is currently expected to require substantial additional financing following completion of the Hughes/ EchoStar merger to fund capital expenditures and costs and expenses in connection with funding its operations, domestic and international investments and its growth strategy and the repayment of indebtedness, particularly in light of the significant cash requirements of certain parts of the Hughes business. Because New EchoStar’s ability to raise equity capital for two years following completion of the Hughes/ EchoStar merger will be severely restricted, it is currently expected that it will be necessary for New EchoStar to incur additional indebtedness to finance its activities. The indentures and other agreements governing the debt of

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New EchoStar and its subsidiaries will restrict its and its subsidiaries’ ability to incur additional debt. Thus, it may be difficult for New EchoStar to obtain additional debt at all or on acceptable terms.

      Moreover, because it is currently expected that New EchoStar will conduct substantially all of its operations through its subsidiaries, its ability to service its debt obligations will be dependent upon the earnings of its subsidiaries and the payment of funds by its subsidiaries to it in the form of loans, dividends or other payments. It is currently expected that New EchoStar will have few assets of significance other than the capital stock of its subsidiaries. New EchoStar’s subsidiaries will be separate legal entities. Furthermore, New EchoStar’s subsidiaries will not be obligated to make funds available to it, and creditors of New EchoStar’s subsidiaries will have a superior claim to its subsidiaries’ assets. In addition, New EchoStar’s subsidiaries’ ability to make any payments to it will depend upon their earnings, the terms of their indebtedness, business and tax considerations and legal restrictions. We cannot assure you that New EchoStar or its subsidiaries will be able to pay dividends or otherwise distribute funds to New EchoStar in an amount sufficient to pay the principal of or interest on the indebtedness owed by New EchoStar, including the Hughes/EchoStar merger financing described at “The Transactions— Description of the Transactions— Hughes/EchoStar Merger Financings.”

      Any additional debt incurred by New EchoStar and its subsidiaries will subject it to higher interest costs and decrease its cash flows and earnings.

      We Cannot Assure You That There Will Be Sufficient Funding for New EchoStar. New EchoStar may not be able to raise adequate capital to fund some or all of its business and growth strategies on favorable terms, or at all, or to react rapidly to changes in technology, products, services or the competitive landscape. We believe that key success factors in the subscription television industry include superior access to capital and financial flexibility. Industry participants often face high capital requirements in order to take advantage of new market opportunities, respond to rigorous competitive pressures and react quickly to changes in technology. For example, as a result of the competitive environment in the subscription television industry, New EchoStar may have to incur increased subscriber acquisition costs.

      New EchoStar expects the global subscription television industry to continue to grow due to the high demand for communications infrastructure and the opportunities created by industry deregulation. Many of New EchoStar’s competitors are committing substantial capital and, in many instances, are forming alliances to acquire and maintain market leadership. New EchoStar’s strategy will be to be a leader in providing entertainment, information and communications products and services by building on its experience in satellite technology and by making acquisitions and establishing, maintaining and restructuring strategic alliances as appropriate. This strategy will require substantial investments of capital over the next several years. In addition, the industry in which New EchoStar will compete is capital intensive requiring significant investment in, among other things, infrastructure, research and marketing. The construction, launch and insurance for new satellites and new satellite systems planned by Hughes, PanAmSat and EchoStar will generate significant capital requirements for New EchoStar. There can be no assurance that additional financing will be available on acceptable terms, or at all, if needed in the future. We cannot assure you that New EchoStar will be able to satisfy its capital requirements in the future, whether through lack of competitive access to capital markets, due to restrictions under agreements relating to the Transactions or otherwise. See “—Risk Factors Relating to New EchoStar After the Transactions— Risks Relating to Liquidity and Financing Activities of New EchoStar— New EchoStar Will Be Subject to Potentially Significant Restrictions with Respect to Issuances of its Equity Securities for a Two-Year Period Following the Hughes/ EchoStar Merger.”

      In addition, New EchoStar’s ability to increase earnings and to make interest and principal payments on its outstanding debt will depend in part upon its ability to continue growing its business by maintaining and increasing its subscriber base, which in turn may require significant additional capital that may not be available to New EchoStar.

      The Actual Amount of Funds Necessary to Implement New EchoStar’s Strategy and Business Plan May Materially Exceed its Current Estimates, Which Could Have a Material Adverse Effect on its Financial Condition and Results of Operations. The actual amount of funds necessary to implement New EchoStar’s

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strategy and business plan may materially exceed the current estimates of Hughes and EchoStar in the event of various factors including, among other things:

  •  unanticipated additional financing requirements to fund capital expenditures and costs and expenses in connection with funding its operations, domestic and international investments and its growth strategy and the repayment of indebtedness;
 
  •  departures from Hughes’ and EchoStar’s respective current business plan;
 
  •  unforeseen delays;
 
  •  cost overruns;
 
  •  unanticipated expenses;
 
  •  regulatory developments; and
 
  •  technological and other risks.

If actual costs do materially exceed Hughes’ and EchoStar’s current estimates for these and other reasons, this could have a material adverse effect on New EchoStar’s financial condition and results of operations.

      New EchoStar’s Indebtedness May Contain Terms That Could Limit the Operational and Financial Flexibility of New EchoStar. New EchoStar will assume certain of the indebtedness of Hughes, PanAmSat and EchoStar and may incur additional indebtedness in the future. The terms of the indebtedness assumed by New EchoStar and incurred by New EchoStar in connection with, or following, the Hughes/ EchoStar merger will contain restrictions and covenants that limit the operational and financial flexibility of New EchoStar. These restrictions and covenants could prevent New EchoStar from taking advantage of strategic opportunities that it could have taken advantage of, or otherwise limit its financing or operational flexibility in a manner that would not otherwise be required, in the absence of those restrictions and covenants and could also limit the ability of New EchoStar to:

  •  incur additional indebtedness;
 
  •  issue preferred stock;
 
  •  sell assets;
 
  •  create, incur or assume liens;
 
  •  merge, consolidate or sell assets;
 
  •  determine not to self-insure certain of its satellites;
 
  •  enter into transactions with affiliates; and
 
  •  pay dividends and make other distributions.

     Risks Relating to Regulatory Matters Affecting New EchoStar

      New EchoStar Will Be Subject to Domestic and Foreign Regulations and May Be Materially Adversely Affected by Such Regulations. New EchoStar will be subject to various regulations, including substantial regulation by the FCC. FCC rules and regulations are subject to change in response to industry developments, new technology and political considerations. In addition, New EchoStar will also be subject to the regulatory authority of the U.S. government and the national communications authorities of the countries in which it operates. These authorities regulate the construction, launch and operation of its satellites and the orbital slots planned for these satellites.

      New EchoStar’s business could be materially adversely affected by the adoption of new laws, policies and regulations. We cannot assure you that it will succeed in obtaining all requisite regulatory approvals for its operations without the imposition of restrictions on, or material adverse consequences to, its businesses. We also cannot assure you that material adverse changes in regulations affecting New EchoStar will not occur in the future.

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      New EchoStar’s Business Will Depend Substantially Upon FCC Licenses That May Not be Renewed or May be Revoked or Modified, Applications That May Not Be Granted and Other Regulatory Approvals That May Not be Obtained. New EchoStar will be subject to the regulatory authority of the U.S. government, primarily the FCC, and the national communications authorities of the countries in which it will operate. If New EchoStar does not obtain all requisite regulatory approvals for the construction, launch and operation of any of its future satellites and for the orbital slots planned for these satellites, or the licenses obtained impose operational restrictions on New EchoStar, its business, financial condition and results of operations could be materially adversely affected. In addition, under certain circumstances, existing licenses are subject to revocation or modification and renewal of licenses that have an expiration date may not be permitted. If existing licenses are not renewed, or are revoked or materially modified, the business, financial condition and results of operations of New EchoStar could be materially adversely affected.

      Moreover, we cannot assure you that New EchoStar will continue to coordinate successfully any or all of its satellites under FCC procedures domestically and under procedures of the International Telecommunication Union internationally. That coordination is required in connection with domestic and international procedures that are intended to avoid interference to or from other satellites. More specifically, the risks of government regulation include:

  •  the relocation of satellites to different orbital locations if the FCC determines that re-location is in the public interest;
 
  •  the rejection by the FCC of the replacement of an existing satellite with a new satellite;
 
  •  regulation by governments, including the U.S. government, of satellite transmissions that have the potential to interfere with government operations, or other satellite or terrestrial commercial operations, which could interfere with New EchoStar’s contractual obligations to customers or other business operations; and
 
  •  revocation of currently unused orbital slots provided to New EchoStar if not utilized prior to certain expiration dates.

      At the effective time of the Hughes/ EchoStar merger, New EchoStar will have pending at the FCC various matters, including matters of the following types:

  •  potential loss of currently allocated frequencies if those frequencies are not used by a certain date or if other obligations with respect to those frequencies are determined by the FCC not to have been met;
 
  •  potential loss of frequencies available pursuant to a “special temporary authority” granted for up to 180 days which the FCC may refuse to grant or renew and that may be subject to restrictive conditions, including special temporary authority for EchoStar II and EchoStar III;
 
  •  third party opposition against some of New EchoStar’s authorizations or pending and future requests to the FCC;
 
  •  relocation of satellites either within or slightly outside the “cluster” of a particular orbital location, or from one orbital location to another, where New EchoStar has various types of authorizations, which requires FCC approval;
 
  •  requests by the states of Alaska and Hawaii that the FCC impose conditions relating to certain aspects of EchoStar’s and DIRECTV’s service, which the FCC has denied for specified conditions but has cautioned that it may impose similar requirements as a result of a pending rulemaking;
 
  •  arguments from the states of Alaska and Hawaii that EchoStar’s and DIRECTV’s service to these states from various orbital locations does not comply with FCC-imposed obligations to serve those states;
 
  •  required approvals from the FCC for the launch and operation of additional satellites at specified orbital locations;

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  •  inadvertent failure to file with the FCC the necessary application to transfer control over certain Earth station authorizations in connection with an acquisition;
 
  •  foreign government objection to use of certain C-band spectrum for certain telemetry, tracking and control operations;
 
  •  lapse of authorizations for use of certain extended C-band spectrum for certain telemetry, tracking and control operations, for which EchoStar has timely applied for an extension of that authorization;
 
  •  an FCC ruling that will allow commercial terrestrial services and hamper future satellite operations in the extended C-band frequencies;
 
  •  proceeding regarding the FCC’s interpretation of the “must carry” requirements; and
 
  •  several other pending requests, applications and petitions on various matters.

      All of New EchoStar’s FCC authorizations are subject to conditions imposed by the FCC in addition to the FCC’s authority to modify, cancel or revoke them. Use of FCC licenses and conditional authorizations are often subject to certain technical and due diligence requirements, including the requirement to construct and launch satellites. EchoStar has not filed, or not timely filed, some of the required reports. The FCC has indicated that it may revoke, terminate, condition or decline to extend or renew such authorizations if EchoStar fails to comply with applicable Communications Act requirements. Failure to comply with such requirements, or comply in a timely manner, could lead to the revocation of authorizations which could have a material adverse effect on the financial condition and results of operation of New EchoStar.

      In addition, many of New EchoStar’s authorizations and pending applications are subject to petitions and oppositions filed by several companies and we cannot be certain that New EchoStar’s authorizations will not be cancelled, revoked or modified or that its applications will not be denied.

      New EchoStar’s projects to construct and launch Ku-band, extended Ku-band and Ka-band satellites are in the early stages of development and are currently being challenged by several companies with interests adverse to New EchoStar’s. We cannot assure you that the FCC will sustain these licenses, or grant the pending applications, or that New EchoStar will be able to successfully capitalize on any resulting business opportunities.

      Because regulatory schemes vary by country, New EchoStar may be subject to regulations in foreign countries of which New EchoStar is not presently aware. If that were to be the case, New EchoStar could be subject to sanctions by a foreign government that could materially adversely affect operations in that country. We cannot assure you that any current regulatory approvals held by New EchoStar are, or will remain, sufficient in the view of foreign regulatory authorities, or that any additional necessary approvals will be granted on a timely basis or at all, in all jurisdictions in which New EchoStar wishes to operate new satellites, or that applicable restrictions in those jurisdictions will not be unduly burdensome. The failure to obtain the authorizations necessary to operate satellites internationally could have a material adverse effect on the business, financial condition and results of operations of New EchoStar.

      New EchoStar, its customers and companies with which it does business may be required to have authority from each country in which it provides services or provides its customers use of its satellites. Because regulations in each country are different, New EchoStar may not be aware if some of its customers and/or companies with which it does business do not hold the requisite licenses and approvals.

      Foreign Ownership Restrictions Could Affect New EchoStar’s Business Plans. The Communications Act and the FCC’s implementing regulations provide that when subsidiaries of a holding company hold certain types of FCC licenses, foreign nationals or their representatives may not own or vote more than 25% of the total equity of the holding company, except upon an FCC public interest determination. There is some ambiguity about the extent to which these restrictions apply to direct broadcast satellite licenses.

      EchoStar believes that a subsidiary of The News Corporation Limited, a South Australia corporation, currently owns about 2.2% of EchoStar’s total outstanding stock, representing less than one percent of EchoStar’s total voting power. In addition, Vivendi Universal’s recent investment in EchoStar Series D

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convertible preferred stock represents about 10.7% of EchoStar’s total outstanding stock and about 2.2% of EchoStar’s total voting power. While EchoStar believes that the current levels of foreign ownership are below any applicable limit, additional foreign ownership in New EchoStar may implicate these limits and require a prior FCC determination that such ownership is in the public interest.

      New EchoStar Will Depend Upon the Cable Act For Access to Others’ Programming. We currently anticipate that New EchoStar will purchase a substantial percentage of its programming from cable-affiliated programmers. Any change in the Cable Act and the FCC’s rules that would permit the cable industry or cable-affiliated programmers to refuse to provide such programming or impose detrimental terms or conditions could materially adversely affect New EchoStar’s ability to acquire programming on a cost-effective basis, or at all. Currently, cable-affiliated programmers generally must offer programming they have developed to all multi-channel video programming distributors on non-discriminatory terms and conditions.

      The Cable Act and the FCC’s rules also prohibit some types of exclusive programming contracts involving cable-affiliated programming. This prohibition on exclusivity will expire in October 2002. The FCC has commenced a proceeding to determine whether to extend the period of exclusivity beyond October 2002. If the FCC allows the exclusivity prohibition to expire, many popular programs may become unavailable to New EchoStar.

      Certain cable providers have denied access to certain cable-affiliated sports programming. The cable providers are asserting that they are not required to provide such programming under the Cable Act. Challenges to this interpretation of the Cable Act have not been successful and New EchoStar may continue to be precluded from obtaining this regional sports programming which could materially adversely affect its ability to compete in regions serviced by these cable providers.

      New EchoStar’s Local Programming Strategy Will Face Uncertainty. The Satellite Home Viewer Improvement Act generally gives satellite companies a statutory copyright license to retransmit local-into-local broadcast channel programming, subject to obtaining the retransmission consent of the local broadcast station. Retransmission consent agreements will be important to New EchoStar because a failure to reach such agreements with broadcasters who elect retransmission consents instead of mandatory “must carry” carriage means it cannot carry these broadcasters’ signals, and the absence of these channels could have an material adverse effect on its strategy to compete with cable, which provides local signals. While DIRECTV and EchoStar have been able to reach retransmission consent agreements with most of the local broadcast stations in areas where they provide local service, any additional roll-out of local channels in more cities will require additional agreements, especially in light of the current plan for New EchoStar to provide local television stations to all 210 designated market areas in the United States. We cannot be certain that New EchoStar will secure these agreements or new agreements upon the expiration of the current retransmission consent agreements, some of which are short term.

      “Must Carry” Requirements May Negatively Affect New EchoStar’s Ability to Offer Local Broadcast Stations. Many other provisions of the Satellite Home Viewer Improvement Act could materially adversely affect the business of New EchoStar. Among other things, the law includes the imposition of “must carry” requirements on direct broadcast satellite service providers. The FCC has implemented the “must carry” requirement and adopted detailed “must carry” rules covering both commercial and non-commercial broadcast stations. These “must carry” rules generally require that, commencing in January 2002, satellite distributors carry all the local broadcast stations requesting carriage in a timely and appropriate manner in areas where they choose to offer any local programming. EchoStar and Hughes have announced that, contingent upon the launch of additional planned satellites, New EchoStar will carry local broadcast stations, and fully comply with “must carry” obligations, in every local television market in the United States. In the near term, following completion of the Hughes/EchoStar merger, however, New EchoStar will have limited capacity, and the projected number of markets in which it can offer local programming will continue to be constrained because of the “must-carry” requirement and may be reduced depending on the FCC’s interpretation of its rules in a pending proceeding. The legislation also includes provisions which could expose New EchoStar to federal copyright infringement lawsuits, material monetary penalties, and permanent prohibitions on the sale of all local and distant network channels, based on inadvertent violations of the

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legislation, prior law, or the FCC rules. Imposition of these penalties would have a material adverse effect on New EchoStar’s business operations generally.

      While Hughes’ and EchoStar’s proposal to provide local broadcast channels in all 210 designated market areas will improve New EchoStar’s ability to comply with “must carry” requirements, New EchoStar’s application for authority to launch and operate the spot-beam direct broadcast satellite may not be granted by the FCC. Additionally, because the proposed satellite employs advanced spot-beam technology, the likelihood of performance reductions may be heightened. There can be no assurance that the technology and equipment will operate to anticipated performance levels. Such failures and reductions in performance levels could materially adversely affect New EchoStar’s ability to meet its “must carry” requirements.

      Several “must carry” complaints by broadcasters against DIRECTV and EchoStar have been filed at the FCC. We cannot be sure that the FCC will not rule against New EchoStar in those proceedings, resulting in carriage of many additional stations in the markets where it will offer local stations. In addition, we cannot be sure that the FCC will not interpret or implement its rules in such a manner as to inhibit New EchoStar’s current near-term plan for compliance with the “must carry” requirements. In fact, the National Association of Broadcasters and Association of Local Television Stations filed an emergency petition January 4, 2002 asking the FCC to modify or clarify its rules to prohibit or hamper EchoStar’s compliance plan. On January 8, 2002, the FCC placed the petition on public notice and stated that it may be able to resolve the issue by means of a declaratory ruling without the need for further rulemaking. Any such FCC action could result in a decrease in the number of local areas where New EchoStar will offer local network programming until new satellites are launched. New EchoStar will also be exposed to court actions and damage claims if EchoStar is found by any court to have violated the “must carry” requirements.

      In addition, while the FCC has decided for now not to impose dual digital/analog carriage obligations (i.e., additional requirements in connection with the carriage of digital television stations that go beyond carriage of one signal, whether analog or digital, for each station), the FCC has also issued a further notice of proposed rulemaking on this matter. We cannot be sure that this rulemaking will not result in further signal carriage requirements.

      New EchoStar’s Retransmission of Distant Signals Will Be Subject to Considerable Litigation Risk. The Copyright Act, as amended by the Satellite Home Viewer Improvement Act, permits satellite retransmission of distant network channels only to “unserved households.” Interpretation and implementation of the Satellite Home Viewer Improvement Act by the FCC could hamper New EchoStar’s ability to retransmit distant network and superstation signals, reduce the number of New EchoStar existing or future customers that can qualify for receipt of these signals and impose testing costs on New EchoStar in connection with the qualification process. In implementing the Satellite Home Viewer Improvement Act’s directive, the FCC has required satellite carriers to delete certain programming, including sports programming from certain stations. These requirements have significantly hampered EchoStar’s ability, and may further hamper New EchoStar’s ability, to retransmit distant network and superstation signals, and the burdens from the rules upon EchoStar and New EchoStar may become so onerous that EchoStar and/or New EchoStar may be required to substantially alter, or stop retransmitting, many or all superstation signals. In addition, the FCC’s sports blackout requirements, which apply to all distant network signals, may require costly upgrades to New EchoStar’s system.

      Television Networks Oppose New EchoStar’s Anticipated Strategy of Delivering Distant Network Signals. Until July 1998, EchoStar obtained distant network channels (ABC, NBC, CBS and FOX) for distribution to its customers through PrimeTime 24. In December 1998, the U.S. District Court for the Southern District of Florida entered a nationwide permanent injunction requiring PrimeTime 24 to shut off distant network channels to many of its customers, and to sell those channels to consumers in accordance with certain stipulations in the injunction.

      In December 1998, the networks filed a motion for preliminary injunction directly against EchoStar. In September 2000, the District Court granted this motion and made several amendments to it. The injunction required EchoStar to terminate distant network programming to certain of its subscribers. The U.S. Court of Appeals for the Eleventh Circuit stayed the injunction pending EchoStar’s appeal. In September 2001, the

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U.S. Court of Appeals for the Eleventh Circuit vacated the District Court’s injunction, finding, among other things, that it was too broad and remanded the case back to the District Court for an evidentiary hearing. If after the trial or an evidentiary hearing the injunction is reinstated, it could force EchoStar to terminate delivery of distant network channels to a substantial portion of its distant network subscriber base, which could also cause many of these subscribers to cancel their subscription to EchoStar’s other services. EchoStar’s management has determined that such termination would result in a small reduction in EchoStar’s reported average monthly revenue per subscriber and could result in a temporary increase in churn. If EchoStar loses the case at trial, the judge could, among other remedies, prohibit all future sales of distant network programming by EchoStar, which would have a material adverse effect on New EchoStar’s business. In order, among other things, to plan for the potential re-implementation of the injunction, EchoStar may terminate the delivery of distant network channels to certain subscribers.

      The Regulatory Regime Under Which New EchoStar Will Operate Could Change Materially Adversely. The FCC imposes different rules for “subscription” and “broadcast” services. We believe that because New EchoStar will offer a subscription programming service, it will not be subject to many of the regulatory obligations imposed upon broadcast licensees. However, we cannot be certain whether the FCC will find in the future that it should comply with regulatory obligations as a broadcast licensee with respect to its operations, and certain parties have requested that direct broadcast satellite service providers be treated as “broadcasters.” If the FCC determines that New EchoStar is a broadcast licensee, the FCC may require it to comply with all regulatory obligations imposed upon broadcast licensees, which are generally subject to more burdensome regulation than subscription service providers.

      Under a requirement of the Cable Act, the FCC imposed public interest requirements on direct broadcast satellite licensees, such as EchoStar and DIRECTV, to set aside four percent of channel capacity exclusively for noncommercial programming for which EchoStar and DIRECTV must charge programmers below-cost rates and for which EchoStar and DIRECTV may not impose additional charges on subscribers. This could displace programming for which New EchoStar could earn commercial rates and could materially adversely affect its financial results. The FCC has not reviewed EchoStar’s methodology for computing the channel capacity it must set aside or for determining the rates that it charges public interest programmers, and we cannot be sure that, if the FCC were to review these methodologies, it would find them in compliance with the public interest requirements.

      The FCC has also commenced an inquiry into distribution of high-speed Internet access services and a rulemaking concerning interactive television services. In these proceedings, the FCC is considering whether to impose on distributors, including possibly satellite distributors like New EchoStar, various types of “open access” obligations, such as required carriage of independent content providers. New EchoStar cannot be sure that the FCC will not ultimately impose such obligations, which could be onerous, and could materially adversely impact its available capacity and ability to provide other services.

      The FCC has commenced a rulemaking which seeks to streamline and revise its rules governing direct broadcast satellite service operators. This rulemaking involves many proposed direct broadcast satellite service rules. There can be no assurance about the content and effect of any new direct broadcast satellite service rules passed by the FCC, and the rules may include expanded geographic service requirements for Alaska, Hawaii and Puerto Rico. The FCC has also released a notice of proposed rulemaking regarding the current restrictions on the flexibility of direct broadcast satellite service operators to provide services other than direct broadcast satellite service, and may change these restrictions.

      The FCC has adopted a proposal to allow non-geostationary orbit fixed satellite services to operate on a co-primary basis in the same frequency as direct broadcast satellite and Ku-band-based FSS services, and is currently finalizing rules to govern these services. These satellite operations could provide global high-speed data services. In the same rulemaking, the FCC has been considering a terrestrial service, Northpoint Technology, Inc., that would retransmit local television or other video and data services to direct broadcast satellite service subscribers or others in the same direct broadcast satellite service spectrum that New EchoStar will use throughout the United States.

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      EchoStar has submitted numerous pleadings jointly with DIRECTV to the FCC objecting to the Northpoint request, which may cause harmful and substantial interference to the service provided to direct broadcast satellite service customers. Furthermore, other entities have now filed applications similar to the one filed by Northpoint, and at least one other entity has also obtained a license from the FCC to conduct experimental operations. If Northpoint or other entities become authorized to use New EchoStar’s spectrum, they could cause harmful and substantial interference with its service.

      On December 8, 2000, the FCC released a Report and Order and Further Notice of Proposed Rulemaking in this proceeding that concluded that a terrestrial “point-to-multipoint” service can share the spectrum with direct broadcast satellite service on a no interference basis, a conclusion that may have a material adverse impact on New EchoStar’s operations. At the same time, the FCC initiated a further notice of proposed rulemaking to determine the appropriate interference standards and technical rules with which such a terrestrial service must comply. The FCC also requested proposals on how to process applications for licenses for the new service, and tentatively proposed excluding satellite companies from such licenses. EchoStar has filed a petition for reconsideration of the FCC’s conclusion and comments on its proposals.

      In addition, recent appropriations legislation required independent testing of the Northpoint technology, and created a rural loan guarantee program for providers of certain types of services. The tests mandated by that law have been completed. MITRE, the independent testing entity, concluded that the new terrestrial service “poses a significant interference threat to [direct broadcast satellite service] operation in many realistic operational situations”; “a wide variety of mitigation techniques exist that . . . can greatly reduce, or eliminate, the geographical extent of the regions of potential . . . interference into [direct broadcast satellite service]”; and that “bandsharing appears feasible if and only if suitable mitigation measures are applied.” The independent study left open the question of whether the potential costs of such mitigation measures together with the impact of residual interference outweighed the benefit of allowing the new terrestrial service in the band used by direct broadcast satellite service. DIRECTV and EchoStar have asserted to the FCC that MITRE’s findings constitute additional grounds for reconsidering the FCC’s conclusion on sharing, while Northpoint has argued that MITRE confirms Northpoint’s ability to share with direct broadcast satellite service. We cannot be sure whether and when these processes will result in the licensing of Northpoint and/or companies proposing a similar service to operate in the spectrum licensed to New EchoStar, what the interference standards will be, and how significant the interference into New EchoStar’s operations will be. On December 3, 2001, DIRECTV and EchoStar filed with the FCC a request that it assign spectrum to these new proposed terrestrial systems other than that currently allocated for use by direct broadcast satellite service. We cannot be sure whether the FCC will take any action on this request, or whether the request will be granted.

      On February 28, 2002, the FCC initiated a proceeding to examine and revise its licensing process for orbital locations or spectrum used for the provision of international or global satellite communications services. The extent to which any changes in the satellite licensing process could affect New EchoStar is unclear.

     Risks Relating to the Capital Stock of New EchoStar

      One Principal Stockholder is Expected to Have Significant Influence Over Actions Requiring Stockholder Approval as a Result of Its Significant Voting Power in New EchoStar. We expect that all of the outstanding shares of New EchoStar Class B common stock will be held initially by a trust controlled by Charles W. Ergen, who will also be the Chairman of the Board of Directors and Chief Executive Officer of New EchoStar. Based on assumptions about certain variable factors described elsewhere in the document, we expect that Mr. Ergen would hold about           % of the outstanding common stock of New EchoStar, which would represent about           % of the total voting power of New EchoStar. As a result, Mr. Ergen will have significant influence over actions of New EchoStar that require stockholder approval.

      In addition, if and to the extent permitted by the IRS, extraordinary matters for which a stockholder vote is required under state law (such as mergers, charter amendments, including changes in the rights of the shares of New EchoStar Class B common stock and any increase in the authorized number of shares of New EchoStar Class B common stock or New EchoStar Class C common stock, and dissolution) or under the rules of the NYSE or the Nasdaq, as applicable, any sale or acquisition of a significant business of New EchoStar,

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any amendment by stockholders to the bylaws of New EchoStar, certain issuances of New EchoStar common stock (or equivalents) and the adoption of certain equity-based benefit plans will require a separate class vote of the holders of New EchoStar Class B common stock for approval. As a result, Mr. Ergen will have the right to veto these matters, which may be favored by a majority of stockholders. The interests of Mr. Ergen may not always coincide with the interests of other stockholders, and these veto rights will effectively grant Mr. Ergen a greater degree of control over New EchoStar than might otherwise be the case.

      For more information about the voting rights of the three classes of New EchoStar common stock, see “New EchoStar Capital Stock—Common Stock—Voting Rights.”

      New EchoStar Does Not Expect to Pay Dividends on its Common Stock in the Foreseeable Future. The New EchoStar board of directors will determine whether to pay dividends on the New EchoStar Class A common stock, New EchoStar Class B common stock and New EchoStar Class C common stock primarily based upon its financial condition, results of operations and business requirements. We do not currently anticipate that New EchoStar will pay dividends on the New EchoStar Class A common stock, New EchoStar Class B common stock or New EchoStar Class C common stock for the foreseeable future.

      You May Receive Shares of New EchoStar Common Stock Having a Market Value Different Than Expected. After the completion of the Transactions, GM Class H common stockholders will hold one share of New EchoStar Class C common stock for each share of GM Class H common stock that they previously held, EchoStar Class A common stockholders will receive 1/0.73, or about 1.3699, shares of New EchoStar Class A common stock in exchange for each share of EchoStar Class A common stock that they previously held and EchoStar Class B common stockholders will receive 1/0.73, or about 1.3699, shares of New EchoStar Class B common stock in exchange for each share of EchoStar Class B common stock that they previously held.

      Under the terms of the Transactions, the number of shares of New EchoStar common stock to be received by each of the GM Class H common stockholders and EchoStar common stockholders for each share of GM Class H common stock or EchoStar common stock, as applicable, will not change even if there are significant changes in the market prices of GM Class H common stock or EchoStar Class A common stock prior to the completion of the Transactions. However, any change in the price of GM Class H common stock or EchoStar Class A common stock will directly affect the relative value that GM Class H common stockholders and EchoStar common stockholders will receive in the Transactions. Stock price changes may result from a variety of factors that are either within or beyond the control of GM, Hughes and EchoStar, including changes in their respective businesses, operations and prospects, regulatory considerations and general market and economic conditions.

      It Is Not Possible to Predict the Relative Trading Prices of the Different Classes of New EchoStar Common Stock. We are not able to predict the relative trading prices of New EchoStar Class A common stock and New EchoStar Class C common stock. Although the New EchoStar Class A common stock and New EchoStar Class C common stock will have substantially identical rights except with respect to voting, the two classes are expected generally to trade at different prices and such differences in trading prices could be material. Many factors may affect the differences in the trading prices of the New EchoStar Class A common stock and New EchoStar Class C common stock, including, among other things, the differences in voting power between the two classes.

      The Trading Prices of New EchoStar Class A Common Stock and New EchoStar Class C Common Stock May be Volatile. The prices at which New EchoStar Class A common stock and New EchoStar Class C common stock trade may be volatile and may fluctuate substantially due to, among other things:

  •  competition and changes in the subscription television industry;
 
  •  regulatory changes;
 
  •  launch and satellite failures;
 
  •  operating results below expectations;
 
  •  New EchoStar’s strategic investments and acquisitions; and

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  •  other factors.

In addition, price and volume fluctuations in the stock market may affect market prices for New EchoStar Class A common stock and New EchoStar Class C common stock for reasons unrelated to New EchoStar’s operating performance.

      Future Re-Sales of New EchoStar Common Stock Could Materially Adversely Affect the Market Price of New EchoStar’s Common Stock and its Ability to Raise Capital in the Future. New EchoStar will have several significant stockholders, including Charles W. Ergen, General Motors (as applicable), certain GM employee benefit plans and Vivendi Universal. Sales of substantial amounts of any class of New EchoStar common stock, including any sale, exchange or monetization by GM of any shares of New EchoStar Class C common stock it may hold after the GM/ Hughes separation transactions or any resale of New EchoStar common stock by any other significant stockholder of New EchoStar, could materially adversely affect the market price of New EchoStar Class A common stock and New EchoStar Class C common stock. Such sales could also materially adversely affect New EchoStar’s ability to raise capital in the future. While the shares issued in the Transactions are generally freely tradable without restriction under the Securities Act of 1933 by persons other than “affiliates,” as defined under the Securities Act, of the parties, certain of New EchoStar’s significant stockholders, including certain “affiliates,” will have the right to require New EchoStar to register their shares under the Securities Act of 1933 and facilitate the sale of those shares to the public. See “Shares Eligible For Future Sale.” Any sales of substantial amounts of New EchoStar Class A common stock or New EchoStar Class C common stock in the public market, or the perception that those sales might occur, could materially adversely affect the market price of New EchoStar Class A common stock and New EchoStar Class C common stock.

      The Conversion of the New EchoStar Class B Common Stock in the Future May Materially Adversely Affect the Market Prices of the New EchoStar Common Stock. Shares of New EchoStar Class B common stock may be converted by the holders of such stock at any time into shares of New EchoStar Class A common stock or New EchoStar Class C common stock on a one-for-one basis. The conversion of the New EchoStar Class B common stock could affect the trading prices of either or both of the New EchoStar Class A common stock and New EchoStar Class C common stock. We cannot predict the impact on the market prices of the New EchoStar Class A common stock or New EchoStar Class C common stock if such a conversion into either class were to occur.

     Other Significant Risks

      New EchoStar Will Have Significant Equity Investments That May Not Be Profitable. Both Hughes and EchoStar have significant equity investments and may make additional strategic investments in debt and equity securities of unrelated third parties that may be non-marketable, difficult to liquidate or that can only be liquidated at a significant discount to current trading values. At December 31, 2001, the combined book value of such investments was about $689 million. Unless liquidated prior to the completion of the Hughes/ EchoStar merger, these investments and any additional investments that may be made by Hughes or EchoStar prior to the completion of the Hughes/ EchoStar merger will become assets of New EchoStar. Because the companies in which Hughes and EchoStar have invested generally have limited access to the capital markets and other funding sources, there is greater risk that such companies will be unable to raise sufficient funds to fully execute their business plans, and there is also an increased risk that New EchoStar will not realize or recover the full value of its investments in these businesses. In addition, New EchoStar, and prior to the Hughes/EchoStar merger, Hughes and EchoStar, may have to write down these investments in their respective financial statements, which could have a material adverse effect on their respective financial condition and results of operations.

      New EchoStar’s Business Will Rely on Intellectual Property, Some of Which Is Owned By Third Parties, and New EchoStar May Inadvertently Infringe Their Patents and Proprietary Rights. Many entities, including some of New EchoStar’s competitors, have or may in the future obtain patents and other intellectual property rights that cover or affect products or services related to those that New EchoStar will offer. In general, if a court determines that one or more of New EchoStar’s products infringes on intellectual property

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held by others, New EchoStar may be required to cease developing or marketing those products, to obtain licenses from the holders of the intellectual property, or to redesign those products in such a way as to avoid infringing the patent claims. If a competitor holds intellectual property rights, it may not allow New EchoStar to use its intellectual property at any price, thus hurting New EchoStar’s competitive position.

      We cannot assure you that New EchoStar will be aware of all intellectual property rights that its products may potentially infringe. In addition, patent applications in the United States are confidential until the Patent and Trademark Office issues a patent and, accordingly, we cannot evaluate the extent to which New EchoStar’s products may infringe claims contained in pending patent applications. Further, it is often not possible to determine definitively whether a claim of infringement is valid, absent protracted litigation.

      We cannot estimate the extent to which New EchoStar may be required in the future to obtain intellectual property licenses or the availability and cost of any such licenses. Those costs, and their impact on net income, could be material. Damages in patent infringement cases may also include treble damages in certain circumstances. To the extent that it is required to pay royalties to third parties to whom New EchoStar is not then making payments, these increased costs of doing business could negatively affect its liquidity and operating results. Each of DIRECTV and EchoStar is currently being sued in patent infringement actions related to use of technologies in their direct broadcast satellite businesses. We cannot assure you that the courts will conclude that New EchoStar’s products do not infringe on the rights of third parties, that New EchoStar would be able to obtain licenses from these persons on commercially reasonable terms or, if it were unable to obtain such licenses, that it would be able to redesign its products to avoid infringement. Certain of some of these actions involve claims for damages in excess of $100 million and claims for injunctive relief.

      The September 11, 2001 Attacks Have Harmed the U.S. Economy and May Amplify Other Risks To Be Faced By New EchoStar. On September 11, 2001, terrorists attacked the World Trade Center in New York City and the Pentagon outside Washington, D.C. In addition to the tragic loss of life and suffering occasioned by these attacks, there has been a disruption of commercial and leisure activities across the United States. The terrorist attacks and subsequent uncertainty surrounding the continuing conflict have negatively affected, and are expected to continue to negatively affect, the U.S. economy generally. These and other developments arising out of the attacks may make the occurrence of one or more of the “Risk Factors” discussed in this document more likely to occur.

      The Potential Purchase Price Adjustment Related to the Sale of Hughes’ Satellite Manufacturing Operations to Boeing Could Result in a Material Payment by New EchoStar. In connection with the sale by Hughes of its satellite businesses to Boeing, the terms of the stock purchase agreement provide for a potential adjustment to the purchase price based upon the final closing date financial statements of the satellite systems manufacturing businesses. The stock purchase agreement also provides for an arbitration process to resolve any disputes that arise in determining the purchase price adjustment. Based upon the final closing date financial statements of the satellite systems manufacturing businesses that were prepared by Hughes, Hughes has acknowledged that it owes to Boeing about $164 million plus interest as a result of the adjustment mechanism. However, Boeing has submitted additional proposed adjustments, of which about $750 million remain unresolved, that Hughes is contesting. Hughes and Boeing are pursuing the arbitration process, which will result in a binding decision unless the matter is otherwise settled. Although Hughes believes it has adequately provided for the disposition of this matter, the impact of its disposition cannot be determined at this time. It is possible that the final resolution of this matter could result in Hughes making a cash payment to Boeing that would be material to New EchoStar’s financial position and results of operations.

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THE TRANSACTIONS

      The following section highlights certain important matters that you should review and consider carefully in connection with your review and consideration of the Transactions. This section includes for all stockholders a description of the Transactions, including:

  •  the GM/Hughes separation transactions;
 
  •  the Hughes/EchoStar merger;
 
  •  the PanAmSat stock sale;
 
  •  the GM debt-for-equity exchanges; and
 
  •  certain related transactions.

      In addition, because the Transactions involve significant changes to GM’s capital structure, including the elimination of GM Class H common stock, we describe in this section certain matters, including the following, that may be of principal importance to GM common stockholders:

  •  GM’s reasons for the Transactions;
 
  •  alternative transactions involving Hughes which have been considered by GM and Hughes in connection with developing the proposed Transactions;
 
  •  background information relating to the development by GM and Hughes of the proposed Transactions; and
 
  •  certain other important matters, including the recommendation of the GM board of directors and the effects of the Transactions.

The discussion of these matters is generally set forth at “—GM Background and Considerations” below.

      Certain information which may be of principal importance to EchoStar common stockholders, including, among other things, information regarding EchoStar’s reasons for the Hughes/ EchoStar merger, background information relating to EchoStar’s consideration of the Hughes/ EchoStar merger and the recommendation of the EchoStar board of directors with respect to the Hughes/ EchoStar merger, is set forth below at “—EchoStar Background and Considerations.”

      Finally, this section addresses certain other important matters relating to the Transactions, such as regulatory requirements relating to the Transactions, the lack of appraisal rights in connection with the Transactions, stockholder litigation relating to the Transactions, accounting treatment of the Transactions and U.S. federal income tax considerations relating to the Transactions.

Description of the Transactions

  Introduction

      The proposed Transactions described in this document principally consist of:

  •  the GM/ Hughes separation transactions, which will separate the Hughes business from GM by means of a split-off of Hughes Holdings; and
 
  •  the Hughes/ EchoStar merger, which will combine the businesses of Hughes and EchoStar by merging Hughes Holdings and EchoStar to create New EchoStar.

      Certain aspects of the GM/Hughes separation transactions require the approval of GM common stockholders. Neither the approval of GM common stockholders nor any further approval of the EchoStar common stockholders is legally required for the Hughes/ EchoStar merger. However, even though such approval is not legally required, GM is submitting all aspects of the Transactions, including the Hughes/EchoStar merger, to GM common stockholders for their approval. Thus, by voting to approve the proposals being submitted to GM common stockholders pursuant to this consent solicitation, GM common

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stockholders will be ratifying all aspects of the Transactions, including, among other things, the Hughes/EchoStar merger. General Motors, as the sole stockholder of Hughes and Hughes Holdings, has approved the Hughes/ EchoStar merger for Hughes and Hughes Holdings. In addition, a trust controlled by Charles W. Ergen, the Chairman of the Board of Directors and Chief Executive Officer of EchoStar, as the holder of all of the outstanding shares of EchoStar Class B common stock, which represents about 90% of the voting power of EchoStar, has approved the Hughes/ EchoStar merger for EchoStar. In addition, the respective boards of directors of GM, Hughes, Hughes Holdings and EchoStar have unanimously approved the Hughes/ EchoStar merger.

      In addition, the completion of the Hughes/ EchoStar merger is conditioned upon the completion of the GM/ Hughes separation transactions. Accordingly, if GM’s common stockholders do not approve the proposals relating to the Transactions, neither the Hughes/ EchoStar merger nor the GM/ Hughes separation transactions will occur. The GM board of directors has unanimously approved the Transactions and recommends that the GM common stockholders vote to approve the Transactions.

      The Transactions also include other related transactions. To achieve additional liquidity through the benefit of debt reduction in connection with the Transactions, GM has the right to issue new shares of GM Class H common stock, or distribute any shares of New EchoStar Class C common stock that it may hold after the Hughes/ EchoStar merger, as the case may be, by exchanging such shares for the satisfaction of GM’s outstanding liabilities to certain of GM’s creditors, in one or more GM debt-for-equity exchange transactions. In addition, you should understand that GM, Hughes and EchoStar have also agreed that, subject to certain conditions, in the event that the Hughes/ EchoStar merger does not occur because certain specified conditions have not been satisfied, EchoStar would be required to purchase the approximately 81% interest in PanAmSat held by Hughes’ subsidiaries. These transactions, as well as the GM/Hughes separation transactions and the Hughes/EchoStar merger, are described in greater detail below.

      In order to help you better understand the proposed Transactions and how they will impact General Motors, Hughes and EchoStar, see the charts set forth at “Summary— Structure of the Transactions.”

      We are working diligently to complete the GM/ Hughes separation transactions and the Hughes/ EchoStar merger as soon as reasonably possible. However, we will not complete the Transactions unless certain conditions described below are satisfied or waived. Assuming that these conditions are satisfied within the time frame we currently anticipate, we expect to complete the GM/ Hughes separation transactions and the Hughes/ EchoStar merger during the second half of 2002.

      The conditions to the companies’ obligations to complete the Transactions, which must be satisfied (or waived) before the Transactions can be completed include, among others:

  •  the receipt of the requisite GM common stockholder approval of the proposals relating to the Transactions;
 
  •  the expiration or termination of the waiting periods applicable to the Hughes/EchoStar merger under the Hart-Scott-Rodino Act and any similar law of foreign jurisdictions;
 
  •  the absence of any effective injunction or order which prevents the completion of the Transactions;
 
  •  the receipt of FCC approval for the transfer of licenses and other authorizations in connection with the Hughes/ EchoStar merger and the Hughes split-off;
 
  •  the receipt of all other approvals of, or the making of all other filings with, governmental authorities required to complete the Transactions, other than approvals and filings, the absence of which, in the aggregate, are not reasonably likely to have a material adverse effect on New EchoStar;
 
  •  the receipt by GM of a ruling by the IRS to the effect that the Hughes split-off will be tax-free to GM and its stockholders for U.S. federal income tax purposes;
 
  •  the availability of financing for the Hughes/ EchoStar merger;

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  •  the approval for listing on either the NYSE or the Nasdaq of the New EchoStar Class A common stock and New EchoStar Class C common stock that will be outstanding following the completion of the Transactions; and
 
  •  the ability of New EchoStar to issue a minimum amount of equity immediately following the Hughes/EchoStar merger without violating certain agreements with General Motors that are designed to preserve the tax-free status of the Hughes split-off to GM. We sometimes refer to this condition as the “minimum equity headroom condition.”

For more information about these conditions, see “—Description of Principal Transaction Agreements— GM/Hughes Separation Agreement— Hughes Recapitalization Closing Conditions” and “—Hughes/ EchoStar Merger Agreement— Conditions.”

     Background Regarding GM’s Retained Economic Interest in Hughes

      Certain aspects of the GM/ Hughes separation transactions will involve a restructuring of GM’s current retained economic interest in Hughes so that GM may realize some of the value arising from its ownership of Hughes. In order to understand and evaluate these aspects of the Transactions, it is important for you to understand GM’s current dual-class common stock capital structure and the methodology for allocating the earnings of Hughes for earnings per share and for dividend purposes under the terms of GM’s restated certificate of incorporation. These are described briefly below.

      Currently, GM has two classes of common stock:

  •  GM $1 2/3 par value common stock; and
 
  •  GM Class H common stock.

      GM Class H common stock is a “tracking stock” of GM designed to provide holders with financial returns based on the financial performance of Hughes. The earnings per share and the amounts available for the payment of dividends on the GM Class H common stock are determined by a fraction set forth in GM’s restated certificate of incorporation which reflects the portion of Hughes’ earnings that is allocated to the amount available for dividends on the GM Class H common stock. We sometimes refer to this fraction as the “GM Class H fraction.” The numerator and denominator of the GM Class H fraction are determined as follows:

  •  The numerator of the GM Class H fraction is the weighted average number of shares of GM Class H common stock that is outstanding during the applicable period.
 
  •  The denominator of the GM Class H fraction is the number of notional shares of GM Class H common stock which, if outstanding, would result in 100% of the earnings of Hughes being allocated to the GM Class H common stock. We sometimes refer to the denominator of the GM Class H fraction as the “GM Class H dividend base.”

The remaining portion of Hughes’ earnings is allocated to earnings per share and the amount available for dividends on the other class of GM common stock, the GM $1 2/3 par value common stock. We sometimes refer to the percentage representing this remaining portion of Hughes’ earnings as representing GM’s “retained economic interest” in Hughes. GM’s retained economic interest in Hughes can also be described by reference to the difference between the numerator and the denominator of the GM Class H fraction, which can be thought of in terms of a number of “notional shares” representing GM’s retained economic interest in Hughes.

      By operation of the provisions of GM’s restated certificate of incorporation, GM’s retained economic interest in Hughes may be reduced or increased by adjusting the numerator or the denominator of the GM Class H fraction. The provisions of the GM restated certificate of incorporation establish the circumstances under which the GM Class H fraction currently may be adjusted by the GM board of directors. For more information about GM’s current dual-class common stock capital structure, the GM Class H common stock and the relevant provisions of the GM restated certificate of incorporation, see “GM Capital Stock— GM’s

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Dual-Class Common Stock Capital Structure— Dividends.” In addition, in order to accomplish the Hughes recapitalization, GM is proposing an amendment to the GM restated certificate of incorporation as described below at “— Amendments to the GM Restated Certificate of Incorporation.”

   Liquidity and Value to be Provided to GM

      The Transactions are designed to, among other things, provide significant liquidity and value to General Motors, which will help to support the credit position of GM after the Transactions. This anticipated liquidity and value will result from the following sources:

  •  GM’s receipt of the Hughes dividend distribution to GM of up to $4.2 billion;
 
  •  as and to the extent applicable, GM’s benefit from debt reduction resulting from debt-for equity exchanges for up to 100 million shares of GM Class H common stock and/or New EchoStar Class C common stock, as applicable; and
 
  •  as and to the extent applicable, GM’s retention of any shares of New EchoStar Class C common stock following the completion of any GM debt-for-equity exchanges.

You should understand that the aggregate amount of liquidity and value to be provided to GM in connection with the Transactions will depend upon the value of GM’s retained economic interest in Hughes before the Hughes split-off or GM’s ownership interest in New EchoStar after the Hughes/EchoStar merger, as applicable, and the circumstances under which GM achieves liquidity with regard to that interest, as explained further below. For example, GM would have the ability to engage in GM debt-for-equity exchanges and/or hold a continuing ownership interest in New EchoStar after the Hughes/EchoStar merger only if and to the extent that the value of GM’s retained economic interest in Hughes at the time of the Hughes recapitalization were to exceed the amount of the Hughes dividend distribution. The value of GM’s retained economic interest at that time for this purpose will depend upon the average market price of GM Class H common stock during a specified period preceding that time.

      Between now and the time of the completion of the Hughes split-off, GM has the ability to achieve liquidity and value in connection with GM debt-for-equity exchanges by issuing up to 100 million shares of GM Class H common stock to certain of GM’s creditors in satisfaction of outstanding liabilities. These transactions would reduce the number of notional shares representing GM’s retained economic interest in Hughes by the number of shares of GM Class H common stock that GM issues in connection with any such GM debt-for-equity exchanges. Thus, to the extent that GM benefits from debt reduction through GM debt-for-equity exchanges before the Hughes split-off, less value would be realized by GM pursuant to the Hughes split-off or GM debt-for-equity exchanges thereafter. The amount of liquidity and value that GM would receive in connection with any such GM debt-for-equity exchanges would likely depend upon, among other things, the trading prices of shares of GM Class H common stock at the time of the completion of any such transactions.

      GM will also receive liquidity and value in connection with the completion of the Hughes split-off. The amount of liquidity and value to be provided to GM at the time of the completion of the Hughes split-off will depend upon the value of GM’s retained economic interest at that time. This value will be determined based on the number of notional shares representing GM’s retained economic interest in Hughes multiplied by the average market prices of GM Class H common stock during a specified period (which is expected to consist of five trading days) preceding the completion of the Hughes split-off, which we sometimes refer to as the “Hughes recapitalization price.”

      At the time of the completion of the Hughes split-off, GM will receive a dividend from Hughes in an amount up to $4.2 billion (but in no event greater than the value of GM’s retained economic interest in Hughes at that time, based on the Hughes recapitalization price). The amount of the Hughes dividend distribution is subject to certain mandatory reductions (but in no event to less than $3.5 billion) under certain circumstances if and to the extent required in order to satisfy the minimum equity headroom condition. GM may also voluntarily reduce the amount of the dividend in order to satisfy this condition so that the Hughes split-off and the Hughes/ EchoStar merger can be completed.

      The Hughes recapitalization price and the amount of the dividend actually paid by Hughes to GM pursuant to the Hughes recapitalization will determine the amount by which GM’s retained economic interest

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in Hughes will be reduced in connection with the completion of the Hughes split-off. In connection with the Hughes dividend distribution, the number of notional shares representing GM’s retained economic interest in Hughes will be reduced by an amount equal to the amount of the Hughes dividend divided by the Hughes recapitalization price.

      If and to the extent that GM continues to have any retained economic interest in Hughes following the payment of this dividend, GM would hold a commensurate number of shares of Hughes Holdings Class C common stock after the Hughes split-off. Up to 100 million of such shares (reduced by the number of shares of GM Class H common stock issued pursuant to any GM debt-for-equity exchanges completed before the completion of the Transactions) may be subject to additional GM debt-for-equity exchanges after the Hughes split-off and, if and to the extent permitted by the IRS, GM would retain any remaining portion of such shares not used in the GM debt-for-equity exchange, which would provide GM with a continued ownership interest in New EchoStar. The aggregate number of shares that would be eligible for GM debt-for-equity exchanges is subject to certain mandatory reductions (but in no event to less than 60 million shares) under certain circumstances if and to the extent required in order to satisfy the minimum equity headroom condition such that the Hughes split-off and the Hughes/ EchoStar merger can be completed. GM is not required to complete any GM debt-for-equity exchanges and may also voluntarily reduce this aggregate number of shares in order to satisfy this condition.

      Mandatory reductions of the aggregate number of shares subject to GM debt-for-equity exchanges after the Hughes/ EchoStar merger would offset, to the specified extent, the amount of any required reduction of the amount of the Hughes dividend distribution. However, under no circumstances would GM be required to both reduce the number of shares subject to GM debt-for-equity exchanges to 60 million and reduce the amount of the Hughes dividend distribution to $3.5 billion in order to satisfy the minimum equity headroom condition. However, GM could voluntarily make further reductions in order to satisfy this condition.

      We cannot assure you whether, or to what extent, GM would elect to voluntarily reduce the number of shares subject to GM debt-for-equity exchanges and/or the amount of the Hughes dividend distribution. Any such reductions would reduce the amount of liquidity to be provided to GM in connection with the Transactions. GM currently expects that it would make any determination regarding any such voluntary reductions immediately prior to completion of the Hughes split-off, based on factors it determines relevant as of such time. If GM were to determine not to make any such voluntary reductions, which determination would be within GM’s sole discretion, such that the specified conditions would not be satisfied, then the Hughes split-off and the Hughes/EchoStar merger would not occur unless such conditions were waived.

      Following the completion of the Hughes split-off and the Hughes/ EchoStar merger, the amount of value that GM would receive with respect to any shares of New EchoStar Class C common stock that it holds, whether such shares are distributed in GM debt-for-equity exchanges within six months following the completion of the Hughes/ EchoStar merger or are retained thereafter by GM as an ownership interest in New EchoStar, would generally depend upon, among other things, the market price of shares of New EchoStar Class C common stock at the time of GM’s disposition of any such shares.

      You should also be aware that, depending on the terms of the IRS ruling, GM may be required to distribute to the holders of the GM $1 2/3 common stock shares of New EchoStar Class C common stock, if any, that are held by GM after the Hughes split-off to the extent required by the transaction agreements. Although holders of GM $1 2/3 common stock would benefit directly from their receipt of shares of New EchoStar Class C common stock, any such required distribution could affect the value and liquidity provided to GM pursuant to the Transactions.

      You should also understand that, depending upon, among other things, the extent to which GM has completed GM debt-for-equity exchanges with shares of GM Class H common stock and the value of GM’s retained economic interest in Hughes after the payment of the Hughes dividend distribution and the related reduction of GM’s retained economic interest in Hughes, GM may hold fewer than 100 million shares (or no shares) of New EchoStar Class C common stock. Under such circumstances, GM’s ability to generate additional liquidity pursuant to GM debt-for-equity exchanges after the Hughes/ EchoStar merger would necessarily be limited based on the number of such shares, if any, then held by GM.

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     The GM/ Hughes Separation Transactions

      The proposed GM/ Hughes separation transactions consist of several transactions involving General Motors and Hughes that are generally designed to prepare Hughes to complete the proposed merger with EchoStar by separating the Hughes business from General Motors. As a result of the GM/Hughes separation transactions, Hughes Holdings, which will be the parent company of Hughes at the time of the completion of the Hughes split-off, will become an independent, publicly owned company immediately prior to the Hughes/EchoStar merger, which is a condition to EchoStar’s obligation to complete the Hughes/EchoStar merger.

      There are two principal components to the GM/ Hughes separation transactions:

  •  the Hughes recapitalization, which generally involves the payment of a dividend of up to $4.2 billion by Hughes to GM and a commensurate reduction of GM’s retained economic interest in Hughes; and
 
  •  the separation of the Hughes business from GM pursuant to the Hughes split-off, which generally involves the distribution by GM of shares of Hughes Holdings Class C common stock to the holders of GM Class H common stock in redemption of their GM Class H common stock.

The GM/Hughes separation transactions also include other related transactions which generally address matters relating to the separation of Hughes from General Motors. The GM/ Hughes separation transactions will not occur unless and until all of the conditions to the completion of the Hughes/ EchoStar merger, other than the completion of the Hughes recapitalization and Hughes split-off, have been satisfied or waived. Unless the companies are prepared to complete the Hughes/EchoStar merger immediately following the GM/ Hughes separation transactions, the Hughes business will not be separated from General Motors pursuant to the GM/ Hughes separation transactions.

          The Hughes Recapitalization

      The Hughes recapitalization consists of a number of preliminary transactions which are designed to prepare the Hughes business to be separated from General Motors pursuant to the Hughes split-off. The Hughes recapitalization primarily involves a restructuring of GM’s retained economic interest in Hughes in order to allow GM to realize some of the economic value arising from GM’s ownership of Hughes prior to the Hughes split-off. The Hughes recapitalization will be effected largely pursuant to transactions described in the GM/ Hughes separation agreement, the implementation agreement and the other agreements contemplated by those agreements. In addition, in order to accomplish the Hughes recapitalization, GM is proposing an amendment to the GM restated certificate of incorporation as described below at “— Amendments to the GM Restated Certificate of Incorporation.”

      Restructuring of GM’s Retained Economic Interest in Hughes Pursuant to the Hughes Recapitalization. The following is a description of the principal aspects of the Hughes recapitalization which will result in the restructuring of GM’s retained economic interest in Hughes:

  •  Hughes will declare and pay a dividend of up to $4.2 billion to GM. We currently expect that the amount of this dividend will be $4.2 billion, provided that the amount of the dividend may be required to be reduced to not less than $3.5 billion (and GM may choose voluntarily to reduce further the amount of the dividend) to the extent necessary in order to ensure that:

  •  the amount of the Hughes dividend distribution does not exceed the value of GM’s retained economic interest in Hughes at the time of the payment of the Hughes dividend distribution, based on the average market value of GM Class H common stock during a specified period preceding that time; and
 
  •  the minimum equity headroom condition set forth in the Hughes/ EchoStar merger agreement, which refers to the ability of New EchoStar to issue a minimum amount of equity immediately following the completion of the Hughes/ EchoStar merger without violating certain covenants with GM that are designed to preserve the tax-free status of the Hughes split-off to GM, will be satisfied at the time of the Hughes/ EchoStar merger.

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  For more information, see “Description of Principal Transaction Agreements— GM/ Hughes Separation Agreement— The Hughes Recapitalization.”
 
  To the extent of any shortfall in funds available to pay the amount of the Hughes dividend distribution in cash, Hughes may substitute a demand note in the amount of the shortfall. If issued, this demand note would be payable immediately upon the effective time of the Hughes/ EchoStar merger.

  •  In consideration of the Hughes dividend distribution, GM’s retained economic interest in Hughes will be reduced in a commensurate amount. To effect this, the number of notional shares representing GM’s retained economic interest in Hughes will be reduced by the number that is equal to the quotient determined by dividing:

  (x)  the amount of the Hughes dividend distribution;

      by

  (y)  the average of the volume weighted average trading prices of GM Class H common stock for each of the five trading days, or, if less, the number of trading days following the public announcement by GM or Hughes of the receipt of certain specified regulatory consents or approvals and before the effective time of the Hughes split-off, ending on and including the trading day immediately prior to the date of the Hughes split-off. This is the price that we sometimes refer to as the Hughes recapitalization price.  

  The GM board of directors does not currently have the ability to make this adjustment. One of the effects of the amendment to the GM restated certificate of incorporation that GM common stockholders are being asked to approve pursuant to this consent solicitation is to authorize the GM board of directors to make this adjustment on the terms described in this document.

  •  After the Hughes dividend distribution and prior to the Hughes split-off, GM will contribute all of the stock of Hughes to Hughes Holdings, which is currently a wholly owned subsidiary of GM. Hughes Holdings will then issue to GM a number of shares of its Class C common stock such that GM will hold a number of shares of Hughes Holdings Class C common stock equal to the denominator of the GM Class H fraction determined as of immediately prior to the Hughes split-off, and after reducing the denominator to reflect the Hughes dividend distribution as described above, and determined for this purpose as of such point in time rather than as an average with respect to any accounting period. This will result in Hughes Holdings becoming the parent company of Hughes.

  Pursuant to the Hughes split-off, GM will distribute one share of Hughes Holdings Class C common stock in exchange for each outstanding share of GM Class H common stock and, accordingly, the aggregate number distributed would be equal to the numerator of the GM Class H fraction at that time. As a result, GM will continue to hold, immediately upon the completion of the Hughes split-off, a number of shares of Hughes Holdings Class C common stock equal to the difference between the numerator and the denominator of the GM Class H fraction, which difference would represent the number of notional shares representing GM’s retained economic interest in Hughes immediately after the Hughes recapitalization and before the Hughes split-off.

      Illustration of the Effect of the Hughes Recapitalization. In order to illustrate the effect of the Hughes recapitalization on GM’s retained economic interest in Hughes, we have calculated the GM Class H fraction based on the number of shares of GM Class H common stock outstanding as of                     , 2002, based on the assumptions described below. On this basis, the portion of Hughes’ earnings allocable to the GM Class H common stock would have been about           %, calculated as follows:

  Number of shares of GM
  Class H common stock outstanding
  ____________________________________________________________________ =           %
  GM Class H dividend base

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      The remaining portion of Hughes’ earnings, about           %, would have been allocable to the GM $1 2/3 par value common stock. The number of notional shares representing GM’s retained economic interest in Hughes would have been                , calculated as follows:

                  GM Class H dividend base

             
 minus minus
   
Number of shares of GM
       
   
Class H common stock outstanding
       
   
     
   
Number of notional shares representing GM’s
       
   
retained economic interest in Hughes
       

These figures illustrate the retained economic interest in Hughes that GM would have had as of such date without giving effect to the Hughes recapitalization.

      For purposes of the above-described calculations, we have assumed a number of outstanding shares of GM Class H common stock based on the number of such shares that were outstanding on such date and the number of shares of GM Class H common stock that would be issued, based on the closing trading price of GM Class H common stock on such date and the mandatory conversion rate applicable to the GM Series H preference stock as a result thereof, upon the conversion of GM Series H preference stock on its mandatory conversion date in June 2002. In addition, for purposes of the above-described calculations, we have determined each of the numerator and the denominator of the GM Class H fraction as of                , 2002, rather than as an average with respect to any accounting period.

      As a result of the Hughes recapitalization, assuming a Hughes dividend distribution to GM in the amount of $4.2 billion and a Hughes recapitalization price of $               , which would have been the Hughes recapitalization price if such price were determined as of                 , 2002, the denominator of the GM Class H fraction and, accordingly, the number of notional shares representing GM’s retained economic interest in Hughes would have been decreased by about                     . This number is equal to the quotient that is determined by dividing $4.2 billion by such Hughes recapitalization price.

      The GM Class H fraction calculated as of                      , 2002 as described above would have changed as illustrated below:

Number of shares of GM

Class H common stock outstanding
____________________________________________________________ =           %
GM Class H dividend base

      Thus, based upon these assumptions, after the Hughes recapitalization, about           % of Hughes’ earnings would have been allocated to the GM Class H common stock for earnings per share and dividend purposes. The balance, about           %, would have been allocated to the GM $1 2/3 par value common stock. The number of GM’s notional shares representing GM’s retained economic interest in Hughes would have been                , calculated as follows:

                  GM Class H dividend base

             
 minus minus
   
Number of shares of GM
       
   
Class H common stock outstanding
       
   
     
   
Number of notional shares representing GM’s
       
   
retained economic interest in Hughes
       

These figures illustrate the retained economic interest in Hughes that GM would have had after giving effect to the Hughes recapitalization, based on a Hughes recapitalization price determined as of                 , 2002.

      Immediately after the completion of the Hughes split-off, GM will hold a number of shares of Hughes Holdings Class C common stock equal to the number of notional shares representing GM’s retained economic

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interest in Hughes, if any, as determined after the denominator of the GM Class H fraction has been reduced to reflect the Hughes dividend distribution, and determined for this purpose as of such point in time rather than as an average with respect to any accounting period. GM’s ownership of any such shares is designed to provide value to GM commensurate to the value of GM’s retained economic interest in Hughes immediately after the Hughes recapitalization and before the Hughes split-off, based on the Hughes recapitalization price. If the IRS does not permit GM to retain such shares, GM will distribute such shares to the holders of shares of GM $1 2/3 par value common stock to the extent required by the transaction agreements.

      These calculations are provided for illustrative purposes only. The actual percentages and the number of notional shares representing GM’s retained economic interest in Hughes will not be known until immediately prior to the time of the completion of the Hughes split-off and will depend upon, among other things, the average of the average market price of GM Class H common stock during a specified period preceding the time of the completion of the Hughes split-off and the amount of the Hughes dividend distribution.

      For more information regarding the terms of the Hughes recapitalization, as provided for in the GM/ Hughes separation agreement, see “Description of Principal Transaction Agreements— GM/ Hughes Separation Agreement— The Hughes Recapitalization.”

     Hughes Split-Off

      After the Hughes recapitalization has been completed, Hughes will be separated from General Motors pursuant to the Hughes split-off. As a result of the Hughes split-off, Hughes Holdings, which will then hold all of the outstanding capital stock of Hughes, will become an independent, publicly owned company, separate from GM (except for any shares that may be retained or otherwise disposed of by GM, as described in this document). The Hughes split-off will be effected largely pursuant to transactions described in the implementation agreement and the other agreements contemplated by that agreement.

      Redemption of GM Class H Common Stock. As a result of the Hughes recapitalization, GM will hold a number of shares of Hughes Holdings Class C common stock equal to the denominator of the GM Class H fraction at the time of the Hughes split-off, as reduced pursuant to the terms of the Hughes recapitalization. In accordance with the terms of the implementation agreement, immediately following the completion of the Hughes recapitalization, GM will distribute one share of Hughes Holdings Class C common stock in exchange for and in redemption of each outstanding share of GM Class H common stock. All of the outstanding shares of GM Class H common stock will thereby be redeemed pursuant to the terms of the GM Class H common stock as set forth in the GM restated certificate of incorporation, as amended as described below at “—Amendments to the GM Restated Certificate of Incorporation” and at “GM Capital Stock— GM’s Dual-Class Common Stock Capital Structure— Redemption”.

      GM will continue to hold, immediately upon the completion of the Hughes split-off, a number of shares of Hughes Holdings Class C common stock equal to the difference, if any, between the denominator of the GM Class H fraction, after giving effect to the reduction of the denominator of the GM Class H fraction in connection with the Hughes recapitalization as described above, and the number of shares of Hughes Holdings Class C common stock distributed by GM pursuant to the redemption of the GM Class H common stock. In other words, upon the completion of the Hughes split-off, GM would hold a number of shares of Hughes Holdings Class C common stock equal to the number of notional shares (if any) representing GM’s retained economic interest in Hughes immediately after the Hughes recapitalization. Up to 100 million of any such shares may be subject to any GM debt-for-equity exchanges after the Hughes split-off and, if and to the extent permitted by the IRS, any remaining portion of these shares would be retained by General Motors after the Transactions.

      If and to the extent required by the IRS in order to obtain the IRS ruling relating to the tax-free status of the Hughes split-off and certain related transactions, or to the extent necessary to satisfy the minimum equity headroom condition set forth in the Hughes/ EchoStar merger agreement, GM would distribute shares of Hughes Holdings Class C common stock held by GM after the completion of the Hughes split-off to the holders of GM $1 2/3 par value common stock on a pro rata basis by means of a dividend distribution to the

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extent required by the terms of the transaction agreements. Any such dividend distribution to the GM $1 2/3 par value common stockholders would be considered part of the Hughes split-off and would be completed around the time of the completion of the redemption of the GM Class H common stock.

      GM does not currently have the ability to exchange shares of the Hughes Holdings Class C common stock for shares of GM Class H common stock. One of the effects of the amendment to the GM restated certificate of incorporation that GM common stockholders are being asked to approve pursuant to this consent solicitation is to authorize the GM board of directors to make this exchange on the terms described in this document. Specifically, the amendment will add a redemption feature to the terms of the GM Class H common stock to make the GM Class H common stock redeemable by GM in exchange for shares of Hughes Holdings Class C common stock. For more information about this proposed amendment to GM’s restated certificate of incorporation, see “—Amendments to the GM Restated Certificate of Incorporation” and “GM Capital Stock— GM’s Dual-Class Common Stock Capital Structure— Redemption.”

      Exchange of GM Series H Preference Stock. The outstanding GM Series H preference stock will automatically convert, in accordance with its terms, into GM Class H common stock on June 24, 2002. We currently expect that all outstanding shares of GM Series H preference stock will be converted into shares of GM Class H common stock prior to the Hughes split-off. However, if and to the extent that any shares of GM Series H preference stock remain outstanding at the time of the proposed redemption of GM Class H common stock in connection with the Hughes split-off as described above, GM will exchange shares of Hughes Holdings preference stock having substantially identical economic terms to the GM Series H preference stock for all outstanding shares of GM Series H preference stock in accordance with the terms of the GM Series H preference stock. As a result, there will be no shares of GM Series H preference stock outstanding after the completion of the Hughes split-off.

      Prior to the completion of the Hughes split-off, Hughes Holdings intends to adopt a stockholder rights plan, which will become effective upon the completion of the Hughes split-off. After the Hughes/ EchoStar merger, this will become the stockholder rights plan of New EchoStar. For more information regarding this stockholder rights plan, see “New EchoStar Capital Stock— Stockholder Rights Plan.”

      As a result of the completion of the Hughes split-off, Hughes Holdings will be an independent, publicly owned company, separate from General Motors. Immediately following the completion of the Hughes split-off, EchoStar will merge with Hughes Holdings to form New EchoStar. For more information regarding this merger, see “—The Hughes/ EchoStar Merger” and “Description of Principal Transaction Agreements— Hughes/ EchoStar Merger Agreement” below.

      No Pro Rata Distribution of the Hughes Dividend Distribution; No 120% Recapitalization of GM Class H Common Stock into GM $1 2/3 Par Value Common Stock. The completion of the GM/ Hughes separation transactions will not result in a pro rata distribution of a portion of the Hughes dividend distribution to GM Class H common stockholders in accordance with the GM Class H fraction, as currently provided for under certain circumstances pursuant to the GM board policy statement regarding certain capital stock matters. By approving the proposals relating to the Transactions being submitted to GM common stockholders pursuant to this consent solicitation, GM common stockholders will be approving and consenting to an asset transfer consisting of the Hughes dividend distribution to GM, as contemplated by the terms of the GM board policy statement. For more information, see “GM Capital Stock— GM Board of Directors Policy Statement.”

      Also, the completion of the GM/ Hughes separation transactions will not result in a recapitalization of the GM Class H common stock into GM $1 2/3 par value common stock at a 120% exchange ratio as currently provided for under certain circumstances pursuant to provisions of the GM restated certificate of incorporation. As part of the GM/ Hughes separation transactions, the GM restated certificate of incorporation will be amended to eliminate any possible application of the recapitalization provision to the GM/ Hughes separation transactions. By approving the proposals relating to the Transactions, GM common stockholders will, in effect, be waiving any application of the recapitalization provision to the GM/ Hughes separation transactions.

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      Elimination of GM Class H Common Stock. GM is also proposing that, after the Hughes split-off, the GM restated certificate of incorporation be further amended in order to eliminate certain provisions relating to the GM Class H common stock. See “—Amendments to the GM Restated Certificate of Incorporation Relating to the GM/Hughes Separation Transaction.” As a result of the redemption of all outstanding shares of GM Class H common stock and the amendment to the GM restated certificate of incorporation to eliminate the GM Class H common stock, GM will no longer have “tracking stock” or a dual-class common stock capital structure, with each class of common stock reflecting the financial performance of different businesses of GM. The GM $1 2/3 par value common stock will remain outstanding and be unchanged and will be GM’s only class of common stock, and GM will become a company primarily focused on its core automotive and related businesses.

      For more information regarding the Hughes split-off, including the redemption of the GM Class H common stock as contemplated by the terms of the implementation agreement, see “Description of Principal Transaction Agreements— Implementation Agreement— Hughes Split-Off.”

          Other Separation-Related Arrangements

      Certain other separation-related arrangements are contemplated in connection with the GM/ Hughes separation transactions. These other arrangements generally address matters relating to the separation of Hughes from General Motors pursuant to the Hughes split-off:

  •  GM and Hughes have agreed to indemnification arrangements in connection with the Transactions, including with respect to certain existing disputes between Hughes and Boeing related to the sale by Hughes of its satellite manufacturing business to Boeing in 2000. GM has agreed to be responsible for liability from a purchase price adjustment claim of Boeing to the extent that such liability, if any, exceeds $670 million. In addition, among other things, GM and Hughes have agreed generally to indemnify each other against losses arising out of the other company’s businesses.
 
  •  GM and Hughes Holdings have agreed to new income tax allocation arrangements, which will become effective on the effective date of the Hughes/ EchoStar merger. These arrangements will modify the income tax allocation arrangements currently in place between GM and Hughes. Among other things, the new income tax allocation arrangements will govern the allocation of U.S. income tax liabilities between the companies for taxable periods ending on or prior to the completion of the Transactions.
 
  •  GM and Hughes have agreed to intellectual property arrangements concerning certain intellectual property and ongoing activities of the companies. Among other things, the intellectual property arrangements provide that before transferring its rights to certain Hughes bandwidth to any third party, Hughes will offer the Hughes bandwidth to GM on the same terms. Similarly, GM has agreed that before transferring its rights to certain OnStar bandwidth to a third party, it will offer the OnStar bandwidth to Hughes on the same terms.
 
  •  GM and Hughes have also agreed to certain arrangements pertaining to employee matters. GM has agreed to provide certain service and salary credits under certain GM retirement plans for GM employees who transfer to Hughes, and Hughes has agreed to provide certain service and salary credits under the Hughes defined benefit pension plan for Hughes employees who transfer to GM.

      For more information regarding the terms of these and other related arrangements, see “Description of Principal Transaction Agreements— Implementation Agreement— Other General Indemnification” and “—GM/ Hughes Separation Agreement— Ancillary Separation Agreements.”

 
Amendments to the GM Restated Certificate of Incorporation

      In order to implement the GM/ Hughes separation transactions as described in this document, it is necessary to amend Article Fourth of the GM restated certificate of incorporation. In particular, in connection

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with the GM/ Hughes separation transactions, GM is proposing to amend Article Fourth of the GM restated certificate of incorporation to:

  •  add a provision which will enable the GM board of directors to reduce the denominator of the GM Class H fraction in an amount commensurate with the amount of the dividend received from Hughes in connection with the Hughes dividend distribution, as described in this document; and
 
  •  add a redemption feature to the terms of the GM Class H common stock that will make the GM Class H common stock redeemable in exchange for shares of Hughes Holdings Class C common stock, on a share-for-share basis, following the Hughes recapitalization, as described in this document.

In addition, pursuant to this amendment, GM is proposing to amend Article Fourth to expressly provide that the completion of the GM/ Hughes separation transactions as described in this document will not result in a recapitalization of the GM Class H common stock into GM $1 2/3 par value common stock at a 120% exchange ratio, as currently provided for under certain circumstances pursuant to provisions of the GM restated certificate of incorporation.

      These amendments to Article Fourth of the GM restated certificate of incorporation are required in order to complete the GM/ Hughes separation transactions as described in this document. In their current forms, these provisions do not allow the GM board of directors to reduce the denominator of the GM Class H fraction in connection with the receipt by GM of the Hughes dividend distribution. Instead, under the current GM board policy statement regarding certain capital stock matters, a proportionate dividend distribution from Hughes would be distributed by GM to the GM Class H common stockholders. Under the proposed Transactions, the denominator of the GM Class H fraction would be reduced as described in this document in lieu of such proportionate dividend. This will result in an appropriate allocation of the tracking stock interest in Hughes and make it possible to complete the Hughes split-off. In addition, current provisions do not permit the redemption of GM Class H common stock in exchange for shares of Hughes Holdings Class C common stock. We are proposing to amend the provisions to provide appropriate mechanics for accomplishing the redemption contemplated by the Hughes split-off.

      Article Fourth of the GM restated certificate of incorporation, in the form proposed to be amended as described above, is included in Appendix A of this document. We urge GM common stockholders to review the form of this proposed amendment to Article Fourth carefully before voting with respect to the proposals relating to the Transactions.

      GM is also proposing a further amendment to Article Fourth of the GM restated certificate of incorporation after the completion of the Transactions in order to eliminate certain provisions relating to the GM Class H common stock because it will no longer be outstanding after the Transactions. This is a technical amendment to the GM restated certificate of incorporation, which is necessary in order to reflect the completion of the GM/ Hughes separation transactions and the elimination of GM’s current dual-class common stock capital structure as a result of these transactions.

      Article Fourth of the GM restated certificate of incorporation, in the form proposed to be further amended to eliminate certain provisions relating to the GM Class H common stock, is included in Appendix B of this document. We urge GM common stockholders to review the form of this proposed amendment to Article Fourth carefully before voting with respect to this additional proposal. Completion of the Transactions is not conditioned on GM common stockholder approval of this further proposed amendment to the GM restated certificate of incorporation.

      GM does not currently expect to amend its bylaws in connection with the GM/ Hughes separation transactions, except to the extent necessary or appropriate to reflect the completion of the GM/ Hughes separation transactions and the elimination of the GM Class H common stock and, if applicable, the GM Series H preference stock.

      For more information regarding the terms of the GM/ Hughes separation transactions, including the Hughes recapitalization, the Hughes split-off and other related transactions, see “Description of Principal Transaction Agreements— Implementation Agreement” and “—GM/ Hughes Separation Agreement” below.

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  The Hughes/ EchoStar Merger

      Overview. The combination of Hughes and EchoStar pursuant to the Hughes/ EchoStar merger will be completed immediately following the completion of the GM/ Hughes separation transactions. As part of the Hughes/ EchoStar merger, EchoStar will merge with Hughes Holdings, the parent company of Hughes at the time of the merger, with Hughes Holdings as the surviving corporation. In connection with the Hughes/ EchoStar merger, the surviving corporation, which we sometimes refer to as “New EchoStar,” will be renamed EchoStar Communications Corporation. As a result of the Hughes/ EchoStar merger, Hughes will become a wholly owned subsidiary of New EchoStar. The Hughes/ EchoStar merger will be effected as described in the Hughes/ EchoStar merger agreement. After the completion of the Hughes/ EchoStar merger, New EchoStar will be one of the nation’s largest subscription television platforms, with about 17 million subscribers based upon the number of subscribers of each of Hughes and EchoStar as of December 31, 2001.

      Pursuant to the Hughes/ EchoStar merger, among other things:

  •  Each share of Hughes Holdings Class C common stock distributed to GM Class H common stockholders in connection with the Hughes split-off will remain outstanding as a share of Class C common stock of New EchoStar and will be unchanged. Similarly, each share of Hughes Holdings Class C common stock held by GM (or GM $1 2/3 par value common stockholders, as applicable) after the Hughes split-off will remain outstanding as a share of Class C common stock of New EchoStar and will be unchanged. As a result, former GM Class H common stockholders and General Motors will be Class C common stockholders of New EchoStar.
 
  •  EchoStar Class A common stockholders will receive 1/0.73, or about 1.3699, shares of New EchoStar Class A common stock in exchange for each share of EchoStar Class A common stock they own, or cash in lieu of fractional shares of New EchoStar Class A common stock that they would otherwise receive. As a result, former EchoStar Class A common stockholders will become Class A common stockholders of New EchoStar.
 
  •  EchoStar Class B common stockholders will receive 1/0.73, or about 1.3699, shares of New EchoStar Class B common stock in exchange for each share of EchoStar Class B common stock they own, or cash in lieu of fractional shares of New EchoStar Class B common stock that they would otherwise receive. As a result, former EchoStar Class B common stockholders will become Class B common stockholders of New EchoStar. A trust controlled by Charles W. Ergen, the Chairman of the Board of Directors and Chief Executive Officer of EchoStar, currently owns all of the outstanding shares of EchoStar Class B common stock and is expected to become the owner of all outstanding shares of New EchoStar Class B common stock as a result of the Hughes/ EchoStar merger.

      Shares Outstanding and Voting Power of New EchoStar. We estimate that, immediately following the completion of the Hughes/ EchoStar merger and based on the assumptions about certain variable factors described below:

  •  the New EchoStar Class A common stock would represent about           % of the outstanding common stock of New EchoStar, representing about           % of the total voting power of New EchoStar;
 
  •  the New EchoStar Class B common stock would represent about           % of the outstanding common stock of New EchoStar, representing about           % of the total voting power of New EchoStar; and
 
  •  the New EchoStar Class C common stock would represent about           % of the outstanding common stock of New EchoStar, representing about      % of the total voting power of New EchoStar.

      Except as to voting rights, the New EchoStar Class A common stock and New EchoStar Class C common stock will be identical. The New EchoStar Class B common stock will have special voting rights, will be convertible into New EchoStar Class A common stock or New EchoStar Class C common stock and will be subject to certain transfer restrictions. However, in all respects other than voting rights, convertibility and the transfer restrictions, the New EchoStar Class B common stock will be substantially the same as the New EchoStar Class A common stock and New EchoStar Class C common stock. The New EchoStar common stock will have the voting rights described below at “New EchoStar Capital Stock— Common Stock.”

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      GM and Hughes would not agree to complete the Transactions unless they were assured that the Hughes split-off would be tax-free to GM and its stockholders for U.S. federal income tax purposes. GM’s receipt of a ruling from the IRS confirming the tax-free nature of the Hughes split-off is a condition to the obligation of GM and Hughes to complete the Transactions. The Hughes split-off will be tax-free to GM for these purposes only if, among other things, General Motors and certain of its historical stockholders acquire stock possessing more than 50% of the aggregate voting power of the stock of New EchoStar in the Transactions. Accordingly, the terms of the various classes of common stock of New EchoStar are designed to ensure that the shares of New EchoStar Class C common stock held by GM (other than shares that are subject to GM debt-for-equity exchanges) and the shares of New EchoStar Class C common stock that are issued to certain of GM’s historical stockholders together possess at least 50.5% of the aggregate voting power of New EchoStar for at least the first two years after the Hughes split-off.

      At the same time, EchoStar wanted to preserve at least to some degree the greater voting power that the EchoStar Class B common stock currently has relative to the EchoStar Class A common stock. This was particularly important given that Mr. Ergen, as the beneficial owner of all of the EchoStar Class B common stock and about 90% of the total voting power of EchoStar, was required to reduce substantially his current voting power in New EchoStar in order to address the tax objectives of GM and Hughes with respect to the Transactions. Mr. Ergen agreed to such a substantial reduction of his own voting power, including giving up voting control of EchoStar, in order to provide the holders of EchoStar Class A common stock the opportunity to participate in the potential benefits expected to accrue to them as a result of the completion of the Hughes/ EchoStar merger.

      The amounts set forth above and throughout this document with respect to the pro forma percentages of outstanding shares and voting power of shares of New EchoStar common stock upon the completion of the Hughes/ EchoStar merger are presented for illustrative purposes only and are very sensitive to their underlying assumptions, including the Hughes recapitalization price. The assumptions used in calculating the pro forma percentages of outstanding shares and voting power of shares of New EchoStar common stock upon the completion of the Hughes/ EchoStar merger are discussed at “— Assumptions Used in Minimum Hughes Recapitalization Price and Pro Forma Percentages of Outstanding Shares and Voting Power Calculations.” The actual percentages of outstanding shares and voting power of shares of New EchoStar common stock will not be known until immediately before the Hughes/ EchoStar merger.

      Satisfaction of the Minimum Equity Headroom Condition. An important condition to the completion of the Hughes/ EchoStar merger is the ability of New EchoStar to issue a specified minimum amount of equity or equity-linked securities, calculated as of immediately following the Hughes/EchoStar merger, without violating certain restrictive covenants in the implementation agreement. The covenants are generally designed to preserve the tax-free status of the Hughes split-off to GM. This condition is designed to ensure that New EchoStar will have a specified amount of “headroom” available for the issuance of new equity after the Hughes/ EchoStar merger.

      The determination of whether the minimum equity headroom condition is satisfied will be made immediately before the completion of the Hughes split-off and the Hughes/EchoStar merger. We will make this determination by using the methodology set forth in the Hughes/EchoStar merger agreement, which involves applying certain presumptions, and by making determinations as to certain variables, based on the facts and circumstances existing at such time. The presumptions relate to certain events relevant to the measurement of headroom that may or may not occur in the future, and are intended to preserve the minimum equity headroom whether or not those events occur. The variable factors include the number of shares of outstanding capital stock of Hughes Holdings and EchoStar, the Hughes recapitalization price, certain assumptions as to the relative value of the various classes of New EchoStar common stock, the number of shares of New EchoStar Class C common stock that could be distributed by GM in connection with GM debt-for-equity exchanges following the completion of the Hughes/EchoStar merger and certain other items. Certain of these items cannot be definitively measured until immediately before the completion of the Hughes split-off. However, for illustrative purposes only, we can estimate the minimum Hughes recapitalization price needed to satisfy the minimum equity headroom condition by making certain assumptions about the application of these presumptions and all of the variable factors other than the Hughes recapitalization price.

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      If the minimum equity headroom condition would not otherwise be satisfied, the GM/ Hughes separation agreement requires GM to take certain actions if doing so would result in satisfaction of the condition and allow the Transactions to proceed. Specifically, if and to the extent necessary in order to satisfy the condition, under certain circumstances, GM is required to reduce:

  •  the number of shares of New EchoStar Class C common stock eligible for GM debt-for-equity exchanges after the Transactions (but not to less than 60 million shares); and/or
 
  •  the amount of the Hughes dividend distribution (but not to less than $3.5 billion).

You should understand, however, that the number of shares of New EchoStar Class C common stock available for GM debt-for-equity exchanges under the terms of the transaction agreements could be reduced automatically if the value of GM’s retained economic interest in Hughes following the Hughes dividend would result in GM holding less than 100 million shares of New EchoStar Class C common stock.

      Mandatory reductions of the aggregate number of shares subject to GM debt-for-equity exchanges after the Transactions would offset, to the specified extent, the amount of any required reduction of the amount of the Hughes dividend distribution. However, under the terms of the transaction agreements, which include certain offset provisions relating to the reductions, under no circumstances would GM be required to both reduce the number of shares subject to GM debt-for-equity exchanges to 60 million and reduce the amount of the Hughes dividend distribution to $3.5 billion. See “Description of Principal Transaction Agreements— GM/Hughes Separation Agreement— The Hughes Recapitalization— Reduction in the Shares Subject to GM Debt-for-Equity Exchanges; Reduction of the Hughes Dividend Distribution.”

      These mandatory reductions would permit the minimum equity headroom condition to be satisfied at a lower Hughes recapitalization price than otherwise would be the case. For example, after making the foregoing reductions of the number of shares subject to GM debt-for-equity exchanges to the full extent required by the terms of the GM/ Hughes separation agreement, and based on the assumptions described below, we have calculated for illustrative purposes that the minimum equity headroom condition would be satisfied so long as the Hughes recapitalization price were equal to at least $           per share.

      If the minimum equity headroom condition would not be satisfied even if GM reduced the number of shares subject to GM debt-for-equity exchanges as described above to the full extent required by the terms of the GM/ Hughes separation agreement, GM would have the right, but not the obligation, to make further reductions of the number of shares subject to GM debt-for-equity exchanges and to the amount of the Hughes dividend distribution in order to cause the condition to be satisfied. See “Description of Principal Transaction Agreements— GM/ Hughes Separation Agreement— The Hughes Recapitalization.” We cannot assure you that GM would determine to make any such voluntary reductions. Any such voluntary reductions would reduce the amount of liquidity to be provided to GM in connection with the Transactions. GM currently expects that it would make any determination regarding any such voluntary reductions immediately before the completion of the Hughes split-off, based on factors it determines relevant as of such time. If GM were to determine not to make any such voluntary reductions, which determination would be within GM’s sole discretion, such that this condition would not be satisfied, then the Hughes split-off and the Hughes/ EchoStar merger would not occur unless this condition was waived.

      In the event that GM reduces either or both of the two foregoing amounts, either because it is required to do so under the GM/ Hughes separation agreement or because it chooses to make further reductions, the effect will be to reduce the amount of liquidity provided to GM in connection with the Transactions. See “Risk Factors— Risk Factors Relating to GM After the Transactions— The Amount of Liquidity and Value To Be Provided to GM Pursuant to the Transactions Could Vary Significantly Based on a Number of Factors.”

      You should understand that satisfaction of the minimum equity headroom condition will not ensure that New EchoStar will actually be able to issue equity at any time after the completion of the Hughes/ EchoStar merger or, if so, on what terms any such equity issuances could be completed. In fact, the agreements among EchoStar, GM and Hughes will severely restrict New EchoStar’s ability to issue any additional equity or equity-linked securities for two years after the Hughes/ EchoStar merger, absent possible favorable IRS

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rulings. We can provide no assurances in this regard. See “Risk Factors— Risk Factors Relating to New EchoStar After the Transactions— Risks Relating to Liquidity and Financing Activities of New EchoStar— New EchoStar Will Be Subject to Potentially Significant Restrictions with Respect to Issuances of its Equity Securities for a Two-Year Period Following the Hughes/ EchoStar Merger.”

      In considering potential market prices of the GM Class H common stock during the period in which the Hughes recapitalization price would be determined, one factor to consider, among others, is the product of the implied exchange ratio multiplied by the EchoStar Class A common stock price. The implied exchange ratio, 0.73, is equal to the inverse of the exchange ratio in the Hughes/ EchoStar merger of 1/0.73 shares of New EchoStar Class A common stock in exchange for each share of EchoStar Class A common stock. We believe it is possible that, prior to the time of the completion of the Hughes/ EchoStar merger, the market prices of shares of GM Class H common stock may equal (or be close to) about 0.73 of the market prices of shares of EchoStar Class A common stock at such time. However, we cannot provide you any assurances with respect to any relationship between the market prices of GM Class H common stock and the market prices of EchoStar Class A common stock during the period with respect to which the Hughes recapitalization price would be determined. We cannot provide you any assurances with respect to the impact, if any, that any such relationships would have on the Hughes recapitalization price.

      For more information about the minimum equity headroom condition, see “Description of Principal Transaction Agreements— Hughes/ EchoStar Merger Agreement— Conditions.”

      The calculation of the minimum Hughes recapitalization price necessary in order for the minimum equity headroom condition to be satisfied under certain circumstances as presented in this document is provided for illustrative purposes only and is very sensitive to its underlying assumptions, certain of which are discussed below. The actual minimum Hughes recapitalization price necessary in order for the minimum equity headroom condition to be satisfied will not be known until immediately before the completion of the Hughes split-off and the Hughes/EchoStar merger.

      Assumptions Used in Minimum Hughes Recapitalization Price and Pro Forma Percentages of Outstanding Shares and Voting Power Calculations. In addition to the presumptions described above that are contained in the Hughes/ EchoStar merger agreement, certain assumptions have been used in calculating:

  •  the amounts set forth throughout this document with respect to pro forma percentages of outstanding shares and voting power of shares of New EchoStar common stock upon the completion of the Hughes/EchoStar merger; and
 
  •  the calculation of the minimum Hughes recapitalization price set forth in this document that would be necessary in order for the minimum equity headroom condition to be satisfied under certain circumstances described in this document.

These assumptions include, among other things, certain assumptions concerning the relative fair market value of the various classes of New EchoStar common stock and the assumptions that:

  •  there would be no material change in the number of shares of GM Class H common stock and EchoStar common stock currently outstanding other than issuances upon conversion of GM Series H preference stock and EchoStar Series D convertible preferred stock (to which we have given full effect for purposes of this calculation);
 
  •  GM would receive a favorable IRS ruling with respect to the treatment of certain transactions involving GM and New EchoStar securities under Section 355 of the Code;
 
  •  no GM debt-for-equity exchanges would be completed prior to the completion of the Hughes/ EchoStar merger, which means that the amount of the Hughes dividend would not be subject to mandatory reduction under the terms of the transaction agreements;
 
  •  the Hughes dividend distribution to GM would be $4.2 billion; and
 
  •  a specified number of shares of New EchoStar common stock would be issued in exchange for the shares of PanAmSat common stock held by persons other than subsidiaries of Hughes.

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      In addition, in calculating the pro forma percentages of outstanding shares and voting power of shares of New EchoStar common stock, we have assumed that the Hughes recapitalization price would be $               and that the number of shares of New EchoStar Class C common stock available to be distributed in connection with GM debt-for-equity exchanges following the completion of the Hughes/EchoStar merger would be                     .

      Changes in the above-described assumptions and other factors could materially impact the minimum Hughes recapitalization price required in order for the minimum equity headroom condition to be satisfied as of any particular time and/or the actual outstanding shares and voting power percentages immediately after the completion of the Hughes/EchoStar merger. Such other factors include, but are not limited to:

  •  the exercise of stock options with respect to GM Class H common stock or EchoStar common stock;
 
  •  the conversion of outstanding EchoStar convertible debt securities into shares of EchoStar common stock; and
 
  •  additional equity issuances by EchoStar;

in each case prior to the completion of the Hughes/ EchoStar merger.

          Certain Covenants and Other Matters Relating to the Hughes/ EchoStar Merger. GM, Hughes, Hughes Holdings and EchoStar have agreed that they will cooperate with each other to obtain prompt termination of the waiting period applicable to the Hughes/ EchoStar merger under the Hart-Scott Rodino Act and in the process of obtaining required governmental approvals, including FCC approval. Hughes and EchoStar may be required, if necessary, to enter into settlements with certain regulatory agencies that require them to divest assets. Divestiture will not be required, however, if those actions would result in the expected synergies of the Hughes/ EchoStar merger being reduced to an amount that is no longer meaningful.

      Hughes and EchoStar also agreed that, upon the completion of the Hughes/ EchoStar merger, New EchoStar will offer multi-channel subscription television service under the DIRECTV brand name.

      In addition, EchoStar will be required to pay Hughes a $600 million termination fee, as described in greater detail at “Description of Principal Transaction Agreements— Hughes/ EchoStar Merger Agreement— Termination Fees; Expense Reimbursement,” if:

  •  the GM/ Hughes separation transactions and the Hughes/ EchoStar merger do not occur because EchoStar or Hughes terminates the merger agreement as a result of a permanent injunction or final and nonappealable order prohibiting the Hughes/ EchoStar merger in an action brought by a federal, state or local authority under U.S. antitrust laws or FCC regulations; or
 
  •  Hughes terminates the merger agreement because the waiting period applicable to the Hughes/EchoStar merger under the Hart-Scott-Rodino Act does not expire or terminate, or because of a failure to obtain FCC approval, in each case by about January 2003 (subject to extension under certain circumstances).

It is currently expected that the proceeds received by Hughes in payment of this fee would be used to repay outstanding debt obligations of Hughes and to fund Hughes’ operations.

      Furthermore, Hughes will be required to pay to EchoStar a $600 million termination fee, as described in greater detail at “Description of Principal Transaction Agreements— Hughes/EchoStar Merger Agreement— Termination Fees; Expense Reimbursement” if:

  •  the GM/Hughes separation transactions and the Hughes/ EchoStar merger do not occur because EchoStar terminates the Hughes/ EchoStar merger agreement because GM fails to obtain the requisite GM common stockholder approval of the proposals relating to the Transactions and under certain circumstances enters into an agreement with respect to a competing transaction to the Hughes/ EchoStar merger; or

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  •  EchoStar or Hughes terminates the Hughes/ EchoStar merger agreement pursuant to the relevant provisions relating to the GM board of directors’ recommendation of the proposals relating to the Transactions to GM common stockholders for their approval or pursuant to the relevant provisions relating to GM’s pursuit of a competing transaction.

      For more information regarding the terms of the Hughes/ EchoStar merger, see “Description of Principal Transaction Agreements— Hughes/ EchoStar Merger Agreement” below.

     Restrictions on Consideration of Competing Transactions and the Fiduciary Out Exception

      Under the terms of the transaction agreements, General Motors and Hughes have agreed not to solicit any proposals from third parties with respect to any merger, consolidation or other business combination involving Hughes or any acquisition of any capital stock or material portion of the assets, subject to certain exceptions, of Hughes or its subsidiaries, any acquisition of any GM Class H common stock or any combination of the foregoing, each of which we sometimes refer to as a “competing transaction.” In addition, GM and Hughes have agreed not to participate in discussions with or furnish information to any third party with respect to any competing transaction, subject to a “fiduciary out” exception described below. We sometimes refer to these agreements together as the “non-solicitation covenant.” General Motors and Hughes believe that it was necessary and appropriate to enter into the non-solicitation covenant and related provisions in order to reach agreement with EchoStar on the terms of the Transactions, particularly in light of the thorough process in which GM and Hughes had engaged of exploring and negotiating alternative transactions involving Hughes prior to entering into the transaction agreements.

      The fiduciary out exception to the non-solicitation covenant applies until the receipt of the requisite GM common stockholder approval of the proposals relating to the Transactions, which may occur several months before the Transactions would be completed. Pursuant to this exception, GM and Hughes may, subject to certain conditions, participate in discussions with and furnish information to a third party (but not solicit proposals) with respect to a competing transaction. One of the conditions for such actions is that GM shall have received a bona fide, written proposal by the third party for a competing transaction that is on terms that the GM board of directors determines in good faith, after consultation with its financial advisors and counsel, would, if completed, result in a transaction that would be more favorable to GM and its stockholders than the Transactions, taking into account such factors as the GM board in good faith deems relevant, including the identity of the third party and all legal, financial, regulatory and other aspects of the proposal, including the terms of any financing and the likelihood that the transaction will be completed, and the GM board of directors, after consultation with counsel, determines in good faith that it is required to do so in order to comply with its fiduciary duties. We sometimes refer to a proposal described in the preceding sentence as a “superior proposal.” For a more complete description of the non-solicitation covenant, see “Description of Principal Transaction Agreements— Implementation Agreement— Covenants of GM, Hughes and EchoStar— No Solicitation of Competing Transactions Involving Hughes.”

      Hughes has the right to terminate the Hughes/EchoStar merger agreement if GM proposes to enter into an agreement or arrangement with respect to a competing transaction, but only if GM is not in breach of certain provisions of the non-solicitation covenant and only if Hughes concurrently pays a termination fee of $600 million to EchoStar. GM common stockholders should understand that, if they vote to approve the proposals recommended by the GM board of directors, that action will result in the termination of the fiduciary out, which would mean that GM would have no practical ability to enter into any agreement or arrangement with respect to a competing transaction without breaching the non-solicitation covenant. However, if GM common stockholders fail to approve the proposals recommended by the GM board of directors, the Transactions could not be completed and GM common stockholders would not have the opportunity to participate in the benefits of the Transactions as described in this document and, under certain circumstances in which GM or Hughes enters into or completes a competing transaction, EchoStar would be entitled to a $600 million termination fee. Further, you should understand that, in either case, there can be no assurance that any proposal for a competing transaction would be available to Hughes and GM or, if available, would result in any agreement or arrangement for a competing transaction. Accordingly, for all of the reasons

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described elsewhere in this document, the GM board recommends that GM common stockholders vote to approve each of the proposals described in this document.

     GM Debt-for-Equity Exchanges

      Between now and the date that is six months after the completion of the Hughes/ EchoStar merger, GM has the right under the transaction documents to issue new shares of GM Class H common stock or distribute shares of New EchoStar Class C common stock that it holds after the Hughes/ EchoStar merger, as the case may be, by exchanging such shares for the satisfaction of outstanding GM liabilities held by certain of GM’s creditors, in one or more transactions. We sometimes refer to these transactions as “GM debt-for-equity exchanges.” The GM debt-for-equity exchanges would provide additional liquidity and value to General Motors as a result of the reduction of outstanding GM debt, which will help to support its credit position after the completion of the Transactions.

      Any GM debt-for-equity exchanges completed prior to the Hughes split-off would be completed by GM issuing new shares of GM Class H common stock. Any such GM debt-for-equity exchanges before the Hughes split-off would have the effect of reducing GM’s retained economic interest in Hughes and increasing the number of outstanding shares of GM Class H common stock by the amount of shares issued in the transaction. After the Hughes split-off, any GM debt-for-equity exchanges would be completed by GM distributing a portion of any shares of New EchoStar Class C common stock GM holds after the completion of the Hughes/ EchoStar merger. Any such GM debt-for-equity exchanges after the Hughes split-off would have the effect of reducing GM’s ownership interest in New EchoStar by the amount of shares distributed in the transaction. GM has agreed with EchoStar that it will in no event issue or distribute more than an aggregate of 100 million shares of GM Class H common stock or New EchoStar Class C common stock, as the case may be, pursuant to GM debt-for-equity exchanges during the specified period. In addition, you should understand that the number of shares of New EchoStar Class C common stock that GM may be entitled to distribute in GM debt-for-equity exchanges after the completion of the Transactions will depend upon, among other things, the value of GM’s remaining retained economic interest in Hughes after the Hughes recapitalization, as described further at “—Liquidity and Value to be Provided to GM.”

      If and to the extent necessary in order to satisfy the minimum equity headroom condition set forth in the Hughes/ EchoStar merger agreement as described further above, the aggregate number of shares that GM may distribute pursuant to GM debt-for-equity exchanges after the Hughes split-off will be mandatorily reduced to as low as 60 million shares pursuant to the terms of the GM/ Hughes separation agreement, as described in greater detail below. See “Description of Principal Transaction Agreements— GM/ Hughes Separation Agreement— The Hughes Recapitalization.”

      GM, Hughes, Hughes Holdings and EchoStar have agreed to cooperate with each other in connection with the execution of any GM debt-for-equity exchanges. In addition, the parties have agreed that certain securities issuances by EchoStar would have priority over GM debt-for-equity exchanges during the period beginning upon the receipt of the IRS ruling and the requisite GM common stockholder approval and concluding immediately prior to the Hughes/ EchoStar merger. During the EchoStar priority period, GM will not commence or effect any GM debt-for-equity exchanges if EchoStar provides GM with a “lockout notice” in which EchoStar informs GM that it has a good faith intention to make an underwritten offering of shares of its Class A common stock. Any lockout period applicable to GM in connection with an EchoStar offering will not last longer than 90 days and will not extend for more than 60 days past the date of completion of the Hughes/ EchoStar merger.

      During the period beginning with the date of completion of the Hughes/ EchoStar merger and concluding on the earlier of the six-month anniversary of the Hughes/ EchoStar merger and the date on which the maximum permitted number of shares will have been exchanged, the parties have agreed that any GM debt-for-equity exchanges will have priority over securities issuances by New EchoStar. During this GM priority period, if GM provides New EchoStar with a lockout notice, New EchoStar will not commence or effect any offering of its Class A common stock or Class C common stock or any securities convertible into or exchangeable therefor. Any lockout period applicable to New EchoStar in connection with any GM debt-for-

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equity exchanges during the GM priority period will not last longer than 90 days. However, New EchoStar may, under certain circumstances, create a blackout period to prevent GM from participating in any GM debt-for-equity exchanges during the GM priority period for up to 30 days in the aggregate.

      GM has agreed to consult with EchoStar regarding the material terms of any GM debt-for-equity exchanges, other than pricing, during the pre-merger EchoStar priority period described above. EchoStar has the right to object to any of such terms that it reasonably determines is either inconsistent with the IRS ruling or would otherwise be reasonably likely to materially impair or delay the completion of the Hughes/ EchoStar merger or any of the GM/ Hughes separation transactions, in which case the applicable terms would not be included in the GM debt-for-equity exchange. All expenses of any GM debt-for-equity exchanges will be borne by GM.

      For more information regarding the terms of the GM debt-for-equity exchanges, see “Description of Principal Transaction Agreements— Implementation Agreement— GM Debt-for-Equity Exchanges” below.

     Hughes Business and Dividend Financings

      Hughes has completed certain financings, and expects to engage in additional financings and related activities, intended to enable it to pay the Hughes dividend distribution of up to $4.2 billion to General Motors and to fund its business during the period prior to the completion of the Hughes split-off.

      To this end, Hughes exercised a contractual right to request PanAmSat to refinance a $1.725 billion loan from Hughes to PanAmSat. In February 2002, PanAmSat repaid this loan using cash on hand at PanAmSat, proceeds from PanAmSat’s issuance of $800 million of PanAmSat Senior Notes and $1.0 billion of borrowings under new credit facilities provided to PanAmSat by third party lenders. Hughes deposited $1.5 billion of the proceeds of the PanAmSat loan repayment into a segregated cash collateral account with GMAC. GMAC has committed to lend to Hughes up to $1.5 billion, secured by the funds deposited into the cash collateral account with GMAC, and about $500 million secured by certain other assets of Hughes. Hughes has borrowed an aggregate of about $1.875 billion under these GMAC facilities and used the proceeds to repay borrowings under certain of Hughes’ other credit facilities. Hughes retired certain of the credit facilities that were repaid. Hughes’ existing $750 million revolving credit facility was repaid and was amended and increased to $1,235 million. In addition, Hughes intends to enter into a new term loan facility of about $600 million in March 2002.

      Certain of Hughes’ borrowings, including the GMAC facilities, the revolving credit facility and the term loan facility described above, are required to be repaid on the earlier of the completion of the Hughes split-off and December 2002. If the Hughes/EchoStar merger is not completed prior to December 2002, Hughes would likely seek to refinance or obtain an extension of the maturity dates of those facilities. See “Risk Factors— Risk Factors Relating to the Transactions — Risks Relating to Hughes and EchoStar — Some Hughes Credit Facilities Mature Prior to the Termination Date of the Hughes/EchoStar Merger Agreement and Hughes May Have Difficulty Refinancing That Debt.” Upon a failure of the Hughes/EchoStar merger that results in the payment of a termination fee from EchoStar and/or a sale of PanAmSat to EchoStar, it is currently expected that Hughes would utilize the cash proceeds received to repay certain outstanding debt obligations of Hughes and to fund Hughes’ business.

      Prior to the completion of the Hughes split-off, Hughes also plans to obtain additional financing of up to $2.7 billion pursuant to a committed bank credit facility, public or private debt offerings or a combination thereof. On the day of the completion of the Hughes split-off, Hughes and GMAC will offset against each other the $1.5 billion segregated cash collateral account and the $1.5 billion loan owed to GMAC. GMAC will then immediately thereafter renew its $1.5 billion loan to Hughes. Hughes will then pay the dividend to GM described above in connection with the Hughes recapitalization, with the funds coming from the credit facilities and financing arrangements described above.

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     Hughes/EchoStar Merger Financings

      The completion of the proposed Hughes/ EchoStar merger and related transactions will require about $7.025 billion of cash. At the time of the signing of the Hughes/ EchoStar merger agreement, EchoStar had about $1.5 billion of available cash on hand and, accordingly, EchoStar and Hughes obtained $5.525 billion in bridge financing commitments for the Hughes/ EchoStar merger and related transactions.

      Since the signing of the Hughes/EchoStar merger agreement, EchoStar has raised a total of about $2.2 billion of additional cash through the sale of $700 million of EchoStar DBS Senior Notes and the $1.5 billion investment by Vivendi Universal in EchoStar Series D convertible preferred stock. The bridge financing commitments have been reduced by the total amount of these financings (to $3.325 billion). Any other financings that EchoStar completes prior to the closing of the Hughes/ EchoStar merger will further reduce the bridge financing commitments on a dollar-for-dollar basis.

      The remaining about $3.325 billion of cash required in connection with the Hughes/EchoStar merger, which we refer to as the “Hughes/EchoStar merger financing,” is expected to come from new cash to be raised by EchoStar, Hughes or a subsidiary of Hughes on or prior to the completion of the Hughes/EchoStar merger through public or private debt or equity offerings, bank debt or a combination thereof. To the extent that such cash is not raised in these ways, the bridge financing commitments are designed to fund the amount of the shortfall. The amount of the Hughes/EchoStar merger financing that may be raised by EchoStar prior to the Hughes/EchoStar merger is severely restricted by the terms of various transaction agreements among GM, Hughes and EchoStar and the terms of the bridge financing commitments.

      We currently expect that a portion of the proceeds of the Hughes/ EchoStar merger financing will be used to satisfy up to $2.7 billion of indebtedness expected to be incurred by Hughes in order to pay the Hughes dividend distribution to GM in connection with the Hughes recapitalization, and the remainder of the Hughes EchoStar merger financing, together with about $3.7 billion or more from EchoStar’s cash reserves, will be used to pay off other obligations of Hughes and to fund the operations of New EchoStar after the completion of the Transactions. The availability of the Hughes/ EchoStar merger financing is a condition to the obligations of the companies to complete the Hughes/ EchoStar merger. The Hughes/ EchoStar merger financing is not intended or expected to be sufficient for the funding requirements of the operations of New EchoStar for any substantial period of time after the completion of the Hughes/ EchoStar merger. These funding requirements are expected to be significant. See “Risk Factors—Risk Factors Relating to New EchoStar After the Transactions—Risks Relating to Liquidity and Financing Activities of New EchoStar— We Cannot Assure You That There Will Be Sufficient Funding for New EchoStar.” In addition, the agreements among EchoStar, Hughes and GM will severely restrict New EchoStar’s ability to issue any additional equity or equity-linked securities for two years following the completion of the Hughes/ EchoStar merger absent possible favorable IRS rulings. See “Description of Principal Transaction Agreements—Implementation Agreement—Preservation of the Tax-Free Status of the Hughes Split-Off” and “Risk Factors— Risk Factors Relating to New EchoStar After the Transactions— Risks Relating to Liquidity and Financing Activities of New EchoStar— New EchoStar Will be Subject to Potentially Significant Restrictions with Respect to Issuances of its Equity Securities for a Two-Year Period Following the Hughes/ EchoStar Merger.”

      Certain Completed EchoStar Financings. On December 20, 2001, EchoStar’s wholly owned indirect subsidiary, EchoStar DBS Corporation, issued $700 million aggregate principal amount of EchoStar DBS Senior Notes, which will provide funding for EchoStar and, after the Hughes/ EchoStar merger, for New EchoStar. If the Hughes/ EchoStar merger is not completed under certain circumstances, a portion of the proceeds from the EchoStar DBS Senior Notes may be used for EchoStar’s purchase of the approximately 81% interest held by Hughes’ subsidiaries in PanAmSat.

      On January 22, 2002, Vivendi Universal made a $1.5 billion equity investment in EchoStar, which will provide funding for EchoStar and, after the Hughes/ EchoStar merger, for New EchoStar. In addition, EchoStar and Vivendi Universal entered into an eight-year strategic alliance in which Vivendi Universal will develop and provide EchoStar’s DISH Network customers, and customers of New EchoStar after completion of the Hughes/ EchoStar merger, with a variety of programming and interactive television services. In

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exchange for this equity investment, EchoStar issued to a subsidiary of Vivendi Universal shares of EchoStar Series D convertible preferred stock that have the same economic rights (other than liquidation rights) and voting rights as shares of EchoStar Class A common stock and will convert into shares of EchoStar Class A common stock:

  •  at the option of the holder at any time and from time to time; and
 
  •  unless previously converted, automatically:

  •  immediately prior to the effectiveness of Hughes/EchoStar merger:
 
  •  on the first date on which the sum of (x) the number of shares of EchoStar Class A common stock into which the shares of Series D convertible preferred stock then held by Vivendi Universal are convertible on such date and (y) the number of shares of EchoStar Class A common stock then held by Vivendi Universal and which Vivendi Universal received upon prior conversion of EchoStar Series D convertible preferred stock, is less than 29,378,443 (as such number may be adjusted from time to time as necessary to reflect appropriately any stock splits, subdivisions, combinations and similar changes to EchoStar’s capital stock);
 
  •  upon any purported sale, assignment, transfer or disposition of a share of EchoStar Series D convertible preferred stock or the beneficial ownership thereof to any person other than Vivendi Universal or any wholly owned subsidiary of Vivendi Universal; or
 
  •  on January 22, 2007.

      In addition, in connection with its investment in EchoStar, Vivendi Universal received certain contingent value rights that are intended to provide protection against any downward price movements in the price of the EchoStar Class A common stock to be issued upon conversion of the EchoStar Series D convertible preferred stock. The maximum payment under the contingent value rights is $225 million if the Hughes/ EchoStar merger is completed, or $525 million if the Hughes/ EchoStar merger is not completed. In general, any amount owing under these contingent value rights would be settled by New EchoStar three years after completion of the Hughes/ EchoStar merger except under certain limited circumstances. In addition, if the Hughes/ EchoStar merger is not completed, these contingent value rights will be settled by EchoStar 30 months after the completion of the PanAmSat stock sale or the termination of each of the PanAmSat stock purchase agreement and the Hughes/ EchoStar merger agreement. Although the contingent value rights were issued to Vivendi Universal by EchoStar, New EchoStar will be responsible for this obligation after the completion of the Hughes/ EchoStar merger. Any settlement of these contingent value rights would be paid in cash or common stock at the option of EchoStar or New EchoStar, as the case may be, but if the Hughes/ EchoStar merger has been completed then these contingent value rights could be settled in common stock of New EchoStar only if certain tax-related conditions are satisfied.

      For a more complete description of the EchoStar Series D convertible preferred stock, see “EchoStar Capital Stock— EchoStar Preferred Stock— EchoStar Series D Convertible Preferred Stock.” EchoStar filed copies of or the forms of certain of the definitive agreements relating to the Vivendi Universal investment with the SEC on a Current Report on Form 8-K on December 21, 2001. For more information about how you can obtain copies of these agreements, see “Where You Can Find More Information” below.

  PanAmSat Stock Sale

      GM, Hughes and EchoStar have agreed that, in the event that the GM/ Hughes separation transactions and the Hughes/ EchoStar merger do not occur due to the failure by EchoStar to satisfy certain financing requirements for the Hughes/ EchoStar merger or due to the fact that certain regulatory-related conditions have not been satisfied, EchoStar will be required to purchase the approximately 81% interest in PanAmSat held by certain Hughes’ subsidiaries at a purchase price of $22.47 per share. EchoStar has the option to structure its purchase of Hughes’ subsidiaries interest as a merger or tender offer so that it can attempt to acquire 100% of PanAmSat in one transaction, in which case Hughes must receive at least the same amount of consideration that it would have received in the PanAmSat stock sale. EchoStar has agreed that, unless it

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has previously entered into an agreement for the acquisition of PanAmSat by merger or commenced a tender offer for all of the outstanding PanAmSat shares, it will commence an exchange offer promptly following the completion of the PanAmSat stock sale for all PanAmSat shares that remain outstanding following the completion of the PanAmSat stock sale for a purchase price of at least $22.47 per share payable, at the option of the holder, either in cash or shares of EchoStar Class A common stock. If the Hughes/EchoStar merger does occur, New EchoStar will indirectly hold the approximately 81% interest in PanAmSat.

      In the event that EchoStar fails to satisfy certain financing requirements for the Hughes/ EchoStar merger financing, or in the event that a private party brings suit under antitrust laws or FCC regulations and obtains a final and non-appealable permanent injunction or other order preventing the Hughes/ EchoStar merger, the purchase price will consist of at least $1.5 billion in cash and EchoStar will use its commercially reasonable efforts to pay the entire purchase price in cash. In the event that a federal, state or local governmental authority brings suit under U.S. antitrust laws or FCC regulations and obtains a final and nonappealable permanent injunction or other order preventing the Hughes/ EchoStar merger or if Hughes terminates the Hughes/ EchoStar merger agreement because the waiting period applicable to the Hughes/ EchoStar merger under the Hart-Scott-Rodino Act does not expire or terminate or because of a failure to obtain FCC approval, in each case by about January 2003 (subject to extension under certain circumstances), up to $600 million of the purchase price may be paid in shares of EchoStar common stock, and the remainder will be paid in cash. Subject to the satisfaction or waiver of all conditions in the PanAmSat stock purchase agreement, the parties have agreed that the completion of the PanAmSat stock sale would take place within 60 days of the termination of the Hughes/ EchoStar merger agreement for the specified reasons.

      If EchoStar purchases all of the common stock of PanAmSat held by Hughes’ subsidiaries, Hughes would remain a wholly owned subsidiary of General Motors, but would no longer have its indirect interest in PanAmSat, and GM Class H common stockholders would remain stockholders of GM. It is currently expected that the proceeds of a PanAmSat stock sale, about $2.7 billion, would be used to repay certain outstanding debt obligations of Hughes and to fund Hughes’ business.

      The PanAmSat stock sale is subject to a number of conditions which must be satisfied before the transaction could be completed. These conditions include, among other things:

  •  the expiration or termination of the waiting period applicable to the PanAmSat stock sale under the Hart-Scott-Rodino Act;
 
  •  the absence of any effective injunction or order which prevents the completion of the PanAmSat stock sale; and
 
  •  the receipt of FCC approval for the transfer of licenses in connection with the PanAmSat stock sale.

      For more information regarding the terms of the PanAmSat stock sale, see “Description of Principal Transaction Agreements— PanAmSat Stock Purchase Agreement” below.

GM Background and Considerations

     GM’s Reasons for the Transactions

      There are two principal purposes of the Transactions. First, the Transactions are expected to better position Hughes to compete in the multi-channel video programming distribution market and, overall, in the telecommunications industry, and to provide Hughes with greater opportunities and financial resources to develop an expanded competitive business and an opportunity to achieve business synergies from its combination with EchoStar that will be beneficial to New EchoStar, its stockholders and its customers. Second, the Transactions are expected to provide significant liquidity and value to General Motors, which will help to support the credit position of General Motors after the Transactions.

      Cable television companies currently account for about 80 percent of the multi-channel video programming distribution market. The telecommunications industry also has recently experienced a trend toward consolidation through transactions which in many cases seek to combine content assets with distribution assets and increase the size of the parties to the transaction in order to improve competitive

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position and drive economies of scale. This consolidation trend has been evidenced by a significant number of recent mergers and acquisitions, including America Online’s merger with Time Warner, AT&T’s acquisition of Tele-Communications, Inc. and Media One, US West’s acquisition of Continental Cablevision and Qwest’s subsequent acquisition of US West, and several other potential transactions, including the pending combination of the cable businesses of AT&T and Comcast. AOL Time Warner, AT&T and Comcast, the cable television industry leaders, are well-capitalized and have increasingly directed their marketing and advertising efforts directly against the businesses of Hughes and EchoStar. This industry consolidation and heightened competitive environment led to an increased focus by General Motors and Hughes on responding to the competitive challenges facing Hughes and its business and sparked the desire of both GM and Hughes to capitalize on the opportunities potentially available to Hughes in an environment of increasing industry consolidation.

      The Transactions are intended to enable Hughes to maintain a strong position in the increasingly competitive multi-channel video programming distribution market and to provide it with a significant opportunity to develop an expanded business and to enhance its position in a consolidating telecommunications industry. We believe that the combined businesses of Hughes and EchoStar will represent a strong competitor in the market which can achieve significant business synergies for the benefit of New EchoStar, its stockholders and its customers. These business synergies include the more efficient use of valuable spectrum, which is expected to allow New EchoStar to greatly increase the amount of programming it offers. We further believe that the Hughes/ EchoStar merger will provide Hughes with the increased financial capacity to facilitate Hughes’ strategic plans and fund Hughes’ growth initiatives. The Hughes split-off will provide the GM Class H common stockholders the ability to benefit from the expected increase in value resulting from the Hughes/ EchoStar merger and will provide them a more conventional stock interest in New EchoStar in place of their current “tracking stock” interest in the business of Hughes.

      Compounding the competitive situation facing Hughes was the impact that continued ownership of Hughes by General Motors was expected to have on GM’s other businesses, including its core automotive and related businesses. First, Hughes projected significant financing requirements over the next few years to support its key growth initiatives, including the expansion of the DIRECTV subscriber base and the development of new services. The increase in leverage that would be required in order to meet these financing requirements was expected to result in downward pressure on GM’s credit ratings, which are an important element to GM’s business success. General Motors, including its wholly owned subsidiary, GMAC, is the world’s largest non-governmental borrower. General Motors sells its vehicles through a dealer network, and GMAC typically provides the financing for dealers to acquire their inventory. In turn, when dealers sell automotive vehicles to retail customers, those sales are often financed through GMAC. As a result of this business model, GMAC is continuously engaged in debt financings in the capital markets, and often has nearly $100 billion in debt outstanding. Even a slight decline in GM’s overall credit ratings could have a negative impact on GMAC’s ability to borrow on a cost-effective basis. Second, Hughes’ projected net losses were expected to adversely impact reported earnings attributable to GM $1 2/3 par value common stock and the related earnings per share.

      From GM’s perspective, the Transactions present an opportunity to meet its own liquidity objectives over the near term and support its credit rating. As part of the Transactions, GM will restructure its retained economic interest in Hughes in order to realize some of the economic value arising from GM’s ownership of Hughes. To accomplish this objective, prior to the Hughes split-off, GM will receive a dividend from Hughes of up to $4.2 billion in exchange for a corresponding reduction of its retained economic interest in Hughes. For more information about the Hughes dividend distribution, see “—Description of the Transactions— The GM/ Hughes Separation Transactions— The Hughes Recapitalization” and “Description of Principal Transaction Agreements— GM/ Hughes Separation Agreement— The Hughes Recapitalization.” In addition, in connection with the Transactions, GM may have the ability to conduct GM debt-for-equity exchanges, as described in greater detail at “—Description of the Transactions— GM Debt-for-Equity Exchanges” and “Description of Principal Transaction Agreements— Implementation Agreement— GM Debt-for-Equity Exchanges.” Any GM debt-for-equity exchanges would allow GM to reduce a portion of its outstanding liabilities in exchange for a portion of its retained economic interest in Hughes or, after the Hughes/ EchoStar

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merger, a portion of its ownership interest in New EchoStar, if any. Finally, subject to IRS approval, GM may retain any such ownership interest in New EchoStar Class C common stock, which would permit GM to benefit from any increase in value resulting from the Hughes/ EchoStar merger or the operation of the New EchoStar business following the completion of the Hughes/ EchoStar merger. For more information regarding the factors that will affect whether GM will have any such ownership interest and, if so, the size of that ownership interest, see “—Description of the Transactions— The Hughes Recapitalization— Illustration of the Effect of the Hughes Recapitalization.” GM’s receipt of the Hughes dividend distribution, GM’s benefit from debt reduction resulting from any GM debt-for-equity exchanges and any retention by General Motors of an ownership interest in New EchoStar after the Transactions are currently expected to provide GM with significant liquidity and value, which would help to support its credit position after the completion of the Transactions.

      Further, in the context of increasing competition and consolidation by competitors of Hughes, General Motors has been required during the last several years to spend increasing amounts of board of directors, management and staff time and other resources to address the strategic challenges facing Hughes and its businesses. The GM/ Hughes separation transactions and the Hughes/ EchoStar merger will allow General Motors to allocate resources currently devoted to those matters to GM’s core automotive and other businesses.

     Alternatives to the Transactions

      Before determining to proceed with the GM/ Hughes separation transactions and the Hughes/ EchoStar merger, General Motors and Hughes carefully considered several strategic alternatives involving Hughes. In considering these strategic alternatives, General Motors and Hughes focused on the effect of such alternatives on the holders of each class of GM common stock, the effect of such alternatives on both classes of GM’s common stockholders, taken together, and the potential of such alternatives to maximize value for GM common stockholders.

      As a preliminary matter, General Motors determined that any strategic transaction involving Hughes could result in a level of corporate and stockholder tax so significant that it would make the transaction uneconomic unless it were accomplished on a tax-free basis. Accordingly, General Motors determined that any potential strategic transactions involving Hughes should be structured to be tax-free for U.S. federal income tax purposes to General Motors and its stockholders. Accordingly, GM is currently seeking a ruling from the IRS regarding the tax-free status of the Hughes split-off and the receipt of that ruling is a condition to the completion of the Transactions. For more information, see “—Material U.S. Federal Income Tax Considerations Relating to the Transactions” below.

      In addition, General Motors considered the impacts of a potential transaction if it were structured in a manner that would result in a recapitalization of GM Class H common stock into GM $1 2/3 par value common stock at a 120% exchange ratio, as currently provided for under certain circumstances in accordance with the provisions of the GM restated certificate of incorporation. GM considered the substantial dilution that would likely reduce the value of the GM $1 2/3 par value common stock as well as the substantial change that would result in the form and nature of the investment of GM Class H common stockholders, who under such provisions would have their “tracking stock” investment in the Hughes business replaced with GM $1 2/3 par value common stock representing a more conventional investment in all of GM’s operations. General Motors believed that most GM Class H common stockholders had purchased their stock in order to make an investment based on the businesses of Hughes rather than an investment based on all of GM’s businesses, and considered that the frustration of that investment objective that would result from a recapitalization of GM Class H common stock into GM $1 2/3 par value common stock would likely result in substantial adverse trading activity that would exacerbate the anticipated adverse effect on the trading value of the stock to the detriment of both classes of investors. Accordingly, and in light of the substantial benefits that the contemplated strategic transactions would be expected to have for the holders of both classes of GM common stock, General Motors determined that it would be in the best interests of all of GM’s common stockholders to structure the contemplated strategic transactions involving Hughes so as not to result in a recapitalization of GM Class H common stock into GM $1 2/3 par value common stock. Accordingly, the proposed amendment of the GM restated certificate of incorporation will, among other things, expressly provide that the Transactions

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will not result in a recapitalization of GM Class H common stock into GM $1 2/3 par value common stock. For more information, see “—Description of the Transactions— The GM/ Hughes Separation Transactions— Hughes Split-Off— No Pro Rata Distribution of the Hughes Dividend Distribution; No 120% Recapitalization of GM Class H Common Stock into GM $1 2/3 Par Value Common Stock” and “—Amendments to the GM Restated Certificate of Incorporation.”

      General Motors and Hughes determined that, in order to address the strategic challenges facing Hughes and its businesses, to facilitate its planned strategic growth initiatives and to preserve and enhance stockholder value for GM common stockholders, General Motors and Hughes should pursue a transaction which would separate Hughes from General Motors and position it to engage in a business combination with another company in the telecommunications industry. In reaching that determination, General Motors and Hughes considered the following principal alternatives to such a transaction:

  •  continuation of the existing business strategy by maintaining Hughes as a wholly owned subsidiary of General Motors, while maintaining the GM Class H common stock as a “tracking stock” of GM reflecting the financial performance of Hughes;
 
  •  an initial public offering, spin-off or split-off of a portion or various portions of the Hughes business, such as its DIRECTV business, either with or without a pre-arranged business combination; and
 
  •  a separation of Hughes from General Motors in the absence of a pre-arranged strategic combination, together with a significant investment by a strategic investor or additional debt financing.

      After careful consideration, General Motors and Hughes determined that maintaining Hughes’ current status as a wholly owned subsidiary of General Motors would limit Hughes’ ability to achieve its strategic objectives and risk degrading its competitive position, particularly in view of the increasing consolidation within the industry. In addition, as described further at “—GM’s Reasons for the Transactions” above, maintaining Hughes as General Motors’ wholly owned subsidiary was expected to have adverse effects on GM’s credit rating and financial position. Further, General Motors and Hughes anticipated that the market reaction to the announcement of maintaining Hughes’ current status would be negative in view of the strategic challenges currently facing Hughes.

      General Motors and Hughes evaluated the possibility that a substantial portion of the Hughes business, such as its DIRECTV business, might be divested on more attractive terms as part of a strategic business combination with another company. If a portion of the Hughes business were separated from General Motors, the remaining Hughes business could either be retained by General Motors or disposed of through a spin-off or split-off or similar transaction, an initial public offering or a sale to a strategic partner, or some combination of several of these transactions. After giving careful consideration to a variety of potential alternative transaction structures, both General Motors and Hughes realized that the separation of a portion of the Hughes business might be inconsistent with Hughes’ overall strategic objectives and would result in a loss of the various synergies currently enjoyed by the various Hughes businesses. If GM Class H common stock were to remain in existence as a “tracking stock” of GM and continue to reflect the financial performance of the retained Hughes business, this option could also give rise to complex issues relating to the valuation of the DIRECTV and other Hughes assets. Moreover, under any scenario involving the separation of a portion of the Hughes business, General Motors and Hughes expected that General Motors would receive less liquidity in respect of its retained economic interest in Hughes, and while the retained business could potentially represent a source of growth and value in the future, the financing needs of the retained business would likely exert unfavorable pressure on the financial position of General Motors in the near term. In addition, General Motors and Hughes were advised that any structure involving a separation of a portion or portions of the Hughes business would likely be less tax efficient.

      A separation of Hughes from GM in the absence of a pre-arranged business combination could better position Hughes to obtain financing for Hughes’ near-term operations through an investment by a strategic investor or the incurrence of additional debt. In addition, this alternative would allow General Motors to focus its board of directors, management, staff time and other resources on GM’s core automotive and other businesses. However, General Motors and Hughes determined that a separation of Hughes in the absence of a

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pre-arranged business combination would be unlikely to provide the financial resources to permit Hughes to expand its business and provide GM with the liquidity it desired in respect of its retained economic interest in Hughes. Further, because of the time required in order to implement the separation of Hughes from General Motors, there was a significant risk that the parties suitable to combine with the free-standing Hughes would undertake to pursue other strategic transactions while General Motors and Hughes implemented the separation of Hughes from General Motors and, as a result, be unwilling or unable to enter into a strategic transaction with Hughes after such time as it became a free-standing entity.

      Coupling the Hughes split-off pursuant to the GM/ Hughes separation transactions with the Hughes/ EchoStar merger offered the same benefits as a separation in the absence of a pre-arranged business combination but also enhanced the likelihood that Hughes could meet its strategic objectives by providing Hughes with greater opportunities and financial resources to expand its business than might otherwise be possible if Hughes were separated from GM in the absence of a pre-arranged business combination. In addition, General Motors and Hughes believed that the Hughes split-off combined with the Hughes/ EchoStar merger would enable the combined company to achieve significant business synergies for its benefit and the benefit of its stockholders and customers.

      After carefully considering each of the alternatives described above, General Motors and Hughes made the judgment that the Transactions, taken as a whole, offered the best solution to the strategic challenges and business objectives of General Motors and Hughes as described further above at “—GM’s Reasons for the Transactions.”

     GM’s Development of the Transactions

      The proposed GM/ Hughes separation transactions and the Hughes/ EchoStar merger arise from the long-standing desire of both General Motors and Hughes to expand the business of Hughes while enhancing the value of the Hughes business to General Motors and its stockholders.

      From time to time, General Motors and Hughes have reviewed Hughes’ business strategy and engaged in discussions with industry participants about possible business combinations or other strategic transactions involving Hughes. As part of these efforts, Hughes and EchoStar engaged in preliminary discussions regarding the possibility of pursuing a strategic transaction between the two companies. However, those discussions did not result in any workable arrangements for both Hughes and EchoStar that warranted further exploration.

      Beginning in mid-2000, following the completion in July of the restructuring of GM’s retained economic interest in Hughes pursuant to an exchange offer of newly issued shares of GM Class H common stock for then outstanding shares of GM $1 2/3 par value common stock and the contributions by GM of newly issued shares of GM Class H common stock to certain of its employee benefit plans, General Motors and Hughes management and their respective financial, legal, tax, accounting and other advisors initiated an intensive assessment of the strategic objectives of Hughes and the financial, legal, tax, accounting and other issues relating to Hughes’ strategic position and alternatives. Consistent with this approach, Hughes completed the sale of its satellite manufacturing operations to Boeing in October 2000, thereby concentrating its activities on the multi-channel video programming distribution marketplace and related telecommunications businesses.

      In connection with this review, General Motors and Hughes analyzed and compared the benefits of a strategic combination involving Hughes and another company in the telecommunications industry with significant distribution and/or content production capabilities to other strategic alternatives, including expanding the business of Hughes under continued GM ownership while addressing the financing needs of the Hughes businesses and of GM’s other businesses and maximizing stockholder value. General Motors and Hughes carefully considered several strategic alternatives which are discussed in greater detail at “—Alternatives to the Transactions” above. However, for the reasons described at “—Alternatives to the Transactions” above, General Motors and Hughes over time determined that pursuing a combination of Hughes’ business with another company in the telecommunications industry represented the best alternative for achieving their objectives.

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      In conjunction with the ongoing assessment of the alternatives available to Hughes, in the fall of 2000 Hughes met on a preliminary basis with telecommunications companies in an effort to assess their potential interest in a business combination involving Hughes. While most of these companies expressed some degree of interest in pursuing discussions about a possible alliance with Hughes, the scope and terms of alliance in which they were interested varied largely from one company to another. Based on their preliminary indications of interest, a handful of parties, including EchoStar and Sky Global Networks (a subsidiary of The News Corporation Limited), appeared ready to explore a potential merger transaction with Hughes following its separation from General Motors. Other companies preliminarily indicated interest in making a minority equity investment in Hughes following a separation of Hughes from General Motors. A few of the companies approached by Hughes indicated preliminary interest in acquiring only Hughes’ interest in PanAmSat. Each of these options was considered by management of GM and Hughes in view of the strategic objectives discussed above and at “—GM’s Reasons for the Transactions.”

      After considering the preliminary indications of interest, General Motors and Hughes determined to postpone discussions with parties only interested in minority investments until a later stage due to the fact that several of them expressed a further interest in participating as a minority investor in a transaction involving a combination of Hughes’ business with that of another industry participant. In addition, as a result of their assessment of the relative merits of the strategic alternatives available with respect to Hughes, General Motors and Hughes decided to focus principally on a transaction involving all of Hughes and decided that potential discussions with buyers interested only in Hughes’ interest in PanAmSat would be handled as a separate process.

      Over time, several of the parties indicated that they had no interest in pursuing further discussions regarding a strategic transaction involving Hughes. As a result, by late fall of 2000, General Motors and Hughes were engaged in serious discussions about a merger with only a few potential strategic partners, including Sky Global Networks. While EchoStar was also considered a potential strategic partner, at this point in time General Motors and Hughes had reservations regarding the extent to which EchoStar and Hughes would have difficulty in obtaining the regulatory clearance that would be needed for a merger of Hughes and EchoStar. In particular, EchoStar had commenced in February 2000 a lawsuit against Hughes (and other parties) alleging antitrust violations by Hughes, premised in part on satellite television representing a separate competitive market (or a separate submarket of the multi-channel video distribution market). Although General Motors and Hughes considered these allegations to be without merit, they were concerned that obtaining regulatory clearance for a merger of Hughes and EchoStar might be more difficult, regardless of the parties’ true competitive environment, if EchoStar were to continue to maintain the view of the competitive marketplace that it had presented in this lawsuit. Accordingly, at that point in time EchoStar was not considered the most promising candidate with which Hughes could negotiate and consummate a business combination and, based on the indication of interest EchoStar had expressed, only preliminary discussions with it were pursued.

      As the process of pursuing a strategic transaction involving Hughes continued, GM and Hughes management, with the assistance of their respective advisors, continued to evaluate the financial, legal, tax and accounting issues that would be presented in connection with such a transaction, and the Hughes board of directors, GM capital stock committee and GM board of directors similarly considered these matters in progressively greater detail. In this regard, the key meetings of the Hughes board of directors, GM capital stock committee and GM board of directors are described below. In connection with these and other meetings, certain members of the GM board of directors, including George M.C. Fisher, Nobuyuki Idei and Lloyd D. Ward, recused themselves from the discussions regarding potential transactions due to potential conflicts of interest resulting from their positions with other parties involved or potentially involved in discussions or negotiations with Hughes. Each of the meetings described below was attended by internal counsel of GM and/or Hughes and, in many cases, by outside counsel representing GM and Hughes in connection with the potential transactions.

      December 5, 2000 General Motors Board Meeting. At the December 5, 2000 meeting of the GM board of directors, GM management presented a report, prepared by Mr. Eric A. Feldstein, Vice President and Treasurer of GM, which reviewed the status of the discussions that had been held relating to a Hughes

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strategic transaction and GM management’s preliminary evaluation of the benefits that could be obtained from any transaction with the various potential parties. In addition, at this meeting, GM management and outside legal counsel presented a report outlining a process for oversight by the Hughes and GM boards of directors of the development of a specific transaction that would address substantive and procedural fairness considerations between the two classes of GM common stock that were likely to arise in the development of such a transaction. Ms. Roxanne S. Austin, then Corporate Senior Vice President and Chief Financial Officer of Hughes, also presented a report on the Hughes business plan. This meeting followed a meeting of the Hughes board of directors on November 29, 2000 which had reviewed the same subjects and had endorsed Hughes pursuing further the strategic opportunities reported to be available to it.

      Following discussion of these matters, the GM board of directors authorized and directed GM and Hughes management to explore and develop jointly the terms of possible specific transactions involving Hughes and the retention of independent investment banking firms separately by General Motors and Hughes to assist in these efforts. Also as part of this effort, and consistent with established governance policies of GM and Hughes, the Hughes board of directors was to review and to make recommendations to the GM board of directors with regard to any such transaction that might be proposed by management. The GM board of directors further delegated to the GM capital stock committee the responsibility to oversee the activities to be undertaken by management of General Motors and of Hughes in developing the terms of a possible transaction involving Hughes and the responsibility to review and make recommendations to the GM board with regard to any such transaction that might be proposed by Hughes or GM management, including the fairness to the holders of both classes of GM common stock of the process for determining the terms of a transaction, any conditions to approval or completion of such a transaction that should be imposed in order to protect the interests of the holders of either class of GM common stock and the fairness to the holders of each such class of stock of any transaction proposed. Also, the GM board of directors directed GM and Hughes management and the appropriate financial, legal, tax, accounting and other advisors to General Motors and Hughes to carry out their responsibilities with respect to the potential transactions in accordance with the purposes and within the framework of the above-described process. As part of the GM capital stock committee’s oversight activities, outside counsel to the GM capital stock committee briefed GM capital stock committee members on a regular basis on the status of the discussions and the development of transaction terms and participated in the reports given at all of the meetings referred to below.

      By February 2001, two potential strategic partners for Hughes had emerged from its discussions about a strategic transaction, one of which was Sky Global Networks. During this period, representatives of Sky Global Networks and its parent company, The News Corporation, met with representatives of General Motors and Hughes and developed parameters for a potential splitoff of Hughes and subsequent merger of Hughes and Sky Global Networks. Preliminary discussions with the other potential strategic partner were also pursued but by the end of this period these discussions terminated because the parties were unable to reach a common understanding on fundamental terms for a transaction.

      In March of 2001, General Motors and Hughes suspended their discussions with Sky Global Networks and The News Corporation in order to assess the negative reaction expressed by some GM Class H common stockholders following public speculation regarding a possible Hughes/ Sky Global Networks transaction, as well as reservations about the benefits of a transaction with Sky Global Networks to General Motors and Hughes expressed by Hughes senior management. General Motors and Hughes began to reconsider transactions not involving a combination with a strategic partner, including separation transactions involving stand-alone strategic investments in Hughes or debt financing at a higher level of leverage than that customarily used by Hughes in its business. Hughes also re-engaged in discussions with EchoStar to explore whether a business combination between Hughes and EchoStar was feasible. Various structures for such a transaction were considered at this time and General Motors’ and Hughes’ reservations relating to the pending EchoStar lawsuit were discussed.

      In April of 2001, Sky Global Networks and The News Corporation proposed economic terms for a strategic combination of Hughes and Sky Global Networks that were more attractive to General Motors and Hughes than the terms previously proposed by these companies. As a result, discussions began again regarding a possible transaction involving Hughes and Sky Global Networks. To facilitate further discussions, in mid-

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April 2001, General Motors and Hughes developed and presented to Sky Global Networks an outline of acceptable parameters for a split-off of Hughes and combination of Hughes and Sky Global Networks, including mechanisms for providing adequate liquidity to General Motors in the context of a separation of Hughes from GM. In response to the outline, Sky Global Networks and The News Corporation presented specific proposed transaction terms at a meeting of senior executives of The News Corporation with GM and Hughes senior executives and their financial and legal advisors.

      From time to time during February, March and April, 2001, the GM capital stock committee, the Hughes board of directors and the GM board of directors received information and updates regarding the status of the discussions. For example, at the February 6, 2001 and March 5, 2001 meetings of the GM board of directors, Mr. John M. Devine, Vice Chairman and Chief Financial Officer of GM, presented status reports and answered questions relating to the discussions with various parties regarding the possibility of a strategic transaction involving Hughes. Also, at the March 6, 2001 special meeting of the Hughes board of directors, Mr. Michael T. Smith presented a report regarding these matters. Other updates were provided to the Hughes board of directors at its March 27, 2001 and April 30, 2001 meetings.

      At its March 23, 2001 meeting, the GM capital stock committee accepted the determination of Mr. John F. Smith, Jr., Chairman of the Board of Directors of General Motors, that, in view of the family relationship between him and Mr. Michael T. Smith, then Chairman of the Board of Directors and Chief Executive Officer of Hughes, Mr. John F. Smith, Jr. should recuse himself from participation as a member of General Motors management and of the General Motors and Hughes boards of directors in consideration of a potential strategic transaction involving Hughes. It was determined that Mr. G. Richard Wagoner, Jr., President and Chief Executive Officer of GM, would participate directly in coordinating the development by GM and Hughes management of a strategic transaction relating to Hughes and would report to the committee on a periodic basis on the matter. Mr. John F. Smith, Jr. subsequently played no role in General Motors’ consideration of a potential strategic transaction involving Hughes, and did not participate in the meetings of the Hughes board of directors, the GM capital stock committee and the General Motors board of directors discussed below, until October 2001, roughly two months after Mr. Michael Smith’s retirement from Hughes (as discussed below). Also at its March 23, 2001 meeting the GM capital stock committee reviewed the issues that might arise in developing a strategic transaction involving Hughes as to which the interests of GM’s two classes of common stockholders might diverge and the processes that should be followed by GM and Hughes to assure fair consideration of the interests of both classes of common stockholders.

      April 30, 2001 Hughes Board Meeting. At the April 30, 2001 meeting of the Hughes board of directors, after discussion of the proposal made by Sky Global Networks and The News Corporation and an update by Hughes management regarding other alternatives for a strategic transaction involving Hughes, the Hughes board of directors recommended that Hughes management, working together with GM management, focus principally on the proposal made by Sky Global Networks and The News Corporation. The Hughes board of directors, however, did not believe that further negotiations with Sky Global Networks and The News Corporation should be conducted on an exclusive basis, and directed that the process remain open to proposals from other parties.

      May 1, 2001 General Motors Board Meeting. At the May 1, 2001 meeting of the GM board of directors, GM and Hughes management updated the GM board of directors regarding the status of the discussions relating to a possible transaction involving Hughes and the transaction proposal made by Sky Global Networks and The News Corporation. The GM board of directors also reviewed and considered the results of the Hughes board meeting on the prior day. Mr. Wagoner led a discussion of these matters and answered questions, with input from Ms. Austin, Mr. Warren G. Andersen, Assistant General Counsel of GM, Mr. Feldstein, Mr. Eddy W. Hartenstein, Corporate Senior Executive Vice President of Hughes, and Mr. Joseph A. Walker, Senior Advisor to GM.

      Following discussion of these matters, GM and Hughes management recommended to the GM board of directors that General Motors and Hughes take further steps to pursue, on a non-exclusive basis, the possibility of a transaction involving a split-off of Hughes and subsequent merger of Hughes and Sky Global Networks based upon the proposal made by Sky Global Networks and The News Corporation. Based on,

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among other things, the assessment that a combination of Sky Global Networks and Hughes would create a strong global media group, involving content, distribution and emerging technology capabilities and meaningful operating synergies, and that the combination would provide both the capital necessary to finance ongoing Hughes business strategies and adequate liquidity to General Motors in the context of a separation of Hughes from GM, the GM board of directors approved this recommendation of management. The GM board of directors authorized representatives of General Motors and of Hughes to engage in further discussions and negotiations with Sky Global Networks and The News Corporation with the goal of seeing if definitive agreements could be reached based on their proposal. This decision to proceed with the negotiation of definitive documentation for a Hughes/ Sky Global Networks business combination was subject to the resolution of certain issues and concerns raised by management with respect to the proposal made by Sky Global Networks and The News Corporation. Immediately following the May 1, 2001 meeting of the GM board of directors, General Motors issued a press release describing the actions taken at the meeting with respect to the further pursuit of discussions and negotiations with Sky Global Networks and The News Corporation.

      On May 14, 2001, General Motors received a letter from EchoStar’s Chairman and Chief Executive Officer, Charles W. Ergen, indicating EchoStar’s desire to pursue a transaction involving the combination of Hughes with EchoStar. This letter was followed on May 17, 2001 by a formal proposal by EchoStar relating to a split-off of Hughes from General Motors and subsequent merger of Hughes and EchoStar involving a cash distribution by Hughes to GM in connection with the split-off and a stock-for-stock exchange in the merger.

      During the second half of May and June 2001, General Motors and Hughes management evaluated this EchoStar proposal and met with representatives of EchoStar to further develop and refine their understanding of the proposal. In these discussions, EchoStar proposed that the parties consider agreeing to a joint operating agreement under which they would share satellite capacity in the event that a merger of their operations was not permitted. This alternative was analyzed and rejected by the parties as impractical due to a number of issues, including the need to agree on compatible technologies, the possible competitive disadvantages that conversion to compatibility could cause one or both parties during the conversion process, the difficulties of placing the most important assets of their respective businesses under joint control, concerns about investing in new technologies without long-term unitary control of the fruits of the investment and resolving the problems that could occur upon termination of any joint operating arrangement. In late June, General Motors and Hughes concluded that, despite the significant synergies and value expected to be created by a merger of Hughes and EchoStar, a transaction with EchoStar on the terms presented was not as attractive an alternative as the transaction then being proposed by Sky Global Networks and The News Corporation. This judgment was based primarily on the determination that the economic terms then proposed by EchoStar were less desirable to General Motors, Hughes and their stockholders, the belief that the transaction proposed with Sky Global Networks had a greater certainty of completion and continuing concerns regarding the regulatory issues involved in a transaction with EchoStar. On July 9, 2001, General Motors and Hughes expressed their concerns to EchoStar in a written response to the EchoStar proposal.

      From May through July 2001, General Motors and Hughes, with the assistance of their respective financial, legal, tax, accounting and other advisors, continued their discussions with Sky Global Networks and The News Corporation and their advisors regarding the possibility of a combination of Hughes and Sky Global Networks following a separation of Hughes from GM. During this period of May through July 2001, GM and Hughes management provided periodic updates and information to the GM capital stock committee, the Hughes board of directors and the GM board of directors regarding the status of potential transactions involving the combination of Hughes with Sky Global Networks or EchoStar. In particular, at the May 21, 2001 and May 31, 2001 meetings of the Hughes board of directors and the June 25, 2001 and July 5, 2001 joint meetings of the Hughes board of directors and the GM capital stock committee, Hughes and GM management provided reports regarding the status of these discussions. On May 25, 2001, Mr. Michael T. Smith retired as Chairman and Chief Executive Officer of Hughes. Mr. Harry J. Pearce was elected as the new Chairman of Hughes, and Mr. Jack A. Shaw was appointed as the new Chief Executive Officer of Hughes. In addition, at the June 5, 2001 meeting of the GM board of directors, Mr. Devine, Mr. Feldstein and Mr. Shaw reported to the GM board of directors regarding the status of these discussions.

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      EchoStar Public Proposal. On August 5, 2001, EchoStar publicly disclosed a proposal to merge Hughes into EchoStar in an all-stock transaction. A letter from EchoStar outlining the proposal was sent to the GM board of directors and simultaneously publicly released. The terms of the proposed merger included the distribution of 0.75 shares of EchoStar common stock in exchange for each share of GM Class H common stock. The proposal was reviewed at an August 7, 2001 meeting of the General Motors board of directors. General Motors and Hughes determined that the terms of the transaction, as then proposed by EchoStar, did not address certain of the key objectives of GM and Hughes with respect to such a transaction, including the lack of a cash component for GM in respect of its retained economic interest in Hughes, assurance of a tax-free transaction for GM and its stockholders and a means for protecting the interests of General Motors and Hughes in the event that a merger of Hughes and EchoStar could not be consummated due to regulatory difficulties. As such, GM and Hughes determined that the terms as then proposed by EchoStar were, considered as a whole, inferior to the terms previously proposed by EchoStar. However, due to the significant potential synergies and value expected to be created by a merger of Hughes and EchoStar, General Motors and Hughes determined to continue discussions with EchoStar regarding the possibility of a combination of Hughes and EchoStar, in parallel with the ongoing discussions relating to a combination of Hughes with Sky Global Networks. In these continuing discussions, General Motors, Hughes and EchoStar discussed alternative deal structures and explored additional means of adequately protecting General Motors and Hughes in the event that regulatory clearance for a merger of Hughes and EchoStar could not be obtained.

      On August 19, 2001, EchoStar proposed to General Motors and Hughes two alternative transaction structures designed to address some of the concerns previously expressed by GM and Hughes. The first alternative was structured as a single-step combination of Hughes’ business with EchoStar’s and consisted of a reduction of $6.7 billion of GM’s retained economic interest in Hughes in exchange for $5.0 billion of cash and a $1.7 billion promissory note to be followed by a separation of Hughes from General Motors and a merger of Hughes into EchoStar in which 0.75 shares of EchoStar common stock would be exchanged for each share of GM Class H common stock. The second alternative was structured as a two-step combination of Hughes’ business with EchoStar’s and was designed to provide funding for the Hughes business in the near term, before regulatory clearance could be achieved for a merger of Hughes and EchoStar. It consisted of the initial purchase by EchoStar of Hughes’ interest in PanAmSat for $3.7 billion of cash and $0.3 billion of EchoStar common stock and the subsequent merger of PanAmSat into EchoStar, providing the public holders of PanAmSat common stock with EchoStar common stock at the same valuation as EchoStar’s purchase of Hughes’ interest in PanAmSat. The second option also involved a reduction of GM’s retained economic interest in Hughes and a separation and merger transaction on the same terms as the first option, with these transactions being executed at a later time following the receipt of all applicable stockholder and regulatory approvals. Both options provided for a $600 million mutual break-up fee under certain circumstances in the event that certain regulatory clearances for the proposed transaction were not received.

      Throughout August, September and October 2001, while simultaneously continuing discussions with Sky Global Networks and The News Corporation, General Motors, Hughes and EchoStar, with assistance from their respective advisors, continued their discussions regarding the possibility of a strategic transaction along the lines EchoStar had proposed. Among the matters discussed were the availability of financing for the contemplated transactions and the regulatory issues that would be faced in obtaining clearance for a merger of Hughes and EchoStar. Analysis of the regulatory issues associated with a merger of EchoStar and Hughes continued. As part of this effort, Hughes and EchoStar exchanged information regarding recent developments and trends in their competitive environment, including the increase in competition each of Hughes and EchoStar were encountering from cable television companies and other competitors due to technological advancements and the growing implementation by cable companies of newer technology in 2001, including the growth of digital cable. This significant evolution and expansion of competition in the market for multi-channel voice distribution and the fact that a merger between Hughes and EchoStar would increase competition in that market caused EchoStar to agree in these discussions that it was prepared to withdraw its suit. These developments lessened the concerns of General Motors and Hughes regarding the regulatory issues that might be involved in a transaction between EchoStar and Hughes.

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      During this time, GM and Hughes management provided periodic updates to the GM capital stock committee, the Hughes board of directors and the GM board of directors, including, among other things, information regarding the status of potential transactions involving Sky Global Networks and EchoStar. In these updates, GM and Hughes management reported on the status of the development of a possible transaction involving Hughes, including the status of discussions with Sky Global Networks and The News Corporation and the status of discussions with EchoStar, and described various open issues associated with each of the potential transactions.

      At the August 29, 2001 joint meeting of the Hughes board of directors and the GM capital stock committee, management of GM and Hughes reported on the EchoStar proposals and discussed potential regulatory issues associated with a combination of Hughes with EchoStar. At this meeting, Mr. Feldstein, Mr. Hartenstein and Mr. Walker provided an update regarding various aspects of the negotiations with both parties. On September 5, 2001, at another joint meeting of the Hughes board of directors and the GM capital stock committee, Mr. Feldstein and Mr. Walker presented an update on the status of discussions with both Sky Global Networks and The News Corporation and EchoStar.

      At additional joint sessions of the Hughes board of directors and the GM capital stock committee on September 26 and September 28, 2001, Mr. Devine, Mr. Shaw, Mr. Feldstein and Mr. Walker provided further status reports regarding the negotiations relating to both potential transactions. In addition, concerns on the part of General Motors and Hughes with the financing arrangements available for an EchoStar transaction and with the antitrust issues that would be faced in completing a transaction were discussed. At the September 28, 2001 meeting, the Hughes board of directors and the GM capital stock committee, after a discussion of the merits and risks of both proposed transactions, authorized the management of General Motors and Hughes to proceed with final negotiations with Sky Global Networks and The News Corporation to resolve all of the open issues in connection with a transaction involving Hughes and Sky Global Networks, subject to board approval of the final terms and conditions. At the same time, the Hughes board of directors, with the endorsement of the GM capital stock committee, authorized Hughes management to continue discussions with EchoStar with a view towards providing EchoStar an opportunity to submit a final offer with respect to a transaction involving Hughes that would address the concerns which General Motors and Hughes had with EchoStar’s previous proposal. At the October 2, 2001 meeting of the GM board of directors, Mr. Devine and Mr. Walker provided an update on both potential transactions to the GM board of directors.

      October 17, 2001 General Motors Board Meeting. At the October 17, 2001 meeting of the GM board of directors, GM and Hughes management provided an update regarding the status of the development of a possible transaction involving Hughes, including the status of discussions with Sky Global Networks and The News Corporation and the status of discussions with EchoStar. Management of GM and Hughes presented a description of the proposed terms of each of the transactions, including the relative advantages and disadvantages of each such transaction, and identified the remaining open issues associated with each transaction. After discussion of these matters, the GM board of directors authorized management of GM and Hughes to continue negotiations with each of Sky Global Networks and The News Corporation and EchoStar. At this time, the GM board of directors determined to reconvene on October 19, 2001 for a further status update regarding these matters.

      Following the October 17, 2001 GM board of directors meeting, GM and Hughes, with the assistance of their respective financial, legal, tax, accounting and other advisors, continued to discuss with each of Sky Global Networks and The News Corporation and EchoStar and their respective advisors regarding the terms of, and definitive documentation relating to, a possible transaction involving a combination of Hughes with each of these companies following the separation of Hughes from GM pursuant to a split-off.

      October 19, 2001 General Motors Board Meeting. At the October 19, 2001 meeting of the GM board of directors, GM and Hughes management presented a further update regarding the status of the development of a possible transaction involving Hughes, including the status of discussions with Sky Global Networks and The News Corporation regarding a combination of Hughes with Sky Global Networks and the status of discussions with EchoStar regarding a combination of Hughes with EchoStar. Management of GM and Hughes described the proposed terms of each of the transactions, including the relative advantages and

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disadvantages of each such transaction, and identified the remaining open issues associated with each transaction. After discussion, the GM board of directors authorized management of GM and Hughes to continue negotiations with each of Sky Global Networks and The News Corporation and EchoStar, with a view towards resolving all remaining open issues as soon as practicable so that the GM board of directors could consider both transactions. The GM board of directors determined to reconvene on October 27, 2001 for this purpose.

      Following the October 19, 2001 GM board of directors meeting, GM and Hughes, with the assistance of their respective financial, legal, tax, accounting and other advisors, continued discussions and negotiations with Sky Global Networks and The News Corporation and with EchoStar, in each case with their respective advisors, regarding the terms of, and definitive documentation relating to, a possible transaction involving a combination of Hughes with each of these companies following the separation of Hughes from GM pursuant to a split-off.

      As a result of the negotiations during this period among GM, Hughes, Sky Global Networks and The News Corporation, the terms of a transaction involving the combination of Hughes with Sky Global Networks following the separation of Hughes from GM pursuant to a split-off that would be presented by the parties to their boards of directors were agreed upon. At this time, Sky Global Networks and The News Corporation informed GM and Hughes of their determination to withdraw their proposal in the event that the proposed transaction involving Hughes and Sky Global Networks was not approved by the GM board of directors at its meeting scheduled for October 27, 2001.

      As a result of the negotiations during this period among GM, Hughes and EchoStar, the terms of a transaction involving the combination of Hughes with EchoStar following the separation of Hughes from GM pursuant to a split-off that would be presented by the parties to their boards of directors were agreed upon. However, during the evening of October 26, 2001, discussions with EchoStar’s commercial banks regarding the terms of the financing commitments from one of EchoStar’s two commercial banks faltered and, as a result, it appeared that EchoStar would be unable at that time to obtain the commitments for the full amount of the financing required in order to complete the transaction that the parties had contemplated presenting to their boards of directors.

      October 27, 2001 Hughes Board, GM Capital Stock Committee and General Motors Board Meeting. On October 27, 2001, there was a joint meeting of the Hughes board of directors, the GM capital stock committee and the GM board of directors. All members of the Hughes board of directors were present at or participated by teleconference in the meeting and all except four members of the GM board of directors were present at or participated by teleconference in the meeting. The meeting was also attended by representatives of Kirkland & Ellis, legal counsel to GM, Weil, Gotshal & Manges LLP, legal counsel to Hughes, and Latham & Watkins, special counsel to the management and directors of Hughes, in connection with the proposed transactions.

      Mr. John F. Smith, Jr. opened the meeting by noting the long history of board activity in prior meetings in which it had reviewed potential strategic transactions involving Hughes and commenting on the necessity of the meeting for reaching a resolution regarding the ultimate structure of a transaction which would provide for the separation of Hughes from GM and its subsequent merger with either Sky Global Networks or EchoStar.

      Mr. Wagoner, Mr. Eckhard Pfeiffer, as Chairman of the GM capital stock committee, Mr. Pearce and Mr. Shaw added further introductory comments, and each of them commented briefly on the purposes of the meeting, and the interests of stockholders, employees, customers and the general public that were to be addressed by the potential transactions.

      Mr. Devine then discussed the immediate issues regarding a potential transaction involving Hughes. Mr. Devine explained that, after many months of negotiations, two alternative transactions regarding Hughes had been developed to a stage at which it was appropriate for the GM board of directors and the Hughes board of directors to consider a decision between them. Mr. Devine noted that the principal objective of any transaction involving Hughes was to enhance the value of Hughes and General Motors for the benefit of GM stockholders. Other important aspects included achieving increased liquidity for General Motors in the context of a separation of Hughes from General Motors and attaining reasonable certainty that the

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transaction, which was expected to take about a year to complete, would be completed. He noted that each of the potential transactions with Sky Global Networks and EchoStar would address the principal objective, albeit in different ways.

      Mr. Devine informed the directors that, while all elements of the potential transaction with Sky Global Networks had been negotiated and documented including committed financing arrangements, certain aspects of the EchoStar transaction relating to its financing had not been finalized. In particular, Mr. Devine noted that commitments for only half of the financing needed for a transaction between Hughes and EchoStar was then available, although EchoStar was confident it could obtain the necessary commitments in the near term. Mr. Devine also stated that GM’s and Hughes’ financial advisors expected that, in time, satisfactory financing for a transaction between Hughes and EchoStar could likely be arranged.

      Mr. Devine stated that representatives of Sky Global Networks and The News Corporation had informed him that its proposed transaction would not continue to be available unless it was approved at that meeting. Accordingly, both potential transactions as they then existed were being presented to the directors for their consideration.

      Mr. Devine noted that briefing materials describing the two alternative potential transactions had been distributed to the directors in advance of the meeting and confirmed that these materials had been received by all such directors. He added that negotiations regarding various terms, particularly the financing of the EchoStar transaction, had continued until a few hours before the commencement of the meeting and that the most recent developments would be discussed at the meeting.

      Mr. Walker then discussed the two alternative transactions involving Hughes. He provided, first, a summary of the potential transaction with Sky Global Networks, including the common structural aspects of the Sky Global Networks transaction and the EchoStar transaction. Both transactions essentially consisted of a split-off of Hughes from General Motors pursuant to a redemption of the outstanding GM Class H common stock in exchange for stock of the split-off company, immediately followed by a combination of the Hughes business with the other party by means of a merger. Generally speaking, the proposed terms of separation of Hughes from General Motors were similar in both transactions. It was noted that the transaction with Sky Global Networks involved certain strategic investors, including certain commercial arrangements between the combined company and these investors.

      Mr. Walker outlined the financing that would be involved in the Sky Global Networks transaction, the market and regulatory contingencies involved in the transaction and the stockholder approval requirements for the transaction. During this presentation, legal counsel commented on the tax aspects of the potential transaction with Sky Global Networks, including the rulings that would be sought from the Internal Revenue Service regarding the tax-free nature of the separation of Hughes from GM, receipt of which was a condition to closing of the transaction and noted that essentially the same requirements would apply to the EchoStar transaction.

      At the end of Mr. Walker’s discussion of the terms of the Sky Global Networks transaction, a discussion commenced regarding the financing available for that transaction in comparison with that available for the EchoStar transaction and related matters. This discussion led to a more general discussion of the relative advantages and disadvantages of the EchoStar transaction and the Sky Global Networks transaction. During this discussion, Mr. Devine reported that a letter had just been received from Mr. Ergen concerning potential revisions to the financing terms for the proposed EchoStar transaction. A discussion of how to respond to this development ensued, after which there was a brief recess of the meeting in order to facilitate review and consideration among management of GM and Hughes and their respective financial and legal advisors concerning Mr. Ergen’s letter, including possible discussions with EchoStar and its investment bankers.

      When the meeting reconvened, Mr. Devine reviewed further the content of the letter from Mr. Ergen, copies of which were made available to the persons present at the meeting, and certain additional telephone discussions with representatives of EchoStar and its investment bankers held during the recess. The letter emphasized the high degree of confidence which EchoStar and its financial advisors had that committed financing needed for their proposed transaction could be obtained within a short period and contained an offer

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from Mr. Ergen to satisfy any potential concerns of GM and Hughes regarding EchoStar’s ability to obtain financing commitments for the transaction by pledging a significant amount of Mr. Ergen’s personal stake in the common stock of EchoStar to demonstrate his confidence that the needed financing commitments would be attained. The letter and the alternatives available to GM and Hughes in light of Mr. Ergen’s offer were commented on by various directors, Mr. Devine, Mr. Walker and by the representatives of the financial advisors to GM and Hughes and the legal counsel to GM and Hughes.

      After this discussion, Mr Walker reviewed the transaction terms that had developed through the most recent negotiations with EchoStar and its potential lenders, which had continued until a few hours before the meeting commenced. He explained the concerns of GM and Hughes with respect to the financing of the EchoStar transaction, which EchoStar and its financial advisors and potential lenders had not at the point those negotiations had ended been able to satisfactorily address.

      Mr. Walker then reviewed the conditions to consummation of the alternative transactions. Legal counsel commented on the antitrust reviews to which the transactions would be subject, assessed the antitrust analysis of the transactions and compared the analysis of the EchoStar transaction to the analysis of the Sky Global Networks transaction. A discussion followed of the arrangements that had been negotiated with EchoStar in the event that antitrust clearance for a merger between Hughes and EchoStar was not achieved, including EchoStar’s purchase of Hughes’ interest in PanAmSat and payment of a significant termination fee to Hughes under certain circumstances. The consequences for Hughes’ competitive position of such a development were also discussed. Mr. Walker then discussed the comparative merits (including potential synergies), risks and opportunities associated with each of the alternative transactions. The risks and benefits from the perspective of both the GM Class H common stockholders and the GM $1 2/3 par value common stockholders were discussed. The two alternative transactions were also compared to the prospect of a Hughes stand-alone strategy. Also discussed were the actions that EchoStar might take if Hughes and GM pursued a transaction with Sky Global Networks and the actions that Sky Global Networks and The News Corporation might take if Hughes and GM pursued a transaction with EchoStar. Members of Hughes management and others present commented on these matters in the course of these presentations and numerous questions about the matters presented were asked by the directors and answered.

      Representatives of Merrill Lynch, together with representatives of Bear Stearns, and representatives of Credit Suisse First Boston, together with representatives of Goldman Sachs, made presentations at this time with respect to the proposed transaction involving Sky Global Networks. During the presentations, questions from the directors were asked and answered. Counsel to the independent directors then reviewed the fiduciary duties of the directors of GM and Hughes in relation to the potential transactions under consideration. The long history of deliberation by the GM board of directors, the GM capital stock committee and the Hughes board of directors regarding a strategic transaction involving Hughes was reviewed, as was the information which had been delivered to the directors concerning the subject over the period of such deliberation and the role played by the directors in overseeing management’s development of the transactions now being considered by the directors. The detailed information that had been provided to the directors in preparation for the meeting was also noted. Finally, the process for consideration of the proposed transactions by the Hughes board of directors, the GM capital stock committee and the GM board of directors that was being undertaken at the meeting was reviewed and counsel provided advice on the proper discharge of the directors’ role relating to the potential transactions.

      At this time, management of Hughes and GM were asked to discuss their views concerning the relative merits of the alternative proposals of Sky Global Networks and EchoStar. A discussion of the relative terms, risks and benefits of the alternative transactions then ensued among management and the directors, as well as the financial and legal advisors present at the meeting. The meeting then briefly recessed.

      After the recess, Mr. Wagoner outlined the conclusions of GM senior management regarding the alternatives facing the directors. Mr. Wagoner expressed the view that, although resolution of significant antitrust issues would apparently be necessary in order to complete the potential EchoStar transaction, the assessment of the risks that would be involved in doing so and of the other risks to successful completion of the EchoStar transaction was not out of line with the assessment of the overall risks to successful completion of

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the Sky Global Networks transaction. In contrast, he noted the consensus judgment which had emerged in the discussions during the meeting to the effect that the financial terms of the EchoStar transaction were more favorable than those of the Sky Global Networks transaction and that the synergies and upside potential for all GM stockholders would be greater if GM and Hughes were able to complete the EchoStar transaction than would be the case if the Sky Global Networks transaction were completed.

      Mr. Wagoner concluded that, given the recent proposal from Mr. Ergen, further effort to achieve a final agreement on a potential EchoStar transaction was warranted and he then proposed that the meeting be recessed until October 28, 2001 with directions to the GM and Hughes teams working on the matter to negotiate with the EchoStar team in order to develop definitive agreements which could form a basis for management and the financial advisors to GM and Hughes recommending to the directors that a transaction with EchoStar be authorized. The risk that the Sky Global Networks transaction would no longer be available if GM and Hughes proceeded in this manner was noted. Mr. Wagoner’s proposal was discussed by the directors and accepted by all members of the GM board of directors and the Hughes board of directors present and the meeting was recessed until the afternoon of October 28, 2001.

      Following the recess of the GM board of directors meeting on October 27, 2000, Sky Global Networks and The News Corporation publicly announced the withdrawal of their proposal to enter into a strategic transaction involving Hughes.

      Also following the recess of the meeting, GM and Hughes management, with the assistance of their respective financial, legal, tax, accounting and other advisors, finalized the terms of the GM/ Hughes separation transactions and the Hughes/ EchoStar merger with EchoStar’s management and its advisors, resolved all outstanding issues, including the terms of an interim GM financing commitment to be secured by the EchoStar stock beneficially held by Mr. Ergen, and finalized all terms of the definitive agreements relating to these transactions.

      October 28, 2001 Hughes Board Meeting. On October 28, 2001, the Hughes board of directors met, in a continuation of the joint session with the GM board of directors and the GM capital stock committee that had been convened on October 27, 2001, to discuss and consider the definitive terms of the GM/ Hughes separation transactions and the Hughes/ EchoStar merger. All members of the Hughes board of directors were present at or participated by teleconference in the meeting. The presentations made and other matters discussed at this meeting are described below as part of the description of the October 28, 2001 meeting of the GM board of directors, which was held concurrently.

      In connection with this meeting, the Hughes board of directors received a joint presentation from representatives of Credit Suisse First Boston and Goldman Sachs, financial advisors to Hughes in connection with the proposed transactions, and oral opinions, later confirmed in writing, from each of them. These opinions were to the effect that, based upon and subject to the matters described in the opinions and based upon such other matters as such financial advisors considered relevant, as of the date of that opinion and based upon market conditions on that date, the exchange ratios set forth in the Hughes/ EchoStar merger agreement were fair from a financial point of view to the holders of Hughes Class C common stock immediately prior to the Hughes/ EchoStar merger, including General Motors, the holders of GM $1 2/3 par value common stock and the holders of GM Class H common stock, as applicable. The fairness opinions from the Hughes financial advisors were also addressed to the GM board of directors. For more information about the fairness opinions received from the Hughes financial advisors, see “—Fairness Opinions of Hughes’ Financial Advisors.”

      After receiving the recommendations of Hughes management and considering the other presentations made and information delivered at the meeting, as further described below, and the information and advice previously provided to and the previous deliberations of the Hughes board of directors, the Hughes board of directors unanimously approved all elements of the GM/ Hughes separation transactions, the Hughes/ EchoStar merger and related transactions requiring its approval and recommended to the GM board of directors that it approve the definitive terms of the GM/ Hughes separation transactions and the Hughes/ EchoStar merger and related transactions.

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      October 28, 2001 GM Capital Stock Committee Meeting. On October 28, 2001, the GM capital stock committee met, in a continuation of a joint session with the GM board of directors and the Hughes board of directors that had been convened on October 27, 2001, to discuss and consider the definitive terms of the GM/ Hughes separation transactions and the Hughes/ EchoStar merger and related transactions. All members of the committee were in attendance at this meeting.

      The GM capital stock committee reviewed and considered the matters discussed at the meeting, as discussed above and below, and the recommendation of GM and Hughes management and the Hughes board of directors that the GM board of directors approve the GM/ Hughes separation transactions and the Hughes/ EchoStar merger and related transactions as proposed. After considering the presentations made and information delivered at the meeting and the information and advice previously provided to and reviewed by the committee and its prior deliberations, the committee unanimously concluded that the GM/ Hughes separation transactions and Hughes/ EchoStar merger and related transactions, on the terms and conditions presented, were as of such date in the best interests of GM and its common stockholders and fair to each class of GM common stockholders and recommended to the GM board of directors the approval and authorization of the transactions.

      October 28, 2001 General Motors Board Meeting. On October 28, 2001, the GM board of directors met, in a continuation of a joint session with the GM capital stock committee and Hughes board of directors that had been convened on October 27, 2001, to discuss and consider the definitive terms of the GM/ Hughes separation transactions and the Hughes/ EchoStar merger and related transactions. All except three members of the GM board of directors were present at or participated by teleconference in the meeting.

      At the October 28, 2001 meeting, Mr. Feldstein provided a report of the developments since the meeting recessed. He noted the withdrawal by Sky Global Networks of its proposal and reported on the resolution which had been reached on each of the items that had remained open with EchoStar when the meeting had recessed. Referencing briefing material that had previously been sent to the directors, Mr. Feldstein explained that the financing issues identified in the previous day’s discussion had been addressed on an interim basis pursuant to an arrangement involving the pledge of $2.7625 billion of EchoStar Class B common stock beneficially held by Mr. Ergen. Under this arrangement, General Motors would agree to fund $2.7625 billion of the financing required for the transaction with EchoStar, with the expectation that its commitment would be replaced by alternative financing sources as soon as possible following announcement of the transaction. If such alternative financing were not obtained prior to the time when the transaction was to close, General Motors would provide the necessary financing and receive a promissory note collateralized with the stock of Mr. Ergen. Mr. Feldstein noted that all other aspects of the transaction were the same as previously presented to the directors.

      Mr. Michael Gaines, Vice President and Chief Financial Officer of Hughes, then provided a report on Hughes’ plan for funding its operations from October 28, 2001 through the anticipated closing date of a transaction between Hughes and EchoStar. Various questions were then asked and answered.

      At this time, Mr. Pfeiffer on behalf of the non-management directors asked senior management of both GM and Hughes to present their conclusions concerning the proposed transaction and the previously identified strategic objectives for a transaction involving Hughes. Mr. Shaw enthusiastically recommended that General Motors and Hughes enter into the proposed transaction with EchoStar. Mr. Wagoner, with similar enthusiasm, supported the proposed EchoStar transaction as the means of best enhancing stockholder value and the interests of GM and Hughes.

      The GM board of directors also received the joint presentation from representatives of Credit Suisse First Boston and Goldman Sachs, financial advisors to Hughes in connection with the proposed transactions, and oral opinions, later confirmed in writing, from each of them to the effect that, based upon and subject to the matters described in the opinions and based upon such other matters as such financial advisors considered relevant, as of the date of that opinion and based on market conditions on that date, the exchange ratios set forth in the Hughes/ EchoStar merger agreement were fair from a financial point of view to the holders of Hughes Class C common stock immediately prior to the Hughes/ EchoStar merger, including General Motors, the holders of GM $1 2/3 par value common stock and the holders of GM Class H common stock, as

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applicable. The fairness opinions from the Hughes financial advisors were also addressed to the Hughes board of directors. For more information about the fairness opinions received from the Hughes financial advisors, see “—Fairness Opinions of Hughes’ Financial Advisors.”

      In addition, the GM board of directors received presentations from representatives of Merrill Lynch and Bear Stearns, financial advisors to General Motors in connection with the proposed transactions, and oral opinions, later confirmed in writing, from each of them to the effect that, on the basis of and subject to the assumptions, conditions, limitations and other matters described therein, as of that date, taking into account all relevant financial aspects of the Transactions taken as a whole, the consideration to be provided to General Motors and its subsidiaries, to the holders of the GM $1 2/3 par value common stock, if applicable, and the holders of the GM Class H common stock in the GM/ Hughes separation transactions was fair, from a financial point of view, to the holders of the GM $1 2/3 par value common stock as a class and the holders of the GM Class H common stock as a class, respectively. For more information about the fairness opinions received from the GM financial advisors, see “—Fairness Opinions of GM’s Financial Advisors.”

      After receiving the recommendations of Hughes management, the Hughes board of directors, GM management and the GM capital stock committee and considering the other presentations made and information delivered at the meeting and the information and advice previously provided to and reviewed by the board of directors and its prior deliberations, the GM board of directors, by unanimous vote of the directors present, determined that the Transactions, including the execution of the implementation agreement and the amendments to GM’s restated certificate of incorporation in connection with the Transactions, were advisable, desirable and in the best interests of General Motors and its stockholders. In addition, the GM board of directors, by the same vote, determined that, as of October 28, 2001, the Transactions, on the terms and subject to the conditions presented, would be fair to the GM $1 2/3 par value common stockholders and the GM Class H common stockholders. On such date, the GM board of directors further determined, by the same vote, that, subject to its fiduciary duties under applicable law, the GM board of directors would recommend the GM/ Hughes separation transactions for approval by the GM common stockholders. Accordingly, the GM board of directors approved and authorized the GM/ Hughes separation transactions, the Hughes/ EchoStar merger and related transactions.

      On October 28, 2001, General Motors, Hughes and EchoStar signed definitive agreements relating to the Transactions and jointly issued a press release announcing their agreement to enter into the Transactions.

      On November 1, 2001, the lawsuit filed by EchoStar against Hughes and certain other parties in February, 2000 was dismissed with prejudice. In addition, all counterclaims made by Hughes in connection with that lawsuit were dismissed with prejudice.

      On November 5, 2001, EchoStar succeeded in obtaining a commitment from an alternative financing source, Credit Suisse First Boston, for the $2.7625 billion financing commitment provided by General Motors in connection with the transactions. Accordingly, the GM interim financing commitment, and the related pledge of EchoStar stock by Mr. Ergen, were terminated.

      Further Discussions with EchoStar; Restatement of Transaction Agreements. From time to time after the execution of the definitive agreements with EchoStar on October 28, 2001, representatives of GM, Hughes and EchoStar, and their respective advisors, have engaged in discussions regarding various matters relating to the Transactions.

      On December 14, 2001, General Motors and Hughes provided their written consent to EchoStar’s execution of agreements relating to a $1.5 billion investment by Vivendi Universal in preferred stock of EchoStar and the issuance of $700 million of EchoStar DBS Senior Notes. For a description of the Vivendi Universal investment and the EchoStar DBS Senior Notes offering, see “— Description of the Transactions— Hughes/ EchoStar Merger Financings.” On December 14, 2001, General Motors, Hughes and EchoStar also amended several provisions of the implementation agreement and the Hughes/ EchoStar merger agreement to reflect certain of the terms of the investment by Vivendi Universal.

      At the time of the signing in October 2001, General Motors, Hughes and EchoStar had anticipated that certain modifications to the structure of the Transactions might become appropriate. As a result, the parties

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agreed to appropriately amend and restate certain of the transaction agreements upon the final determination of the nature and scope of such structural modifications. On                , 2002, the parties amended and restated the transaction agreements entered into at the signing to reflect, among other things, the creation of a holding company which would become the parent company of Hughes at the time of the Hughes split-off and Hughes/ EchoStar merger and the corporate entity into which EchoStar would be merged pursuant to the Hughes/ EchoStar merger.

      In addition, as contemplated by the terms of a letter agreement entered into by and among General Motors, certain employee benefit plans of General Motors, Mr. Ergen and EchoStar at the time of the signing in October 2001, the parties continued negotiations relating to the terms of registration rights agreements. For more information about these registration rights agreements, see “Shares Eligible For Future Sale.”

      Negotiations among GM, Hughes and EchoStar also continued with respect to the terms of the certificate of incorporation, bylaws and stockholders rights plan for New EchoStar. For more information about these arrangements, see “New EchoStar Capital Stock.”

 
      Recommendations of the GM Capital Stock Committee, the GM Board of Directors and the Hughes Board of Directors; Fairness of the GM/ Hughes Separation Transactions and the Hughes/EchoStar Merger

      As described above, General Motors and Hughes considered the strategic challenges facing Hughes and reviewed and assessed various alternative structures for a transaction or series of transactions involving Hughes. See “—Alternatives to the Transactions” and “—GM’s Development of the Transactions” above.

      On October 28, 2001, after discussion and consideration of the GM/ Hughes separation transactions, each of the Hughes board of directors and the GM capital stock committee recommended that the GM board of directors approve and authorize the Transactions.

      The GM capital stock committee, in connection with its determination to recommend that the GM board of directors approve and authorize the Transactions, considered a number of factors, including, among others, the presentations made to and discussions held at the October 28, 2001 meeting. These presentations included presentations by representatives of Merrill Lynch and Bear Stearns and the delivery of their oral opinions, later confirmed in writing, that, as of October 28, 2001, taking into account all relevant financial aspects of the Transactions taken as a whole, the consideration to be provided to General Motors and its subsidiaries, the holders of GM $1 2/3 par value common stock, if applicable, and the holders of the GM Class H common stock in the GM/ Hughes separation transactions was fair, from a financial point of view, to the holders of GM $1 2/3 par value common stock as a class and the holders of GM Class H common stock as a class, respectively. In addition, the presentations included a joint presentation by representatives of Credit Suisse First Boston and Goldman Sachs and the delivery of their oral opinions, later confirmed in writing, that, based upon and subject to the matters described in the opinions and based upon such other matters as such financial advisors considered relevant, as of the date of that opinion and based on market conditions on that date, the exchange ratios set forth in the Hughes/ EchoStar merger agreement were fair to the holders of Hughes Class C common stock immediately prior to the Hughes/ EchoStar merger, including General Motors, the holders of GM $1 2/3 par value common stock and the holders of GM Class H common stock, as applicable. As part of its oversight of the process, among other things, the GM capital stock committee confirmed the full participation of Hughes and its management in the process of developing the terms of the GM/ Hughes separation transactions and the Hughes/ EchoStar merger and related transactions and their recommendation of the Transactions.

      On October 28, 2001, upon the recommendation of GM management and the GM capital stock committee, as well as the recommendation of Hughes management and the Hughes board of directors, and considering the background, oversight, deliberations and views of the GM capital stock committee with respect to the development of the terms of the GM/ Hughes separation transactions and the Hughes/ EchoStar merger, the GM board of directors unanimously determined that the Transactions, including the execution of the implementation agreement, the formation of Hughes Holdings and the amendments to GM’s restated certificate of incorporation in connection with the Transactions, were advisable, desirable and in the best interests of General Motors and its stockholders. In addition, the GM board of directors unanimously

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determined that, as of October 28, 2001, the Transactions, on the terms and subject to the conditions presented, would be fair to the GM $1 2/3 par value common stockholders and the GM Class H common stockholders. On such date, the GM board of directors further determined that, subject to its fiduciary duties under applicable law, the GM board of directors would recommend the GM/ Hughes separation transactions for approval by the GM common stockholders. Accordingly, the GM board of directors approved the GM/ Hughes separation transactions, the Hughes/ EchoStar merger and related transactions.

      With respect to the procedural fairness of the GM/ Hughes separation transactions, the GM board of directors placed substantial reliance on its determination that fair processes had been implemented to develop the definitive terms of the GM/ Hughes separation transactions and the Hughes/ EchoStar merger, including the oversight function of the GM capital stock committee. The GM board of directors considered the fact that the definitive terms of the GM/ Hughes separation transactions had been developed jointly by GM management and Hughes management, working together with the advice and consultation of their respective financial, legal, tax, accounting and other advisors, subject to the oversight of the GM capital stock committee. See “—GM’s Development of the Transactions” above. In addition, the GM board of directors considered that the GM/ Hughes separation transactions would be submitted for the separate approvals of the holders of a majority of the outstanding shares of each class of GM common stock, each voting as a separate class, and voting together as a single class based on their respective per share voting power in accordance with the GM restated certificate of incorporation.

      In determining the fairness of the GM/ Hughes separation transactions, taken as a whole, to the holders of both classes of GM common stock, the GM board of directors considered each of the foregoing factors. The GM board of directors did not formally assign weights to specific factors, but instead considered all factors together. The GM board of directors also attributed substantial importance to its determination that a fair process had been developed and implemented for the development of the definitive terms of the Transactions. In addition with respect to the fairness, from a financial point of view, to the holders of GM $1 2/3 par value common stock as a class and the holders of GM Class H common stock as a class, respectively, of the consideration to be provided to General Motors and its subsidiaries, the holders of GM $1 2/3 par value common stock, if applicable, and the holders of GM Class H common stock in the GM/ Hughes separation transactions, the GM board of directors relied upon the fairness opinions delivered by Merrill Lynch and Bear Stearns and the presentations by representatives of Merrill Lynch and representatives of Bear Stearns to the GM board of directors relating to their respective fairness opinions. General Motors asked each of Merrill Lynch and Bear Stearns to consider whether, taking into account all relevant financial aspects of the Transactions taken as a whole, the consideration to be provided to General Motors and its subsidiaries, the holders of GM $1 2/3 par value common stock, if applicable, and the holders of GM Class H common stock in the GM/ Hughes separation transactions was fair from a financial point of view to the holders of GM $1 2/3 par value common stock as a class and the holders of GM Class H common stock as a class, respectively (rather than asking one financial advisor to consider the fairness issues only from the perspective of the holders of GM $1 2/3 par value common stock and the other financial advisor to consider the fairness issues only from the perspective of the holders of GM Class H common stock because, among other things, General Motors believed that such an approach corresponded to the fiduciary duties of the GM board of directors to the holders of both classes of GM common stock). See “— Fairness Opinions of GM’s Financial Advisors” below.

      In addition to and without limiting the factors described above, in connection with its October 28, 2001 determination, the GM board of directors considered:

  •  the reports, presentation and recommendation of GM’s executive management regarding the GM/ Hughes separation transactions and the Hughes/ EchoStar merger;
 
  •  the final merger proposal by EchoStar relating to the Hughes/ EchoStar merger;
 
  •  the recommendation of GM management and Hughes management that General Motors proceed with the Transactions;
 
  •  the advice, presentations and written opinions of representatives of Merrill Lynch and representatives of Bear Stearns;

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  •  the advice, presentation and written opinions of representatives of Credit Suisse First Boston and Goldman Sachs;
 
  •  legal advice received with respect to the exchange of shares of GM Series H preference stock for shares of Hughes preference stock in connection with the Transactions in the event that any GM Series H preference stock were outstanding at the time of the completion of the Transactions;
 
  •  the background, oversight, deliberations and views of the GM capital stock committee with respect to the GM/ Hughes separation transactions and the Hughes/ EchoStar merger and its recommendation that the Transactions be approved;
 
  •  the information previously provided to and reviewed by the GM board of directors and the prior deliberations of the GM board of directors concerning the Transactions and the possibility of alternative strategic transactions and business strategies involving the business of Hughes, including a transaction involving the combination of the business of Hughes and the business of Sky Global Networks following a split-off of Hughes from General Motors; and
 
  •  related matters reported on at the October 28, 2001 meeting and other previous meetings of the GM board of directors.

      See “—GM’s Development of the Transactions” above.

      Based on the foregoing, among other considerations, the GM board of directors has determined that the Transactions are advisable and in the best interests of General Motors and its common stockholders and that the Transactions are fair to the holders of both classes of GM common stock. The GM board of directors has unanimously approved the Transactions and recommends that the GM common stockholders vote to approve each of the proposals described in this document by executing and returning the enclosed consent as soon as possible.

      The consequences of the completion of the Transactions for holders of GM $1 2/3 par value common stock and for holders of GM Class H common stock will differ in important respects, as described in greater detail elsewhere in this document. See “The Transactions— Certain Effects of the Transactions on GM Common Stockholders.” Despite these differences, the GM board of directors has determined for the reasons discussed above that the Transactions are in the best interests of GM and its common stockholders as a whole and are fair to the holders of both classes of GM common stock and has unanimously approved the Transactions and recommends that the GM common stockholders of each class vote to approve each of the proposals described in this document. If the proposals relating to the Transactions were to receive the requisite GM common stockholder approval, we currently believe that it is possible that certain of the other applicable conditions to the completion of the Transactions, including the receipt of certain requisite regulatory approvals, would not be satisfied (if satisfied at all) until several months after the time of the receipt of the requisite GM common stockholder approval of the proposals relating to the Transactions. Accordingly, it is possible that the Transactions would not be completed for a significant period of time after the time of the receipt of the requisite GM common stockholder approval. During any such time interval between the receipt of the requisite GM common stockholder approval and the satisfaction or waiver of all other conditions to the completion of the Transactions, it is possible that circumstances relating to the business or financial condition of EchoStar or Hughes or financial, economic or other circumstances could change significantly and in a manner not considered at the time that the GM board of directors approved the Transactions. GM common stockholders should understand that, despite any such change in circumstances that might occur during this period, it is not a condition to the completion of the Transactions that the GM board of directors conclude that, at the time the Transactions are to be completed or at any earlier time during such period, the Transactions will be fair to both classes of GM common stockholders. The GM board of directors will not make any further determination with regard to the fairness of the Transactions to both classes of GM common stockholders during this period unless the GM board of directors considers taking any action that would change in any material respect the terms on which the Transactions are to be completed, such as agreeing to waive a condition to the completion of the Transactions or making any voluntary reduction to either the number of shares subject to GM debt-for-equity exchanges or the amount of the Hughes dividend distribution,

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in which case the GM board of directors in considering such matters would consider, among other factors, in accordance with the GM board policy statement regarding certain capital stock matters, the fairness of the Transactions (as to be so revised) to the holders of both classes of GM common stock.

     Fairness Opinions of GM’s Financial Advisors

      A description of the fairness opinions of GM’s financial advisors in connection with the Transactions, Merrill Lynch and Bear Stearns, is set forth below. These descriptions are qualified in their entirety by reference to the full text of the opinions included in Appendix C to this document. Because the fairness opinions of Merrill Lynch and Bear Stearns were delivered prior to the final determination of the necessary structural modifications to the Transactions described at “—GM’s Development of the Transactions— Further Discussions with EchoStar; Restatement of Transaction Agreements,” the following description does not reflect the fact that Hughes Holdings will become the parent company of Hughes in connection with the GM/ Hughes separation transactions and the corporate entity into which EchoStar will be merged in the Hughes/ EchoStar merger.

     Merrill Lynch Fairness Opinion

      On October 28, 2001, at a meeting of the GM board of directors held to consider the Transactions, Merrill Lynch delivered to the GM board of directors its oral opinion, which opinion was later confirmed by delivery of a written opinion, that, as of such date and based upon and subject to the assumptions, conditions, limitations and other matters set forth in that opinion, taking into account all relevant financial aspects of the Transactions taken as a whole, the consideration to be provided to General Motors and its subsidiaries, to the holders of the GM $1 2/3 par value common stock, if applicable, and to the holders of the GM Class H common stock in the GM/ Hughes separation transactions is fair, from a financial point of view, to the holders of the GM $1 2/3 par value common stock as a class and to the holders of the GM Class H common stock as a class, respectively.

      The full text of the Merrill Lynch written opinion, which sets forth the assumptions made, matters considered, and qualifications and limitations on the review undertaken, is included in Appendix C to this document and is incorporated into this document by reference. The summary of the opinion set forth in this document is qualified in its entirety by reference to the full text of the opinion. You are urged to read the Merrill Lynch opinion in its entirety. No limitations were imposed by General Motors or the GM board of directors with respect to the investigations made or procedures followed by Merrill Lynch in rendering its opinion.

      The Merrill Lynch opinion was provided to the GM board of directors for its use and benefit and is directed only to the fairness, from a financial point of view, to the holders of GM $1 2/3 par value common stock as a class and to the holders of GM Class H common stock as a class, respectively, taking into account all relevant financial aspects of the Transactions, taken as a whole, of the consideration to be provided to General Motors and its subsidiaries, to the holders of the GM $1 2/3 par value common stock, if applicable, and to the holders of the GM Class H common stock in the GM/ Hughes separation transactions. The opinion of Merrill Lynch does not constitute a recommendation to any GM common stockholder as to whether such stockholder should vote to approve any of the proposals described in this document. The terms of the GM/ Hughes separation transactions were developed by the management of General Motors and Hughes and were approved by the GM board of directors.

      The summary set forth below does not purport to be a complete description of the analyses underlying the opinion of Merrill Lynch. The preparation of a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, such an opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, Merrill Lynch did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, Merrill Lynch believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering all analyses, would create an incomplete view of the process underlying its opinion.

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      In performing its analyses, Merrill Lynch made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of General Motors. Any estimates contained in the analyses performed by Merrill Lynch are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by such analyses. In addition, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which such businesses or securities might actually be sold. Accordingly, such analyses and estimates are inherently subject to substantial uncertainty. In addition, the opinion of Merrill Lynch was one of several factors taken into consideration by the GM board of directors in making its determination to approve the GM/ Hughes separation transactions. Consequently, the Merrill Lynch analyses described below should not be viewed as determinative of the decision of the GM board of directors with respect to the fairness from a financial point of a view to the holders of GM $1 2/3 par value common stock as a class and to the holders of GM Class H common stock as a class, respectively, of the consideration to be provided to General Motors and its subsidiaries, to the holders of the GM $1 2/3 par value common stock as a class and to the holders of GM Class H common stock as a class.

      In preparing its opinion, Merrill Lynch, among other things:

  •  reviewed GM’s restated certificate of incorporation and bylaws, each as of the date of the fairness opinion of Merrill Lynch;
 
  •  reviewed GM’s annual reports, Forms 10-K and related financial information for the three fiscal years ended December 31, 2000 and GM’s Forms 10-Q and the related unaudited financial information for the quarterly periods ended March 31, 2001 and June 30, 2001;
 
  •  reviewed Hughes’ annual reports, Forms 10-K and related financial information for the three fiscal years ended December 31, 2000 and Hughes’ Forms 10-Q and the related unaudited financial information for the quarterly periods ended March 31, 2001, June 30, 2001 and September 30, 2001;
 
  •  reviewed PanAmSat’s annual reports, Forms 10-K and related financial information for the three fiscal years ended December 31, 2000 and PanAmSat’s Forms 10-Q and the related unaudited financial information for the quarterly periods ended March 31, 2001, June 30, 2001 and September 30, 2001;
 
  •  reviewed EchoStar’s annual reports, Forms 10-K and related financial information for the three fiscal years ended December 31, 2000 and EchoStar’s Forms 10-Q and the related unaudited financial information for the quarterly periods ended March 31, 2001 and June 30, 2001;
 
  •  reviewed certain information, including historical financial data and financial projections, relating to the business, earnings, cash flow, assets, liabilities and prospects of General Motors, Hughes and EchoStar furnished to Merrill Lynch by General Motors, Hughes and EchoStar, as the case may be;
 
  •  conducted discussions with members of senior management of General Motors, Hughes and EchoStar concerning their respective businesses and prospects and their views regarding the strategic rationale for, and the financial effects on General Motors, Hughes and EchoStar, as the case may be, of, the Transactions;
 
  •  reviewed certain information, including financial projections relating to the amount and timing of the revenue and cost savings synergies and related expenses expected to result from the Transactions, which Merrill Lynch refers to herein as the expected synergies of the Transactions, furnished to Merrill Lynch by General Motors, Hughes and EchoStar, as the case may be;
 
  •  reviewed the pro forma financial results, financial condition and capitalization of each of General Motors and Hughes and of the pro forma combined company, in each case after giving effect to the Transactions;
 
  •  conducted discussions with members of senior management of General Motors, Hughes and EchoStar concerning the expected synergies of the Transactions;

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  •  conducted discussions with members of senior management of Hughes concerning their views regarding the strategic rationale for, and the financial effects on Hughes of, the Transactions and various strategic alternatives available to Hughes;
 
  •  compared the results of operations of Hughes and EchoStar with those of certain companies that Merrill Lynch deemed to be reasonably similar to Hughes and EchoStar, respectively;
 
  •  reviewed the following, including any exhibits and attachments or schedules thereto:

  •  the implementation agreement;
 
  •  the Hughes/ EchoStar merger agreement;
 
  •  the GM/ Hughes separation agreement;
 
  •  the proposed amendments to Article Fourth of the GM restated certificate of incorporation;
 
  •  the proposed amendments to the amended and restated certificate of incorporation of Hughes;
 
  •  the contribution and transfer agreement by and between General Motors and United States Trust Company of New York;
 
  •  the supplemental agreement and guaranty; and
 
  •  the pledge agreement and certain related agreements thereto;

  •  reviewed the commitment letters related to the financing by EchoStar and Hughes of the Hughes/ EchoStar merger; and
 
  •  reviewed such other financial studies and analyses and performed such other investigations and took into account such other matters as Merrill Lynch deemed necessary, including Merrill Lynch’s assessment of general economic, market and monetary conditions.

      In preparing its opinion, Merrill Lynch relied on the accuracy and completeness of all information supplied or otherwise made available to it, discussed with or reviewed by or for it, or publicly available, and Merrill Lynch did not assume any responsibility for independently verifying such information or undertake an independent evaluation or appraisal of the assets or liabilities of General Motors, Hughes or EchoStar, and was not furnished with any such evaluation or appraisal. In addition, Merrill Lynch did not assume any obligation to conduct, nor did Merrill Lynch conduct, any physical inspection of the properties or facilities of General Motors, Hughes or EchoStar. With respect to the financial projections and the analyses of the expected synergies of the Transactions furnished to or discussed with Merrill Lynch by General Motors, Hughes or EchoStar, as the case may be, Merrill Lynch assumed that they were reasonably prepared and reflect the best currently available estimates and judgments of the managements of General Motors, Hughes or EchoStar as to the expected future financial performance of General Motors, Hughes, EchoStar and the pro forma combined company, and as to the expected synergies of the Transactions.

      Furthermore, in preparing its opinion, Merrill Lynch assumed that in the course of obtaining the necessary consents or approvals, including contractual, governmental or otherwise, for the Transactions no restrictions, including any divestiture requirements or amendments or modifications, will be imposed that would have a material adverse effect on the contemplated benefits of the Transactions. In addition, Merrill Lynch assumed that each of the Transactions will be consummated in a timely manner and in accordance with their terms as contemplated by the various agreements and other documents referred to in the Merrill Lynch opinion. Merrill Lynch was advised by General Motors, and it assumed, that:

  •  as a result of the amendment to Article Fourth of the GM restated certificate of incorporation, the provisions of Article Fourth, Division I, Section (c) of the GM restated certificate of incorporation should not apply to the Transactions; and
 
  •  General Motors would be responsible for no contingent liabilities of Hughes which are material in the aggregate as a result of the consummation of the Transactions.

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Merrill Lynch also assumed that the recapitalization price used to effect the reduction of GM’s retained economic interest in Hughes would be determined by the GM board of directors in accordance with the terms set forth in the GM/ Hughes separation agreement. Merrill Lynch further assumed that there will be no material adverse effect on General Motors, Hughes or the pro forma combined company resulting from the accounting treatment of the Transactions. The opinion of Merrill Lynch is necessarily based upon market, economic, financial and other conditions as they existed and could be evaluated as of the date of the Merrill Lynch opinion. During the course of its engagement, Merrill Lynch was asked by the GM board of directors to solicit indications of interest from various third parties regarding a transaction with Hughes and Merrill Lynch considered the results of such solicitation in rendering its opinion. Merrill Lynch expressed no opinion as to the prices at which the Hughes Class C common stock, the Hughes preference stock or the GM $1 2/3 par value common stock will trade subsequent to consummation of the Transactions. In addition, Merrill Lynch was not requested to opine as to, and its opinion does not in any manner address, GM’s or Hughes’ underlying business decision to proceed with or effect the Transactions, the relative merits of the Transactions as compared to any alternative business strategies or transactions that might exist for GM or Hughes or the effects of any other transaction in which GM or Hughes might engage. Furthermore, Merrill Lynch was not requested to opine as to, and its opinion does not in any manner address, the PanAmSat stock sale.

      In preparing its opinion, Merrill Lynch also assumed that the separation of Hughes from GM will be treated as a tax-free distribution under Section 355 and the related provisions of the Code and Merrill Lynch has further assumed that the Hughes/ EchoStar merger will qualify as a tax-free “reorganization” within the meaning of Section 368(a) of the Code.

      As part of its investment banking business, Merrill Lynch is engaged continually in the valuation of businesses and their securities in connection with mergers and acquisitions and strategic transactions and for other purposes. Merrill Lynch was retained by General Motors because Merrill Lynch is an internationally recognized investment banking firm, with substantial experience in complex strategic transactions, and because Merrill Lynch was familiar with General Motors, including its capital structure, and Hughes. Pursuant to an engagement letter dated November 17, 2001, General Motors agreed to pay Merrill Lynch fees of:

  •  $1,000,000 on the date of such engagement letter (which amount is credited towards the amount payable under the third bullet below);
 
  •  $500,000 payable upon delivery of its fairness opinion (which amount is credited towards the amount payable under the third bullet below); and
 
  •  between $10,000,000 and $24,000,000 upon consummation of the Transactions, such amount to be determined based upon the value of the Transactions at the time of announcement and closing.

General Motors also agreed to reimburse Merrill Lynch for its reasonable out-of-pocket expenses incurred in connection with Merrill Lynch’s activities under the engagement letter, including the reasonable fees and disbursements of its legal counsel and to indemnify Merrill Lynch and certain related persons and entities for certain liabilities, including liabilities under securities laws, related to or arising out of its engagement.

      Merrill Lynch has, in the past, provided financial advisory and financing services to GM and its affiliates and may continue to do so, and Merrill Lynch has received, and may receive, fees for the rendering of such services. In addition, in the ordinary course of its business, Merrill Lynch may actively trade shares of the GM $1 2/3 par value common stock, the GM Class H common stock, and other securities of GM for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities.

      Set forth below is a summary of the material financial analyses performed by Merrill Lynch in connection with the preparation of the opinion of Merrill Lynch dated October 28, 2001. The financial analyses summarized below include information presented in tabular format. In order to understand fully Merrill Lynch’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and

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assumptions underlying the analyses, could create a misleading or incomplete view of Merrill Lynch’s analyses.

          Hughes Analysis. Merrill Lynch performed a sum-of-the-parts valuation of each of Hughes’ principal businesses and significant investments in order to derive an implied per share equity value for Hughes. Merrill Lynch examined and independently valued DIRECTV, DIRECTV Latin America, PanAmSat, Hughes Network Systems, Spaceway, Telocity, Hughes’ public investments and Hughes’ corporate reserve allocation. The corporate reserve allocation represents an estimate by Hughes management of future cash expenses which are not otherwise directly allocated to any of the business units of Hughes.

      DIRECTV. Merrill Lynch performed a discounted cash flow, or DCF, analysis of DIRECTV using projections provided by Hughes’ management.

      The DCF for DIRECTV, which includes the cash flow associated with National Rural Telecommunications Cooperative subscribers, was calculated assuming discount rates ranging from 12.0% to 14.0% and was comprised of the sum of the present values of:

  •  the projected cash flows for the third quarter of 2001 through the fiscal year ended December 31, 2005, and
 
  •  the 2005 terminal value based upon a range of multiples of estimated 2005 earnings before interest, taxes, depreciation and amortization, which is referred to as EBITDA, from 9.0x to 11.0x.

                 
Low High


(in millions)
DCF Value of DIRECTV
  $ 14,530     $ 19,240  

      Using publicly available information, Merrill Lynch compared selected historical stock, financial and operating data and ratios for DIRECTV with corresponding data and ratios of similar publicly traded companies. These companies were selected by Merrill Lynch based upon Merrill Lynch’s views as to the comparability of the financial and operating characteristics of these companies to DIRECTV.

      The companies included in the DIRECTV comparable company analysis were:

  •  British Sky Broadcasting Group PLC;
 
  •  EchoStar Communications Corporation; and
 
  •  Pegasus Communications Corporation.

      Merrill Lynch derived an estimated valuation range for DIRECTV by comparing estimated current enterprise value as a multiple of estimated 2001 subscribers and as a multiple of estimated 2002 EBITDA. The results of these analyses were as follows:

                 
Comparable Company Analysis Low High



Estimated 2001 Subscriber Multiple
  $ 1,316     $ 2,129  
Estimated 2002 EBITDA Multiple
    25.7x       34.4x  

      Using these analyses, and applying a range of $1,600 to $1,900 per estimated 2001 subscriber and an estimated 2002 EBITDA multiple range of 25.0x to 30.0x, Merrill Lynch estimated the following ranges of value for DIRECTV as of September 30, 2001:

                 
Implied Value of DIRECTV Low High



Estimated 2001 Subscriber Multiple
  $ 14,794     $ 17,625  
Estimated 2002 EBITDA Multiple
  $ 14,234     $ 17,125  

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      Based on the DCF valuation and comparable company analysis Merrill Lynch assigned the following reference range of values to the DIRECTV segment:

                 
Low High


(in millions)
Reference Range Value
  $ 14,500     $ 18,500  

      DIRECTV Latin America. Merrill Lynch derived an estimated equity valuation range for Hughes’ interest in DIRECTV Latin America through an estimated current enterprise value as a multiple of current subscribers. The results of this analysis are as follows:

                 
Low High


Current Subscriber Multiple
    $800       $1,200  

      The net equity valuation of Hughes’ investment assumes 1.3 million current Latin American subscribers, $1,017 million of net debt attributable to DIRECTV Latin America and 78% ownership by Hughes. The results of these analyses were as follows:

                 
Implied Value of Hughes’ Interest
in DIRECTV Latin America Low High



Current Subscriber Multiple
    $0       $390  

      Based upon the implied subscriber valuation, Merrill Lynch assigned the following current reference range of values to the DIRECTV Latin America segment:

                 
Low High


(in millions)
Reference Range
    $(100 )     $300  

      PanAmSat. Merrill Lynch performed a DCF analysis of PanAmSat using projections provided by Hughes’ management.

      The DCF value of the approximately 81% indirect interest of Hughes in PanAmSat, or about 120.8 million shares, was calculated assuming discount rates ranging from 10.0% to 12.0%, $2,162 million of net debt attributable to PanAmSat and was comprised of the sum of the present values of:

  •  the projected cash flows for the third quarter of 2001 through the fiscal year ended December 31, 2005, and
 
  •  the 2005 terminal value based upon a range of multiples of estimated 2005 EBITDA, from 8.5x to 10.5x.

                 
Low High


(in millions)
DCF Value of Hughes’
Indirect Interest in PanAmSat
    $2,005       $3,232  

      Using publicly available information, Merrill Lynch compared selected historical stock, financial and operating data and ratios for PanAmSat with corresponding data and ratios of similar publicly traded companies. These companies were selected by Merrill Lynch based upon Merrill Lynch’s views as to the comparability of the financial and operating characteristics of these companies to PanAmSat.

      The companies included in the PanAmSat comparable company analysis were:

  •  APT Satellite Holdings LTD;
 
  •  Asia Satellite Telecommunications Holdings Limited;
 
  •  JSAT Corporation;

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  •  New Skies Satellites N.V.; and
 
  •  Societe Europeenne des Satellites SA.

      Merrill Lynch derived an estimated value of the approximately 81% indirect interest of Hughes in PanAmSat by comparing estimated current enterprise value as a multiple of estimated 2001 revenue and also as a multiple of estimated 2001 EBITDA. The results of these analyses were as follows:

                 
Comparable Company Analysis Low High



Estimated 2001 Revenue Multiple
    0.73x       8.32x  
Estimated 2001 EBITDA Multiple
    1.1x         11.9x    

      Using these analyses, and applying an estimated 2001 revenue multiple range of 6.0x to 8.0x and an estimated 2001 EBITDA multiple range of 8.5x to 10.5x, Merrill Lynch estimated the following ranges of value for the approximately 81% indirect interest of Hughes in PanAmSat, based on $2,215 million of total net debt at PanAmSat as of September 30, 2001:

                 
Implied Value of Hughes’ Indirect
Interest in PanAmSat Low High



Estimated 2001 Revenue Multiple
    $2,221       $3,556  
Estimated 2001 EBITDA Multiple
    $2,025       $2,922  

      In addition, Merrill Lynch considered both the 52-week trading range of PanAmSat’s common shares and the range of price targets published by Wall Street equity research analysts as of October 25, 2001. The resulting values of Hughes’ investment are based on Hughes’ approximately 81% indirect interest in PanAmSat:

                 
Low High


(in millions)
52-Week Trading Range
    $2,196       $5,232  
Research Analyst Price Targets
    $2,779       $4,832  

      Using these analyses, Merrill Lynch believed the current public market value of Hughes’ indirect stake in PanAmSat to be reasonably proximate to its theoretical intrinsic value. Based on about 120.8 million, approximately 81%, of PanAmSat shares owned by Hughes’ subsidiaries and the October 25, 2001 closing price of $23.03, the public market value of Hughes’ indirect stake in PanAmSat, as of October 25, 2001, is calculated to be $2,782 million.

      Hughes Network System. Merrill Lynch performed a DCF analysis of Hughes Network Systems using projections provided by Hughes’ management.

      The DCF for Hughes Network Systems was calculated assuming discount rates ranging from 12.0% to 14.0% and was comprised of the sum of the present values of:

  •  the projected cash flows for the third quarter of 2001 through the fiscal year ended December 31, 2005; and
 
  •  the 2005 terminal value based upon a range of multiples of estimated 2005 EBITDA from 4.0x to 5.0x.

                 
Low High


(in millions)
DCF Value of Hughes Network Systems
    $1,926       $2,814  

      Using this analysis, Merrill Lynch estimated the value of Hughes Network Systems to be between $1,500 million and $2,800 million as of September 30, 2001.

      Spaceway. Merrill Lynch estimated the value of Hughes’ investment in Spaceway to be between 0.0x and 1.0x the estimated invested capital of $940 million, resulting in a range of value from $0 to $940 million.

      Telocity. Merrill Lynch estimated the value of Hughes’ investment in Telocity to be between 0.0x and 0.5x the estimated acquisition cost of $180 million, resulting in a range of value from $0 to $90 million.

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      Public Investments. Merrill Lynch valued Hughes’ aggregate investments in the publicly traded common shares of the following companies at $595 million based on the their respective closing prices and applicable currency exchange rates as of October 25, 2001:

  • Crown Media Holdings;
 
  • TiVo Inc.;
 
  • GlobeComm Systems Inc.;
 
  • Hughes Software Systems Ltd.;
 
  • Hughes Tele.com (India) Limited;
 
  • Motient Corporation;
 
  • Nippon Avionics Co., Ltd.;
 
  • P.T. Pasifik Satelit Nusantra;
 
  • Quokka Sports, Inc.;
 
  • Sky Perfect Communications Inc.;
 
  • THOMSON multimedia SA;
 
  • Wink Communications, Inc.; and
 
  • XM Satellite Radio Holdings Inc.

      Corporate Reserve Allocation. Merrill Lynch performed a DCF analysis of the net cash flow effect of the corporate reserve allocations of Hughes using projections provided by Hughes’ management.

      The DCF for corporate contingency was calculated assuming discount rates ranging from 16.0% to 18.0% and was comprised of the sum of the present values of:

  •  the projected cash flows for the third quarter of 2001 through the fiscal year ended December 31, 2005, and
 
  •  the 2005 terminal value based upon a range of assumed perpetual growth rates for the net cash flow effect from 1.0% to 2.0%.

                 
Low High


(in millions)
DCF Value of Corporate Contingency
  $ 2,931     $ 3,493  

      Using the analysis, Merrill Lynch estimated the value of corporate reserve allocations to be between $3,000 million and $3,500 million, as of September 30, 2001.

      Hughes on a Consolidated Basis. Using these analyses, Merrill Lynch estimated the range of per share value of the consolidated Hughes based on 1,300.7 million basic outstanding shares of GM Class H common stock, options to acquire 21.8 million shares of GM Class H common stock with a weighted average exercise price of $10.75, options to acquire 12.1 million shares of GM Class H common stock with a weighted average exercise price of $17.00, 80.1 million shares of GM Class H common stock reserved for issuance upon conversion of the GM Series H preference stock, $1,565 million of net cash and $325 million estimated value of contingent liabilities as of September 30, 2001:

                 
Low High


Implied Equity Value per Share
  $ 12.66     $ 17.10  

          EchoStar Analysis. Merrill Lynch performed a sum-of-the-parts valuation in order to derive an implied per share equity value for EchoStar. Merrill Lynch examined and independently valued EchoStar’s DISH Network, EchoStar’s other businesses, which include EchoStar Technology Corporation and EchoStar

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Satellite Services, EchoStar’s investments in privately held companies and its investments in publicly traded securities.

      DISH Network. Merrill Lynch performed a DCF analysis of EchoStar’s DISH Network using projections provided by EchoStar’s management.

      The DCF value for EchoStar’s DISH Network was calculated assuming discount rates ranging from 12.0% to 14.0% and was comprised of the sum of the present values of:

  •  the projected cash flows for the third quarter of 2001 through the fiscal year ended December 31, 2005, and
 
  •  the 2005 terminal value based upon a range of multiples of estimated 2005 EBITDA from 9.0x to 11.0x.

                 
Low High


(in millions)
DCF Value of DISH Network
  $ 13,601     $ 19,125  

      Using publicly available information, Merrill Lynch compared selected historical stock, financial and operating data and ratios for EchoStar’s DISH Network with corresponding data and ratios of similar publicly traded companies. These companies were selected by Merrill Lynch based upon Merrill Lynch’s views as to the comparability of the financial and operating characteristics of these companies to EchoStar’s DISH Network.

      The companies included in the DISH Network comparable company analysis were:

  •  British Sky Broadcasting Group PLC;
 
  •  Hughes; and
 
  •  Pegasus Communications Corporation.

      Merrill Lynch derived an estimated valuation range for EchoStar’s DISH Network by comparing estimated current enterprise value as a multiple of estimated 2001 subscribers and as a multiple of estimated 2002 EBITDA. The results of these analyses were as follows:

                 
Comparable Company Analysis Low High



Estimated 2001 Subscriber Multiple
  $ 1,316     $ 2,049  
Estimated 2002 EBITDA Multiple
    27.6x       34.4x  

      Using these analyses, and applying a range of $2,000 to $2,400 per estimated 2001 subscriber and an estimated 2002 EBITDA multiple range of 25.0x to 30.0x, Merrill Lynch estimated the following ranges of value for EchoStar’s DISH Network as of September 30, 2001:

                 
Implied Value of DISH Network Low High



Estimated 2001 Subscriber Multiple
  $ 14,000     $ 16,800  
Estimated 2002 EBITDA Multiple
  $ 23,775     $ 28,530  

      Based on the DCF valuation and comparable company analysis, Merrill Lynch assigned the following reference range of values to the DISH Network segment.

                 
Low High


(in millions)
Reference Value Range
  $ 13,500     $ 17,800  

      Using publicly available information, Merrill Lynch compared selected historical stock, financial and operating data and ratios for EchoStar Technology Corporation with corresponding data and ratios of similar publicly traded companies. These companies were selected by Merrill Lynch based upon Merrill Lynch’s views as to the comparability of the financial and operating characteristics of these companies to EchoStar Technology Corporation.

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      The companies included in the EchoStar Technology Corporation comparable company analysis were:

  •  Scientific-Atlanta, Inc.;
 
  •  Pace Micro Technology PLC; and
 
  •  THOMSON multimedia SA.

      Merrill Lynch derived an estimated valuation range for EchoStar Technology Corporation by comparing estimated current enterprise value as a multiple of estimated 2002 EBITDA. The results of these analyses were as follows:

                 
Comparable Company Analysis Low High



Estimated 2002 EBITDA Multiple
    5.6x       16.3x  

      Using these analyses, and applying an estimated 2002 EBITDA multiple range of 5.0x to 6.0x, Merrill Lynch estimated the following ranges of value for EchoStar Technology Corporation as of September 30, 2001:

                 
Implied Value of EchoStar
Technology Corporation Low High



Estimated 2002 EBITDA Multiple
  $ 240     $ 288  

      EchoStar Satellite Services. Using publicly available information, Merrill Lynch compared selected historical stock, financial and operating data and ratios for EchoStar Satellite Services with corresponding data and ratios of similar publicly traded companies. These companies were selected by Merrill Lynch based upon Merrill Lynch’s views as to the comparability of the financial and operating characteristics of these companies to EchoStar Satellite Services.

      The companies included in the EchoStar Satellite Services comparable company analysis were:

  •  ViaSat, Inc.; and
 
  •  Gilat Satellite Networks LTD.

      Merrill Lynch derived an estimated valuation range for EchoStar Satellite Services by comparing estimated current enterprise value as a multiple of estimated 2002 EBITDA. The results of these analyses were as follows:

                 
Comparable Company Analysis Low High



Estimated 2002 EBITDA Multiple
    7.1x       9.8x  

      Using these analyses, and applying an estimated 2002 EBITDA multiple range of 7.5x to 8.5x, Merrill Lynch estimated the following ranges of value for EchoStar Satellite Services as of September 30, 2001:

                 
Implied Value of EchoStar Satellite
Services Low High



Estimated 2002 EBITDA Multiple
  $ 255     $ 289  

      Based on the comparable company analysis, Merrill Lynch assigned the following reference range of values, in the aggregate, for EchoStar’s other businesses:

                 
Low High


(in millions)
Reference Value Range
  $ 495     $ 577  

      Private Investments. Merrill Lynch estimated the value of EchoStar’s investment in privately held companies to be between 0.0x and 0.5x the estimated invested capital of $166 million, resulting in a range of value of $0 to $83 million.

      Public Investments. Merrill Lynch valued EchoStar’s investment in the publicly traded common shares of OpenTV Corp. to be $20 million, based on the 2.25 million shares held and the October 25, 2001 closing price of $9.05 per share.

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      EchoStar on a Consolidated Basis. Using these analyses, Merrill Lynch estimated the range of per share value of the consolidated EchoStar common stock, based on 240.8 million shares of EchoStar Class A common stock, 238.4 million shares of EchoStar Class B common stock, options to acquire 22.1 million shares of EchoStar Class A common stock at a weighted average exercise price of $5.93, options to acquire 0.3 million shares of EchoStar Class A common stock at a weighted average exercise price of $22.72, $5,026 million of debt and $2,172 million of cash as of September 30, 2001:

                 
Low High


Implied Equity Value per Share
  $ 22.53     $ 31.43  

      Expected Synergies. Merrill Lynch performed a DCF analysis of the estimated synergies resulting from the proposed combination of Hughes and EchoStar using two sets of projections provided by Hughes’ management, referred to as the High case and the Low case. The expected synergies are projected to be a result of increased number of subscribers, reduced subscriber turnover, increased advertising revenue, reduced subscriber acquisition costs, reduced programming costs and other cost reductions and incremental revenues. These synergy estimates were netted against the implementation costs.

      The DCF for the synergy estimates was calculated assuming a discount rate of 12.5% and was comprised of the sum of the present values of:

  •  the projected cash flows for the years 2002 through the fiscal year ended December 31, 2005; and
 
  •  the 2005 terminal value based upon a 10.0x multiple of estimated 2005 EBITDA.

                 
Low High


(in billions)
DCF Value of Expected Synergies
of the Transactions
  $ 17.8     $ 24.8  

      Historical Exchange Ratio Analysis. Merrill Lynch reviewed the per share daily closing market price movements of GM Class H common stock and EchoStar Class A common stock for the one-year period ending on October 25, 2001, and calculated the historical exchange ratios during this period implied by dividing the daily per share closing prices of GM Class H common stock by those of EchoStar Class A common stock. Merrill Lynch calculated a range of implied exchange ratios of between 0.528x and 1.091x. Merrill Lynch also calculated the averages of those historical trading ratios for the one-week, one-month, three-month, six-month, and one-year periods ending October 25, 2001. The analysis resulted in the following average historical trading ratios for the periods indicated, rounded to the nearest thousandth, compared to an implied exchange ratio in the Hughes/ EchoStar merger of 0.73 shares of EchoStar Class A common stock in exchange for each share of GM Class H common stock, which is the inverse of the exchange ratio in the Hughes/ EchoStar merger of 1/0.73, or about 1.3699, shares of New EchoStar Class A common stock in exchange for each share of EchoStar Class A common stock and 1/0.73, or about 1.3699, shares of New EchoStar Class B common stock in exchange for each share of EchoStar Class B common stock:

         
Implied
Exchange
Period ending October 25, 2001 Ratio


October 24, 2001
    0.583x  
Last 1 Week
    0.591x  
Last 1 Month
    0.572x  
Last 3 Months
    0.638x  
Last 6 Months
    0.666x  
Last 1 Year
    0.732x  

      Implied Exchange Ratio Analysis. Based upon the midpoint of the range of implied per share equity values of Hughes and EchoStar that were estimated on a consolidated sum-of-the-parts basis using the methodologies described above, Merrill Lynch calculated an implied pre-redemption equity ownership split of

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60.6% for Hughes and 39.4% for EchoStar. This compares to the proposed pre-redemption equity ownership split of 67.1% for Hughes and 32.9% for EchoStar, based on the agreed-to exchange ratio.

      Relative Valuation of Direct Broadcast Satellite Assets. Merrill Lynch compared the appropriate public enterprise valuation multiples of EchoStar’s core direct broadcast satellite assets, the DISH Network, versus Hughes’ core direct broadcast satellite assets, DIRECTV. EchoStar’s core direct broadcast satellite assets were valued by taking EchoStar’s publicly traded enterprise value as of October 25, 2001 and subtracting the estimated sum-of-the-parts value of the non-direct broadcast satellite assets. Hughes’ core direct broadcast satellite assets were valued using two separate methodologies:

  •  by taking Hughes’ publicly traded enterprise value as of October 25, 2001 and subtracting the estimated sum-of-the-parts value of the non-direct broadcast satellite assets; and
 
  •  by taking Hughes’ enterprise valuation using the implied transaction offer price per share and subtracting the estimated sum-of-the-parts value of the non-direct broadcast satellite assets.

                         
Direct Broadcast Satellite EchoStar Hughes Hughes at
Asset Value as a Multiple of: at Market at Market Deal Value




Estimated 2001 Subscribers
  $ 2,226     $ 1,894     $ 2,525  
Estimated 2002 Subscribers
  $ 1,807     $ 1,645     $ 2,193  
Estimated 2001 Pre-SAC Direct Broadcast Satellite EBITDA
    9.8x       10.1x       13.4x  
Estimated 2002 Pre-SAC Direct Broadcast Satellite EBITDA
    7.3x       8.0x       10.7x  
Estimated 2002 Direct Broadcast Satellite EBITDA
    16.1x       30.8x       41.1x  

      Premium to GM Class H Common Stockholders and GM $1 2/3 Par Value Common Stockholders. Merrill Lynch analyzed the valuation impact and implied premium to the GM Class H common stockholders and GM $1 2/3 par value common stockholders at various levels of value attributed to synergies assuming a pro forma trading value that gives effect to the proposed $4.2 billion reduction of GM’s retained economic interest in Hughes and assumes the October 25, 2001 closing share price of $15.40 for the GM Class H common stock and an implied exchange ratio in the Hughes/ EchoStar merger of 0.73 shares of EchoStar Class A common stock in exchange for each share of GM Class H common stock:

                 
Implied Implied
Synergy Assumption Price Premium



No Synergies
  $ 16.67       8.3 %
$5.4 Billion of Assumed Synergy Value
  $ 19.26       25.0 %
$10.0 Billion of Assumed Synergy Value
  $ 21.52       39.7 %
$20.0 Billion of Assumed Synergy Value
  $ 26.31       70.9 %

      Credit Rating Impact Considerations for General Motors. Merrill Lynch evaluated the potential impact to the financial position and credit rating of General Motors resulting from the proposed Transactions. The appropriate credit statistics of General Motors are compared before and after giving effect to the proposed $4.2 billion reduction of GM’s retained economic interest in Hughes and the exchange of 100 million shares of GM Class H common stock or New EchoStar Class C common stock, as the case may be, for outstanding GM liabilities and assuming the Transactions closed on June 30, 2001. General Motors was analyzed excluding the financial results of GMAC. For a more complete description of General Motors on a pro forma basis after giving effect to the GM/ Hughes separation transactions, see “— Description of the Transactions— The GM/ Hughes Separation Transactions.”

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GM Excluding GMAC

Last 12
Months as Pro Forma GM
of June 2001 (Excluding Hughes)


EBITDA/ Gross Interest Expense
    12.4 x     16.4 x
Total Debt/ EBITDA
    1.5 x     1.3