-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IGHH4bzSLYozpiFPtboJS0VNvjN1O/uSV4HsPwB2e1cYlGhkD0ns1JfNRSD20CZS l/v4puvvsMLIUTNRNTMSqw== 0000950134-99-009339.txt : 19991101 0000950134-99-009339.hdr.sgml : 19991101 ACCESSION NUMBER: 0000950134-99-009339 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19991029 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ECHOSTAR COMMUNICATIONS CORP CENTRAL INDEX KEY: 0001001082 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 880336997 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-88755 FILM NUMBER: 99737882 BUSINESS ADDRESS: STREET 1: 5701 SOUTH SANTA FE DRIVE CITY: LITTLETON STATE: CO ZIP: 80120 BUSINESS PHONE: 3037231000 MAIL ADDRESS: STREET 1: 5701 SOUTH SANTA FE DRIVE CITY: LITTLETON STATE: CO ZIP: 80120 S-3/A 1 AMENDMENT NO. 1 TO FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1999 REGISTRATION NO. 333-88755 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ECHOSTAR COMMUNICATIONS CORPORATION (Exact name of registrant as specified in its charter) Nevada 88-0336997 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 5701 South Santa Fe Drive Littleton, Colorado 80120 (303) 723-1000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive office) ------------------------------------------ David K. Moskowitz, Esq. Senior Vice President, General Counsel and Secretary EchoStar Communications Corporation 5701 South Santa Fe Drive Littleton, Colorado 80120 (303) 723-1000 (Name, address, including zip code, and telephone number, including area code, of agent for service) With copies to: Raymond L. Friedlob, Esq. Gerald Raskin, Esq. John W. Kellogg, Esq. Friedlob Sanderson Raskin Paulson & Tourtillott, LLC 1400 Glenarm Place, Third Floor Denver, Colorado 80202 (303) 571-1400 ------------------------------------------ Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box: [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please the following box. [ ] 2
- -------------------------------------------------------------------------------------------------------------------- CALCULATION OF REGISTRATION FEE - -------------------------------------------------------------------------------------------------------------------- TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE PROPOSED MAXIMUM PROPOSED AMOUNT OF REGISTERED REGISTERED OFFERING PRICE MAXIMUM REGISTRATION PER SHARE AGGREGATE FEE OFFERING PRICE (1) - -------------------------------------------------------------------------------------------------------------------- Class A Common Stock, $.01 par value 17,206,232 $96.00 $1,651,798,272 $459,200 - -------------------------------------------------------------------------------------------------------------------- TOTAL 17,206,232 $96.00 $1,651,798,272 $459,200(2) - --------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of determining the Registration Fee pursuant to Rule 457(c) as of October 12, 1999. (2) Of this fee, $430,201 was previously paid. The balance of $28,999 has been paid with the filing of this amendment. -------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. (ii) 3 ================================================================================ OCTOBER 29, 1999 [ECHOSTAR LOGO(R)] 34,412,464 SHARES OF CLASS A COMMON STOCK - -------------------------------------------------------------------------------- This prospectus relates to the proposed sale from time to time of shares of our Class A Common Stock by selling shareholders. These shares were acquired from us by a subsidiary of The News Corporation and a subsidiary of MCI WorldCom, Inc. We will not receive any of the proceeds from the sale of these shares and the selling shareholders will pay all registration and selling expenses, including any brokerage or underwriting commissions. THERE ARE LIMITATIONS ON THE NUMBER OF SHARES THAT MAY BE SOLD: Although we are registering 34.4 million shares, the selling shareholders can only sell 3.4 million shares until they have made all payments for the construction and launch of our EchoStar V and EchoStar VI direct broadcast satellites. Even after those payments have been made, the selling shareholders can only sell: o a maximum of 11.5 million shares in the aggregate through June 24, 2000, and 22.9 million shares in the aggregate between June 25, 2000 and June 24, 2001, less any shares sold prior to June 25, 2000; or o in a firm commitment underwritten public offering, a maximum of 17.2 million shares in the aggregate through June 24, 2000, and 27.5 million shares in the aggregate between June 25, 2000 and June 24, 2001, less any shares sold prior to June 25, 2000. As of the date of this prospectus, the selling shareholders have not made all construction and launch payments which are required to be made prior to the launch of EchoStar VI, nor have they appointed an underwriter. These sale limitations are discussed in more detail under the heading "Plan of distribution" commencing on page 24. Our common stock is traded on the Nasdaq National Market under the symbol "DISH." On October 28, 1999 the last reported sale price of our common stock on the Nasdaq National Market was $61.31 per share. We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read this entire prospectus and any amendments or supplements carefully before you make your investment decision. SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN RISKS YOU SHOULD CONSIDER BEFORE YOU PURCHASE ANY SHARES. - -------------------------------------------------------------------------------- Neither the SEC nor any state securities commission has approved or determined whether this prospectus is truthful or complete. Nor have they made, nor will they make, any determination as to whether anyone should buy these securities. Any representation to the contrary is a criminal offense. - -------------------------------------------------------------------------------- 4 TABLE OF CONTENTS
Page WHERE YOU CAN FIND MORE INFORMATION.............................................................................-3- FORWARD LOOKING STATEMENTS......................................................................................-3- ECHOSTAR COMMUNICATIONS.........................................................................................-4- RISK FACTORS....................................................................................................-6- USE OF PROCEEDS................................................................................................-20- SELLING SHAREHOLDERS...........................................................................................-20- DESCRIPTION OF OUR CAPITAL STOCK...............................................................................-21- PLAN OF DISTRIBUTION...........................................................................................-24- LEGAL MATTERS..................................................................................................-25- EXPERTS........................................................................................................-26-
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND IN ANY ACCOMPANYING PROSPECTUS SUPPLEMENT. NO ONE HAS BEEN AUTHORIZED TO PROVIDE YOU WITH DIFFERENT INFORMATION. THE SHARES OF COMMON STOCK ARE NOT BEING OFFERED IN ANY JURISDICTION WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THOSE DOCUMENTS. -2- 5 WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any document that we file at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to you free of charge at the SEC's web site at http://www.sec.gov. Our common stock is traded as "National Market Securities" on the Nasdaq National Market. Material filed by us can be inspected at the offices of the National Association of Securities Dealers, Inc., Reports Section, 1735 K Street, N.W., Washington, D.C. 20006. The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus, and information that we file later with the SEC will automatically update and supersede previously filed information, including information contained in this document. We incorporate by reference the documents listed below and any future filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until this offering has been completed: - Our Annual Report on Form 10-K for the year ended December 31, 1998. - Our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999. - Our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999. - Our Current Reports on Form 8-K filed January 5, 1999, May 25, 1999, July 2, 1999 and October 7, 1999. - The description of our common stock set forth in our Registration Statement on Form 8-A filed on May 30, 1995. You may request free copies of these filings by writing or telephoning us at our principal offices, which are located at the following address: EchoStar Communications Corporation 5701 South Santa Fe Drive Littleton, Colorado 80120 Attention: David K. Moskowitz, Esq. (303) 723-1000 FORWARD LOOKING STATEMENTS All statements contained in this prospectus, as well as statements made in press releases and oral statements that may be made by us or by officers, directors or employees acting on our behalf, that are not statements of historical fact constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known or unknown risks, uncertainties and other factors that could cause our actual results to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. The "Risk factors" section of this prospectus, commencing on page 6, summarizes certain of the material risks and uncertainties that could cause our actual results to differ materially. In addition to statements that explicitly describe such risks and uncertainties, readers are urged to consider statements that include the terms "believes," "belief," "expects," "plans," "anticipates," "intends" or the like to be uncertain and forward-looking. All cautionary statements made herein should be read as being applicable to all forward-looking statements wherever they appear. In this connection, investors should consider the risks described herein and should not place undue reliance on any forward-looking statements. -3- 6 ECHOSTAR COMMUNICATIONS We are a leading provider of direct broadcast satellite, or DBS, television services in the United States through our DISH Network business unit. We are also an international supplier of digital satellite receiver systems and a provider of other satellite services. The DISH Network We started offering subscription television services on the DISH Network in March 1996. As of October 1999, more than 3.0 million households subscribed to DISH Network programming services. We now have five DBS satellites in orbit. Currently, we have the ability to provide about 350 channels of digital television programming, CD quality audio programming and data services across the continental United States. We believe that the DISH Network offers programming packages that have a better "price-to-value" relationship than packages currently offered by most other subscription television providers, particularly cable TV operators. As of August 31, 1999, approximately 12 million United States households subscribed to direct broadcast satellite and other direct-to-home satellite services. In the first nine months of 1999, more than 1,000,000 new households subscribed to our direct broadcast satellite services, an increase of 81% from the comparable period in 1998. We believe that there continues to be significant unsatisfied demand for high quality, reasonably priced television programming services. With the recent launch of EchoStar V, we expect to be able to offer over 500 video and audio channels, together with data services and high definition and interactive TV services. Our subscribers can receive our services across the continental United States with one small "dual location" satellite dish. EchoStar Technologies Corporation In addition to supplying EchoStar satellite receiver systems for the DISH Network, our EchoStar Technologies Corporation subsidiary supplies similar digital satellite receivers to international satellite TV service operators. Our two major customers are Via Digital, a subsidiary of Telefonica, Spain's national telephone company, and Express Vu, a subsidiary of Bell Canada, Canada's national telephone company. We also offer consulting and integration services to development stage, international direct-to-home satellite operators. Satellite Services Our Satellite Services business unit primarily leases capacity on our satellites to customers, including international services that broadcast foreign language programming to our subscribers, and Fortune 1000 companies that use our business television service to communicate with employees, customers and suppliers located around the United States. In addition, we are developing a wide range of Internet and high-speed data services. In mid-1999 we began offering to consumers our first of its kind DISHPlayer which combines satellite receiver, digital VCR, gaming and internet access capabilities all in one box. When a consumer subscribes to the WebTV service we offer in partnership with Microsoft, in addition to all of the video and audio channels we offer, the DISHPlayer receiver gives consumers e-mail and unlimited Internet access on their television. Business strategy Our primary objective is to continue to expand our DISH Network subscriber base and to develop as an integrated, full-service satellite company. To achieve this objective, we seek to: - Leverage our significant share of the DBS spectrum by offering unique programming services that will differentiate us from our competition. These services include satellite-delivered local signals and niche and foreign language services; - Offer marketing promotions that will enhance our position as a leading provider of value-oriented programming services and receiver systems; - Continue to expand DISH Network distribution channels; - Develop our ETC and Satellite Services businesses; and - Emphasize one-stop shopping for DBS services and equipment and superior customer service. -4- 7 Recent developments On September 23, 1999, we successfully launched EchoStar V, our fifth DBS satellite, from Cape Canaveral, Florida. The solar panels were successfully deployed a few hours after launch and the communication antennas were successfully deployed, as expected. During in-orbit testing of EchoStar V, minor anomalies were detected which are not expected to affect service. Assuming successful completion of final in-orbiting testing, EchoStar V is expected to commence commercial service during November 1999. EchoStar V will enable our customers to receive 500 video and audio channels, together with data, high definition, and interactive TV services through the use of one "dual location" dish. On each of July 19, 1999 and October 25, 1999, we completed a two-for-one stock split of our outstanding class A and class B Common Stock. All references to shares included in this prospectus retroactively give effect to the July and October stock splits. -5- 8 RISK FACTORS You should carefully consider all of the information contained in this prospectus before deciding whether to invest in our common stock and, in particular, the following factors: We have substantial indebtedness and are dependent on our subsidiaries' earnings to make payments on our indebtedness We have substantial debt service requirements which make us vulnerable to changes in general economic conditions. The indentures governing our subsidiaries' debt restrict their ability to incur additional debt. Thus it is, and will continue to be, difficult for our subsidiaries to obtain additional debt if required or desired in order to implement our business strategy. Since we conduct substantially all of our operations through our subsidiaries, our ability to service our debt obligations is dependent upon the earnings of our subsidiaries and the payment of funds by our subsidiaries to us in the form of loans, dividends or other payments. Our subsidiaries are not obligated to make funds available to us, and creditors of our subsidiaries will have a superior claim to our subsidiaries' assets. In addition, our subsidiaries' ability to make any payments to us will depend on their earnings, the terms of their indebtedness, business and tax considerations and legal restrictions. The outstanding senior notes of one of our subsidiaries, EchoStar DBS Corporation, would currently prohibit it from paying any dividends to us. As of June 30, 1999, we had outstanding long-term debt (including both the current and long-term portion) of approximately $2.06 billion and $615 million of other liabilities. Our subsidiaries may incur significant indebtedness in the future. Our ability to meet our payment obligations will depend on the success of our business strategy, which is subject to uncertainties and contingencies beyond our control. Restrictive covenants under our indebtedness may limit our ability to operate our business The indentures relating to our long-term indebtedness contain restrictive covenants that may inhibit our ability to manage our business, engage in certain transactions that we believe to be beneficial to holders of common stock and to react to changing market conditions. These restrictions, among other things, limit the ability of our subsidiaries to: - incur additional indebtedness; - issue preferred stock; - sell assets; - create, incur or assume liens; - create dividend and other payment restrictions with respect to our subsidiaries; - merge, consolidate or sell assets; - enter into transactions with affiliates; and - pay dividends. We expect operating losses through at least 2000 and we cannot be certain that we will achieve or sustain operating profitability or positive cash flow from operating activities Our financial performance will affect the market value of our common stock. Due to the substantial expenditures necessary to complete construction, launch and deployment of our direct broadcast satellite system and introduction of our DISH Network service to consumers, we have sustained significant losses in recent periods. If we do not have sufficient income or another source of cash, it could eventually affect our ability to service our debt and pay our other obligations. Our operating losses were $109 million, $224 million and $123 million for the years ended December 31, 1996, 1997 and 1998, respectively, and $37 million and $107 million for the six months ended June 30, 1998 and 1999, respectively. We had net losses of $101 million, $313 million, $261 million for the years ended December 31, 1996, 1997 and 1998, respectively, and $96 million and $448 million for the six months ended June 30, 1998 and 1999, respectively. Improvements in our results of operations depend largely upon our ability to increase our customer base while maintaining our price structure, effectively managing our costs and controlling -6- 9 subscriber turnover, which is the rate at which subscribers terminate service. We cannot assure that we will be effective with regard to these matters. In addition, we incur significant acquisition costs to obtain DISH Network subscribers. These costs, which continue to increase, magnify the negative effects of subscriber turnover. We anticipate that we will continue to experience operating losses through at least 2000. These operating losses may continue beyond 2000. We may need additional capital, which may not be available, in order to continue growing and increase earnings Our ability to increase earnings, and the market value and liquidity of our common stock, will partly depend on our ability to continue growing our business, which may require additional capital that we cannot be certain will be available to us. We may require additional funds to acquire new DISH Network subscribers or to enable existing subscribers to utilize all of the services we offer. We expect to incur material one-time expenses, primarily during 2000, associated with repositioning existing subscribers' satellite dishes from the 119 degree orbital location to the 110 degree orbital location (or supplying customers with dual location dishes if they want to utilize all of our services). The cost to us of repositioning subscriber dishes could be $100 per subscriber or more. We believe that many of our subscribers will reposition their own satellite dishes, and that when we have to reposition dishes, many subscribers will purchase additional programming services and hardware, partially offsetting our repositioning costs. We cannot predict the percentage of our subscriber base whose dishes we will have to reposition, or for whom we will bear a repositioning cost, and we cannot predict the extent to which subscribers will purchase additional hardware or programming services which may partially offset our final cost to reposition their dishes. Those costs are likely to exceed $100 million. In addition, we have conditional licenses or applications pending with the FCC for a two satellite Ku-band system, a two satellite Ka-band system, a two satellite extended Ku-band system and (through a partly owned subsidiary) a six satellite low earth orbit satellite system. We will need to raise additional funds for the foregoing purposes. Further, a number of factors, some of which are beyond our control or ability to predict, could require us to raise additional capital. These factors include, among other things, higher than expected subscriber acquisition costs or a defect in or the loss of any satellite. We cannot assure you that we will be able to raise additional capital at the time necessary or on satisfactory terms. The inability to raise sufficient capital would have a material adverse effect on our business. We face intense competition from direct broadcast satellite and other satellite system operators, which could affect our ability to grow and increase earnings Our ability to increase earnings will partly depend on our ability to compete in the highly competitive subscription television industry. We compete with companies offering video, audio, data, programming and entertainment services, including cable operators and other satellite operators. Many of these competitors have substantially greater financial, marketing and other resources than we have. One competitor, DIRECTV, Inc., has launched four high powered direct broadcast satellites and has 46 direct broadcast satellite frequencies that are capable of full coverage of the continental United States . DIRECTV currently offers more than 200 channels of combined video and audio programming and as of October 7, 1999 had approximately 7.6 million subscribers. DIRECTV is, and will be for the foreseeable future, in an advantageous position with regard to market entry, programming, such as DIRECTV's exclusive sports programming and, possibly, volume discounts for programming offers. In addition, two other satellite companies in the U.S., including a subsidiary of Loral Space and Communications Limited, have conditional permits for a comparatively small number of direct broadcast satellite assignments that can be used to provide service to portions of the United States. The FCC has proposed to allocate additional expansion spectrum for direct broadcast satellite services, which could create significant additional competition in the market for subscription television services. -7- 10 We compete with cable television and other land-based systems, which could affect our ability to grow and increase earnings We encounter substantial competition in the subscription television market from cable television and other land-based systems. Cable television operators have a large, established customer base, and many cable operators have significant investments in, and access to, programming. Cable television service is currently available to more than 90% of the approximately 99 million U.S. television households, and approximately 66% of total U.S. households currently subscribe to cable. Cable television operators currently have an advantage relative to us by providing local programming and service to multiple television sets within the same household. Cable operators may also obtain a competitive advantage through bundling their analog video service with expanded digital video services delivered terrestrially or via satellite, efficient 2-way high speed data transmission, and telephone service on upgraded cable systems. For example, some cable companies now offer high speed Internet access over their upgraded fiber optic systems, and AT&T has announced that it intends to provide telephone service over Time Warner's cable system. As a result of these and other factors, we may not be able to continue to expand our subscriber base or compete effectively against cable television operators. When fully deployed, new technologies could have a material adverse effect on the demand for our direct broadcast satellite services. For example, new and advanced local multi-point distribution services are still in the development stage. In addition, entities such as regional telephone companies, which are likely to have greater resources than we have, are implementing and supporting digital video compression over existing telephone lines and digital "wireless cable." 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 us. For instance, AT&T has acquired cable operator TCI and has entered into a definitive agreement to acquire MediaOne. We may not be able to compete successfully with existing competitors or new entrants in the market for subscription television services. Cable competitors may block our access to popular programming We cannot be certain whether or not cable or other TV service providers would seek to acquire sports franchises or other popular programming and distribute exclusively the corresponding programming, which could possibly limit our access to such popular programming. For example, on May 19, 1998, we filed a complaint against Comcast, a major cable provider, seeking access to the sports programming controlled by Comcast in the Philadelphia area. On January 22, 1999, the FCC denied this complaint, partly on the basis that Comcast's programming is delivered terrestrially and therefore is not subject to program access prohibitions. We cannot be certain whether or not other TV service providers who control production or distribution of their own programming would switch to terrestrial transmission of their programming and seek to rely on the FCC's denial of our complaint against Comcast in order to deny us access to their programming. We depend on others to produce programming We depend on third parties to provide us with programming services. Our programming agreements have remaining terms ranging from one to ten years and contain various renewal and cancellation provisions. We 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 we are unable to renew any of these agreements or the other parties cancel the agreements, we cannot assure you that we would be able to obtain substitute programming, or that such substitute programming would be comparable in quality or cost to our existing programming. In particular, the cost of sports programming has been rising rapidly. Our competitors currently offer much of the same programming that we do. Our ability to compete successfully will depend on our ability to continue to obtain desirable programming and offer it attractively to our customers at competitive prices. -8- 11 We depend on the Cable Act for access to others' programming Any change in the Cable Consumer Protection and Competition Act of 1992 ("Cable Act") and the FCC's rules that permit the cable industry or cable-affiliated programmers to discriminate against competing businesses, such as ours, in the sale of programming could adversely affect our ability to acquire programming at all or to acquire programming on a cost-effective basis. Under the Cable Act and the FCC's rules, 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. We purchase a substantial percentage of our programming from cable-affiliated programmers. Some of these restrictions on cable-affiliated programmers will expire in 2002 unless the FCC extends the rules. While we have filed several complaints with the FCC alleging discrimination, exclusivity, or refusals to deal, we have had limited success in convincing the FCC to grant us relief. The FCC has denied or dismissed many of our complaints, and we believe has generally not shown a willingness to enforce the program access rules stringently. As a result, we may be limited in our ability to obtain access (or non-discriminatory access) to cable-affiliated programming. In addition, the FCC recently modified certain of its attribution rules that determine whether a programmer is affiliated with a cable operator and therefore subject to the program access obligations. We do not yet know the implications or impact of these modified rules. In particular, on January 14, 1999, we filed a program access complaint with the FCC against Speedvision Network, L.L.C. and Outdoor Life Network, L.L.C. seeking access to programming controlled by these two networks alleging that the conduct of Speedvision and Outdoor Life Network in cutting off our access to programming after five days of carriage constituted an unreasonable refusal to deal and a prohibited unfair practice under the Communications Act and the FCC's rules. Speedvision has cut off the service allegedly based on its view that we breached a November 1998 contract between the parties and has sued us in federal district court in Connecticut requesting several remedies. On June 14, 1999 the FCC dismissed our complaint without prejudice to its reinstatement after the conclusion of the federal court litigation. We cannot be sure how the court will rule on Speedvision's and Outdoor Life Network's complaint. On June 23, 1999 we also filed a program access complaint alleging that the terms for carriage of the Fox Sports Arizona channel are discriminatory. Fox Sports has claimed, among other things, that our complaint is barred by an FCC ruling dismissing an earlier complaint against Fox Sports on statute of limitations grounds. We cannot be sure how the FCC will rule on these issues. In addition, the need to obtain certain retransmission consents and copyright licenses may limit our strategy to provide local programming in multiple markets. Impediments to retransmission of local broadcast signals; our local programming strategy faces uncertainty Although we believe that the Satellite Home Viewer Act allows us to retransmit the programs of a local network station to its local market via satellite, several other parties oppose that view. We also believe that the compulsory copyright license under the Satellite Home Viewer Act and the retransmission consent rules of the Communications Act of 1934, as amended may not be sufficient to permit us to implement our strategy to retransmit that programming in the most efficient and comprehensive manner and that new legislation may be necessary for that purpose. We offer programming telecast by local affiliates of national television networks to several major population centers within the continental United States. In order to retransmit network station programming, satellite TV companies must have a copyright license and must sometimes also obtain the retransmission consent of the network station. Although we have entered into a retransmission consent agreement covering FOX Network owned and operated stations, we cannot be certain whether we will obtain retransmission consents to the extent they are required from the other three major networks or any local affiliate. Our inability to retransmit local programming could have an adverse effect on our strategy to compete with cable companies, which provide local programming. Bills that permit local-into-local retransmission subject to a retransmission consent requirement and other conditions have been passed by the House and the Senate and are currently being considered by a conference committee. We cannot be sure whether or when this process will result in the passage of new legislation and whether a new law would be favorable to us. -9- 12 The bills now being considered by the House and Senate conference committee also include the imposition of "must carry" requirements on DBS providers. The "must carry" rules generally require cable distributors to carry all the local broadcast stations in areas they serve, not just the four major networks. The broadcasters also argue that satellite companies should not be allowed to provide local-into-local network service unless they also become subject to these requirements. If Congress enacts new legislation imposing such requirements, our plans to provide local programming will be adversely affected. TV networks oppose our strategy of delivering distant network signals The Satellite Home Viewer Act permits satellite retransmission of distant network signals only to "unserved households." The national networks and local affiliate stations recently challenged, based upon copyright infringement, PrimeTime 24's methods of selling network programming to consumers. Historically, we obtained distant broadcast network signals for distribution to our customers through PrimeTime 24. The United States District Court for the Southern District of Florida entered a nationwide permanent injunction preventing PrimeTime 24 from selling its programming to consumers unless the programming was sold in accordance with certain stipulations in the injunction. The injunction covers "distributors" as well. The plaintiffs in the Florida litigation informed us that they considered us a "distributor" for purposes of that injunction. A federal district court in North Carolina also issued an injunction against PrimeTime 24 prohibiting certain distant signal retransmissions in the Raleigh area. The Fourth Circuit Court of Appeals recently affirmed the North Carolina Court's decision. We have implemented Satellite Home Viewer Act compliance procedures which materially restrict the market for the sale of network channels by us. In October 1998, we filed a declaratory judgment action in the United States District Court for the District of Colorado against the four major networks. We asked the court to enter a judgment declaring that our method of providing distant network programming does not violate the Satellite Home Viewer Act and hence does not infringe the networks' copyrights. In November 1998, the four major broadcast networks and their affiliate groups filed a complaint against us in federal court in Miami alleging, among other things, copyright infringement. The court combined the case that we filed in Colorado with the case in Miami and transferred it to the Miami court. In February 1999, CBS, NBC, Fox and ABC filed a "Motion for Temporary Restraining Order, Preliminary Injunction and Contempt Finding" against DIRECTV, Inc. in Miami related to the delivery of distant network channels to DIRECTV customers by satellite. Under the terms of a settlement between DIRECTV and the networks, some DIRECTV customers were scheduled to lose access to their satellite-provided network channels by July 31, 1999, while other DIRECTV customers are to be disconnected by December 31, 1999. Subsequently, PrimeTime 24 and substantially all providers of satellite-delivered network programming other than us agreed to this cut-off schedule. The networks are pursuing a Motion for Preliminary Injunction in the Miami Court, asking the court to enjoin us from providing network programming except under very limited circumstances. In general, the networks want us to turn off programming to our customers on the same schedule agreed to by DIRECTV. A preliminary injunction hearing was held on September 21, 1999. The Court took the issues under advisement to consider the networks' request for an injunction, whether to hear live testimony before ruling upon the request, and whether to hear argument on why the Satellite Home Viewer Act may be unconstitutional, among other things. The Court did not say when a decision will be made, or whether an additional hearing will be necessary prior to ruling upon the networks' preliminary injunction motion. If this case is decided against us, or a preliminary injunction is issued, significant material restrictions on the sale of distant ABC, NBC, CBS and Fox channels by us could result. Among other things, the litigation, together with -10- 13 legislation pending in Congress, could require us to terminate delivery of network signals to a material portion of our subscriber base, which could cause many of these subscribers to cancel their subscription to our other services. While the networks have not sought monetary damages, they have sought to recover attorney fees if they prevail. We have commenced sending letters to some of our subscribers warning that their access to distant broadcast network channels might be terminated this year. Such terminations would result in a small reduction in average monthly revenue per subscriber and could result in increased subscriber turnover. Under the Satellite Home Viewer Act, the determination of whether a household qualifies as "unserved" for the purpose of eligibility to receive a distant network channel depends, in part, on whether that household can receive a signal of "Grade B intensity" as defined by the FCC. In February 1999, the FCC released a report and ruling on these matters. Although the FCC declined to change the values of Grade B intensity, it adopted a method for measuring it at particular households. The FCC also endorsed a method for predicting Grade B intensity at particular households. The FCC recently denied in part and granted in part our petition for reconsideration, allowing us some additional flexibility in the method for measuring Grade B intensity but denying our requests on other matters. We cannot be sure whether these methods are favorable to us or what weight, if any, the courts will give to the FCC's decision. We also cannot be certain whether the application of these methods by the courts will result in termination of distant signal delivery to a material portion of our subscribers and decreases in future subscriber activations. In addition, the Satellite Home Viewer Act is set to expire at the end of 1999. While proposed legislation being considered in conference by Congress would extend the satellite companies' ability to retransmit distant network signals subject to many limitations, we cannot be sure whether or when such legislation will be enacted or whether it would be favorable to us. Our business relies on the intellectual property of others and we may inadvertently infringe their patents and proprietary rights Many entities, including some of our competitors, now have and may in the future obtain patents and other intellectual property rights that cover or affect products or services directly or indirectly related to those that we offer. In general, if a court determines that one or more of our products infringes on intellectual property held by others, we would be required to cease developing or marketing those products, to obtain licenses to develop and market those products form 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, the entity might be predisposed to exercise their right to prohibit our use of their intellectual property in our products and services at any price, thus impacting our competitive position. We cannot assure you that we are aware of all patents and other intellectual property rights that our 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 our products may infringe claims contained in pending patent applications. Further, it is often not possible to determine definitively whether a claim or infringement is valid, absent protracted litigation. We cannot estimate the extent to which we may be required in the future to obtain licenses with respect to patents held by others and the availability and cost of any such licenses. Those costs, and their impact on net income, could potentially be material. Damages in patent infringement cases can also include a tripling of actual damages in certain cases. Potential royalties for products already produced could also impact liquidity. Various parties have asserted patent and other intellectual property rights with respect to components within our direct broadcast satellite system. We cannot be certain that these persons do not own the rights they claim, that our products do not infringe on these rights, that we would be able to obtain licenses from these persons on commercially reasonable terms or, if we were unable to obtain such licenses, that we would be able to redesign our products to avoid infringement. -11- 14 Satellite programming signals have been pirated, which could cause us to lose subscribers and revenue The delivery of subscription programming requires the use of encryption technology to assure 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 our signal encryption has been pirated and could be further compromised in the future. We continue to respond to compromises of our encryption system with measures intended to make signal theft of our programming commercially uneconomical. We utilize a variety of tools to continue to accomplish this goal. Ultimately, if other measures are not successful, it could be necessary to replace the credit card size card that controls the security of each consumer set top box at a material cost to us. If we can not promptly correct a compromise in our encryption technology, it would adversely affect our revenue and our ability to contract for video and audio services provided by programmers. We use only one digital broadcast center We rely upon a single digital broadcast center located in Cheyenne, Wyoming, for key operations for programming signals, such as reception, encryption and compression. Although we recently acquired a digital broadcast center located in Gilbert, Arizona, this digital broadcast center will require significant time and expenditures to become fully operational. If a natural or other disaster damaged the digital broadcast center in Cheyenne, Wyoming, we cannot assure you that we would be able to continue to provide programming services to our customers. Our satellites are subject to risks during and after launch Satellite launches are subject to significant risks, including launch failure, which may result in incorrect orbital placement or improper commercial operation. Approximately 15% of all commercial geostationary satellite launches have resulted in a total or constructive total loss. The failure rate varies by launch vehicle and satellite manufacturer. The loss, damage or destruction of any of our satellites as a result of electrostatic storm or collision with space debris would have a material adverse effect on our business. EchoStar IV has experienced certain anomalies; see "--Insurance coverage of our satellites is limited." Our satellites have minimum design lives of 12 years, but could fail before then Our ability to earn revenue wholly depends on the usefulness of our satellites. Each of our satellites has a limited useful life. A number of factors affect the useful lives of the satellites, including the quality of their construction, the durability of their component parts, the longevity of their station-keeping on orbit and the efficiency of the launch vehicle used. The minimum design life of each of EchoStar I, EchoStar II, EchoStar III, EchoStar IV and EchoStar V is 12 years. We can provide no assurance, however, as to the useful lives of the satellites. Our operating results would be adversely affected if the useful life of any of these satellites were significantly shorter than 12 years. The satellite construction contracts for our satellites contain no warranties if EchoStar I, EchoStar II, EchoStar III, EchoStar IV or EchoStar V fails following launch. Additionally, moving any of these satellites, either temporarily or permanently, to another orbital location, could decrease the orbital life of the satellite by up to six months per movement. Earlier this year, we temporarily moved our EchoStar IV satellite to the 110 degree orbital location, see "-Our business depends substantially on FCC licenses that can expire or be revoked or modified." In the event of a failure or loss of any of EchoStar I, EchoStar II or EchoStar III, we may relocate EchoStar IV and use the satellite 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 EchoStar IV would not cause additional interference -12- 15 compared to EchoStar I, EchoStar II or EchoStar III. If we choose to use EchoStar IV in this manner, we cannot assure you that this use would not adversely affect our ability to meet the operation deadlines associated with our permits. Failure to meet those deadlines could result in the loss of such permits which would have an adverse effect on our operations. Complex technology used in our business could fail or become obsolete New applications and adaptations of existing and new technology, including compression, conditional access, on screen guides and other matters, and significant software development, are integral to our direct broadcast satellite system and may, at times, not function as we expect. Technology in the satellite television industry is in a rapid and continuing state of change as new technologies develop. We cannot assure you that we and our suppliers will be able to keep pace with technological developments. In addition, delays in the delivery of components or other unforeseen problems in our direct broadcast satellite system may occur that could adversely affect performance or operation of our direct broadcast satellite system and could have an adverse effect on our business. Further, if a competitive satellite receiver technology becomes commonly accepted as the standard for satellite receivers in the United States, we would be at a significant technological disadvantage. Insurance coverage of our satellites is limited We renewed in-orbit insurance for EchoStar I, EchoStar II and EchoStar III through July 2000. The insurance policy with respect to in-orbit operation contains standard commercial satellite insurance provisions, including a material change in underwriting information clause requiring us to notify our insurers of any material change in the written underwriting information provided to the insurers or any change in any material fact or circumstance concerning our satellites insured under the policy. That notification could permit insurers to renegotiate the terms and conditions if the result is a material change in risk of loss or insurable interest. A change in the operating status of an insured satellite or any loss occurring during the policy period does not entitle the insurers to renegotiate the policy terms. Currently, our satellite insurance contains customary exclusions and does not apply to loss or damage caused by acts of war or civil insurrection, anti-satellite devices, nuclear radiation or radioactive contamination or certain willful or intentional acts designed to cause loss or failure of a satellite. There may be circumstances in which insurance will not fully reimburse us for any loss. For example, as a result of the failure over the past two years of 3 transponders on EchoStar III, resulting in the loss of use of 6 transponders on EchoStar III, our new insurance policy for EchoStar III contains a deductible of 3 or 6 transponders, depending on the power mode that we operate in. As a result of this deductible, we are currently insured for approximately 81% of our total transponders on EchoStar III. The EchoStar IV launch insurance policy provided for insurance of $219.3 million covering the period from launch of the satellite on May 8, 1998 through May 8, 1999. Due to anomalies experienced by EchoStar IV during that period and the resulting pending claim for a total constructive loss, we did not obtain in-orbit insurance on EchoStar IV. Consequently, if we are unable to resolve our pending insurance claim to our satisfaction, EchoStar IV will not be insured if further losses occur in the future. In addition, insurance will not reimburse us for business interruption, loss of business, profit opportunity and similar losses that might arise from delay in the launch of any EchoStar satellite. We have procured normal and customary launch insurance for EchoStar V. The launch insurance policy provides for insurance of $225.0 million covering the period from launch of the satellite on September 23, 1999 through September 23, 2000. Before the policy expires, we expect to procure normal and customary in-orbit insurance but might not be able to procure that insurance at reasonable rates, or at all, if EchoStar V experiences any anomalies before that time. We may be unable to settle outstanding claims with insurers As a result of the partial failure of EchoStar IV solar arrays to deploy, a maximum of approximately 18 transponders on EchoStar IV are currently available for use at any one time. The number of available transponders -13- 16 will decrease over time. Additionally, six of the 44 transponders on EchoStar IV have failed, resulting in the loss of use of a total of 12 transponders. In addition to transponder failures, EchoStar IV has experienced anomalies affecting its heating systems and fuel system. Based on existing data, we expect that approximately 16 transponders will probably be available over the entire expected life of the satellite, absent significant additional transponder problems or other failures. In September 1998, we filed a $219.3 million insurance claim for a constructive total loss under the launch insurance policy related to EchoStar IV. However, if we receive $219.3 million for a constructive total loss on the satellite, the insurers would obtain the sole right to the benefits of salvage from EchoStar IV under the terms of the launch insurance policy. Although we believe we have suffered a total loss of EchoStar IV under that definition in the launch insurance policy, we intend to negotiate a settlement with the insurers to compensate us for the reduced satellite transmission capacity and allow us to retain title to the asset. Our satellite insurance policy for EchoStar IV consists of separate identical policies with different carriers for varying amounts which, in combination, create a total insured amount of $219.3 million. We anticipate meeting with many of our insurance carriers during late 1999. However, two of the participants in our insurance line have notified us they believe that our alleged delay in providing required insurance claim information may reduce their obligation to pay any settlement related to the claim. One carrier recently asserted it has no obligation to pay. We strongly disagree with the position taken by those insurers and continue to believe that the EchoStar IV insurance claim will be resolved in a manner satisfactory to us. However, we cannot assure you that we will receive the amount claimed or, if we do, that we will retain title to EchoStar IV with its reduced capacity. While there can be no assurance, we do not currently expect a material adverse impact on short or medium term satellite operations. Although we have not fully assessed the impairment to EchoStar IV from the transponder failures and other anomalies, we continue to believe that insurance proceeds will be sufficient to offset all write-downs of satellite assets that might ultimately be necessary because of lost functionality. However, we can provide no assurance that additional material failures will not occur, and we can provide no assurance as to the ultimate amount that may be received from the insurance claim, or that coverage will be available. We will continue to evaluate the performance of EchoStar IV and may modify our loss assessment as new events or circumstances develop. We depend primarily on a single receiver manufacturer SCI Technology, Inc., a high-volume contract electronics manufacturer, is the primary manufacturer of EchoStar receiver systems. VTech recently began manufacturing some EchoStar receiver systems for us. JVC manufactures other consumer electronics products incorporating our receiver systems. If SCI is unable for any reason to produce receivers in a quantity sufficient to meet our requirements, it would impair our ability to add additional DISH Network subscribers and grow our technology business unit. Likewise, it would adversely affect our results of operations. We have fewer distribution channels than our largest direct broadcast satellite competitor We do not have manufacturing agreements or arrangements with consumer products manufacturers other than JVC and Philips, and only JVC currently manufactures consumer electronics equipment incorporating our receivers. As a result, our receivers, and consequently our programming services, are less well known to consumers than those of our largest direct satellite broadcast competitor. Due in part to the lack of product recognition, approximately 19,000 retail outlets carry our receiver systems for sale compared to approximately 30,000 retail outlets for our largest direct satellite broadcast competitor. Increased subscriber turnover could affect our financial performance During 1999, we have experienced an increase in subscriber turnover, or churn. If our churn rate increases materially, it could adversely affect our financial condition and results of operations. While we expect to be able to continue to manage churn in line with our internal benchmark for the remainder of this year, we can provide no -14- 17 assurance that churn will not increase in the future. Further, our benchmark could increase in the future as our subscriber base, and the industry generally, mature. Increased subscriber acquisition costs could affect our financial performance We subsidize the cost of EchoStar receiver systems in order to attract new DISH Network subscribers. Consequently, our subscriber acquisition costs are significant. During the past several months, we have experienced a gradual increase in subscriber acquisition costs. Our subscriber acquisition costs, both in the aggregate and on a per new subscriber activation basis, may materially increase to the extent that we continue or expand our bounty programs or the DISH Network One-Rate Plan, or if we determine that more aggressive promotions are necessary to respond to competition, or for other reasons. If subscriber acquisition costs increase materially, it could adversely affect our financial condition and results of operations. We may be unable to manage rapidly expanding operations If we are unable to manage our growth effectively, it could materially adversely affect our business and results of operations. To manage our growth effectively, we must continue to develop our internal and external sales force, installation capability, customer service operations and information systems, and maintain our relationships with third party vendors. We also need to continue to expand, train and manage our employee base, and our management personnel must assume even greater levels of responsibility. We may be vulnerable to risks associated with acquisitions Acquisitions involve numerous risks, including, among other things, difficulties and expenses that we incur in connection with the acquisition and the subsequent assimilation of the operations of the acquired company, adverse consequences of conforming the acquired company's accounting policies to ours, the difficulty in operating acquired businesses, the diversion of management's attention from other business concerns and the potential loss of key employees of acquired companies. We may not be able to successfully integrate any acquisition into our on-going operations or achieve estimated cost savings. We have made a number of acquisitions and will continue to review future acquisition opportunities. Acquisition candidates may not continue to be available on terms and conditions acceptable to us. In addition, if the operations of an acquired business do not meet expectations, we may need to restructure the acquired business or write-off the value of some or all of the assets of the acquired business. We rely on key personnel We believe that our future success will depend to a significant extent upon the performance of Charles W. Ergen, Chairman, Chief Executive Officer and President. The loss of Mr. Ergen could have an adverse effect on our business. We do not maintain "key man" insurance. Although all of our executives, other than executive officers, have executed agreements limiting their ability to work for or consult with competitors if they leave us, we do not have any employment agreements with any of our executive officers. Your shares of common stock will have limited voting rights Our equity securities consist of common stock and preferred stock. Our common stock has been divided into three classes with different voting rights. Holders of class A common stock and holders of class C common stock are entitled to one vote per share on all matters submitted to a vote of stockholders and holders of class B common stock are entitled to ten votes per share. Holders of series C preferred stock have no voting rights except as provided by law or unless dividends are in arrears. No class C common stock or other series of preferred stock is currently outstanding. However, upon a "change in control" of EchoStar, any holder of class C common stock would be entitled to ten votes per share. Holders of common stock generally vote together as single class on matters submitted to stockholders. Although the class A common stock represents approximately 48% of our total common and preferred shares outstanding, it represents only 8% of our total voting power. Holders of common stock -15- 18 purchased in this offering will therefore not be able to meaningfully participate in our affairs absent a restructuring of our capital stock or the conversion of the outstanding class B common stock into class A common stock. We are controlled by one principal stockholder Charles W. Ergen, our Chairman, Chief Executive Officer and President, currently beneficially owns approximately 52% of our total equity securities, assuming exercise of employee stock options, and he currently possesses approximately 91% of the total voting power. Thus, Mr. Ergen has the ability to elect a majority of our directors and to control all other matters requiring the approval of our stockholders. In addition, pursuant to a voting agreement among Mr. Ergen, News Corporation and MCI WorldCom, News Corporation and MCI WorldCom have agreed to vote their shares in accordance with the recommendation of our Board of Directors for five years. For Mr. Ergen's total voting power to be reduced to below 51%, his percentage ownership of the equity securities of EchoStar would have to be reduced to below 10%. The regulatory regime we operate under could change adversely The FCC imposes different rules for "subscription" and "broadcast" services. We believe that because we offer a subscription programming service, we are not 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 we should comply with regulatory obligations as a broadcast licensee with respect to our current and future operations, and certain parties have requested that we be treated as a broadcaster. If the FCC determined that we are a broadcast licensee, the FCC may require us to comply with all regulatory obligations imposed upon broadcast licensees, which are generally subject to more burdensome regulation than subscription service providers like us. Direct broadcast satellite operators like us currently are not subject to the "must carry" requirements of the Cable Act that require cable operators to carry all the local broadcast stations in the areas they serve, not just the four major networks. The cable industry and the broadcasters have argued that direct broadcast satellite operators should be subject to these requirements, and the broadcasters also have argued that satellite companies should not be allowed to distribute local network signals unless they become subject to those requirements. Congress is considering legislation that imposes such requirements on satellite companies. If Congress passes that legislation, or if the FCC imposes "must carry" rules on direct broadcast satellite operations, these obligations may adversely affect our plans to provide local programming, and "must carry" requirements could displace possibly more attractive programming. Additionally, the FCC recently imposed public interest requirements on direct broadcast satellite licensees, such as us, to set aside four percent of channel capacity exclusively for noncommercial programming for which we must charge programmers below-cost rates and for which we may not impose additional charges on subscribers. This could also displace programming for which we could earn commercial rates and cause us to have less net income. The FCC has commenced a rulemaking which seeks to streamline and revise its rules governing direct broadcast satellite operators. This rulemaking concerns many new possible direct broadcast satellite rules. There can be no assurance about the content and effect of any new direct broadcast satellite rules passed by the FCC. The FCC has proposed allowing non-geostationary orbit fixed satellite services to operate on a co-primary basis in the same frequency as DBS and Ku-based FSS services. If the proposal is adopted, these satellite operations could provide global high-speed data services. This would, among other things, create additional competition for satellite and other services. The FCC has also requested comment on a request that would allow a terrestrial service proposed by Northpoint Communications, Inc. to retransmit local television or other video and data services to DBS subscribers or others in the same DBS spectrum that we use throughout the United States. Both of these proposed operations, if authorized and implemented, may cause harmful interference into our service. Northpoint has been allowed by the FCC to conduct experimental operations in Texas and Washington, D.C. -16- 19 Foreign ownership restrictions could affect our business plan 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, considered on a fully-diluted basis, except upon an FCC public interest determination. Although the FCC's International Bureau has ruled that these limitations do not apply to providers of subscription direct broadcast satellite service like us, the ruling is under challenge. Furthermore, the limitations will apply to our licenses for fixed satellite service if we hold ourselves out as a common carrier or if the FCC decides to treat us as such a carrier. The FCC has noted that we have proposed to operate one of our authorized fixed satellite service systems on a common carrier as well as a non-common carrier basis. We have recently informed the FCC that we have no common carrier plans with respect to that system. Our recent transaction with News Corporation and MCI WorldCom has resulted in the issuance to an Australian corporation, News Corporation, of 11.7% of our total outstanding stock having 2.1% of our total voting power. The transaction has thus increased the possibility that foreign ownership of our stock may exceed the foreign ownership limitations if they apply. In connection with the MCI WorldCom authorization that we received in connection with that transaction, the FCC has decided to waive any foreign ownership limitations to the extent applicable. Nevertheless, we cannot foreclose the possibility that, in light of any subsequent FCC decisions or policy changes, we may in the future need a separate FCC determination that foreign ownership in excess of any applicable limits is consistent with the public interest in order to avoid a violation of the Communications Act or the FCC's rules. Our business depends substantially on FCC licenses that can expire or be revoked or modified We have licenses to operate EchoStar I and EchoStar II at the 119 degree orbital location, which both expire in 2006, a license to operate EchoStar III at the 61.5 degree orbital location, which expires in 2008 and an authorization to launch and operate for 10 years EchoStar V and EchoStar VI at the 110 degree orbital location. Also, we have filed with the FCC an application for a license to operate EchoStar IV from the 148 degree orbital location as well as a request for a waiver of the requirement of serving Alaska and Hawaii from that orbital location. The state of Hawaii has requested the FCC to impose several conditions on these requested authorizations, and we have opposed many of these conditions. We cannot be sure whether the FCC will grant these requests or whether it will impose onerous conditions. Until recently, we operated EchoStar IV at the 148 degree orbital location under a special temporary authorization. Our authorization at the 148 degree orbital location requires us to utilize all of our FCC-allocated frequencies at that location by December 20, 2002, or risk losing those frequencies that we are not using. Third parties have opposed, and we expect them to continue to oppose, some of our authorizations or pending and future requests to the FCC for extensions, waivers and approvals. We recently received another special temporary authorization from the FCC to temporarily move our EchoStar IV satellite to the 110 degree orbital location and operate it pending the launch and successful in-orbit testing and initial operation of EchoStar V. This authorization is for a limited time and is subject to several other conditions. We have recently requested the extension of that authorization through the launch, in-orbit testing, and initial operation of EchoStar VI, or 180 days, whichever is less. We cannot be sure how the FCC will act on this request. The telemetry, tracking and control operations of EchoStar I are in an area of the spectrum called the "C-band." Although the FCC granted us conditional authority to use these frequencies for telemetry, tracking and control, in January 1996 a foreign government raised an objection to EchoStar I's use of these frequencies. We cannot be certain whether that objection will subsequently require us to relinquish the use of such C-band frequencies for telemetry, tracking and control purposes. Further, EchoStar II's telemetry, tracking and control operations are in the "extended" C-band. Our authorization to use these frequencies expired on January 1, 1999. Although we have timely applied for extension of that authorization to November 2006, we cannot be sure that the FCC will grant our request. If we lose the ability to use these frequencies for controlling either satellite, we would lose the satellite. Recently, the FCC released a notice of proposed rulemaking that may inhibit future satellite operations in the "extended" C-band frequencies. The FCC also is no longer accepting earth station applications in that band. These recent developments might have negative implications for us. -17- 20 All of our FCC authorizations are subject to conditions as well as to the FCC's authority to modify, cancel or revoke them. In addition, all of our authorizations for satellite systems that are not yet operational, including the license that we received from MCI WorldCom, are subject to construction and progress obligations, milestones, reporting and other requirements. The FCC has indicated that it may revoke, terminate, condition or decline to extend or renew such authorizations if we fail to comply with applicable Communications Act requirements. If we fail to file adequate reports or to demonstrate progress in the construction of our satellite systems, the FCC has stated that it may cancel our authorizations for those systems. We have not filed, or timely filed, all required reports or other filings, and some of our construction permits have expired, in connection with our authorized systems with the FCC. We cannot be certain whether or not the FCC would cancel our authorizations. We may be in default on certain obligations We used satellite vendor financing in connection with the purchase of each of our operational satellites. Under the terms of that financing, we deferred paying a portion of the purchase price for the satellites until after the satellites were in orbit. As of June 30, 1999, we had $13.4 million in principal amount outstanding of these deferred payments relating to EchoStar I, $14.7 million relating to EchoStar II, $10.0 million relating to EchoStar III and $10.6 million relating to EchoStar IV. One of our wholly-owned subsidiaries, and its subsidiaries, provided security for the outstanding deferred payments relating to EchoStar I and EchoStar II with substantially all of their assets, subject to certain restrictions, and EchoStar DBS Corporation, another of our wholly-owned subsidiaries, guaranteed those amounts. The consummation of the January 1999 offering by EchoStar DBS Corporation of $2 billion of senior notes, and our recent reorganization, might have resulted in breaches of certain covenants in favor of the holders of these outstanding deferred payments, in particular the holders of outstanding deferred payments relating to EchoStar I and EchoStar II. We believe that, if a breach did occur, the holders of such outstanding deferred payments could theoretically allege damages arising out of such breach, including possibly the obligation to repay such outstanding deferred payments prior to their scheduled maturity together with the economic equivalent of interest through the scheduled maturity date. We may become liable in a pending fee dispute In connection with the News Corporation litigation that arose in 1997, we have a contingent fee arrangement with the attorneys who represented us in that litigation which provides for the attorneys to be paid a percentage of any net recovery obtained in the News Corporation litigation. The attorneys have asserted that they may be entitled to receive payments totaling hundreds of millions of dollars under this fee arrangement. We are vigorously contesting the attorneys' interpretation of the fee arrangement, which we believe significantly overstates the magnitude of our liability. If we are unable to resolve this fee dispute, it would be resolved through arbitration or litigation. It is too early to determine the outcome of negotiations, arbitration or litigation regarding this fee dispute. Failure of Year 2000 compliance initiatives could adversely affect us The Year 2000 issue exists because many computer systems and applications currently use two-digit date fields to designate a year. Thus, as the century date approaches, date sensitive systems may recognize the year 2000 as 1900 or not at all. The inability to recognize or properly treat the year 2000 may cause computer systems to process critical financial and operational information incorrectly. If our Year 2000 remediation plan is not successful or is not completed in a timely manner, the Year 2000 issue could significantly disrupt our ability to transact business with our customers and suppliers, and could have a material impact on our operations. Even if our Year 2000 remediation plan is successful or we complete it on time, there can be no assurance that other companies will timely convert their systems with which our systems interact, or that any such failure to convert by another company would not have an adverse effect on our business or operations. We cannot estimate the potential adverse impact that may result from non-compliance with the year 2000 issue by the software and equipment vendors and others with whom we conduct business. -18- 21 We do not expect to pay dividends in the foreseeable future We have never declared or paid any cash dividends on any class of our common stock and we do not expect to declare dividends on our common stock in the foreseeable future. Payment of any future dividends will depend upon our earnings and capital requirements, restrictions in our debt facilities and other factors our Board of Directors considers appropriate. We currently intend to retain our earnings, if any, to support future growth and expansion. Future sales of our common stock may depress our stock price Sales of a substantial number of shares of common stock in the public market in connection with this offering, or other offerings by us, could cause the market price of our common stock to decline. Our stock price may be volatile The price at which our common stock trades may be volatile and may fluctuate substantially due to competition and changes in the subscription television industry, regulatory changes, launch and satellite failures, operating results below expectations and other factors. In addition, price and volume fluctuations in the stock market may affect market prices for our common stock for reasons unrelated to our operating performance. -19- 22 USE OF PROCEEDS All of the common stock covered by this prospectus is being sold by the selling shareholders. We will not receive any of the proceeds from those sales. SELLING SHAREHOLDERS The table below shows certain information about the shares covered by this prospectus and other shares of common stock beneficially owned by the selling shareholders on the date of this prospectus. Our registration of these shares does not necessarily mean that any selling shareholder will sell all or any of its shares of common stock. The number of shares that the selling shareholders may sell at any particular time are subject to certain restrictions, which are described in the section "Plan of distribution." This table assumes that all shares covered by this prospectus will be sold by the selling shareholders and that no additional shares of common stock are bought or sold by any selling shareholder. The number of shares set forth in the table gives effect to our July 1999 two-for-one stock split and our October 1999 two-for-one stock split.
Number of Number of Percentage of Shares Number of Shares Shares to be Shares to be Beneficially Offered by this Held After Held After Selling Shareholder Owned Prospectus(1) Offering(2) Offering(2) ------------------- ------------ ---------------- ------------ ------------- News America Incorporated 27,564,384 27,564,384 0 0% MCI WorldCom Network Services, Inc.* 6,848,080 6,848,080 0 0% ---------- Total 34,412,464 ==========
*A wholly-owned subsidiary of MCI WorldCom. (1) Subject to satisfaction of conditions described in "Plan of distribution". (2) Sales of shares may be made from time to time in several offerings. As a result, the number of shares held by each selling shareholder, and their respective percentage interest in the company, may change upon completion of each subsequent offering. -20- 23 DESCRIPTION OF OUR CAPITAL STOCK General Our authorized capital stock currently consists of: - 1,600,000,000 shares of common stock, of which 800,000,000 shares are designated class A common stock, 400,000,000 shares are designated class B common stock and 400,000,000 shares are designated class C common stock; and - 20,000,000 shares of preferred stock, including 2,300,000 shares of 6:% Series C cumulative convertible preferred stock. As of October 26, 1999, 108,616,472 shares of class A common stock were issued and outstanding and held of record by 2152 stockholders, 119,217,604 shares of class B common stock were issued and outstanding and held of record by Charles W. Ergen, our Chairman, Chief Executive Officer and President, and no shares of class C common stock were issued and outstanding. As of October 6, 1999, 1,039,680 shares of Series C preferred stock were issued and outstanding. All outstanding shares of the class A common stock and class B common stock are fully paid and nonassessable. A summary of the powers, preferences and rights of the shares of each class of common stock and each series of preferred stock is described below. The transfer agent for our capital stock, including the class A common stock, is American Securities Transfer & Trust, Inc. On each of July 19, 1999 and October 25, 1999, we completed a two-for-one stock split of our outstanding class A and class B common stock. Class A common stock Each holder of class A common stock is entitled to one vote for each share owned of record on all matters submitted to a vote of stockholders. Except as otherwise required by law, the class A common stock votes together with the class B common stock and the class C common stock on all matters submitted to a vote of stockholders. Subject to the preferential rights of any outstanding series of preferred stock and to any restrictions on the payment of dividends imposed under the terms of our indebtedness, the holders of class A common stock are entitled to such dividends as may be declared from time to time by our Board of Directors from legally available funds and, together with the holders of the class B common stock, are entitled, after payment of all prior claims, to receive pro rata all of our assets upon a liquidation. Holders of class A common stock have no redemption, conversion or preemptive rights. Class B common stock Each holder of class B common stock is entitled to ten votes for each share of class B common stock on all matters submitted to a vote of stockholders. Except as otherwise required by law, the class B common stock votes together with the class A common stock and the class C common stock on all matters submitted to a vote of the stockholders. Each share of class B common stock is convertible, at the option of the holder, into one share of class A common stock. The conversion ratio is subject to adjustment from time to time upon the occurrence of certain events, including: (i) dividends or distributions on class A common stock payable in class A common stock or certain other capital stock; (ii) subdivisions, combinations or certain reclassifications of class A common stock; and (iii) issuances of rights, warrants or options to purchase class A common stock at a price per share less than the fair market value of the class A common stock. Each share of class B common stock is entitled to receive dividends and distributions upon liquidation on a basis equivalent to that of the class A common stock and class C common stock. -21- 24 Class C common stock Each holder of class C common stock is entitled to one vote for each share of class C common stock on all matters submitted to a vote of stockholders. Except as otherwise required by law, the class C common stock votes together with class A common stock and the class B common stock on all matters submitted to a vote of stockholders. Each share of class C common stock is convertible into class A common stock on the same terms as the class B common stock. Each share of class C common stock is entitled to receive dividends and distributions upon liquidation on a basis equivalent to that of the class A common stock and class B common stock. Upon a change of control of our company, each holder of outstanding shares of class C common stock is entitled to cast ten votes for each share of class C common stock held by such holder. We do not currently intend to issue any shares of class C common stock. Under current National Association of Securities Dealers rules, we are not able to issue class C common stock so long as the class A common stock is quoted on the Nasdaq National Market. Preferred stock Our Board of Directors is authorized to divide the preferred stock into series and, with respect to each series, to determine the preferences and rights and the qualifications, limitations or restrictions of the series, including the dividend rights, conversion rights, voting rights, redemption rights and terms, liquidation preferences, sinking fund provisions, the number of shares constituting the series and the designation of such series. Our Board of Directors may, without stockholder approval, issue additional preferred stock of existing or new series with voting and other rights that could adversely affect the voting power of the holders of common stock and could have certain anti-takeover effects. Series C preferred stock Effective August 2, 1999, holders of an aggregate of 1,129,717 shares of the Company's 6:% Series C cumulative convertible preferred stock converted their shares into 9,269,470 shares of class A common stock. Holders of the Series C preferred stock are entitled to a quarterly cash payment of $0.844 per share through November 1, 1999, which is funded from a deposit account created when the Series C preferred stock was issued. Dividends will begin to accrue on the Series C preferred stock after November 1, 1999. By that time, any amounts remaining in the deposit account or which have previously been deferred will be paid to the holders of the Series C preferred stock or will be used to purchase shares of class A common stock from us for transfers to holders of Series C preferred stock. The shares would effectively be purchased at a 5% discount to the market price. Dividends on the Series C preferred stock accrue from November 2, 1999, and holders of the Series C preferred stock will be entitled to receive cumulative dividends at an annual rate of 6:% of the liquidation preference, payable quarterly in arrears, commencing February 1, 2000. Dividends may, at our option, be paid in cash or by delivery of shares of class A common stock. The Series C preferred stock is redeemable at any time on or after November 1, 2000, in whole or in part, at our option, in cash or by delivery of class A common stock at specified redemption premiums. Upon any change of control, if the market value of our class A common stock is less than the conversion price, holders of Series C preferred stock would have a one time option to convert all of their outstanding shares into shares of class A common stock at an adjusted conversion price equal to the greater of the market value as of the change of control date and 66.67% of the market value as of the date of the initial offering of the Series C preferred stock. In lieu of issuing the shares of class A common stock issuable upon conversion in the event of a change of control, we may, at our option, make a cash payment equal to the market value of such class A common stock otherwise issuable. The Series C preferred stock is convertible at any time, unless previously redeemed, at the option of the holder thereof, into that number of whole shares of class A common stock as is equal to the liquidation preference divided by a conversion price of $6 3/32, subject to adjustment under certain circumstances. The Series C preferred stock ranks senior to the class A common stock and senior or pari passu with other existing and future offerings of preferred stock in right of payment. Holders of the Series C preferred stock have no -22- 25 voting rights with respect to general corporate matters except as provided by law or upon certain dividend arrearages. The affirmative vote or consent of holders of at least 66-% of the outstanding Series C preferred stock is required for the issuance of any class or series of our stock (or security convertible into our stock) ranking senior to or pari passu with the Series C preferred stock as to dividends or liquidation rights (other than additional shares of Series B preferred stock or certain pari passu securities with an aggregate liquidation preference not to exceed $100 million) and for amendments to our articles of incorporation that would affect adversely the rights of holders of the Series C preferred stock. Limitation of liability and indemnification matters Our articles of incorporation provide that our directors are not personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director, except in certain cases where liability is mandated by Nevada corporate law. The provision has no effect on any non-monetary remedies that may be available to us or our stockholders and does not relieve us or our directors from complying with federal or state securities laws. Our articles of incorporation and by-laws provide for indemnification, to the fullest extent permitted by Nevada corporate law, of any person who is or was involved in any manner in any investigation, claim or other proceeding by reason of the fact that such person is or was a director or officer of our company, or is or was serving at our request as a director or officer of another corporation, against all expenses and liabilities actually and reasonably incurred by such person in connection with the investigation, claim or other proceeding. However, no indemnification may be made for any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of such person's duty to us. Nevada law and limitations on changes in control The Nevada Revised Statutes prevent an "interested stockholders" defined generally as a person owning 10% or more of a corporation's outstanding voting stock, from engaging in a "combination" with a publicly-held Nevada corporation for three years following the date such person became an interested stockholder unless, before such person became an interested stockholder, the board of directors of the corporation approved the transaction in which the interested stockholder became an interested stockholder or approves the combination. The provisions authorizing our Board of Directors to issue preferred stock without stockholder approval and the provisions of the Nevada Revised Statutes relating to combinations with interested stockholders could have the effect of delaying, deferring or preventing a change in our control or the removal of our existing management. Each of the indentures relating to the senior notes of EchoStar DBS Corporation (one of our wholly-owned subsidiaries) also contains provisions with respect to a change of control. The series C preferred stock certificate of designation also contains certain change of control provisions. Charles W. Ergen, our Chairman, President and Chief Executive Officer, owns 119,217,604 shares of class B common stock, which constitute all of the outstanding class B shares. These shares are transferable to other persons, subject to securities laws limitations. If Mr. Ergen transferred a substantial portion of his shares of class B common stock, a change in control of EchoStar would result and Mr. Ergen would receive any premium paid for control of our company. In addition, any such change in control would result in an obligation on the part of EchoStar DBS Corporation, our wholly-owned subsidiary, to offer to purchase at a premium all of its outstanding senior notes. -23- 26 PLAN OF DISTRIBUTION We are registering the Class A Common Stock covered by this prospectus for the selling shareholders. These shares may be sold or distributed from time to time by the selling shareholders, by their donees or transferees or by their other successors in interest. The selling shareholders, on a pro-rata basis, will pay the fees and expenses of registering the Class A Common Stock, including the reasonable fees and disbursements of persons retained by us, as well as any commissions or transfer taxes relating to the sale of the Class A Common Stock. We have agreed to indemnify the selling shareholders against certain liabilities relating to resale of the Common Stock under the Securities Act of 1933. These agreements provide for rights of contribution if indemnification is not available. The selling shareholders, or any underwriters or other agents they may engage, may sell these shares at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at negotiated prices or at fixed prices, which may be changed. The selling shareholders reserve the right to accept or reject, in whole or in part, any proposed purchase of these shares, whether the purchase is to be made directly or through agents. The selling shareholders may offer these shares at various times in one or more of the following transactions: - in ordinary brokers' transactions and transactions in which the broker solicits purchasers; - in transactions involving cross or block trades or otherwise on the Nasdaq National Market; - in transactions in which brokers, dealers or underwriters purchase the shares as principal and resell the shares for their own accounts pursuant to this prospectus; - in transactions "at the market" to or through market makers of EchoStar Common Stock or into an existing market for the Common Stock; - in other ways not involving market makers or established trading markets, including direct sales of the shares to purchasers or sales of the shares effected through agents; - through transactions in options, swaps or other derivatives which may or may not be listed on an exchange; - in face-to-face transactions between sellers and purchasers without a broker-dealer; - in transactions to cover short sales; and - in a combination of any of the foregoing transactions. The selling shareholders also may sell these shares in accordance with Rule 144 under the Securities Act. The selling shareholders may sell short their Class A Common Stock. The selling shareholders may deliver this prospectus in connection with such short sales and use the shares offered by this prospectus to cover such short sales. The selling shareholders may enter into hedging transactions with broker-dealers. The broker-dealers may engage in short sales of the Class A Common Stock in the course of hedging the positions they assume with the selling shareholders, including positions assumed in connection with distributions of these shares by such broker-dealers. The selling shareholders also may enter into options or other transactions with broker-dealers that involve the delivery of these shares to the broker-dealers, who may then resell or otherwise transfer such shares. In addition, the selling shareholders may loan or pledge these shares to a financial institution or a broker-dealer, which may sell the loaned shares or, upon a default by the selling shareholder of the secured obligation, may sell or otherwise transfer the pledged shares. The selling shareholders may use brokers, dealers, underwriters or agents to sell these shares and may enter into customary forms of underwriting agreements in connection therewith. Any underwriter or agent involved in the offer and sale will be named in the applicable prospectus supplement. The persons acting as agents may receive compensation in the form of commissions, discounts or concessions, and will be set forth in the applicable prospectus supplement. This compensation may be paid by the selling shareholders or the purchasers of the shares for whom such persons may act as agent, or to whom they may sell as principal, or both. The compensation as to a particular person may be less than or in excess of customary commissions. The selling shareholders and any agents or broker-dealers that participate with the selling shareholders in the offer and sale of these shares may be deemed to -24- 27 be "underwriters" within the meaning of the Securities Act. Any commissions they receive and any profit they realize on the resale of these shares by them may be deemed to be underwriting discounts and commissions under the Securities Act of 1933. We have advised the selling shareholders that during such time as they may be engaged in a distribution of these shares, they are required to comply with Regulation M under the Securities Exchange Act of 1934. With certain exceptions, Regulation M prohibits the selling shareholders, any affiliated purchasers and other persons who participate in such a distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase, any security which is the subject of the distribution until the entire distribution is complete. The selling shareholders have agreed to the following limitations with respect to the sale of these shares: - Until all payments under the agreements for the construction and launch of our EchoStar V and EchoStar VI DBS satellites have been made by the selling shareholders (the "Satellite Payments"), the selling shareholders cannot sell, assign or otherwise transfer or dispose of more than 3,441,248 shares. - Assuming the Satellite Payments have been made; (i) from October 8, 1999 through June 24, 2000, the selling shareholders may sell or transfer a maximum of 11,470,824 shares in the aggregate; and (ii) from June 25, 2000 and June 24, 2001, the selling shareholders may sell or transfer a maximum of 22,941,648 shares in the aggregate, less any shares sold prior to June 25, 2000. - Assuming the Satellite Payments have been made, the selling shareholders are permitted, under a firm commitment underwritten public offering, to sell that number of shares that does not exceed (i) the difference between 17,206,160 shares and the number of shares sold or transferred by the selling shareholders during the period from October 8, 1999 through June 24, 2000 or (ii) the difference between 27,529,976 shares and the number of shares sold or transferred by the selling shareholders during the period from June 25, 1999 to June 24, 2001. As of the date of this prospectus, no underwriter has been engaged by the selling shareholders. - Once the Satellite Payments have been made, from and after June 25, 2001, the selling shareholders may sell or transfer their shares without respect to any contractual restriction on the number of shares sold. As of the date of this prospectus, the Satellite Payments have not been made, but are required to be made by the selling securityholders prior to the launch of EchoStar VI. It is possible that a significant number of these shares could be sold at the same time. Such sales, or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock. LEGAL MATTERS Friedlob Sanderson Raskin Paulson & Tourtillott, LLC, Denver, Colorado, will pass on the validity of the class A common stock offered by this prospectus. Mr. Friedlob, a member of the firm, is also a member of our Board of Directors and owns options to acquire 44,000 shares of class A common stock. Friedlob Sanderson Raskin Paulson & Tourtillott, LLC will rely on an opinion of Hale Lane Peek Dennison Howard and Anderson, Reno, Nevada, as to matters of Nevada law. EXPERTS The audited financial statements incorporated by reference in this prospectus and elsewhere in the registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto and are included herein in reliance upon the authority of such firm as experts in giving said report. -25- 28 October 29, 1999 [ECHOSTAR LOGO(R)] 34,412,464 SHARES OF CLASS A COMMON STOCK ----------------------------------------- PROSPECTUS ----------------------------------------- - -------------------------------------------------------------------------------- We have not authorized any dealer, salesperson or other person to give you written information other than this prospectus or to make representations as to matters not stated in the prospectus. You must not rely on unauthorized information. This prospectus is not an offer to sell these securities or our solicitation of your offer to buy the securities in any jurisdiction where that would not be permitted. The information contained in this prospectus is correct only as of the date of this prospectus, regardless of the time of the delivery of this prospectus or any sale of these securities. - -------------------------------------------------------------------------------- 29 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses, other than any underwriting discounts and commissions, payable in connection with the sale of common stock being registered. All amounts are estimates except the SEC registration fee. All of the costs and expenses other than the NASDAQ Fee will be borne by the selling shareholders on a pro rata basis, based on the number of shares originally requested to be included in this registration statement. SEC registration fee ................................ $459,200 NASDAQ Fee........................................... 17,500 Legal fees and expenses.............................. 33,000 Accounting fees and expenses......................... 7,500 Printing fees........................................ 1,560 Transfer agent fees.................................. 50 Miscellaneous........................................ 1,190 -------- Total $520,000 ========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Chapter 78.7502(1) of the Nevada Revised Statutes allows EchoStar to indemnify any person made or threatened to be made a party to any action (except an action by or in the right of EchoStar, a "derivative action"), by reason of the fact that he is or was a director, officer, employee or agent of EchoStar, or is or was serving at the request of EchoStar as a director, officer, employee or agent of another corporation, against expenses including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in a good faith manner which he reasonably believed to be in or not opposed to the best interests of EchoStar and, with respect to any criminal proceeding, had no reasonable cause to believe that his conduct was unlawful. Under chapter 78.7502(2), a similar standard of care applies to derivative actions, except that indemnification is limited solely to expenses (including attorneys' fees) incurred in connection with the defense or settlement of the action and court approval of the indemnification is required where the person seeking indemnification has been found liable to EchoStar. In addition, Chapter 78.751(2) allows EchoStar to advance payment of indemnifiable expenses prior to final disposition of the proceeding in question. Decisions as to the payment of indemnification are made by a majority of the Board of Directors at a meeting at which a quorum of disinterested directors is present, or by written opinion of special legal counsel, or by the stockholders. Provisions relating to liability and indemnification of officers and directors of EchoStar for acts by such officers and directors are contained in Article IX of the Amended and Restated Articles of Incorporation of EchoStar and Article IX of EchoStar's by-laws. These provisions state, among other things, that, consistent with and to the extent allowable under Nevada law, and upon the decision of a disinterested majority of EchoStar's Board of Directors, or a written opinion of outside legal counsel, or EchoStar's stockholders: (1) EchoStar shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (other than an action by or in the right of EchoStar) by reason of the fact that he is or was a director, officer, employee, fiduciary or agent of EchoStar, or is or was serving at the request of EchoStar as director, officer, employee, fiduciary or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, if he conducted himself in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of EchoStar, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful; and (2) EchoStar shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of EchoStar to procure a judgment in its favor by reason of the fact that he is or was a director, II-1 30 officer, employee, fiduciary or agent of EchoStar, or is or was serving at the request of EchoStar as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of EchoStar, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to EchoStar unless and only to the extent that the court in which such action or suit was brought shall determine upon application that despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. ITEM 16. EXHIBITS 5.1 Opinion of Hale Lane Peek Dennison Howard and Anderson* 5.2 Opinion of Friedlob Sanderson Raskin Paulson & Tourtillott, LLC* 23.1 Consent of Arthur Andersen LLP 23.2 Consent of Hale Lane Peek Dennison Howard and Anderson (included in Exhibit 5.1) 23.3 Consent of Friedlob Sanderson Raskin Paulson & Tourtillott, LLC (included in Exhibit 5.2) 24.1 Power of Attorney (included on page II-4 of this registration statement)* - ----------- *Previously filed. ITEM 17. UNDERTAKINGS The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement; provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the 1933 Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-2 31 (4) For purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (5) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-3 32 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Littleton, State of Colorado on October 29, 1999. ECHOSTAR COMMUNICATIONS CORPORATION By: /s/ David K. Moskowitz -------------------------------- David K. Moskowitz Senior Vice President, General Counsel, Secretary and Director Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:
Signature Title Date - --------- ----- ---- /s/ David Moskowitz Chief Executive Officer, President and Director October 29, 1999 - ------------------- (Principal Executive Officer) David Moskowitz Attorney-In-Fact Charles W. Ergen /s/ David Moskowitz Chief Financial Officer October 29, 1999 - ------------------- (Principal Financial Officer) David Moskowitz Attorney-In-Fact Steven B. Schaver /s/ David Moskowitz Director October 29, 1999 - ------------------- David Moskowitz Attorney-In-Fact James DeFranco /s/ David K. Moskowitz Director October 29, 1999 - ---------------------- David K. Moskowitz /s/ David Moskowitz Director October 29, 1999 - ------------------- David Moskowitz Attorney-In-Fact Raymond L. Friedlob /s/ David Moskowitz Director October 29, 1999 - ------------------- David Moskowitz Attorney-In-Fact O. Nolan Daines
II-4 33 INDEX TO EXHIBITS
Number Title - ------ ----- 5.1 Opinion of Hale Lane Peek Dennison Howard and Anderson* 5.2 Opinion of Friedlob Sanderson Raskin Paulson & Tourtillott, LLC* 23.1 Consent of Arthur Andersen LLP 23.2 Consent of Hale Lane Peek Dennison Howard and Anderson (included in Exhibit 5.1) 23.3 Consent of Friedlob Sanderson Raskin Paulson & Tourtillott, LLC (included in Exhibit 5.2) 24.1 Power of Attorney (included on page II-4 of this registration statement)*
- ----------- *Previously filed. II-5 EX-23.1 2 CONSENT OF ARTHUR ANDERSEN LLP 1 Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report and to all references to our Firm included in or made part of this Registration Statement. Denver, Colorado October 27, 1999 -----END PRIVACY-ENHANCED MESSAGE-----