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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1999
REGISTRATION NO. 333-___
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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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
(1) OFFERING PRICE
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<S> <C> <C> <C> <C>
Class A Common Stock, $.01 par value 17,206,232 $89.9375 $1,547,485,491 $430,201
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TOTAL 17,206,232 $89.9375 $1,547,485,491 $430,201
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(1) Estimated solely for the purpose of determining the Registration Fee
pursuant to Rule 457(c).
-------------------
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)
<PAGE> 3
===============================================================================
PRELIMINARY PROSPECTUS
OCTOBER 8, 1999
[ECHOSTAR LOGO(R)]
17,206,232 SHARES OF CLASS A COMMON STOCK
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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 17.2 million shares, the selling
shareholders can only sell 1.7 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 5.7 million shares in the aggregate through June 24,
2000, and 11.4 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
8.6 million shares in the aggregate through June 24, 2000, and
13.8 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 .
Our common stock is traded on the Nasdaq National Market under the symbol
"DISH." On October 7, 1999 the last reported sale price of our common stock on
the Nasdaq National Market was $105.75 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 FOR CERTAIN RISKS YOU SHOULD CONSIDER
BEFORE YOU PURCHASE ANY SHARES.
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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.
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TABLE OF CONTENTS
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WHERE YOU CAN FIND MORE INFORMATION -6-
FORWARD LOOKING STATEMENTS -6-
ECHOSTAR COMMUNICATIONS -7-
RISK FACTORS -8-
USE OF PROCEEDS -20-
SELLING SHAREHOLDERS -20-
DESCRIPTION OF OUR CAPITAL STOCK -21-
PLAN OF DISTRIBUTION -24-
LEGAL MATTERS -25-
EXPERTS -25-
</TABLE>
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.
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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:
o Our Annual Report on Form 10-K for the year ended December 31,
1998.
o Our Quarterly Report on Form 10-Q for the quarter ended March 31,
1999.
o Our Quarterly Report on Form 10-Q for the quarter ended June 30,
1999.
o Our Current Reports on Form 8-K filed January 5, 1999, May 25,
1999 and July 2, 1999.
o 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 ,
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.
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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 September 30, 1999, more than 3.0 million
households subscribed to DISH Network programming services. We now have five DBS
satellites in orbit, more than any other direct broadcast satellite operator in
the United States. 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, 1,032,000
new households subscribed to 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 high definition, data and
interactive TV services to our customers, which can be received by subscribers
across the continental United States with one small 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. For example, 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. For example, 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 the consumer 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:
o Leverage our significant share of 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;
o Offer marketing promotions that will enhance our position as a
leading provider of value-oriented programming services and
receiver systems;
o Continue to expand DISH Network distribution channels;
o Develop our ETC and Satellite Services businesses; and
o Emphasize one-stop shopping for DBS services and equipment and
superior customer service.
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Recent developments
On September 23, 1999, EchoStar V, our fifth DBS satellite, was
successfully launched from Cape Canaveral, Florida. Assuming successful
completion of in-orbit checkout of EchoStar V, we will be able to offer over 500
video and audio channels, high definition, data, and interactive TV services to
our customers.
On July 19, 1999, we completed a two-for-one stock split of our
outstanding Class A and Class B Common Stock. On October 7, 1999, we announced a
two-for-one stock split of our Class A and Class B Common Stock for our
stockholders of record on October 18, 1999, payable on or about October 25,
1999. All references to shares included in this prospectus retroactively give
effect to the July stock split, but not the October stock split.
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 we 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. Some of our subsidiaries may become parties
to other agreements that severely restrict their ability to obtain additional
debt financing for working capital, capital expenditures and general corporate
purposes. As of June 30, 1999, we had outstanding long-term debt (including both
the current and long-term portion) of approximately $2.06 billion. 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:
o incur additional indebtedness;
o issue preferred stock;
o sell assets;
o create, incur or assume liens;
o create dividend and other payment restrictions with respect to our
subsidiaries;
o merge, consolidate or sell assets;
o enter into transactions with affiliates; and
o 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
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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 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. See "--Increased subscriber turnover could affect our financial
performance." 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. 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. 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 with confidence 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 with confidence 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 could 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 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 three high powered direct
broadcast satellites and has 27 frequencies at the 101 degree orbital location
that are capable of full coverage of the continental United States. DIRECTV and
USSB, which operates five more frequencies on one of DIRECTV's satellites,
currently offer more than 200 channels of combined video and audio
programming and as of August 31, 1999 had approximately 3.9 million subscribers.
DIRECTV and USSB are 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. On
May 20, 1999, DIRECTV's parent acquired the business and assets of USSB. In
addition to the five USSB frequencies at the 101 degree orbital location, this
combination gives DIRECTV access to three additional frequencies controlled by
USSB at the 110 degree orbital location, which is also a very favorable position
for coverage of the United States. On April 28, 1999, DIRECTV acquired the
medium powered direct broadcast satellite business of Primestar, Inc., which as
of August 31, 1999 had approximately 1.5 million subscribers, and certain assets
of TCI Satellite Entertainment, Inc. The acquired assets included two direct
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broadcast satellites and 11 direct broadcast frequencies at the 119 degree
orbital location. As a result of the acquisitions of USSB and the TCI assets,
DIRECTV controls 46 direct broadcast satellite frequencies that are capable of
full coverage of the continental United States and has an aggregate of 5.4
million subscribers.
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.
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
cancelled prior to expiration of their original term. If we are unable to renew
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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.
We depend on the Cable Act for access to others' programming
Any change in the Cable Act and the FCC's rules that permit the cable
industry or 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 Television Consumer Protection and Competition Act of 1992 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. 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 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 usually must have a copyright license and 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 in connection with the agreement with News Corporation and MCI
WorldCom, 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.
TV networks oppose our strategy of delivering distant network signals
There are currently a number of lawsuits regarding the efforts of
satellite TV service providers, including us, to retransmit the signals of
network programming.
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, Joint Venture.
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 and the decision in
that case could be used as legal precedent against us. The Fourth Circuit Court
of Appeals recently affirmed the North Carolina Court's decision. In response to
the recent legal activity, among other things, we have implemented Satellite
Home Viewer Act compliance procedures which materially restrict the market for
the sale of network channels by us.
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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 plaintiffs in that action have also requested the issuance of
a preliminary injunction against us. 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 June 30, 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.
On September 21, 1999, the Miami Court held a hearing on the networks' Motion
for Preliminary Injunction. Prior to the hearing, on September 17, 1999, we
filed a motion challenging the constitutionality of the Satellite Home Viewer
Act.
Prior to the September 21, 1999 hearing, we also submitted testimony
from expert witnesses and certain of our employees supporting our continuing
efforts to comply with the Satellite Home Viewer Act, and arguing that the
networks are not entitled to the injunction that they request. The networks have
also filed additional materials in support of their injunction request and
opposing our constitutional challenge to the Satellite Home Viewer Act. At the
hearing on September 21, 1999, the networks requested that the Court issue their
requested injunction. We contested the issuance of an injunction. The Miami
Court did not rule on the networks' request for an injunction at the September
21, 1999 hearing. Instead, 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, significant material restrictions
on the sale of distant ABC, NBC, CBS and Fox channels by us could result. Among
other things, the litigation, and legislation pending in Congress, could require
us to terminate delivery of network signals to a material portion of our
subscriber base. 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.
Our business relies on the intellectual property of others and we may
inadvertently infringe their patents and proprietary rights
Many of our competitors have and may obtain patents that cover or
affect products or services directly or indirectly related to those that we
offer. If our competitors hold such rights, they can either prevent us from
using that product or service, or they can force us to license from them the
right to use the product or service, thereby increasing our costs in a way that
may affect our net income. We cannot assure you that we are aware of all patents
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. In general, if a
court determines that one or more of our products infringes on patents held by
others, we would be required to cease developing or marketing those products, to
-12-
<PAGE> 12
obtain licenses to develop and market those products from the holders of the
patents or to redesign those products in such a way as to avoid infringing the
patent claims. 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. Various parties have asserted
claims, claiming 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.
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. 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."
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<PAGE> 13
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 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 and 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 permits 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 current 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 provides for insurance of
$219.3 million covering the period from launch of the satellite on May 8, 1998
through May 8, 1999. Due to the anomalies experienced by EchoStar IV during that
period and the 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.
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<PAGE> 14
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 out of 32 on EchoStar IV are
currently available for use at any one time. The number of available
transponders will decrease over time. Additionally, five transponders on
EchoStar IV have failed, resulting in the loss of use of a total of 10
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. However, the predicted useful life of the satellite
is less than 12 years as of the result of anomolies experienced. 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 in accordance with 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 creates a total insured amount of $219.3 million. We anticipate
meeting with many of our insurance carriers during the fall of 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 18,000
retail outlets carry our receiver systems for sale compared to approximately
30,000 retail outlets for our largest direct satellite broadcast competitor.
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<PAGE> 15
Increased subscriber turnover could affect our financial performance
During the past several months, we have experienced a gradual increase
in subscriber turnover. If the rate of turnover increases 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, including the transaction with News Corporation and MCI
WorldCom, 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,
including the transaction with News Corporation and MCI WorldCom, 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 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, which is the class offered by this prospectus,
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 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.
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<PAGE> 16
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.
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.
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<PAGE> 17
We believe that our foreign ownership prior to the transaction with
News Corporation and MCI WorldCom was under 5%. That transaction 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 the two satellites acquired from News
Corporation and MCI WorldCom (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 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 the EchoStar IV satellite to the 110 degree orbital
location and operate it pending the launch and successful in-orbit testing of
EchoStar V. This authorization is for a limited time and is subject to several
other conditions.
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.
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.
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<PAGE> 18
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 our dispute with News Corporation. The attorneys have
asserted that they may be entitled to receive payments totaling hundreds of
millions of dollars under this fee arrangement in connection with the settlement
of the dispute with News Corporation. We intend to vigorously contest 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 under the fee arrangement,
the fee dispute 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.
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.
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<PAGE> 19
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.
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<PAGE> 20
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, but does not give effect
to the two-for-one stock split announced on October 7, 1999.
<TABLE>
<CAPTION>
Number of Number of Number of Percentage of
Shares Shares Offered Shares to be Shares to be
Beneficially by this Held After Held After
Selling Shareholder Owned Prospectus(1) Offering(2) Offering(2)
------------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
News America Incorporated 13,782,192 13,782,192 0 0%
MCI WorldCom Network Services, Inc.* 3,424,040 3,424,040 0 0%
Total 17,206,232
==========
</TABLE>
- -------------------
*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.
-21-
<PAGE> 21
DESCRIPTION OF OUR CAPITAL STOCK
General
Our authorized capital stock currently consists of:
o 800,000,000 shares of Common Stock, of which 400,000,000
shares are designated Class A Common Stock, 200,000,000 shares
are designated Class B Common Stock and 200,000,000 shares are
designated Class C Common Stock; and
o 20,000,000 shares of Preferred Stock, including 2,300,000
shares of 6 3/4% Series C Cumulative Convertible Preferred
Stock.
As of October 6, 1999, 54,299,002 shares of Class A Common Stock were
issued and outstanding and held of record by 2,062 stockholders, 59,608,802
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, 1,041,757 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
set forth below.
The transfer agent for our capital stock, including the Class A Common
Stock, is American Securities Transfer & Trust, Inc.
On July 19, 1999, we completed a two-for-one stock split of our
outstanding Class A and Class B Common Stock. On October 7, 1999, we announced a
two-for-one stock split of our Class A and Class B Common Stock for our
stockholders of record on October 18, 1999, payable on or about October 25,
1999. All references to shares included in this prospectus retroactively give
effect to the July stock split, but not the October stock split.
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.
-22-
<PAGE> 22
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 3/4% Series C Cumulative Convertible Preferred Stock
converted their shares into 4,634,735 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 3/4% 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 $12 3/16, subject to adjustment under certain
circumstances.
-23-
<PAGE> 23
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
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 66b% 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 shall 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 stockholder" which
is 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 contain 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 59,608,802 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.
-24-
<PAGE> 24
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:
o in ordinary brokers' transactions and transactions in which the
broker solicits purchasers;
o in transactions involving cross or block trades or otherwise on
the Nasdaq National Market;
o 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;
o in transactions "at the market" to or through market makers of
EchoStar Common Stock or into an existing market for the Common
Stock;
o 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;
o through transactions in options, swaps or other derivatives which
may or may not be listed on an exchange;
o in face-to-face transactions between sellers and purchasers
without a broker-dealer;
o in transactions to cover short sales; and
o 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
-25-
<PAGE> 25
any agents or broker-dealers that participate with the selling shareholders in
the offer and sale of these shares may be deemed to 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:
o 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 1,720,624 shares.
o 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 5,735,412 shares in the aggregate; and
(ii) from June 25, 2000 and June 24, 2001, the selling
shareholders may sell or transfer a maximum of 11,470,824 shares
in the aggregate, less any shares sold prior to June 25, 2000.
o 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 8,603,080 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 13,764,988 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.
o 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 22,000 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.
-26-
<PAGE> 26
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.
-27-
<PAGE> 27
October 8, 1999
[ECHOSTAR LOGO(R)]
17,206,232 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.
- --------------------------------------------------------------------------------
<PAGE> 28
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.
<TABLE>
<S> <C>
SEC registration fee ................................ $430,201
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........................................ 1,189
--------
Total............................. $491,000
========
</TABLE>
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 Bylaws. 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, officer, employee, fiduciary
II-1
<PAGE> 29
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
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)
- -----------
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
<PAGE> 30
(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
<PAGE> 31
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 8, 1999.
ECHOSTAR COMMUNICATIONS CORPORATION
By: /s/ David K. Moskowitz
--------------------------------
David K. Moskowitz
Senior Vice President, General
Counsel, Secretary and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Charles W. Ergen, Steven B. Schaver and
David K. Moskowitz, and each of them, his attorney-in-fact, for him in any and
all capacities, to sign any amendments to this registration statement, and any
related registration statement filed pursuant to Rule 462(b), and to file the
same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute, may do or cause to be done by virtue
hereof.
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:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Charles W. Ergen Chief Executive Officer, President and Director October 8, 1999
- -------------------- (Principal Executive Officer)
Charles W. Ergen
/s/ Steven B. Schaver Chief Financial Officer October 8, 1999
- --------------------- (Principal Financial Officer)
Steven B. Schaver
/s/ James DeFranco Director October 8, 1999
- ------------------
James DeFranco
/s/ David K. Moskowitz Director October 8, 1999
- ----------------------
David K. Moskowitz
/s/ Raymond L. Friedlob Director October 8, 1999
- -----------------------
Raymond L. Friedlob
/s/ O. Nolan Daines Director October 8, 1999
- -------------------
O. Nolan Daines
</TABLE>
II-4
<PAGE> 32
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Title
------ -----
<S> <C>
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)
</TABLE>
- -----------
II-5
<PAGE> 1
EXHIBIT 5.1
HALE LANE PEEK
DENNISON HOWARD AND ANDERSON
A Professional Corporation
Attorneys and Counsellors at Law
<TABLE>
<S> <C> <C>
Office Address: (775) 327-3000 Mailing Address:
100 West Liberty Street, Tenth Floor (775) 786-7900 Post Office Box 3237
Reno, Nevada 89501 Facsimile (775) 786-6179 Reno, Nevada 89505
</TABLE>
September 30, 1999
EchoStar Communications Corporation
5701 South Santa Fe Drive
Littleton, CO 80120
Ladies and Gentlemen:
We have acted as special Nevada counsel for EchoStar Communications
Corporation, a Nevada corporation (the "Company"), in connection with the
filing by the Company with the Securities and Exchange Commission of a
Registration Statement on Form S-3 (the "Registration Statement") with respect
to the proposed offering and sale by certain stockholders of up to an aggregate
of 17,206,232 shares of Class A Common Stock, par value $.01 per share (the
"Common Stock"), pursuant to a public offering.
In so acting, we have examined such documents, records and matters of
law as we have deemed relevant and necessary for the purposes of this opinion.
In rendering the opinion hereinafter set forth, we have assumed the validity of
and relied upon the representations of the Company as to certain factual
matters relevant thereto.
On the basis of our examination, it is our opinion that the shares of
Common Stock being registered are legally and validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" in the prospectus included in the Registration Statement. In giving
this consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission.
Very truly yours,
HALE LANE PEEK DENNISON
HALE LANE PEEK
DENNISON HOWARD AND ANDERSON A Professional Corporation
Attorneys and Counsellors at Law
Office Address:100 West Liberty Street, Tenth Floor
Reno, Nevada 89501(775) 327-3000
(775) 786-7900
Facsimile (775) 786-6179
Mailing Address:Post Office Box 3237 Reno, Nevada 89505
<TABLE>
<S> <C>
LAS VEGAS OFFICE: 2300 West Sahara Avenue, Eighth Floor, Box 8, Las Vegas, Nevada 89102
(702) 362-5118 o Facsimile (702) 365-6940
CARSON CITY OFFICE: 777 East William Street, Suite 201, Post Office Box 2620, Carson City, Nevada 89702
(702) 684-6000 o Facsimile (702) 684-6001
</TABLE>
<PAGE> 1
Exhibit 5.2
Friedlob Sanderson Raskin Paulson & Tourtillott, LLC
1400 Glenarm Place, 3rd Floor
Denver, Colorado 80202-5099
October 6, 1999
EchoStar Communications Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
Re: EchoStar Communications Corporation 17,206,232 Shares of Class A
Common Stock to Be Sold Pursuant to Registration Statement on Form
S-3
Gentlemen:
We have acted as counsel to EchoStar Communications Corporation, a
Nevada corporation ("EchoStar"), in connection with the filing by EchoStar with
the Securities and Exchange Commission of a Registration Statement on Form S-3
(the "Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to 17,206,232 Shares of EchoStar's Class A
Common Stock, par value $.01 per share (the "Class A Common Stock"). The Class A
Common Stock was issued pursuant to the Purchase Agreement dated as of November
30, 1998 by and among American Sky Broadcasting, LLC ("ASkyB"), The News
Corporation Ltd. ("News Corporation"), MCI Telecommunications Corporation
("MCI") and EchoStar, as amended by the First Amendment to Purchase Agreement
dated as of June 23, 1999 (collectively the "Purchase Agreement"). Capitalized
terms used in this letter and not otherwise defined herein shall have the
meaning ascribed to them in the Registration Statement.
In connection with this opinion, we have examined originals, or copies
of certified or otherwise identified to our satisfaction, of (i) the Purchase
Agreement; (ii) the Registration Rights Agreement dated as of June 24, 1999 by
and among EchoStar, MCI, ASkyB and News America Incorporated, a wholly-owned
subsidiary of News Corporation; (iii) the Amended and Restated Articles of
Incorporation and the Bylaws of EchoStar, each as amended to date; and (iv)
records of certain of EchoStar's proceedings relating to, among other things,
the issuance and sale of the Class A Common Stock pursuant to the Purchase
Agreement. In addition, we have made such other examinations of law and facts as
we considered necessary in order to form a basis for the opinions expressed
herein. In our examination of the aforesaid documents, we have assumed, without
independent investigation, the genuineness of all signatures, the enforceability
of the documents
<PAGE> 2
EchoStar Communications Corporation
October 6, 1999
Page 2
against each party thereto other than EchoStar, the authenticity of all
documents submitted to us as originals, the conformity to the original document
of all documents submitted to us as certified, photostatic, reproduced or
conformed copies of validly existing agreements or other documents, the
authenticity of all such latter documents, the legal capacity of all individuals
who have executed any of the documents we have reviewed, the correctness of all
statements of fact contained in all such original documents and the lack of any
undisclosed termination, modification, waiver, or amendment with respect to any
document reviewed by us.
We are members of the bar of the State of Colorado and, for purposes of
this opinion, do not hold ourselves out as experts on the law of any
jurisdiction other than the State of Colorado and the United States of America.
Insofar as this opinion relates to or is dependent upon matters governed by the
law of the State of Nevada, we have, with your consent, relied upon the opinion
of Hale Lane Peek Dennison Howard and Anderson dated September 30, 1999.
In expressing the opinions set forth herein, we have relied upon
representations as to factual matters contained in certificates of officers of
EchoStar.
Based upon the foregoing, and subject to the assumptions, exceptions
and qualifications set forth herein, we are of the opinion that the shares of
Class A Common Stock to be offered and sold pursuant to the Registration
Statement are legally issued, fully paid and nonassessable.
This opinion is delivered to you solely for your use in connection with
the Registration Statement and may not be used or relied upon by you for any
other purpose or by any other person without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the prospectus included in the Registration Statement. In giving
this consent, we do not hereby admit that we are within the category of persons
whose consent is required under Section 7 of the Securities Act or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
Very truly yours,
/s/ Friedlob Sanderson Raskin
-------------------------------
Paulson & Tourtillott, LLC
<PAGE> 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 4, 1999
/s/ Arthur Andersen, LLP
--------------------------------
