EXHIBIT 99.1

 

EchoStar Communications Corporation
9601 S. Meridian Blvd.
Englewood, Colorado 80112

 

 

December [  ], 2007

 

Dear EchoStar Communications Corporation Shareholder:

 

We are pleased to inform you that on December 11, 2007, the Board of Directors of EchoStar Communications Corporation approved the spin-off of EchoStar Holding Corporation, a wholly-owned subsidiary of EchoStar Communications Corporation. EchoStar Holding Corporation will hold the technology and certain infrastructure assets of EchoStar Communications Corporation. EchoStar Communications Corporation will retain its consumer pay-TV business, DISH Network. We believe that our separation into two independent publicly-traded companies is in the best interests of each of the businesses. Immediately following the completion of the spin-off, EchoStar Communications Corporation intends to change its name to “DISH Network Corporation.”

 

The spin-off of EchoStar Holding Corporation is anticipated to occur on or about January 1, 2008 by way of a pro rata dividend to EchoStar Communications Corporation shareholders. For each share of EchoStar Communications Corporation Class A common stock or Class B common stock you hold as of 5:00 p.m., New York City time, on December 27, 2007, which is the record date of the spin-off, you will be entitled to receive a dividend of 0.20 of a share of the same class of EchoStar Holding Corporation common stock. Please note that if you sell your shares of Class A common stock of EchoStar Communications Corporation after the record date but before the distribution date, the buyer of those shares will be entitled to receive the shares of our Class A common stock issuable in respect of the shares sold. The distribution of shares of our Class A common stock will be made in book-entry form, which means that no physical Class A stock certificates will be issued in the distribution. No fractional shares of EchoStar Holding Corporation Class A or Class B common stock will be issued. If you would have been entitled to a fractional share of EchoStar Holding Corporation Class A common stock in the distribution, you will receive cash in lieu of a fractional share interest.

 

Shareholder approval of the spin-off is not required, and you are not required to take any action to receive shares of EchoStar Holding Corporation common stock.

 

Immediately following the spin-off, you will own shares of common stock of both EchoStar Communications Corporation and EchoStar Holding Corporation. EchoStar Communications Corporation Class A common stock will continue to trade on the Nasdaq Global Select Market under the symbol “DISH.” We have applied to list our Class A common stock on the Nasdaq Global Select Market under the symbol “SATS.”

 

We expect the spin-off to be tax-free for all shareholders of EchoStar Communications Corporation, except for any cash received in lieu of fractional shares. To that end, we have received a ruling from the Internal Revenue Service confirming that the spin-off will be tax free to shareholders of EchoStar Communications Corporation for U.S. federal income tax purposes. The spin-off is subject to certain customary conditions, including the receipt of any necessary regulatory approvals.

 

The enclosed information statement, which is being mailed to all EchoStar Communications Corporation shareholders, describes the spin-off and contains important information about EchoStar Holding Corporation, including its historical and pro forma combined financial statements.

 

We look forward to your continued support as a shareholder in both EchoStar Communications Corporation and EchoStar Holding Corporation.

 

Sincerely,

 

Charles W. Ergen

Chairman and Chief Executive Officer

EchoStar Holding Corporation
90 Inverness Circle East
Englewood, Colorado 80112

 

December [  ], 2007

 

Dear EchoStar Holding Corporation Shareholder:

 

It is my pleasure to welcome you as a shareholder of our new company, EchoStar Holding Corporation. As an independent, publicly-traded company, we believe we can more effectively focus on our objectives and satisfy the strategic needs of our company. In addition, we will have the opportunity to offer our employees incentive opportunities linked to our performance as an independent, publicly-traded company, which we believe will enhance employee performance.

 

EchoStar Holding Corporation intends to operate two primary businesses, a digital set-top box business and a fixed satellite services business:

 

 

We have applied to list our Class A common stock on the Nasdaq Global Select Market under the symbol “SATS.” We currently expect that our Class A common stock will begin trading on January 2, 2008.

 

I invite you to learn more about EchoStar Holding Corporation by reviewing the enclosed information statement. We thank you in advance for your support as a shareholder in EchoStar Holding Corporation.

 

Sincerely,

 

Charles W. Ergen

Chairman and Chief Executive Officer

 

SUBJECT TO COMPLETION, DATED DECEMBER 26, 2007

 

INFORMATION STATEMENT

 

ECHOSTAR HOLDING CORPORATION

90 Inverness Circle E.

Englewood, Colorado 80112

 

Class A Common Stock

Class B Common Stock

(par value $0.001 per share)

 

We are sending this information statement to you to describe the spin-off of EchoStar Holding Corporation. Prior to the spin-off described in this information statement, we were a wholly-owned subsidiary of EchoStar Communications Corporation, which we refer to as ECC. We are engaged in the design, development and distribution of set-top boxes, antennae and other equipment for the “direct to home” satellite television industry. Following the spin-off, we will also be engaged in the provision of fixed satellite transmission services. We expect that the spin-off will be tax-free to ECC shareholders for U.S. federal income tax purposes, except for any cash received in lieu of fractional shares. We have received a ruling from the Internal Revenue Service confirming that the spin-off will be tax free to shareholders of EchoStar Communications Corporation for U.S. federal income tax purposes. Immediately following the spin-off, ECC intends to change its name to “DISH Network Corporation.”

 

For each share of ECC Class A common stock or ECC Class B common stock held by you as of 5:00 p.m., New York City time, on December 27, 2007, the record date for the spin-off, you will receive 0.20 of a share of the same class of our common stock. The distribution of shares of our Class A common stock will be made in book-entry form, which means that no physical Class A stock certificates will be issued in the distribution. No fractional shares of EchoStar Holding Corporation Class A or Class B common stock will be issued. If as a result of the foregoing ratio you would be entitled to receive a fraction of a share of our Class A common stock, you will receive cash in lieu of such fractional share interest. We expect the shares of our Class A common stock and Class B common stock to be distributed by ECC to you on or about January 1, 2008, which we refer to as the distribution date.

 

No vote of ECC’s shareholders is required in connection with the spin-off. We are not asking you for a proxy and you are requested not to send us a proxy. No action is required of you to receive shares of our common stock, which means that:

 

 

There is no current trading market for any class of our common stock. We expect, however, that a limited trading market for our Class A common stock, commonly known as a “when issued” trading market, will develop shortly after the record date for the spin-off, and we expect “regular way” trading of our Class A common stock will begin the first trading day after the distribution date. We have applied to list our Class A common stock on the Nasdaq Global Select Market under the symbol “SATS.” We expect that our Class A common stock will begin trading on January 2, 2008. Charles W. Ergen, our Chairman and Chief Executive Officer, will immediately after the distribution date beneficially own approximately 50.0% of our outstanding equity and possess approximately 80.0% of the total voting power represented by all of our common stock, which is equivalent to his ownership and voting interests in ECC.

 

In reviewing this information statement, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 16.

 

 

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

 

This information statement is not an offer to sell, or a solicitation of an offer to buy, any securities.

 

 

 

 

 

The date of this information statement is December [  ], 2007.

 

TABLE OF CONTENTS

 

•	Expand set-top box business to additional customers.   We believe our separation from ECC may enhance our opportunities to sell set-top boxes to a broader group of multi-channel video distributors. Historically, certain multi-channel video distributors have perceived us as a competitor due to our affiliation with ECC. After the spin-off, we believe we could have opportunities to enter into commercial relationships with these multi-channel video distributors. There can be no assurance, however, that we will be successful in entering into any of these commercial relationships, particularly if we continue to be perceived as affiliated with ECC as a result of common ownership and related management.
•	Leverage satellite capacity and related infrastructure.   Our fixed satellite services business has excess satellite and leased fiber capacity that we believe was in large part created through innovation and operational efficiencies at ECC. While we expect that ECC will initially be our primary customer for fixed satellite services, we believe market opportunities exist to utilize our capacity to provide digital video distribution, satellite-delivered IP, corporate communications and government services to a broader customer base.
•	Offer comprehensive network infrastructure solutions.   We intend to leverage our over 700 engineers to customize infrastructure solutions for a broader base of customers. For example, we could offer a customer the ability to deliver a fully integrated video programming delivery solution, incorporating our satellite and backhaul capacity, customized set-top boxes and network design and management services.
•	Capitalize on change in regulations.   Changes in federal law and regulations applicable to the set-box industry may create opportunities for us to expand our business.

	•	Digital transition.   Congress has mandated that by February 2009 all network broadcasts be transmitted digitally, which will require households that receive over-the-air broadcast signals with an analog television to obtain a digital converter device. This digital converter device is a new product

	•	Removable security systems.   The Federal Communications Commission, or FCC, mandated that by July 2007 cable providers use removable security modules to provide conditional access security for television content. The FCC intends for this regulation to spur competition in the retail cable set-top box market, providing an even playing field between leased cable set-top boxes and retail-bought, cable-ready TVs and cable set-top box equipment. We believe this new regulation may create an opportunity for us to compete on a more level field in the domestic market for cable set-top boxes.

•	Exploit international opportunities.   We believe that direct-to-home satellite service is particularly well-suited for countries without extensive cable infrastructure, and we intend to continue to try to secure new customer relationships from international direct-to-home satellite service providers.
•	Pursue strategic partnerships, joint ventures and acquisitions.   We intend to selectively pursue partnerships, joint ventures and strategic acquisition opportunities that we believe may allow us to expand into new markets, broaden our portfolio of products or intellectual property, and strengthen our relationships with our customers.
•	Act on the set-top box replacement cycle.   The broader adoption of high definition television by consumers will require more advanced compression and security technologies within set-top boxes. This may launch a replacement cycle, particularly among subscription television providers with substantial bases of legacy equipment, which may create additional market opportunities for us.

•	We may not realize the potential benefits that we expect from the spin-off. Certain of these benefits depend upon market acceptance of our separation from ECC which we cannot predict and which may be affected by significant common stock ownership by our Chairman and Chief Executive Officer as well as interlocks between our management and board of directors. In addition, we will incur significant costs as a separate company, which may exceed our estimates. We will also incur some negative effects from our separation from ECC, including loss of access to ECC’s financial resources.
•	We currently depend on ECC and Bell Express Vu for substantially all of our revenue, and the loss of, or a significant reduction in orders from, either of these two customers would significantly reduce our revenue and adversely impact our operating results. ECC accounted for over 80% of our revenue in each of the last three years and the nine months ended September 30, 2007 and it is under no obligation to remain our customer in the future.

•

We currently have substantial unused satellite capacity. Future costs associated with this excess capacity will negatively impact our margins if we do not generate revenue to offset these costs. In addition, because a substantial portion of the capacity of each of our AMC-15, AMC-16 and EchoStar IX satellites remains unused, there is a significant risk that in the future, in addition to reporting lower than expected revenues and profitability, we will be required to record a substantial impairment charge relating to one or more of these satellites. We currently estimate that these potential charges could aggregate up to $250 million, which, if incurred would have a material adverse effect on our reported operating results and financial position. Furthermore, it is possible that in 2008 ECC will discontinue the use of some or all of the capacity on one or more other satellites that it will initially lease from us. To the extent that this occurs and we are unable to find other customers to lease this additional excess capacity, we may be required to record substantial additional impairment charges that we currently estimate could aggregate up to $100 million. We performed a preliminary assessment of the recoverability of the satellites to be contributed by ECC as if the

	spin-off had been consummated and preliminarily concluded that the recoverability of the satellites will not be impaired as of the distribution date.

•	Our historical combined and pro forma financial information included in this information statement are not indicative of our future financial position, future results of operations or future cash flows, nor do they reflect what our financial position, results of operations or cash flows would have been as a stand-alone company during the periods presented. We were not profitable in the nine months ended September 30, 2007 and each of 2006, 2005 and 2004, as our operations have historically been dedicated primarily to support ECC and we provided our products and services to ECC at cost.
•	Our ability to decrease our losses or to generate revenues will depend in part on our ability to grow our business. This may require significant additional capital that may not be available to us. We may also use a significant portion of our existing cash and marketable securities to fund stock buyback programs. Our board of directors has approved a program in which we may repurchase up to $1.0 billion of our Class A common stock during 2008.
•	If ECC enters into a business combination transaction, or Mr. Ergen no longer controls a majority of the voting power of ECC or of us, our relationship with ECC could be terminated or substantially curtailed with little or no advance notice. Any material reduction in our sales to ECC as a result of a change in control of ECC would have a significant material adverse effect on our business and financial position.
•	Our future success may depend on our ability to identify and successfully exploit opportunities to acquire other businesses or technologies to complement, enhance or expand our current business or products or otherwise offer us growth opportunities. We may not be able to pursue these growth opportunities successfully.
•	We have entered into certain strategic transactions and investments in Asia and elsewhere, and we may increase our strategic investment activity in the United States and in international markets. These investments, which we believe could become substantial over time, involve a high degree of risk, are concentrated in a few companies and could expose us to significant financial losses if the underlying ventures are not successful. These investments may also cause us to defer or suspend share repurchases.
•	Our business relies on intellectual property, some of which is owned by third parties, and we may inadvertently infringe their patents and proprietary rights. We may be required to cease developing or marketing infringing products, to obtain licenses from the holders of the intellectual property at a material cost, or to redesign those products in such a way as to avoid infringing the patent claims of others.
•	Our businesses change rapidly as new technologies are developed. These new technologies may cause our services and products to become obsolete. Changes in existing technologies could also cause demand for our products and services to decline.

•	We depend on sales of set-top boxes for nearly all of our revenue, and if sales of our set-top boxes decline, our business and financial position will suffer. The set-top box business is highly competitive and our ability to compete in this industry will depend substantially on our ability to develop and manufacture products and services at competitive costs, successfully bring new technologies to market and penetrate new markets for set-top boxes, including among customers such as cable television operators that are competitors of DISH Network and have historically been and may continue to be reluctant to deal with us. These potential customers also have well established relationships with other set-top box providers, such as Motorola and Cisco Systems, which acquired Scientific Atlanta in 2006.
•	Our commercial success in selling our set-top boxes to cable television operators depends significantly on our ability to obtain licenses to use the conditional access systems deployed by these operators in our set-top boxes. The owners of these conditional access systems are also in many cases competitors of ours. There can be no assurance we will be able to obtain such licenses on acceptable terms or at all.
•	In order to grow our revenue and business and to build a large customer base, we believe we will be required to increase our sales of set-top boxes in international markets. We have limited experience selling our set-top boxes internationally. To succeed in expanding these sales efforts, we believe we must hire

	additional sales personnel and develop and manage new relationships with cable operators and other providers of digital television in international markets.

•	Our set-top boxes are extremely complex and can have defects in design, manufacture or associated software. We could incur significant expenses, lost revenue, and reputational harm if we fail to detect or effectively address such issues through design, testing or warranty repairs.
•	We obtain many components for our set-top boxes from a single supplier or a limited group of suppliers. Our reliance on a single or limited group of suppliers, particularly foreign suppliers, and our increasing reliance on subcontractors, involves several risks. These risks include a potential inability to obtain an adequate supply of required components, and reduced control over pricing, quality, and timely delivery of these components.
•	Future demand for our set-top boxes will depend significantly on the growing market acceptance of high definition television, or HDTV. The effective delivery of HDTV will depend on digital television operators developing and building infrastructure to provide wide-spread HDTV programming.
•	During April 2006, a jury concluded that certain of our digital video recorders, or DVRs, infringed a patent held by Tivo. If the Tivo jury verdict is upheld on appeal, to the extent that ECC does not indemnify us, we will be required to pay substantial damages and/or license fees, and if we were not able to successfully implement alternative technology (including the successful defense of any challenge that such technology infringes Tivo’s patent), we could also be prohibited from distributing DVRs, or be required to modify or eliminate certain user-friendly DVR features that we currently offer to consumers.

•	The fixed satellite services industry is highly competitive and is characterized by long-term leases and high switching costs. Therefore, it will be difficult to displace customers from their current relationships with our well-established competitors and we may face competition from others in the future.
•	Satellites are subject to significant operational risks while in orbit. While we believe that our satellite fleet is generally in good condition, certain satellites in our fleet have experienced malfunctions or anomalies, some of which have had a significant adverse impact on their commercial operation. There can be no assurance that we can recover critical transmission capacity in the event one or more of our in-orbit satellites were to fail. Therefore, the loss of a satellite or other satellite malfunctions or anomalies could have a material adverse effect on us.
•	We are subject to comprehensive governmental regulation by the FCC for our domestic satellite operations. We are also regulated by other federal agencies, state and local authorities and the International Telecommunication Union. Domestic and international regulations regarding the licensing, authorization and operations of satellite communications providers may restrict our fixed satellite services operations.
•	ECC has not historically carried and we do not anticipate carrying insurance for any of the in-orbit satellites that we will own.

•	The allocation of assets, liabilities, rights, indemnifications and other obligations between ECC and us under the separation agreement and the related commercial and other agreements we will enter into with ECC may not reflect what two unaffiliated parties might have agreed to.

•

ECC has received a private letter ruling from the Internal Revenue Service, or IRS, to the effect that, among other things, the spin-off, together with certain related transactions, will qualify for tax-free treatment under Sections 355 and 368(a)(1)(D) of the Code. Although a private letter ruling relating to the qualification of the spin-off under Sections 355 and 368(a)(l)(D) of the Internal Revenue Code of 1986, as amended, generally will be binding on the IRS, the validity of such ruling, if obtained, will be subject to the accuracy of factual representations and assumptions made in the ruling request. If the spin-off does not qualify for tax-free treatment for U.S. federal income tax purposes, then, in general, ECC would be subject to tax as if it had sold the common stock of our company in a taxable sale for its fair market value. ECC’s shareholders would be subject to tax as if they had received a distribution equal to the fair market value of our common stock that was distributed to them, which would be treated as a taxable dividend to the extent of ECC’s

	earnings and profits. It is expected that the amount of any such taxes to ECC and its shareholders would be substantial.

•

Actual or perceived conflicts of interest may arise between ECC and us in a number of areas relating to our past and ongoing relationships, including: (i) cross officerships, directorships and stock ownership, (ii) intercompany transactions, (iii) intercompany agreements and (iv) business opportunities. In particular, Charles W. Ergen will be the Chief Executive Officer and Chairman of the Board and will beneficially own approximately 50.0% of the total equity and control 80.0% of the total voting power, of each of ECC and us. Thus, Mr. Ergen will have the ability to elect a majority of ECC’s and our directors and to control all other matters requiring the approval of ECC’s and our shareholders.

•	An active trading market may not develop or be sustained for our Class A common stock after the spin-off. In addition, the prices at which our Class A common stock may trade after the spin-off may decline or be subject to volatility.
•	We expect that some of our shareholders, including possibly some of our larger shareholders, will sell the Class A common stock that they receive in the spin-off because, among other reasons, our business profile or market capitalization as an independent, publicly-traded company do not fit their investment objectives. These sales may adversely affect the market price for our Class A common stock as well as the market perception of our business.
•	We have never declared or paid any dividends on our common stock. We intend to retain any earnings to finance the operation and expansion of our business, and we do not anticipate paying any cash dividends in the future.

Summary of the Spin-Off

 

The following is a brief summary of the terms of the spin-off.

 

Distributing Company		EchoStar Communications Corporation, a Nevada corporation. After the distribution, EchoStar Communications Corporation will not own any shares of common stock of EchoStar Holding Corporation.

 

Separated Company		EchoStar Holding Corporation, a Nevada corporation and a wholly-owned subsidiary of ECC. After the distribution, EchoStar Holding Corporation will be an independent, publicly-traded company. However, all of ECC’s directors after the distribution, except James DeFranco, Cantey Ergen and Gary S. Howard, will also be directors of EHC. Charles W. Ergen, our Chairman and Chief Executive Officer, will continue to be the Chairman and Chief Executive Officer of ECC. In addition, certain executive officers of ECC will also serve as our executive officers. Based on Mr. Ergen’s ownership as of November 30, 2007, Mr. Ergen will beneficially own approximately 50.0% of the total equity and approximately 80.0% of the total voting power of each of ECC and us.

 

Primary purposes of the spin-off		The board of directors of ECC believes that creating independent, focused companies is the best way to realize the full value of ECC’s businesses. The board of directors of ECC considered the following potential benefits, among others, in making its determination to consummate the spin-off:

		• creating effective management incentives tied to each of EHC and ECC’s performance and increasing the ability to attract and retain personnel;

		• creating opportunities to effectively develop and finance expansion plans;

		• creating separate companies that have different financial characteristics, which may appeal to different investor bases; and

		• allowing each company to separately pursue the business strategies that best suit its long-term interest.

		The board of directors of ECC also considered the costs and risks associated with the spin-off. The board of directors of ECC considered, among other factors:

		• the potential negative impact on ECC’s credit ratings as a result of the divestiture of assets that will be contributed to us;

		• the possibility that either we or ECC may experience disruptions in our respective businesses as a result of the spin-off;

		• the risk that the combined trading prices of our Class A common stock and ECC’s Class A common stock after the spin-off may be lower than the trading price of ECC’s Class A common stock before the spin-off;

		• actual or perceived conflicts of interest that may arise between ECC and us in a number of areas relating to our past and ongoing relationships, including: (i) cross officerships, directorships and stock ownership, (ii) intercompany transactions, (iii) intercompany agreements and (iv) business opportunities;

		• the loss of synergies from operating as one company; and

		• the additional legal, accounting, administrative and other costs that we would incur as a separate, publicly-traded company.

		In view of the variety of factors considered by the ECC board of directors in connection with the evaluation of the spin-off and the complexity of these matters, the ECC board of directors did not find it useful to, and did not attempt to, quantify, rank or otherwise assign relative weights to the factors considered. The board of directors of ECC concluded that considered in the aggregate the potential benefits of the spin-off outweigh the potential negative factors, and that separating the non-core business of ECC from ECC in the form of a tax-free distribution to ECC shareholders is appropriate, advisable and in the best interests of ECC and its shareholders.

Conditions to the spin-off		The spin-off is subject to the satisfaction or waiver by ECC under the separation agreement of the following conditions, each of which is waivable by ECC in its sole discretion (other than the effectiveness of our registration statement on Form 10 and other required material regulatory approvals):

		• the Securities and Exchange Commission shall have declared effective our registration statement on Form 10 and no stop order shall be in effect;
		• all permits, registrations and consents required under the securities or blue sky laws in connection with the spin-off shall have been received;
		• ECC shall have received the opinion of White & Case LLP confirming the tax-free status of the spin-off and certain related transactions for U.S. federal income tax purposes on the distribution date;

		• the listing of our Class A common stock on the Nasdaq Global Market or Nasdaq Global Select Market shall have been approved;

		• all material governmental approvals and other consents necessary to consummate the distribution shall have been received; and
		• no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing consummation of the distribution or any of the transactions related thereto shall be in effect.
		The fulfillment of the foregoing conditions will not create any obligation on ECC’s part to effect the spin-off. ECC has the right not to complete the spin-off if, at any time, ECC’s board of directors determines, in its sole discretion, that the spin-off is not in the best interests of ECC or its shareholders, or that market conditions are such that it is not advisable to separate EHC from ECC.
Securities to be Distributed		Shares of EHC Class A common stock and Class B common stock will constitute all of the outstanding shares of our common stock immediately after the distribution. We expect the shares of our Class A common stock and Class B common stock to be distributed by ECC to you, based on the same class of ECC common stock that you own, on or about January 1, 2008, which we refer to as the distribution date. Charles Ergen, our Chairman and Chief Executive Officer, will, immediately after the distribution date, beneficially own approximately 50.0% of our equity and possess approximately 80.0% of the total voting power represented by our common stock.

Q:		What is the spin-off?
A:		The spin-off is the method by which ECC will separate its existing business segments into two independent, publicly-traded companies. In the spin-off, ECC will distribute to its shareholders as of the distribution date all of the shares of our Class A common stock and Class B common stock that it owns. Following the spin-off, we will be a separate company from ECC, and ECC will not retain any ownership interest in us. The number of shares of ECC common stock you own will not change as a result of the spin-off.
Q:		What is being distributed in the spin-off?
A:		Approximately 42.0 million shares of our Class A common stock and 47.7 million shares of our Class B common stock will be distributed in the spin-off, based upon the number of shares of ECC Class A common stock and ECC Class B common stock outstanding on the record date. The shares of our Class A common stock and Class B common stock to be distributed by ECC will constitute all of the issued and outstanding shares of our Class A common stock and Class B common stock immediately after the distribution. For more information on the shares being distributed in the spin-off, see “Description of Our Capital Stock — Our Class A Common Stock” and “Description of Our Capital Stock — Our Class B Common Stock” beginning on page 116 of this information statement.
Q:		What will I receive in the spin-off?
A:		Holders of ECC Class A common stock will receive a dividend of 0.20 of a share of our Class A common stock for each share of ECC Class A common stock held by them on the record date, and holders of ECC Class B common stock will receive a dividend of 0.20 of a share of our Class B common stock for every share of ECC Class B common stock held by them on the record date. As a result of the spin-off, your proportionate interest in ECC will not change and you will own the same percentage of equity securities and voting power in EHC as you previously did in ECC. For a more detailed description, see “The Spin-Off.”
Q:		What is the record date for the distribution?
A:		Record ownership will be determined as of 5:00 p.m., New York City time on December 27, 2007 which we refer to as the record date.
Q:		When will the distribution occur?
A:		We expect that shares of our Class A common stock and Class B common stock will be distributed by the distribution agent, on behalf of ECC, on or about January 1, 2008, which we refer to as the distribution date.
Q:		What will the relationship between EchoStar Communications Corporation and EchoStar Holding Corporation be following the spin-off?
A:		After the spin-off, ECC will not own any shares of our common stock and we will not own any shares of ECC common stock. Five of our directors after the distribution will also be directors of ECC, and our Chairman and Chief Executive Officer will continue to serve as the Chairman and Chief Executive Officer of ECC. In addition, in connection with the spin-off, we and ECC are entering into a number of agreements that will govern our spin-off from ECC and our future relationship. We cannot assure you that these agreements will be on terms as favorable to us as agreements with unaffiliated parties. See “Certain Intercompany Agreements.” In addition, if we acquire knowledge of a potential transaction or matter which may be a corporate opportunity for both us and ECC, our mutual officers and directors are only required to first present the opportunity to us if (A) we have expressed an interest in such corporate opportunity as evidenced by resolutions appearing in the minutes of our board of directors; (B) such

		potential corporate opportunity was expressly offered to one of our directors or officers solely in his or her capacity as a director or officer of us or as a director or officer of any subsidiary of us; and (C) such opportunity relates to a line of business in which we or any subsidiary of us is then directly engaged. See “Description of Our Capital Stock — Provisions of Our Articles of Incorporation Relating to Related-Party Transactions and Corporate Opportunities.”
Q:		What do I have to do to participate in the spin-off?
A:		No action is required on your part. Shareholders of ECC on the record date for the distribution are not required to pay any cash or deliver any other consideration, including any shares of ECC common stock, for the shares of our common stock distributable to them in the spin-off.
Q:		If I sell, on or before the distribution date, shares of ECC Class A common stock that I held on the record date, am I still entitled to receive shares of EHC Class A common stock distributable with respect to the shares of ECC Class A common stock I sold?
A:		No. No ex-dividend market will be established for our Class A common stock until the first trading day following the distribution date. Therefore, if you own shares of ECC Class A common stock on the record date and thereafter sell those shares on or prior to the distribution date, you will also be selling the shares of our Class A common stock that would have been distributed to you in the spin-off with respect to the shares of ECC Class A common stock you sell.
Q:		How will fractional shares be treated in the spin-off?
A:		If you would be entitled to receive a fractional share of Class A common stock in the spin-off, you will instead receive a cash payment. See “The Spin-Off — Treatment of Fractional Shares” for an explanation of how the cash payments will be determined.
Q:		How will ECC distribute shares of EHC common stock to me?
A:		Holders of shares of ECC’s Class A or Class B common stock on the record date will receive shares of the same class of our common stock, in book-entry form. See “The Spin-Off — Manner of Effecting the Spin-Off” for a more detailed explanation.
Q:		What is the reason for the spin-off?
A:		The potential benefits considered by ECC’s board of directors in making the determination to consummate the spin-off included the following:

	•	The spin-off is expected to allow the creation of effective management incentives tied to each of EHC’s and ECC’s respective performance, increasing the ability to attract and retain personnel.
	•	The spin-off is expected to create opportunities to effectively develop and finance expansion plans of each independent company.
	•	The spin-off is expected to allow the creation of separate companies that have different financial characteristics, which may appeal to different investor bases, which could enhance the ability of each company to raise capital to fund its growth plans and initiatives.
	•	The spin-off is expected to allow each company to separately pursue the business strategies that best suit its long-term interests.

		The board of directors of ECC also considered the costs and risks associated with the spin-off. The board of directors of ECC considered, among other factors, the following:

	•	The potential negative impact on ECC’s credit ratings as a result of the divestiture of assets that will be contributed to us.
	•	The possibility that either we or ECC may experience disruptions in our respective businesses as a result of the spin-off.

	•	The risk that the combined trading prices of our Class A common stock and ECC’s Class A common stock after the spin-off may be lower than the trading price of ECC’s Class A common stock before the spin-off.
	•	Actual or perceived conflicts of interest that may arise between ECC and us in a number of areas relating to our past and ongoing relationships, including: (i) cross officerships, directorships and stock ownership, (ii) intercompany transactions, (iii) intercompany agreements and (iv) business opportunities.
	•	The loss of synergies from operating as one company.
	•	The additional legal, accounting, administrative and other costs that would be incurred by us as a separate, publicly-traded company.

		In view of the variety of factors considered by the ECC board of directors in connection with the evaluation of the spin-off and the complexity of these matters, the ECC board of directors did not find it useful to, and did not attempt to, quantify, rank or otherwise assign relative weights to the factors considered. The board of directors of ECC concluded that considered in the aggregate, the potential benefits of the spin-off outweigh the potential negative factors, and that separating the non-core business of ECC from ECC in the form of a tax-free distribution to ECC shareholders is appropriate, advisable and in the best interests of ECC and its shareholders.
Q:		What are the federal income tax consequences to me of the spin-off?

A:		ECC has received a private letter ruling from the IRS, and the spin-off is conditioned upon the receipt by ECC of the opinion of White & Case LLP on the distribution date (which condition ECC may waive in its sole discretion), in each case, substantially to the effect that the spin-off, together with certain related transactions, will qualify as reorganizations under Sections 355 and 368(a)(l)(D) of the Code and that, accordingly, for U.S. federal income tax purposes, no gain or loss will be recognized by, and no amount will be included in the income of, a holder of ECC common stock upon the receipt of shares of our common stock pursuant to the spin-off. A holder of ECC common stock will generally recognize gain or loss with respect to cash received in lieu of a fractional share of our common stock.

Q:		Does EHC intend to pay cash dividends?
A:		No. We currently intend to retain future earnings, if any, to finance the expansion of our businesses. As a result, we do not expect to pay any cash dividends for the foreseeable future. All decisions regarding the payment of dividends by our company will be made by our board of directors from time to time in accordance with applicable law.
Q:		How will EHC common stock trade?

A:		Currently, there is no public market for our common stock. We have applied to list our Class A common stock on the Nasdaq Global Select Market under the symbol “SATS.”

Q:		Will the spin-off and distribution affect the trading price of my ECC Class A common stock?
A:		Yes. After the distribution of EHC Class A common stock, the trading price of ECC Class A common stock may be lower than the trading price of the ECC Class A common stock immediately prior to the distribution. Moreover, until the market has evaluated the operations of ECC without the operations of EHC, the trading price of ECC Class A common stock may fluctuate significantly. ECC believes the separation of EHC from ECC offers its shareholders the greatest long-term value. However, the combined trading prices of ECC Class A common stock and EHC Class A common stock after the spin-off may be lower than the trading price of ECC Class A common stock prior to the spin-off. See “Risk Factors” beginning on page 16.
Q:		Do I have appraisal rights?
A:		No. Holders of ECC common stock are not entitled to appraisal rights in connection with the spin-off.
Q:		Who is the transfer agent for your common stock?
A:		Computershare Trust Company, N.A. 250 Royall Street Canton, MA 02021
Q:		Where can I get more information?
A:		If you have questions relating to the mechanics of the distribution of shares of EHC common stock, you should contact the distribution agent:

 

RISK FACTORS

 

The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that we are unaware of or that we currently believe to be immaterial also may become important factors that affect us. This information statement also contains forward-looking statements that involve risks and uncertainties. See “Cautionary Statement Concerning Forward-Looking Statements.”

 

If any of the following events occur, our business, financial condition or results of operation could be materially and adversely affected .

 

General Risks Affecting Our Business

 

We may not realize the potential benefits from the spin-off.

 

We may not realize the potential benefits that we expect from the spin-off which are described elsewhere in this information statement. Certain of these benefits depend upon market acceptance of our separation from ECC which we cannot predict and which may be affected by the significant common stock ownership by our Chairman and Chief Executive Officer, as well as interlocks between our management and board of directors. In addition, we will incur significant costs, including those described elsewhere in this information statement, which may exceed our estimates. We will also incur some negative effects from our separation from ECC, including loss of access to ECC’s financial resources.

 

We currently depend on ECC and Bell ExpressVu for substantially all of our revenue and ECC accounted for over 80% of our revenue in the nine months ended September 30, 2007 and each of 2006, 2005 and 2004; the loss of, or a significant reduction in orders from, either of ECC or Bell ExpressVu would significantly reduce our revenue and adversely impact our operating results.

 

ECC accounted for approximately 86.2%, 84.5%, 85.6% and 89.7% of our revenue in the nine months ended September 30, 2007 and in 2006, 2005 and 2004, respectively. In addition, Bell ExpressVu accounted for approximately 10.0%, 12.2%, 11.4% and 7.3% of our revenue in the nine months ended September 30, 2007 and in 2006, 2005 and 2004, respectively. Any reduction in sales to ECC or Bell ExpressVu or in the prices they pay for the products and services they purchase from us would have a significant negative impact on our business. Moreover, because our sales to these customers are made pursuant to standard purchase orders, these customers have no future obligation to purchase set-top boxes from us and existing orders may be cancelled or reduced on short notice. Cancellations or reductions may be more frequent once we are separated from ECC. Cancellations or reductions of customer orders could result in the loss of anticipated sales without allowing us sufficient time to reduce our inventory and operating expenses. In addition, the timing of orders from these two customers could vary significantly depending on equipment promotions these customers offer to their subscribers, changes in technology, and their use of remanufactured set-top boxes, which may cause our revenue to vary significantly quarter over quarter and could expose us to the risks of inventory shortages or excess inventory. These inventory risks are particularly acute during end product transitions in which a new generation of set-top boxes is being deployed and inventory of older generation set-top boxes is at a higher risk of obsolescence. This in turn could cause our operating results to fluctuate significantly.

 

In addition, because substantially all of our revenue is tied to ECC and Bell ExpressVu, our success also depends to a significant degree on the continued success of ECC and Bell ExpressVu in attracting new subscribers or in marketing programming packages to subscribers that will require the purchase of new set-top boxes.

 

There is a relatively small number of potential new customers for our set-top boxes and fixed satellite services, and we expect this customer concentration to continue for the foreseeable future. Therefore, our operating results will likely continue to depend on sales to a relatively small number of customers, as well as the continued success of these customers. In addition, we may from time to time enter into customer agreements providing for exclusivity periods during which we may sell a specified product only to that customer. If we do not develop relationships with new customers, we may not be able to expand our customer base or maintain or increase our revenue.

We currently have substantial unused satellite capacity; our results of operations could be materially adversely affected if we are not able to utilize all of this capacity.

 

While we are currently evaluating various opportunities to make profitable use of our satellite capacity (including, but not limited to, supplying satellite capacity for new international ventures), we do not have firm plans to utilize all of our satellite capacity. In addition, there can be no assurance that we can successfully develop the business opportunities we currently plan to pursue with this capacity. Future costs associated with our excess satellite capacity will negatively impact our margins if we do not generate revenue to offset the costs of this capacity.

 

In addition, we currently have leased minimal capacity on our two leased satellites, AMC-15 and AMC-16, and have substantial unleased capacity on one of our owned satellites, EchoStar IX. Each of our satellites must be reviewed for possible impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. In the event that we are unsuccessful in marketing capacity on these satellite assets and do not achieve sufficient utilization and prices, in addition to reporting lower than expected revenues and profitability, we will be required to record a substantial impairment charge relating to one or more of these satellites. We currently estimate that these potential charges could aggregate up to $250 million, which, if incurred would have a material adverse effect on our reported operating results and financial position. Furthermore, it is possible that in 2008 ECC will discontinue the use of some or all of the capacity on one or more other satellites that it will initially lease from us. To the extent that this occurs and we are unable to lease this additional excess capacity, we may be required to record substantial additional impairment charges that we currently estimate could aggregate up to $100 million. We performed a preliminary assessment of the recoverability of the satellites to be contributed by ECC as if the spin-off had been consummated and preliminarily concluded that the recoverability of the satellites will not be impaired as of the distribution date.

 

Our historical combined and pro forma financial information included in this information statement are not necessarily indicative of our future financial position, future results of operations or future cash flows nor do they reflect what our financial position, results of operations or cash flows would have been as a stand-alone company during the periods presented.

 

The historical and pro forma combined financial information included in this information statement do not reflect the financial condition, results of operations or cash flows we would have achieved as an independent publicly-traded company during the periods presented or those results we will achieve in the future. This is primarily a result of the following factors:

 

requirements. Without the opportunity to obtain financing from ECC, we may in the future need to obtain additional financing from banks, or through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements. Such financing may not be available to us on acceptable terms, or at all. We may have a credit rating that is lower than ECC’s credit rating and may incur debt on terms and at interest rates that will not be as favorable as those historically enjoyed by ECC.

 

 

The acquisition of EchoStar Communication Corporation by a third party could have a material adverse effect on our business and financial position.

 

Our sales to ECC accounted for approximately 86.2%, 84.5%, 85.6% and 89.7% of our revenue in the nine months ended September 30, 2007 and in 2006, 2005 and 2004, respectively. Because sales to ECC following the spin-off will primarily be made pursuant to short-term contracts, ECC will have no obligation to continue to purchase our principal products and services following the spin-off. Therefore, if ECC enters into a business combination transaction, or Mr. Ergen no longer controls a majority of the voting power of ECC or of us, our relationship with ECC could be terminated or substantially curtailed with little or no advance notice. Any material reduction in our sales to ECC would have a significant adverse effect on our business, results of operations and financial position.

 

Furthermore, because there are a relatively small number of potential customers for our products and services, if we lose ECC as a customer, it will be difficult for us to obtain alternative customer relationships that would replace our historical revenues from ECC.

 

We may not be able to obtain additional capital on acceptable terms or at all in order to grow and to increase earnings.

 

Our ability to increase earnings will depend in part on our ability to grow our business. While we expect to satisfy our need for funds to meet our growth plans to be satisfied from cash and marketable investment securities to be contributed to us in connection with the spin-off, cash we generate from operations and future financings, we cannot assure you that we will generate sufficient cash from operations or that additional financing will be available on acceptable terms, or at all, if needed in the future.

 

In addition, we currently have contracts to construct, and conditional licenses and pending FCC applications for, a number of Ku-band, Ka-band and extended Ku-band satellites. We may need to raise additional capital to construct, launch, and insure these satellites. Depending on market conditions and our results of operations and financial condition we may not be able to raise such additional capital on acceptable terms or at all. We also periodically evaluate various strategic initiatives, the pursuit of which also could require us to raise significant additional capital. We may also use a significant portion of our existing cash to fund a potential stock buyback program during 2008 of up to $1 billion of our Class A common stock.

 

We also have substantial satellite-related payment obligations under our various satellite service agreements.

 

We could be exposed to significant financial losses if our investments are unsuccessful.

 

We have entered into certain strategic transactions and investments in Asia and elsewhere, and we expect to increase our strategic investment activity in the United States and in international markets. These investments, which we expect will become substantial, involve a high degree of risk. These investments could also expose us to significant financial losses, and may restrict our ability to make other investments or limit alternative uses of our capital resources, particularly if the underlying ventures are not successful. In particular, the laws, regulations and practices of certain countries may make it harder for our investments to be successful.

 

In addition, the companies in which we invest or with whom we partner may not be able to compete effectively or there may be insufficient demand for the services and products offered by these companies.

We may pursue new acquisitions, joint ventures and other transactions to complement or expand our business which may not be successful.

 

We may not be able to complete such transactions and such transactions, if executed, pose significant risks and could have a negative effect on our operations. Our future success may depend on opportunities to buy other businesses or technologies that could complement, enhance or expand our current business or products or that might otherwise offer us growth opportunities. Any transactions that we are able to identify and complete may involve a number of risks, including:

 

 

In addition, we may not be able to successfully or profitably integrate, operate, maintain and manage our newly acquired operations or employees. We may not be able to maintain uniform standards, controls, procedures and policies, and this may lead to operational inefficiencies.

 

New acquisitions, joint ventures and other transactions may require the commitment of significant capital that would otherwise be directed to investments in our existing businesses or be distributed to shareholders. Commitment of this capital may cause us to defer or suspend any share repurchases that we otherwise may have made.

 

Our business relies on intellectual property, some of which is owned by third parties, and we may inadvertently infringe their patents and proprietary rights.

 

Many entities, including some of our competitors, have or may in the future obtain patents and other intellectual property rights that cover or affect products or services related to those that we offer. In general, if a court determines that one or more of our products infringes on intellectual property held by others, we may be required to cease developing or marketing those products, to obtain licenses from the holders of intellectual property or to redesign those products in such a way as to avoid infringing the patent claims, each of which may require material expenditures by us. If those intellectual property rights are held by a competitor, we may be unable to obtain the intellectual property at any price, which could adversely affect our competitive position.

 

If we fail to protect our intellectual property rights, it could harm our business and competitive position.

 

Our business relies on intellectual property rights to stay competitive in the market place. We rely on a combination of patent, trademark and copyright laws, trade secrets, confidentiality procedures and contractual provisions to protect our intellectual property rights and the obligations we have to third parties from whom we license intellectual property rights. Nevertheless, these afford only limited protection and policing unauthorized use of proprietary technology can be difficult and expensive. We may not be able to take appropriate steps to enforce our intellectual property rights and this could have a material adverse effect on our business, operating results and financial condition.

 

Our accounting and other management systems and resources may not be adequately prepared to meet the financial reporting and other requirements to which we will be subject following the spin-off. If we are unable to achieve and maintain effective internal controls, our business, financial position and results of operations could be adversely affected.

 

Our financial results previously were included within the consolidated results of ECC, and our reporting and control systems were appropriate for those of subsidiaries of a public company. However, we were not directly subject to reporting and other requirements of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. As a result of the spin-off, we will be directly subject to these requirements, including the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which will require annual management assessments of the effectiveness of our internal control over financial reporting and a report by

our independent registered public accounting firm addressing these controls. These reporting and other obligations will place significant demands on our management and administrative and operational resources, including accounting resources. To comply with these requirements, we anticipate that we will need to upgrade our systems, including information technology, implement additional financial and management controls, reporting systems and procedures and hire additional accounting and finance staff. If we are unable to upgrade our financial and management controls, reporting systems, information technology and procedures in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies could be impaired.

 

Prior to the spin-off, we will not have been an independent company and we may be unable to make, on a timely or cost-effective basis, the changes necessary to operate as an independent company.

 

Prior to the spin-off, our business was operated by ECC as part of its broader corporate organization, rather than as an independent company. ECC’s senior management oversaw the strategic direction of our businesses and ECC performed various corporate functions for us, including, but not limited to:

 

 

Following the spin-off, neither ECC nor any of its affiliates will have any obligation to provide these functions to us other than those services that will be provided for a limited period of time by ECC pursuant to the services agreement between us and ECC. See “Certain Intercompany Agreements — Agreements with ECC — Services Agreement.” If, once this services agreement terminates, we do not have in place our own systems and business functions, we do not have agreements with other providers of these services or we are not able to make these changes cost effectively, we may not be able to operate our business effectively and our profitability may decline. If ECC does not continue to perform effectively the services that are called for under the services agreement, we may not be able to operate our business effectively after the spin-off.

 

Changes in existing technologies or the emergence of new products or technologies could significantly harm our business.

 

Our businesses change rapidly as new technologies are developed. These new technologies may cause our services and products to become obsolete. Changes in existing technologies could also cause demand for our products and services to decline. For example, if changes in technology allow digital television subscribers to use devices such as personal computers, cable ready televisions and network based digital video recording services in place of set-top boxes, our customers may not need to purchase our set-top boxes to provide their digital television subscribers with digital video recording and other set-top box features. One or more new technologies also could be introduced that compete favorably with our set-top boxes or that cause our set-top boxes to no longer be of significant benefit to our customers.

 

We and our suppliers also may not be able to keep pace with technological developments. Alternatively, if the new technologies on which we intend to focus our research and development investments fail to achieve acceptance in the marketplace, we could suffer a material adverse effect on our future competitive position that could cause a reduction in our revenues and earnings. Our competitors could also obtain or develop proprietary technologies that are perceived by the market as being superior to ours. Further, after we have incurred substantial research and development costs, one or more of the technologies under our development, or under development by one or more of our strategic partners, could become obsolete prior to its introduction. Finally, delays in the delivery of components or other unforeseen problems may occur that could materially and adversely affect our ability to generate revenue, offer new services and remain competitive.

Technological innovation is important to our success and depends, to a significant degree, on the work of technically skilled employees. Competition for the services of these types of employees is intense. We may not be able to attract and retain these employees. If we are unable to attract and maintain technically skilled employees, our competitive position could be materially and adversely affected.

 

We intend to make significant investments in new products and services that may not be profitable.

 

We have made and will continue to make significant investments in research, development, and marketing for new products, services, and technologies, including new set-top box designs and entry into new business areas. Investments in new technology are inherently speculative and commercial success depends on many factors including novelty, service and support, and effective sales and marketing. We may not achieve significant revenue from new product and service investments for a number of years, if at all. Moreover, new products and services may not be profitable, and even if they are profitable, operating margins for new products and businesses may be minimal.

 

We rely on key personnel.

 

We believe that our future success will depend to a significant extent upon the performance of Charles W. Ergen, our Chairman and Chief Executive Officer and certain other executives. Mr. Ergen and certain of these executives will also continue to devote significant time to their employment at ECC. The loss of Mr. Ergen or of certain other key executives or their ability to devote sufficient time and effort to our business could have a material adverse effect on our business, financial condition and results of operations. Although all of our executives will execute agreements limiting their ability to work for or consult with competitors if they leave us, we do not have employment agreements with any of them.

 

Risks Affecting Our Set-Top Business

 

We depend on sales of set-top boxes for nearly all of our revenue, and if sales of our set-top boxes decline, our business and financial position will suffer.

 

Our historical revenues consist primarily of sales of our set-top boxes. In addition, we currently derive, and expect to continue to derive in the near term, nearly all of our revenue from sales of our set-top boxes to ECC and Bell ExpressVu. Continued market acceptance of our set-top boxes is critical to our future success. If we are not able to expand sales of our set-top boxes to other providers of digital television, including cable operators, our growth prospects will be limited, and our revenues will be substantially impacted if sales of our set-top boxes to providers of satellite-delivered digital television decline.

 

Our business may suffer if direct-to-home satellite service providers, who currently comprise our customer base, do not compete successfully with existing and emerging alternative platforms for delivering digital television, including terrestrial networks, Internet protocol television and cable television operators.

 

Our existing customers are direct-to-home satellite video providers, which compete with cable television operators and terrestrial broadcasters for the same pool of viewers. As technologies develop, other means of delivering information and entertainment to television viewers are evolving. For example, some telecommunications companies, such as AT&T Inc. and Verizon Communications, are seeking to compete with terrestrial broadcasters, cable television network operators and direct-to-home satellite services by offering IPTV, which allows telecommunications companies to stream television programs through telephone lines or fiber optic lines. To the extent that the terrestrial television networks, telecommunications companies and cable television network operators compete successfully against direct-to-home satellite services for viewers, the ability of our existing customer base to attract and retain subscribers may be adversely affected. As a result, demand for our satellite television set-top boxes could decline and we may not be able to sustain our current revenue levels.

Our future financial performance depends on our ability to penetrate new markets for set-top boxes.

 

Our products were initially designed for, and have been deployed mostly by, providers of satellite-delivered digital television. To date, we have not made any sales of our set-top boxes to cable operators. In addition, the cable set-top box market is highly competitive and we expect competition to intensify in the future. This competition may make it more difficult for us to sell cable set-top boxes and may result in pricing pressure, small profit margins, high sales and marketing expenses and failure to obtain market share, any of which would likely seriously harm our business, operating results and financial condition.

 

Our ability to sell our set-top boxes to cable television operators depends on our ability to obtain licenses to use the conditional access systems utilized by these cable television operators.

 

Our commercial success in selling our set-top boxes to cable television operators depends significantly on our ability to obtain licenses to use the conditional access systems deployed by these operators in our set-top boxes. In many cases, the intellectual property rights to these conditional access systems are owned by the set-top box manufacturer that currently provides the cable television operator with its set-top boxes. We cannot assure you that we will able to obtain any required license on commercially favorable terms, if at all. If we do not obtain the necessary licenses, we may be delayed or prevented from pursuing the development of some potential products with cable television operators. Our failure to obtain a license to any technology that we may require to develop or commercialize our set-top boxes with cable television operators will significantly and negatively affect our business.

 

Growth in our set-top box business likely requires expansion of our sales to international customers; we may be unsuccessful in expanding international sales.

 

We believe that in order to grow our set-top box revenue and business and to build a large customer base, we must increase sales of our set-top boxes in international markets. We have limited experience selling our set-top boxes internationally. To succeed in these sales efforts, we believe we must hire additional sales personnel and develop and manage new relationships with cable operators and other providers of digital television in international markets. If we do not succeed in our efforts to sell to these target markets and customers, the size of our total addressable market may be limited. This, in turn, would harm our ability to grow our customer base and revenue.

 

The set-top box business is extremely competitive.

 

Currently, there are many significant competitors in the set-top box business including several established companies who have sold set-top boxes to major cable operators in the United States for many years. These competitors include companies such as Motorola, Cisco Systems, which acquired Scientific Atlanta in 2006, and Pace. In addition, a number of rapidly growing companies have recently entered the market, many of them with set-top box offerings similar to our existing satellite set-top box products. We also expect additional competition in the future from new and existing companies who do not currently compete in the market for set-top boxes. As the set-top box business evolves, our current and potential competitors may establish cooperative relationships among themselves or with third parties, including software and hardware companies that could acquire significant market share, which could adversely affect our business. We also face competition from set-top boxes that have been internally developed by digital video providers. Any of these competitive threats, alone or in combination with others, could seriously harm our business, operating results and financial condition.

 

Our set-top boxes are highly complex and may experience quality or supply problems.

 

Our set-top boxes are extremely complex and can have defects in design, manufacture or associated software. Set-top boxes often contain “bugs” that can unexpectedly interfere with their operation. Defects may also occur in components and products that we purchase from third-parties. There can be no assurance that we will be able to detect and fix all defects in the set-top boxes that we sell. We could incur significant expenses, lost

revenue, and harm to our reputation if we fail to detect or effectively address such issues through design, testing or warranty repairs.

 

The average selling price of our set-top boxes may decrease, which could negatively impact our operating results.

 

As a part of ECC, we have historically sold set-top boxes to ECC at our cost. In order to operate a profitable business we will be required to sell our set-top boxes to ECC at higher prices. It is possible that our ability to increase the average selling prices of our set-top boxes will be limited and that prices may decrease in the future in response to competitive pricing pressures, new product introductions by us or our competitors or other factors. If we are unable to increase or at least maintain the average selling prices of our set-top boxes, or if such selling prices decline, and we are unable to respond in a timely manner by developing and introducing new products and continually reducing our product costs, our revenues and gross margin may be negatively affected, which will harm our business and results of operations.

 

If significant numbers of television viewers are unwilling to pay for premium programming packages that utilize set-top boxes, we may not be able to sustain our current revenue level.

 

Our revenues are derived entirely from direct-to-home satellite service providers who purchase our set-top boxes for their subscribers. Therefore, we are substantially dependent upon the ability of these providers to promote the delivery of premium programming packages that utilize technology incorporated into our set-top boxes, such as DVR technology and IPTV, to generate future revenues.

 

However, direct-to-home satellite service providers may be unsuccessful in promoting value-added services. Subscribers of direct-to-home satellite services have historically purchased stand-alone satellite receivers without the advanced set-top box functionality that we offer. If direct-to-home satellite service providers are unable to develop compelling reasons for their subscribers to purchase our more advanced set-top boxes, it will be difficult for us to sustain our historical revenues.

 

Our reliance on several key components used in our set-top boxes could restrict production and result in higher set-top box costs.

 

We obtain many components for our set-top boxes from a single supplier or a limited group of suppliers. Our reliance on a single or limited group of suppliers, particularly foreign suppliers, and our increasing reliance on subcontractors, involves several risks. These risks include a potential inability to obtain an adequate supply of required components, and reduced control over pricing, quality, and timely delivery of these components. We do not generally maintain long-term agreements with any of our suppliers or subcontractors. An inability to obtain adequate deliveries or any other circumstances requiring us to seek alternative sources of supply could affect our ability to ship our set-top boxes on a timely basis, which could damage our relationships with current and prospective customers and harm our business, resulting in a loss of market share, and reduce revenues and income.

 

We generally maintain low inventory levels and do not make binding long-term commitments to suppliers. As a result, it may be difficult in the future to obtain components required for our products or to increase the volume of components if demand for our products increases.

 

Our future growth depends on market acceptance of HDTV.

 

Future demand for our set-top boxes will depend significantly on the growing market acceptance of high definition television, or HDTV. The effective delivery of HDTV will depend on digital television operators developing and building infrastructure to provide wide-spread HDTV programming. If the introduction or adoption of HDTV or the deployment of HDTV is not as widespread or as rapid as we or our customers expect, our revenue growth will be limited.

During April 2006, a jury concluded that certain of our digital video recorders, or DVRs, infringed a patent held by Tivo. If the verdict is upheld on appeal and we are not able to successfully implement alternative technology, we could be prohibited from distributing DVRs, or be required to modify or eliminate certain user-friendly DVR features that we currently offer to consumers.

 

If the Tivo jury verdict is upheld on appeal, to the extent that ECC does not indemnify us, we will be required to pay substantial damages and/or license fees, and if we were not able to successfully implement alternative technology (including the successful defense of any challenge that such technology infringes Tivo’s patent), we could also be prohibited from distributing DVRs, or be required to modify or eliminate certain user-friendly DVR features that we currently offer to consumers. In that event we would be at a significant disadvantage to our competitors who could offer this functionality and, while we would attempt to provide that functionality through other manufacturers, the adverse affect on our business could be material.

 

Risks Affecting Our Fixed Satellite Services Business

 

We currently face competition from established competitors in the fixed satellite service business and may face competition from others in the future.

 

In our fixed satellite services business, we will compete against larger, well-established fixed satellite service companies, such as Intelsat, SES Americom and Telesat Canada. Because the satellite services industry is relatively mature, our growth strategy depends largely on our ability to displace current incumbent providers, which often have the benefit of long-term contracts with customers. These long-term contracts and other factors result in relatively high switching costs for customers, making it more difficult for us to displace customers from their current relationships with our competitors. In addition, the supply of satellite capacity has increased in recent years, which will make it more difficult for us to sell our services in certain markets and to price our capacity at acceptable levels. Competition may cause downward pressure on prices and further reduce the utilization of our fleet capacity, both of which would have an adverse effect on our financial performance. Our fixed satellite services business also competes with fiber optic cable and other terrestrial delivery systems, which may have a cost advantage, particularly in point-to-point applications where such delivery systems have been installed.

 

Our satellites are subject to significant operational risks.

 

Satellites are subject to significant operational risks while in orbit. These risks include malfunctions, commonly referred to as anomalies, that have occurred in our satellites and the satellites of other operators as a result of various factors, such as satellite manufacturers’ errors, problems with the power systems or control systems of the satellites and general failures resulting from operating satellites in the harsh environment of space.

 

Although we work closely with the satellite manufacturers to determine and eliminate the cause of anomalies in new satellites and provide for redundancies of many critical components in the satellites, we may experience anomalies in the future, whether of the types described above or arising from the failure of other systems or components.

 

Any single anomaly or series of anomalies could materially and adversely affect our operations and revenues and our relationship with current customers, as well as our ability to attract new customers for our satellite services. In particular, future anomalies may result in the loss of individual transponders on a satellite, a group of transponders on that satellite or the entire satellite, depending on the nature of the anomaly. Anomalies may also reduce the expected useful life of a satellite, thereby reducing the revenue that could be generated by that satellite, or create additional expenses due to the need to provide replacement or back-up satellites.

 

Meteoroid events pose a potential threat to all in-orbit satellites. The probability that meteoroids will damage those satellites increases significantly when the Earth passes through the particulate stream left behind by comets. Occasionally, increased solar activity also poses a potential threat to all in-orbit satellites.

 

Some decommissioned spacecraft are in uncontrolled orbits which pass through the geostationary belt at various points, and present hazards to operational spacecraft, including our satellites. We may be required to

perform maneuvers to avoid collisions and these maneuvers may prove unsuccessful or could reduce the useful life of the satellite through the expenditure of fuel to perform these maneuvers. The loss, damage or destruction of any of our satellites as a result of an electrostatic storm, collision with space debris, malfunction or other event could have a material adverse effect on our business, financial condition and results of operations.

 

Our satellites have minimum design lives of 12 years, but could fail or suffer reduced capacity before then.

 

Our ability to earn revenue depends on the usefulness of our satellites. Each satellite has a limited useful life. A number of factors affect the useful lives of the satellites, including, among other things, the quality of their construction, the durability of their component parts, the ability to continue to maintain proper orbit and control over the satellite’s functions, the efficiency of the launch vehicle used, and the remaining on-board fuel following orbit insertion. Generally, the minimum design life of each of our satellites is 12 years. We can provide no assurance, however, as to the actual useful lives of the satellites.

 

In the event of a failure or loss of any of our satellites, we may relocate another satellite and use it as a replacement for the failed or lost satellite, which could have a material adverse effect on our business, financial condition and results of operations. Such a relocation would require FCC approval and, among other things, a showing to the FCC that the replacement satellite would not cause additional interference compared to the failed or lost satellite. We cannot be certain that we could obtain such FCC approval.

 

Our satellites are subject to risks related to launch.

 

Satellite launches are subject to significant risks, including launch failure, incorrect orbital placement or improper commercial operation. Certain launch vehicles that may be used by us have either unproven track records or have experienced launch failures in the past. The risks of launch delay and failure are usually greater when the launch vehicle does not have a track record of previous successful flights. Launch failures result in significant delays in the deployment of satellites because of the need both to construct replacement satellites, which can take more than two years, and to obtain other launch opportunities. Such significant delays could materially and adversely affect our ability to generate revenues. If we were unable to obtain launch insurance, or obtain launch insurance at rates we deem commercially reasonable, and a significant launch failure were to occur, it could have a material adverse effect on our ability to generate revenues and fund future satellite procurement and launch opportunities. In addition, the occurrence of launch failures whether on our satellites or those of others may significantly reduce the availability of launch insurance on our satellites or make launch insurance premiums uneconomical.

 

Our fixed satellite services business is subject to risks of adverse government regulation.

 

Our satellite services business is subject to varying degrees of regulation in the United States by the FCC, and other entities, and in foreign countries by similar entities. These regulations are subject to the political process and have been in constant flux over the past decade. Moreover, a substantial number of foreign countries in which we have, or may in the future make, an investment, regulate, in varying degrees, the ownership of satellites and the distribution and ownership of programming services and foreign investment in programming companies. Further material changes in law and regulatory requirements must be anticipated, and there can be no assurance that our business and the business of our affiliates will not be adversely affected by future legislation, new regulation or deregulation.

 

Our business depends substantially on FCC licenses that can expire or be revoked or modified and applications that may not be granted.

 

If the FCC were to cancel, revoke, suspend or fail to renew any of our licenses or authorizations, it could have a material adverse effect on our business, financial condition and results of operations. Specifically, loss of a frequency authorization would reduce the amount of spectrum available to us, potentially reducing the amount of services available to our customers. The materiality of such a loss of authorizations would vary based upon,

among other things, the location of the frequency used or the availability of replacement spectrum. In addition, Congress often considers and enacts legislation that could affect us, and FCC proceedings to implement the Communications Act and enforce its regulations are ongoing. We cannot predict the outcomes of these legislative or regulatory proceedings or their effect on our business.

 

We may not be aware of certain foreign government regulations.

 

Because regulatory schemes vary by country, we may be subject to regulations in foreign countries of which we are not presently aware. If that were to be the case, we could be subject to sanctions by a foreign government that could materially and adversely affect our ability to operate in that country. We cannot assure you that any current regulatory approvals held by us are, or will remain, sufficient in the view of foreign regulatory authorities, or that any additional necessary approvals will be granted on a timely basis or at all, in all jurisdictions in which we wish to operate new satellites, or that applicable restrictions in those jurisdictions will not be unduly burdensome. The failure to obtain the authorizations necessary to operate satellites internationally could have a material adverse effect on our ability to generate revenue and our overall competitive position.

 

We, our customers and companies with which we do business may be required to have authority from each country in which we or they provide services or provide our customers use of our satellites. Because regulations in each country are different, we may not be aware if some of our customers and/or companies with which we do business do not hold the requisite licenses and approvals.

 

Our dependence on outside contractors could result in delays related to the design, manufacture and launch of our new satellites, which could in turn adversely affect our operating results.

 

There are a limited number of manufacturers that are able to design and build satellites according to the technical specifications and standards of quality we require, including Astrium Satellites, Boeing Satellite Systems, Lockheed Martin, Loral and Thales Alenia Space. There are also a limited number of agencies able to launch such satellites, including International Launch Services, Arianespace, Lockheed Martin Launch Systems and Sea Launch Company. The loss of any of our manufacturers or launch agencies could result in the delay of the design, building or launch of our satellites. Even if alternate suppliers for such services are available, we may have difficulty identifying them in a timely manner, we may incur significant additional expense in changing suppliers, and this could result in difficulties or delays in the design, manufacturing or launch of our satellites. Any delays in the design, building or launch of our satellites could have a material adverse effect on our business, financial condition and results of operations.

 

We currently have no commercial insurance coverage on the satellites we own.

 

We do not insure our owned satellites against in-orbit or other failures. The loss of a satellite or other satellite malfunctions or anomalies could have a material adverse effect on our financial performance which we may not be able to mitigate by using available capacity on other satellites. In addition, the loss of a satellite or other satellite malfunctions or anomalies could affect our ability to comply with FCC regulatory obligations and our ability to fund the construction or acquisition of replacement satellites for our in-orbit fleet in a timely fashion, or at all.

 

Risks Relating to the Spin-Off

 

Our agreements with ECC may not reflect what two unaffiliated parties might have agreed to.

 

The allocation of assets, liabilities, rights, indemnifications and other obligations between ECC and us under the separation and ancillary agreements we will enter into with ECC do not necessarily reflect what two unaffiliated parties might have agreed to. Had these agreements been negotiated with unaffiliated third parties, their terms may have been more favorable, or less favorable, to us.

The spin-off could result in significant tax liability.

 

ECC has received a private letter ruling from the IRS to the effect that, among other things, the spin-off, together with certain related transactions, will qualify for tax-free treatment under Sections 355 and 368(a)(1)(D) of the Code. In addition, the spin-off is conditioned upon the receipt by ECC of the opinion of White & Case LLP on the distribution date (which condition ECC may waive in its sole discretion) substantially to the effect that, among other things, the spin-off, together with certain related transactions, will qualify as reorganizations for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, and that, accordingly for U.S. federal income tax purposes, no gain or loss will be recognized by, and no amount will be included in the income of, a holder of ECC common stock upon the receipt of shares of our common stock pursuant to the spin-off, except to the extent such holder receives cash in lieu of fractional shares of our common stock. See “The Spin-Off — Material U.S. Federal Income Tax Consequences of the Spin-Off.”

 

Although a private letter ruling from the IRS generally is binding on the IRS, if the factual representations or assumptions made in the letter ruling request are untrue or incomplete in any material respect, we will not be able to rely on the ruling. Furthermore, the IRS will not rule on whether a distribution satisfies certain requirements necessary to obtain tax-free treatment under Section 355 of the Code. Rather, the ruling is based upon representations by ECC that these conditions have been satisfied, and any inaccuracy in such representations could invalidate the ruling. ECC has made it a condition to the spin-off that ECC obtain the opinion of counsel described above. The opinion will be based on, among other things, certain assumptions and representations made by ECC and us, which if incorrect or inaccurate in any material respect would jeopardize the conclusions reached by counsel in its opinion. The opinion will not be binding on the IRS or the courts. See “The Spin-Off — Material U.S. Federal Income Tax Consequences of the Spin-Off” for more information regarding the private letter ruling and the tax opinion.

 

If the spin-off does not qualify for tax-free treatment for U.S. federal income tax purposes, then, in general, ECC would be subject to tax as if it had sold the common stock of our company in a taxable sale for its fair market value. ECC’s shareholders would be subject to tax as if they had received a distribution equal to the fair market value of our common stock that was distributed to them, which would be treated as a taxable dividend to the extent of ECC’s earnings and profits. It is expected that the amount of any such taxes to ECC’s shareholders and ECC would be substantial. See “The Spin-Off — Material U.S. Federal Income Tax Consequences of the Spin-Off.”

 

A potential indemnity liability to ECC if the spin-off is treated as a taxable transaction could materially adversely affect our company.

 

In the tax sharing agreement with ECC, we have agreed to indemnify ECC for any losses, claims, and expenses (including any resulting taxes) resulting from the spin-off or certain related transactions failing to qualify as tax-free transactions pursuant to any provision of Section 355 or Section 361 of the Code because of (i) a direct or indirect acquisition of any of our stock, stock options or assets, (ii) any action that we take or fail to take or (iii) any action that we take that is inconsistent with the information and representations furnished to the IRS in connection with the request for the private letter ruling, or to counsel in connection with any opinion being delivered by counsel with respect to the spin-off or certain related transactions. For a more detailed discussion, see “Certain Intercompany Agreements — Agreements with ECC — Tax Sharing Agreement.” Our indemnification obligations to ECC and its subsidiaries are not limited in amount or subject to any cap. If we are required to indemnify ECC and its subsidiaries under the circumstances set forth in the tax sharing agreement, we may be subject to substantial liabilities.

We will have potential conflicts of interest with ECC after the spin-off.

 

Questions relating to conflicts of interest may arise between ECC and us in a number of areas relating to our past and ongoing relationships. Areas in which conflicts of interest between ECC and us could arise include, but are not limited to, the following:

 

 

 

 

We may not be able to resolve any potential conflicts, and, even if we do so, the resolution may be less favorable to us than if we were dealing with an unaffiliated party.

 

We do not have any agreements with ECC that restrict us from selling our products to competitors of ECC. We also do not have any agreements with ECC that would prevent us from competing with each other.

 

In addition, the corporate opportunity policy set forth in our articles of incorporation addresses potential conflicts of interest for officers and directors of ECC who are also officers or directors of us. This policy could restrict our ability to take advantage of certain corporate opportunities. The principles for resolving such

potential conflicts of interest are described under “Description of Our Capital Stock — Provisions of Our Articles of Incorporation Relating to Related-Party Transactions and Corporate Opportunities.”

 

We may incur material costs and expenses as a result of our separation from ECC.

 

We may incur costs and expenses greater than those we currently incur as a result of our separation from ECC. These increased costs and expenses may arise from various factors, including financial reporting, costs associated with complying with federal securities laws (including compliance with the Sarbanes-Oxley Act of 2002), tax administration and human resources related functions. Although ECC will continue to provide many of these services to us under the services agreement, such services are for a limited period of time. We cannot assure you that these costs will not be material to our business.

 

Substantial sales of our common stock may occur in connection with or following the spin-off, which could cause our share price to decline.

 

The EHC Class A common stock that is distributed in the spin-off generally may be sold immediately in the public market. We expect that some of our shareholders, including possibly some of our larger shareholders, will sell the Class A common stock that they receive in the spin-off because, among other reasons, our business profile or market capitalization as an independent, publicly-traded company do not fit their investment objectives. Moreover, index funds hold ECC Class A common stock. Unless we are included in these indices from the date of the spin-off, these index funds will be required to sell our Class A common stock that they receive in the distribution. The sales of significant amounts of our Class A common stock or the perception in the market that these sales will occur could adversely affect the market price of our Class A common stock.

 

Risks Relating to our Common Stock and the Securities Market

 

We cannot be certain that an active trading market will develop or be sustained after the spin-off, and following the spin-off our stock price may fluctuate significantly.

 

We cannot assure you that an active trading market will develop or be sustained for our common stock after the spin-off. Nor can we predict the prices at which classes of our common stock may trade after the spin-off. Similarly, we cannot predict the effect of the spin-off on the trading prices of ECC’s common stock or whether the market value of the shares of a class of our common stock and the shares of the same class of ECC’s common stock held by a shareholder after the spin-off will be less than, equal to or greater than the market value of the shares of that class of ECC’s common stock held by such shareholder prior to the spin-off.

 

The market price of our common stock may fluctuate significantly due to a number of factors, some of which may be beyond our control, including:

 

 

If, following the spin-off, we are unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or our internal control over financial reporting is not effective, the reliability of our financial statements may be questioned and our stock price may suffer.

 

Section 404 of the Sarbanes-Oxley Act of 2002 requires any company subject to the reporting requirements of the U.S. securities laws to do a comprehensive evaluation of its and its consolidated subsidiaries’ internal control over financial reporting. To comply with this statute, we will eventually be required to document and test our internal control procedures, our management will be required to assess and issue a report concerning our internal control over financial reporting, and our independent auditors will be required to issue an opinion on management’s assessment of those matters. The rules governing the standards that must be met for

management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During the course of its testing, our management may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act. If our management cannot favorably assess the effectiveness of our internal control over financial reporting or our auditors identify material weaknesses in our internal controls, investor confidence in our financial results may weaken, and our stock price may suffer.

 

It may be difficult for a third party to acquire us, even if doing so may be beneficial to our shareholders.

 

Certain provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a change in control of our company that a shareholder may consider favorable. These provisions include the following:

 

 

After the spin-off, we will be controlled by one principal shareholder.

 

Immediately after the spin-off, Charles W. Ergen, our Chairman and Chief Executive Officer, will beneficially own approximately 80.0% of our total equity securities and possess approximately 50.0% of the total voting power. Thus, Mr. Ergen will have the ability to elect a majority of our directors and to control all other matters requiring the approval of our shareholders. As a result of Mr. Ergen’s voting power, we will be a “controlled company” as defined in the Nasdaq listing rules and, therefore, will not be subject to Nasdaq requirements that would otherwise require us to have (i) a majority of independent directors; (ii) a nominating committee composed solely of independent directors; (iii) compensation of our executive officers determined by a majority of the independent directors or a compensation committee composed solely of independent directors; and (iv) director nominees selected, or recommended for the Board’s selection, either by a majority of the independent directors or a nominating committee composed solely of independent directors. Mr. Ergen will also beneficially own approximately 50.0% of the total equity and 80.0% of the total voting power of ECC and will continue to be the Chairman and Chief Executive Officer of ECC, which will directly and through its subsidiaries continue to be our largest customer, accounting for a substantial majority of our revenues.

 

Holders of any single class of our common stock may not have any remedies if any action by our directors or officers has an adverse effect on only that series of our common stock.

 

Principles of Nevada law and the provisions of our certificate of incorporation may protect decisions of our board of directors that have a disparate impact upon holders of any single class of our common stock. Under Nevada law, the board of directors has a duty to act with due care and in the best interests of all of our shareholders, including the holders of all classes of our common stock. Principles of Nevada law established in cases involving differing treatment of multiple classes or series of stock provide that a board of directors owes an equal duty to all common shareholders regardless of class or series and does not have separate or additional duties to any group of shareholders. As a result, in some circumstances, our directors may be

required to make a decision that is adverse to the holders of one class of our common stock. Under the principles of Nevada law referred to above, you may not be able to challenge these decisions if our board of directors is disinterested and adequately informed with respect to these decisions and acts in good faith and in the honest belief that it is acting in the best interests of all of our shareholders.

 

We do not intend to pay dividends for the foreseeable future.

 

We have never declared or paid any dividends on our common stock. We intend to retain any earnings to finance the operation and expansion of our business, and we do not anticipate paying any cash dividends in the future. As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases.

 

If securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline.

 

The trading market for our common stock will depend in part on any research reports that securities or industry analysts publish about us or our business. After our separation from ECC, if no securities or industry analysts initiate coverage of us, the trading price for our stock may be negatively impacted. In the event securities or industry analysts cover us and one or more of these analysts downgrade our stock or publish unfavorable reports about our business, our stock price would likely decline. In addition, if any securities or industry analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

 

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

 

This information statement contains certain forward-looking statements regarding business strategies, market potential, future financial performance and other matters. In particular, information included under the headings “The Spin-Off,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” contain forward-looking statements. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. Please refer to “Risk Factors” for some but not all of the factors that could cause actual results or events to differ materially from those anticipated.

 

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.

 

These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this information statement, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, or to reflect any change in our expectations with regard thereto or any other change in events, conditions or circumstances on which any such statement is based.

 

THE SPIN-OFF

 

Background

 

The board of directors of ECC has approved the spin-off of EchoStar Holding Corporation, a wholly owned subsidiary of ECC. EHC will hold the technology and certain infrastructure assets of ECC. ECC will retain its consumer business, including DISH Network, its U.S. consumer pay-TV business. In making its determination, the ECC board of directors met numerous times and considered, among other things, the continuation of ECC’s current operating strategy, and concluded that we and ECC would be able to compete more effectively and have the opportunity to achieve better revenue growth and profitability as a result of the spin-off.

 

Prior to the spin-off, we were a wholly-owned subsidiary of ECC. Following a series of distributions and contributions from ECC and its subsidiaries to us, we and the companies that will be our subsidiaries after the spin-off, which we refer to as EchoStar Holding Corporation, or EHC, will be engaged in the digital set-top box business and the fixed satellite services business.

 

To accomplish the spin-off, ECC will distribute all of its equity interest in us, consisting of shares of our Class A common stock and our Class B common stock, to ECC’s shareholders on a pro rata basis based on the class of ECC common stock held by each such shareholder. Following the spin-off, ECC will cease to own any equity interest in us, and we will operate independently from ECC. No vote of ECC’s shareholders is required or being sought in connection with the spin-off, and ECC’s shareholders will not have any appraisal rights in connection with the spin-off.

 

The distribution of our common stock as described in this information statement is subject to the satisfaction or waiver of certain conditions. For a more detailed description of these conditions, see “— Conditions to the Spin-Off.”

 

Reasons for the Spin-off

 

The ECC board of directors regularly reviews the operations that ECC conducts to ensure that ECC’s resources are being put to use in a manner that is in the best interests of ECC and its shareholders. As a result of this ongoing evaluation, ECC concluded that some of its existing non-core businesses were being undervalued by analysts and the market generally, and that these businesses would be in a better competitive position if they were operated as a separate entity from DISH Network. Neither we nor ECC can assure you that, following the spin-off, any benefits will be realized to the extent we anticipate or at all. The board of directors of ECC considered the following potential benefits in making its determination to consummate the spin-off:

 

 

 

 

The board of directors of ECC also considered the costs and risks associated with the spin-off. The board of directors of ECC considered, among other factors, any potential negative impact on ECC’s credit ratings as a result of the divestiture of assets that will be contributed to us; the possibility that either we or ECC may experience disruptions in our respective businesses as a result of the spin-off; actual or perceived conflicts of interest that may arise between ECC and us in a number of areas relating to our past and ongoing relationships, including: (i) cross officerships, directorships and stock ownership, (ii) intercompany transactions, (iii) intercompany agreements and (iv) business opportunities; the risk that the combined trading prices of our common stock and ECC’s common stock after the spin-off may be lower than the trading price of ECC’s common stock before the spin-off; the loss of synergies from operating as one company; and the additional legal, accounting and administrative costs associated with our becoming a separate, publicly-traded company. In view of the wide variety of factors considered in connection with the evaluation of the spin-off and the complexity of these matters, the ECC board of directors did not find it useful to, and did not attempt to quantify, rank or otherwise assign relative weights to the factors considered. The board of directors of ECC concluded, however, that the potential benefits of the spin-off outweigh the potential negative factors, and that separating the non-core business of ECC from ECC in the form of a tax-free distribution to ECC shareholders is appropriate and advisable for ECC and its shareholders.

 

Manner of Effecting the Spin-Off

 

ECC will effect the spin-off by distributing to its shareholders as a dividend:

 

 

and

 

 

in each case, owned of record by each shareholder on the record date.

 

Prior to the spin-off, ECC will deliver all of the issued and outstanding shares of our Class A common stock and Class B common stock to the distribution agent. On or about January 1, 2008, which we refer to as the distribution date, the distribution agent will effect delivery of the shares of our common stock issuable in the spin-off electronically, as of the distribution date, to you or to your bank or brokerage firm on your behalf by

way of direct registration in book-entry form. Registration in book-entry form refers to a method of recording share ownership when no physical share certificates are issued to shareholders, as is the case in this distribution.

 

Commencing on or shortly after the distribution date, if you hold physical share certificates that represent your common stock of ECC and you are the registered holder of the ECC shares represented by those certificates, the distribution agent will mail to you an account statement that indicates the number of shares of our common stock that have been registered in book-entry form in your name.

 

Please note that if any shareholder of ECC on the record date sells shares of ECC common stock after the record date but on or before the distribution date, the buyer of those shares, and not the seller, will become entitled to receive the shares of our common stock issuable in respect of the shares sold. See “ — Trading Between the Record Date and Distribution Date” below for more information.

 

Most ECC shareholders hold their common stock of ECC through a bank or brokerage firm. In such cases, the bank or brokerage firm would be said to hold the shares in “street name” and ownership would be recorded on the bank or brokerage firm’s books. If you hold your ECC common stock through a bank or brokerage firm, your bank or brokerage firm will credit your account for the common stock of our company that you are entitled to receive in the spin-off. If you have any questions concerning the mechanics of having shares held in “street name,” we encourage you to contact your bank or brokerage firm.

 

Shareholders of ECC are not being asked to take any action in connection with the spin-off. No shareholder approval of the spin-off is required or being sought. We are not asking you for a proxy, and you are requested not to send us a proxy. You are also not being asked to surrender any of your shares of ECC common stock for shares of our common stock. The number of outstanding shares of ECC common stock will not change as a result of the spin-off.

 

Interests of EHC directors and officers in the spin-off

 

In connection with the spin-off, EHC directors and executive officers have interests in the spin-off that are different from, or in addition to, your interests as a shareholder, and that may present actual or potential conflicts of interest. These interests include:

 

 

Treatment of Fractional Shares

 

The distribution agent will not distribute any fractional shares in connection with the spin-off. Instead, any shareholder who would be entitled to receive a fractional share of our Class A common stock will instead receive a cash payment in lieu of such fractional share. The distribution agent will aggregate all fractional shares into whole shares and sell the whole shares in the open market at prevailing market prices. The distribution agent will then distribute the aggregate net cash proceeds of the sales pro rata to each holder who otherwise would have been entitled to receive a fractional share. The distribution agent, in its sole discretion, without any influence by ECC or us, will determine when, how, through which broker-dealer and at what price to sell the whole shares. We will reimburse the distribution agent for the cost of any brokerage fees incurred

by the distribution agent in connection with these sales, which we expect to be reasonable and customary for transactions of this type. The distribution agent and any broker-dealer used by the distribution agent will not be an affiliate of either ECC or us. Any shareholder who would be entitled to receive a fractional share of our Class B common stock will have such fractional share rounded off and will instead receive the number of whole shares they are entitled to receive without regard to any fractional share. The elimination of fractional shares of our Class B common stock is due the limited number of Class B shareholders and the small number of fractional shares that would therefore result from the spin-off, making an aggregation and public sale of such fractional shares impractical.

 

The distribution agent will distribute a check to each record holder of Class A shares representing the cash amount deliverable in lieu of the record holder’s fractional share interest as soon as practicable following the calculation of these cash amounts. If you hold your shares through a bank or brokerage firm, your bank or brokerage firm will receive, on your behalf, your pro rata share of the aggregate net cash proceeds of the sales and will electronically credit your account for your share of such proceeds. No interest will be paid on any cash distributed in lieu of fractional shares. The receipt of cash in lieu of fractional shares will generally be taxable to the recipient shareholders. See “— Material U.S. Federal Income Tax Consequences of the Spin-Off” below for more information.

 

Treatment of ECC Stock Incentive Awards

 

Options to purchase shares of ECC Class A common stock, which we refer to as ECC Options, and restricted stock units with respect to shares of ECC Class A common stock, which we refer to as ECC RSUs have been granted to various directors, officers and employees of ECC and certain of its subsidiaries pursuant to the EchoStar Communications Corporation 1995 Stock Incentive Plan, the Amended and Restated EchoStar Communications Corporation 1999 Stock Incentive Plan, the Amended and Restated EchoStar Communications 2001 Nonemployee Director Stock Option Plan and the EchoStar Communications Corporation 1995 Nonemployee Director Stock Option Plan and various other stock incentive plans administered by the compensation committee of ECC’s board of directors. Under the anti-dilution provisions of the applicable plans, the ECC compensation committee has the authority to make equitable adjustments to outstanding ECC Options and ECC RSUs in the event of certain transactions, including the distribution of our common stock in connection with the spin-off. The ECC compensation committee has determined to make various adjustments to outstanding ECC Options and ECC RSUs, as described below, to preserve the economic benefits of the original award following the spin-off. These adjustments will be made in the same manner for all holders of ECC options and other stock-based awards of ECC, including ECC’s executive officers and directors. Any options to purchase, or awards relating to, shares of our common stock issued in connection with such adjustments will be obligations of our company. All options exercisable for, and all awards relating to, shares of ECC Class A common stock, regardless of any adjustment, will remain obligations of ECC.

 

We intend to file a registration statement with respect to shares of our common stock issuable upon exercise, or vesting, of the equity awards that we issue, as soon as practicable following the effective date of this registration statement.

 

Option Awards

 

As of the distribution date, each ECC Option will be divided into two options as follows:

 

 

 

The aggregate exercise price of each outstanding ECC option will be allocated between the EHC Option and the Adjusted ECC Option as follows:

 

 

 

Set forth below is an example of how the allocation would work.

 

Assume that a current employee, executive officer or director of ECC holds an option to purchase 100 shares of ECC Class A common stock with an exercise price of $10.00 per share. Also assume that the closing trading price of ECC common stock on the first regular trading day after the distribution date is $35.00, the closing trading price of EHC common stock on the first regular trading day after the distribution date is $25.00 and 0.20 of a share of EHC Class A common stock has been issued for every share of ECC Class A common stock held by a shareholder of ECC. The EHC Option would be an option to purchase 20 shares of EHC Class A common stock ( i.e. , 100 x 0.20) with an exercise price of $6.25 per share ( i.e. , $10 * ($25 / ($35 + $5))). The Adjusted ECC Option would be an option to purchase 100 shares of ECC Class A common stock with an exercise price of $8.75 per share ( i.e. , $10 * ($35 / ($35 + $5))). Assuming that the value of ECC immediately prior to the allocation was equal to the combined value of ECC and EHC following the spin-off ( i.e. , ($35 + ($25 * 0.2)), or $40), the intrinsic value of the ECC stock option prior to the allocation was $3,000 ( i.e. , ($40 − $10) * 100), and after the allocation, the intrinsic value of the EHC Option and Adjusted ECC Option, taken together, would still be $3,000 ( i.e. , ($25 − $6.25) * 20, or $375) plus ( i.e. , ($35 − $8.75) * 100, or $2,625).

 

Each Adjusted ECC Option and EHC Option will take into account all employment with both ECC and EHC for purposes of determining when the option vests and terminates. Fractional shares will be adjusted or compensated by ECC as appropriate in the sole discretion of the ECC compensation committee. All other terms and conditions of the EHC Option and the Adjusted ECC Option will generally be the same as the outstanding ECC Option, in all material respects.

 

As a result of these adjustments, certain persons who are employed by or associated with ECC immediately following the distribution date will hold EHC Options, and certain persons who will be employed by or associated with our company immediately following the distribution date may hold Adjusted ECC Options. Regardless of these employment or other relationships, ECC will not be responsible for the exercise or settlement of any EHC Option, and we will not be responsible for the exercise or settlement of any option to purchase ECC common stock (including an Adjusted ECC Option). Any exercising holder of an EHC Option must exercise the security directly with us. Similarly, any exercising holder of an option to purchase ECC common stock must exercise the security directly with ECC. In this regard, we will enter into an option agreement with each holder of an EHC Option, and, if necessary, ECC will amend its existing option agreement with each holder of an outstanding ECC Option, in each case to reflect the provisions described above.

 

Restricted Stock Unit Awards

 

For each ECC RSU outstanding as of the distribution date, the holder of such ECC RSU will be entitled to receive, for each share of ECC Class A common stock subject thereto, an EHC RSU with respect to the

number of shares our Class A common stock that would have been issued in the spin-off in respect of the shares of ECC Class A common stock subject to the applicable ECC RSU.

 

The distribution will not have any other effect on the outstanding ECC RSUs, and the RSUs relating to our common stock will be subject to the same terms and conditions as apply to the ECC awards with respect to which the adjustment, or distribution, as applicable, is made. Each such award will take into account all employment with both ECC and EHC for purposes of determining when the award vests or the restrictions on the award lapse, as applicable. Fractional shares will be adjusted or compensated by ECC as appropriate in the sole discretion of the ECC compensation committee.

 

Material U.S. Federal Income Tax Consequences of the Spin-Off

 

The following is a summary of certain material U.S. federal income tax consequences to the holders of ECC common stock in connection with the spin-off. The summary is based on the Code, the Treasury Regulations promulgated thereunder and judicial and administrative interpretations thereof, in each case as in effect and available as of the date of this document and all of which are subject to change at any time, possibly with retroactive effect. Any such change could affect the tax consequences described below.

 

This summary does not discuss all tax considerations that may be relevant to shareholders in light of their particular circumstances, nor does it address the consequences to shareholders subject to special treatment under the U.S. federal income tax laws, such as:

 

 

This summary does not address the U.S. federal income tax consequences to ECC shareholders who do not hold ECC common stock as a capital asset. Moreover, this summary does not address any state, local or foreign tax consequences.

 

If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds ECC common stock, the tax treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership. Such a partner or partnership should consult its own tax advisor as to its tax consequences.

You should consult your own tax advisor with respect to the U.S. federal, state, local and foreign tax consequences of the distribution.

 

The spin-off is conditioned upon ECC’s receipt of an opinion of White & Case LLP to be delivered on the distribution date (which condition ECC may waive in its sole discretion), substantially to the effect that the spin-off, together with certain related transactions, will qualify as reorganizations under Sections 355 and 368(a)(1)(D) of the Code. In addition, ECC has received a private letter ruling from the IRS that the distribution will so qualify. Assuming the spin-off so qualifies for U.S. federal income tax purposes:

 

 

ECC shareholders that have acquired different blocks of ECC common stock at different times or at different prices should consult their tax advisors regarding the allocation of their aggregate adjusted basis among, and their holding period of, shares of our common stock distributed with respect to such blocks of ECC common stock.

 

If you receive cash in lieu of a fractional share of Class A common stock as part of the spin-off, you will be treated as though you first received a distribution of the fractional share in the spin-off and then sold it for the amount of such cash. You will generally recognize capital gain or loss, provided that the fractional share is considered to be held as a capital asset, measured by the difference between the cash you receive for such fractional share and your tax basis in that fractional share, as determined above. Such capital gain or loss will be a long-term capital gain or loss if your holding period for your ECC common stock is more than one year on the distribution date.

 

Although a private letter ruling relating to the qualification of the spin-off and certain related transactions under Sections 355 and 368(a)(l)(D) of the Code will generally be binding on the IRS, the continuing validity of such ruling, if obtained, will be subject to the accuracy of factual representations and assumptions made in the ruling request. Also, as part of the IRS’s general policy with respect to rulings on spin-off transactions under Section 355 of the Code, any private letter ruling obtained by ECC will not be based upon a determination by the IRS that certain conditions which are necessary to obtain tax-free treatment under Section 355 of the Code have been satisfied. Rather, such private letter ruling will be based upon representations by ECC that these conditions have been satisfied, and any inaccuracy in such representations could invalidate the private letter ruling. As a result of this IRS policy, ECC has made it a condition to the spin-off that ECC obtain an opinion of White & Case LLP on the distribution date substantially to the effect that the spin-off, together with certain related transactions, will qualify as reorganizations under Sections 355 and 368(a)(1)(D) of the Code (which condition ECC may waive in its sole discretion). The opinion will be based upon various factual representations and assumptions, as well as certain undertakings made by ECC and us. If any of those factual representations or assumptions were untrue or incomplete in any material respect, any undertaking was not complied with, or the facts upon which the opinion is based were materially different from the facts at the time of the spin-off, the spin-off may not qualify for tax-free treatment. Opinions of counsel are not binding on the IRS. As a result, the conclusions expressed in the opinion of counsel could be challenged by the IRS, and if the IRS prevails in such challenge, the tax consequences to you could be materially less favorable.

The Spin-off

 

If the spin-off were not to qualify as a tax-free transaction, ECC would recognize taxable gain equal to the excess of the fair market value of our common stock distributed to ECC shareholders over ECC’s tax basis in our common stock. In addition, each shareholder who receives our common stock in the spin-off would generally be treated as receiving a distribution in an amount equal to the fair market value of our common stock received, which would generally result in:

 

 

Even if the spin-off otherwise qualifies for tax-free treatment under Section 355 of the Code, it may be disqualified as tax-free to ECC under Section 355(e) of the Code if 50% or more of the stock of either ECC or us is acquired as part of a plan or series of related transactions that include the distribution. For this purpose, any acquisitions of our stock or ECC’s stock within two years before or after the distribution are presumed to be part of such a plan, although ECC or we may be able to rebut that presumption. If such an acquisition of our stock or ECCs stock triggers the application of Section 355(e) of the Code, ECC would recognize taxable gain as described above with respect to the spin-off, but the spin-off would generally be tax-free to each ECC shareholder. Under the tax sharing agreement between ECC and us, we would be required to indemnify ECC against that taxable gain if it were triggered by an acquisition of our stock, stock options or assets. Additionally, pursuant to the tax sharing agreement between ECC and us, we would be required to indemnify ECC against any taxes, losses, claims and expenses resulting from the spin-off and certain related transactions failing to qualify as tax-free distributions pursuant to any provision of Section 355 or Section 361 of the Code in certain other circumstances.

 

ECC may incur some tax cost in connection with the spin-off (as a result of certain intercompany transactions or as a result of certain differences between federal, on the one hand, and foreign or state tax rules, on the other), whether or not the spin-off qualifies for tax-free treatment under Sections 355 and 368(a)(1)(D) of the Code.

 

Information Statement

 

U.S. Treasury Regulations require each ECC shareholder that (i) receives shares of our stock in the spin-off and (ii) immediately before the spin-off owned five percent or more (by vote or value) of the total outstanding stock of ECC, to attach to such shareholder’s U.S. federal income tax return for the year in which such stock is received a statement setting forth certain information related to the spin-off.

 

THE ABOVE DESCRIPTION IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSEQUENCES RELATING TO THE SPIN-OFF. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR CONCERNING THE TAX CONSEQUENCES OF YOUR PARTICULAR SITUATION.

 

Results of the Spin-Off

 

After the spin-off, we will be an independent, publicly-traded company. Immediately following the spin-off, we expect to have outstanding approximately 42.0 million shares of our Class A common stock and approximately 47.7 million shares of our Class B common stock, based upon the number of shares of ECC Class A common stock and ECC Class B common stock outstanding as of November 30, 2007. The actual number of shares of our Class A common stock and Class B common stock to be distributed in the spin-off will depend upon the actual number of shares of ECC Class A common stock and ECC Class B common stock outstanding on the record date and will reflect any exercise of ECC options between the date the ECC

board of directors declares the dividend for the spin-off and the record date of the spin-off. In addition, no shares of our Class C common stock or Class D common stock will be outstanding immediately following the spin-off. The spin-off will not affect the number of outstanding shares of ECC common stock or any rights of ECC shareholders, although it will affect the market value of each outstanding share of ECC common stock.

 

Immediately following the spin-off, we expect to have approximately 11,500 holders of record of shares of our Class A common stock. Mr. Ergen and entities related to Mr. Ergen will be the only holders of record of our Class B common stock following the spin-off.

 

Before the spin-off, we will enter into a Separation Agreement and other agreements with ECC to effect the spin-off and provide a framework for our relationship with ECC after the spin-off. These agreements will govern the relationships among ECC and us subsequent to the completion of the spin-off and provide for the allocation among ECC and us of ECC’s assets, liabilities and obligations attributable to periods prior to our separation from ECC. The Separation Agreement, in particular, requires ECC to assume certain of ECC’s contingent corporate liabilities and debt.

 

Listing and Trading of our Common Stock

 

On the date of this information statement, we are a wholly-owned subsidiary of ECC. Accordingly, there is currently no public market for our common stock; although a “when-issued” market in our Class A common stock may develop. See “— Trading Between the Record Date and Distribution Date” below for an explanation of a “when-issued” market. We have applied to list our shares of Class A common stock on the Nasdaq Global Select Market under the symbol “SATS.” Following the spin-off, ECC Class A common stock will continue to trade on the Nasdaq Global Select Market under the symbol “DISH.”

 

Neither we nor ECC can assure you as to the trading price of ECC Class A common stock or our Class A common stock after the spin-off or as to whether the combined trading prices of our Class A common stock and the ECC Class A common stock after the spin-off will be less than, equal to or greater than the trading prices of ECC Class A common stock prior to the spin-off. The trading price of our Class A common stock may fluctuate significantly following the spin-off. See “Risk Factors — Risks Relating to Our Common Stock and the Securities Market.”

 

The shares of our common stock distributed to ECC’s shareholders will be freely transferable, except for shares received by individuals who are our affiliates and any shares distributed in respect of any ECC RSUs. Individuals who may be considered our affiliates after the spin-off include individuals who control, are controlled by or are under common control with us, as those terms generally are interpreted for federal securities law purposes. This may include some or all of our executive officers and directors. Individuals who are our affiliates will be permitted to sell their shares of our common stock only pursuant to an effective registration statement under the Securities Act of 1933, as amended, or an exemption from the registration requirements of the Securities Act, such as the exemptions afforded by Section 4(1) of the Securities Act or Rule 144 thereunder. Our affiliates will not be permitted to sell shares of our common stock under Rule 144 until 90 days after the date on which the registration statement of which this information statement forms a part is declared effective.

 

Trading Between the Record Date and Distribution Date

 

Between the record date and the distribution date, ECC Class A common stock will continue to trade on the Nasdaq Global Select Market in the regular way market. During this time, shares of ECC Class A common stock that trade on the regular way market will trade with an entitlement to receive shares of our Class A common stock distributable in the spin-off. No ex-dividend market will be established for any class of our common stock until the first trading day following the distribution date. Therefore, if you own shares of ECC common stock on the record date and thereafter sell those shares on or prior to the distribution date, you will also be selling the shares of our common stock that would have been distributed to you in the spin-off with respect to the shares of ECC common stock you sell. On the first trading day following the distribution date, shares of ECC Class A common stock will begin trading without any entitlement to receive shares of our common stock. Shares of ECC Class A common stock trade under the symbol “DISH.”

 

Between the record date and the distribution date, a when-issued trading market in our Class A common stock may develop. Our Class A common stock is expected to be listed for trading on the Nasdaq Global Select Market. The when-issued trading market would be a market for the shares of our Class A common stock that will be distributed in the spin-off. If you own shares of ECC common stock on the record date (and do not sell those shares of ECC common stock on or before the distribution date), then you are entitled to a number of shares of the same class of our common stock based upon the number of shares of such class of ECC common stock you held at that time. If you own ECC Class A common stock, you may trade this entitlement to receive shares of our common stock, without the shares of ECC Class A common stock you own, on the when-issued trading market. We expect when-issued trades of our Class A common stock to settle within three trading days after the distribution date. On the first trading day following the distribution date, any when-issued trading with respect to our Class A common stock will end and regular way trading will begin. If when-issued trading occurs, the listing for our Class A common stock is expected to be under trading symbols different from our regular way trading symbols. Following the distribution date, shares of our Class A common stock are expected to be listed on the Nasdaq Global Select Market under the trading symbol “SATS.” If the spin-off does not occur, all when-issued trading will be null and void.

 

Conditions to the Spin-Off

 

We expect that the spin-off will be effective on the distribution date, provided, that among other conditions described in this information statement, the following conditions shall have been satisfied or waived by ECC under the Separation Agreement, each of which conditions may be waived by ECC in its sole discretion (other than the effectiveness of our registration statement on Form 10 and other required material regulatory approvals):

 

 

 

 

The fulfillment of the foregoing conditions will not create any obligation on ECC’s part to effect the spin-off. ECC has the right not to complete the spin-off if, at any time, ECC’s board of directors determines, in its sole discretion, that the distribution is not in the best interests of ECC or its stockholders or that market conditions are such that it is not advisable to separate EHC from ECC.

 

Reasons for Furnishing this Information Statement

 

This information statement is being furnished solely to provide information to ECC shareholders who will receive shares of our common stock in the spin-off. It is not to be construed as an inducement or encouragement to buy or sell any of our securities or any securities of ECC. We believe that the information contained in this information statement is accurate as of the date set forth on the cover. Changes to the information contained in this information statement may occur after that date, and neither our company nor ECC undertakes any obligation to update the information except in the normal course of our respective public disclosure obligations and practices.

 

SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED
AND ADJUSTED FINANCIAL DATA

 

The following tables present selected historical information relating to our combined financial condition and results of operations for the nine months ended September 30, 2007 and 2006 and the past five years. The financial data for the three years ended December 31, 2006 has been derived from our audited combined financial statements for the corresponding periods. Data for the other periods presented has been derived from unaudited information. The data should be read in conjunction with our combined financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein. Our historical and pro forma financial data included in this information statement may not be indicative of our future performance and does not necessarily reflect what our financial condition and results of operations would have been had we operated as a separate, stand-alone entity during the periods presented, particularly since changes will occur in our operations and capitalization as a result of our spin-off from ECC. Our audited combined financial statements reflect the historical financial position and results of operations of entities included in consolidated financial statements of ECC, representing almost exclusively ECC’s set-top box business, using the historical results of operations and historical bases of assets and liabilities of this business. Our historical combined financial statements reflect sales to ECC at cost and do not include certain satellites, uplink and satellite transmission assets, real estate and other assets and related liabilities that will be contributed to us by ECC in the spin-off. These assets and liabilities, which will primarily comprise our fixed satellite services business, have been separately audited and are included in the Statement of Net Assets to be Contributed by ECC and Unaudited Pro Forma Combined and Adjusted Financial Information included herein. The financial condition and results of operations of our fixed satellite services business have not been included in our historical combined financial statements because our fixed satellite services business was operated as an integral part of ECC’s subscription television business and did not constitute a “business” in the historical financial statements of ECC. Our historical financial data also does not include financial information of Sling Media, Inc., which was recently acquired by ECC and will be contributed to us in the spin-off. Sling Media’s audited consolidated financial statements are included elsewhere in this information statement, and its historical financial information also has been included in our “Unaudited Pro Forma Combined and Adjusted Financial Information.”