Dish Network 2002 Annual Report Download - page 27

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various counterclaims. We have reached a settlement agreement with PrimeTime 24 pursuant to which the parties
agreed to release all parties from any liability and dismiss the case with prejudice. The settlement amount was not
material.
StarBand Shareholder Lawsuit
On August 20, 2002, shareholders in StarBand filed an action in the Delaware Court of Chancery against us
and EchoBand Corporation, together with four of our executives who sat on the Board of Directors of StarBand, for
alleged breach of the fiduciary duties of due care, good faith and loyalty, and also against us and EchoBand
Corporation for aiding and abetting such alleged breaches. Two of the individual defendants, Charles W. Ergen and
David K. Moskowitz, are members of our Board of Directors. The action stems from the defendants’ involvement as
directors, and EchoBand’s position as a shareholder, in StarBand, a broadband Internet satellite venture that is currently
in bankruptcy. Plaintiffs allege that the defendants conspired to ensure StarBand’s failure in order to guarantee that our
then-pending merger with Hughes would be successful. Plaintiffs seek an accounting of damages for their $25 million
investment in StarBand in addition to costs and disbursements. Defendants deny the allegations in the complaint and
intend to defend the litigation vigorously. During October 2002, we, along with the other defendants, filed a motion to
dismiss the complaint in its entirety based on lack of personal jurisdiction. These motions have been briefed and oral
argument has been set by the Court for March 18, 2003. It is too early to make an assessment of the probable outcome
of the litigation or to determine the extent of any potential liability or damages.
Merger Related Proceedings
On October 24, 2002, a purported shareholder filed a Shareholder’s Derivative Action against us and the
current members of our Board of Directors and named us as a nominal defendant. The plaintiff filed the action in the
United States District Court of Clark County, Nevada. The complaint alleges breach of fiduciary duties, corporate
waste and other unlawful acts relating to our agreement to (1) pay Hughes Electronics Corporation a $600 million
termination fee in certain circumstances and (2) acquire Hughes’ shareholder interest in PanAmSat at a premium rate.
The agreements to pay the termination fee and acquire PanAmSat were required in the event that the merger with
DirecTV was not completed by January 21, 2003. No answer is due from the defendants, and all parties have entered
into a stipulation allowing the defendants to answer only subject to 30-day notice from the plaintiff. We and the
individual defendants intend to deny all liability and to defend this action vigorously. It is too early to make an
assessment of the probable outcome of the litigation or to determine the extent of any potential liability or damages.
Satellite Insurance
In September 1998, we filed a $219.3 million insurance claim for a total loss under the launch insurance
policies covering EchoStar IV. The satellite insurance consists of separate substantially identical policies with different
carriers for varying amounts that, in combination, create a total insured amount of $219.3 million. The insurance
carriers include La Reunion Spatiale; AXA Reinsurance Company (n/k/a AXA Corporate Solutions Reinsurance
Company), United States Aviation Underwriters, Inc., United States Aircraft Insurance Group; Assurances Generales
De France I.A.R.T. (AGF); Certain Underwriters at Lloyd’s, London; Great Lakes Reinsurance (U.K.) PLC; British
Aviation Insurance Group; If Skaadeforsikring (previously Storebrand); Hannover Re (a/k/a International Hannover);
The Tokio Marine & Fire Insurance Company, Ltd.; Marham Space Consortium (a/k/a Marham Consortium
Management); Ace Global Markets (a/k/a Ace London); M.C. Watkins Syndicate; Goshawk Syndicate Management
Ltd.; D.E. Hope Syndicate 10009 (Formerly Busbridge); Amlin Aviation; K.J. Coles & Others; H.R. Dumas & Others;
Hiscox Syndicates, Ltd.; Cox Syndicate; Hayward Syndicate; D.J. Marshall & Others; TF Hart; Kiln; Assitalia Le
Assicurazioni D'Italia S.P.A. Roma; La Fondiaria Assicurazione S.P.A., Firenze; Vittoria Assicurazioni S.P.A.,
Milano; Ras - Riunione Adriatica Di Sicurta S.P.A., Milano; Societa Cattolica Di Assicurazioni, Verano; Siat
Assicurazione E Riassicurazione S.P.A, Genova; E. Patrick; ZC Specialty Insurance; Lloyds of London Syndicates 588
NJM, 1209 Meb AND 861 Meb; Generali France Assurances; Assurance France Aviation; and Ace Bermuda
Insurance Ltd.
The insurance carriers offered us a total of approximately $88 million, or 40% of the total policy amount, in
settlement of the EchoStar IV insurance claim. The insurers assert, among other things, that EchoStar IV was not a
total loss, as that term is defined in the policy, and that we did not abide by the exact terms of the insurance policies.
We strongly disagree and filed arbitration claims against the insurers for breach of contract, failure to pay a valid