Dish Network 2010 Annual Report Download - page 142

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-57
Under the terms of the QuetzSat-1 Transponder Agreement, we will make certain monthly payments to
EchoStar commencing when the QuetzSat-1 satellite is placed into service and continuing through the
service term. Unless earlier terminated under the terms and conditions of the QuetzSat-1 Transponder
Agreement, the service term will expire ten years following the actual service commencement date. Upon
expiration of the initial term, we have the option to renew the QuetzSat-1 Transponder Agreement on a
year-to-year basis through the end of life of the QuetzSat-1 satellite. Upon a launch failure, in-orbit failure
or end of life of the QuetzSat-1 satellite, and in certain other circumstances, we have certain rights to
receive service from EchoStar on a replacement satellite. There can be no assurance that any options to
renew this agreement will be exercised or that we will exercise our option to receive service on a
replacement satellite.
TT&C Agreement. In connection with the Spin-off, we entered into a telemetry, tracking and control
(“TT&C”) agreement pursuant to which we receive TT&C services from EchoStar for a period ending on
January 1, 2012. The fees for services provided under the TT&C agreement are calculated at cost plus a
fixed margin. We may terminate the TT&C agreement for any reason upon at least 60 days notice.
Satellite Procurement Agreement. In connection with the Spin-off, we entered into a satellite procurement
agreement pursuant to which we had the right, but not the obligation, to engage EchoStar to manage the
process of procuring new satellite capacity for us. The satellite procurement agreement expired on January
1, 2010. However, we and EchoStar agreed that following January 1, 2010, we shall continue to have the
right, but not the obligation, to engage EchoStar to manage the process of procuring new satellite capacity
for us pursuant to the Professional Services Agreement as discussed above.
“Cost of sales – subscriber promotion subsidies – EchoStar”
Receiver Agreement. EchoStar is currently our sole supplier of set-top box receivers. The table below
indicates the dollar value of set-top boxes and other equipment that we purchased from EchoStar as well as
the amount of purchases that are included in “Cost of sales – subscriber promotion subsidies – EchoStar”
on our Consolidated Statements of Operations and Comprehensive Income (Loss). The remaining amount
is included in “Inventory” and “Property and equipment, net” on our Consolidated Balance Sheets.
2010 2009 2008
Set-top boxes and other equipment purchased from EchoStar...................... 1,470,173$ 1,174,763$ 1,491,556$
Set-top boxes and other equipment purchased from EchoStar included
in “Cost of sales – subscriber promotion subsidies – EchoStar”................. 175,777$ 188,793$ 167,508$
For the Years Ended December 31,
(In thousands)
In connection with the Spin-off, we entered into a receiver agreement pursuant to which we have the right,
but not the obligation, to purchase digital set-top boxes and related accessories, and other equipment from
EchoStar for a period ending on January 1, 2012. The receiver agreement allows us to purchase digital set-
top boxes, related accessories and other equipment from EchoStar at cost plus a fixed margin, which varies
depending on the nature of the equipment purchased. Additionally, EchoStar provides us with standard
manufacturer warranties for the goods sold under the receiver agreement. We may terminate the receiver
agreement for any reason upon at least 60 days notice to EchoStar. EchoStar may terminate the receiver
agreement if certain entities were to acquire us. The receiver agreement also includes an indemnification
provision, whereby the parties indemnify each other for certain intellectual property matters.