Dish Network 1997 Annual Report Download - page 76

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
12. Other Commitments and Contingencies
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EchoStar has contracted with Lockheed-Khrunichev-Energia-International, Inc. (“ LKE” ) for the launch of
EchoStar IV from the Baikonur Cosmodrome in the Republic of Kazakhstan, a territory of the former Soviet Union,
utilizing a Proton launch vehicle (the “ LKE Contract” ). The launch is currently expected to occur in the Spring of 1998.
Either party may request a delay in the launch period, subject to the payment of penalties based on the length of the
delay and the proximity of the request to the launch date. During 1998, EchoStar expects to expend approximately $68
million in connection with the construction launch and insurance of EchoStar IV. These expenditures will be funded
from the Satellite Escrow.
EchoStar has filed applications with the Federal Communications Commission (“ FCC” ) for authorization to
construct, launch and operate a two satellite FSS (fixed satellite service) Ku-band system and a two satellite FSS Ka-
band satellite system. No assurance can be given that EchoStar’s applications will be approved by the FCC or that, if
approved, EchoStar will be able to successfully develop the FSS Ku-band or the Ka-band systems. EchoStar believes
that establishment of the FSS Ku-band system or the FSS Ka-band system would enhance its competitive position in the
DTH industry. In the event EchoStar’s FSS Ku-band or Ka-band system applications are approved by the FCC,
additional debt or equity financing would be required. No assurance can be given that such financing will be available,
or that it will be available on terms acceptable to EchoStar.
Purchase Commitments
As of December 31, 1997, EchoStar’s purchase commitments totaled approximately $87 million. The
majority of these commitments relate to EchoStar Receiver Systems and related components. All of the purchases
related to these commitments are expected to be made during 1998. EchoStar expects to finance these purchases from
existing unrestricted cash balances and future cash flows generated from operations, if any.
Other Risks and Contingencies
During February 1997, EchoStar and The News Corporation Limited (“News” ) announced an agreement (the
“ News Agreement” ) pursuant to which, among other things, News agreed to acquire approximately 50% of the
outstanding capital stock of EchoStar. News also agreed to make available for use by EchoStar the DBS permit for 28
frequencies at 110° West Longitude purchased by MCI Communications Corporation for over $682 million following a
1996 FCC auction. During late April 1997, substantial disagreements arose between the parties regarding their
obligations under the News Agreement.
In May 1997, EchoStar filed a Complaint requesting that the Court confirm EchoStar’s position and declare
that News is obligated pursuant to the News Agreement to lend $200 million to EchoStar without interest and upon
such other terms as the Court orders. EchoStar also filed a First Amended Complaint significantly expanding the scope
of the litigation, to include breach of contract, failure to act in good faith, and other causes of action. EchoStar seeks
specific performance of the News Agreement and damages, including lost profits based on, among other things, a
jointly prepared ten -year business plan showing expected profits for EchoStar in excess of $10 billion based on
consummation of the transactions contemplated by the News Agreement.