Dish Network 2002 Annual Report Download - page 100

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ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-40
StarBand Shareholder Lawsuit
On August 20, 2002, a shareholder in StarBand filed an action in the Delaware Court of Chancery against
EchoStar and EchoBand Corporation, together with four EchoStar executives who sat on the Board of Directors for
StarBand, for alleged breach of the fiduciary duties of due care, good faith and loyalty, and also against EchoStar 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 the Board of Directors of EchoStar. 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 EchoStar’s 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, EchoStar,
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 EchoStar and
the current members of its Board of Directors and named EchoStar 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 EchoStar’s 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. EchoStar 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.
EchoStar is subject to various other legal proceedings and claims which arise in the ordinary course of
business. In the opinion of management, the amount of ultimate liability with respect to any of those actions will not
materially affect EchoStar’s financial position or results of operations.
Meteoroid Events
Meteoroid events pose a potential threat to all in orbit geosynchronous satellites including EchoStar’s DBS
satellites. While the probability that EchoStar’s satellites will be damaged by meteoroids is very small, that
probability increases significantly when the Earth passes through the particulate stream left behind by various
comets.
Occasionally, increased solar activity poses a potential threat to all in-orbit geosynchronous satellites
including EchoStar’s DBS satellites. The probability that the effects from this activity will damage our satellites or
cause service interruptions is generally very small.
Some decommissioned spacecraft are in uncontrolled orbits which pass through the geostationary belt at
various points, and present hazards to operational spacecraft including EchoStar’s DBS satellites. The locations of
these hazards are generally well known and may require EchoStar to perform maneuvers to avoid collisions.