Dish Network 2008 Annual Report Download - page 36

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operation deadlines associated with our authorizations. Failure to meet those deadlines could result in the loss of
such authorizations, which would have an adverse effect on our ability to generate revenues.
We currently have no commercial insurance coverage on the satellites we own and could face significant
impairment charges if one of our satellites fails.
Generally, we do not carry launch or in-orbit insurance on the satellites we use. We currently do not carry in-orbit
insurance on any of our satellites and do not use commercial insurance to mitigate the potential financial impact of
in-orbit failures because we believe that the cost of insurance premiums is uneconomical relative to the risk of
satellite failure. If one or more of our in-orbit satellites fail, we could be required to record significant impairment
charges.
We may have potential conflicts of interest with EchoStar due to our common ownership and management.
Questions relating to conflicts of interest may arise between EchoStar and us in a number of areas relating to our
past and ongoing relationships. Areas in which conflicts of interest between EchoStar and us could arise include, but
are not limited to, the following:
x Cross officerships, directorships and stock ownership. We have significant overlap in directors and
executive officers with EchoStar, which may lead to conflicting interests. For instance, certain of our
executive officers, including Charles W. Ergen, our Chairman, President and Chief Executive Officer,
serve as executive officers of EchoStar. Three of our executive officers provide management services to
EchoStar pursuant to a management services agreement between EchoStar and us. These individuals may
have actual or apparent conflicts of interest with respect to matters involving or affecting each company.
Furthermore, our board of directors includes persons who are members of the board of directors of
EchoStar, including Mr. Ergen, who serves as the Chairman of EchoStar and us. The executive officers
and the members of our board of directors who overlap with EchoStar have fiduciary duties to EchoStar’s
shareholders. For example, there is the potential for a conflict of interest when we or EchoStar look at
acquisitions and other corporate opportunities that may be suitable for both companies. In addition, our
directors and officers own EchoStar stock and options to purchase EchoStar stock, which they acquired or
were granted prior to the Spin-off of EchoStar from us, including Mr. Ergen, who owns approximately
53.0% of the total equity and controls approximately 87.0% of the voting power of EchoStar. These
ownership interests could create actual, apparent or potential conflicts of interest when these individuals are
faced with decisions that could have different implications for us and EchoStar.
x Intercompany agreements related to the Spin-off. We have entered into certain agreements with EchoStar
pursuant to which we will provide EchoStar with certain management, administrative, accounting, tax,
legal and other services, for which EchoStar will pay us our cost plus a fixed margin. In addition, we have
entered into a number of intercompany agreements covering matters such as tax sharing and EchoStar’s
responsibility for certain liabilities previously undertaken by us for certain of EchoStar’s businesses. We
have also entered into certain commercial agreements with EchoStar pursuant to which EchoStar is, among
other things, obligated to sell to us at specified prices, set-top boxes and related equipment. The terms of
these agreements were established while EchoStar was a wholly-owned subsidiary of us and were not the
result of arm’s length negotiations. The allocation of assets, liabilities, rights, indemnifications and other
obligations between EchoStar and us under the separation and other intercompany agreements we entered
into with EchoStar in connection with the Spin-off of EchoStar from us 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. In addition, conflicts could
arise between us and EchoStar in the interpretation or any extension or renegotiation of these existing
agreements.
x Future intercompany transactions. In the future, EchoStar or its affiliates may enter into transactions with
us or our subsidiaries or other affiliates. Although the terms of any such transactions will be established
based upon negotiations between EchoStar and us and, when appropriate, subject to the approval of the
disinterested directors on our board or a committee of disinterested directors, there can be no assurance that