Dish Network 2009 Annual Report Download - page 146

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DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-56
Other Agreements - EchoStar
Tax Sharing Agreement. In connection with the Spin-off, we entered into a tax sharing agreement with
EchoStar which governs our respective rights, responsibilities and obligations after the Spin-off with respect to
taxes for the periods ending on or before the Spin-off. Generally, all pre-Spin-off taxes, including any taxes
that are incurred as a result of restructuring activities undertaken to implement the Spin-off, are borne by us,
and we will indemnify EchoStar for such taxes. However, we are not liable for and will not indemnify
EchoStar for any taxes that are incurred as a result of the Spin-off or certain related transactions failing to
qualify as tax-free distributions pursuant to any provision of Section 355 or Section 361 of the Code because of
(i) a direct or indirect acquisition of any of EchoStar’s stock, stock options or assets, (ii) any action that
EchoStar takes or fails to take or (iii) any action that EchoStar takes that is inconsistent with the information
and representations furnished to the IRS in connection with the request for the private letter ruling, or to
counsel in connection with any opinion being delivered by counsel with respect to the Spin-off or certain
related transactions. In such case, EchoStar is solely liable for, and will indemnify us for, any resulting taxes,
as well as any losses, claims and expenses. The tax sharing agreement will only terminate after the later of the
full period of all applicable statutes of limitations including extensions or once all rights and obligations are
fully effectuated or performed.
Tivo. Because both we and EchoStar are defendants in the Tivo lawsuit, we and EchoStar are jointly and
severally liable to Tivo for any final damages and sanctions that may be awarded by the District Court. We
have determined that we are obligated under the agreements entered into in connection with the Spin-off to
indemnify EchoStar for substantially all liability arising from this lawsuit. EchoStar has agreed to contribute an
amount equal to its $5 million intellectual property liability limit under the Receiver Agreement. We and
EchoStar have further agreed that EchoStar’s $5 million contribution would not exhaust EchoStar’s liability to
us for other intellectual property claims that may arise under the Receiver Agreement. We and EchoStar also
agreed that we would each be entitled to joint ownership of, and a cross-license to use, any intellectual property
developed in connection with any potential new alternative technology.
Multimedia Patent Trust. In December 2009, we determined that we are obligated under the agreements
entered into in connection with the Spin-off to indemnify EchoStar for all of the settlement relating to the
period prior to the Spin-off and a portion of the settlement relating to the period after the Spin-off. EchoStar
has agreed that its contribution towards the settlement shall not be applied against EchoStar’s aggregate liability
cap under the Receiver Agreement.
International Programming Rights Agreement. For each of the years ended December 31, 2009 and 2008, we
purchased certain international rights for sporting events from EchoStar included in “Subscriber-related
expenses” on the Consolidated Statements of Operations and Comprehensive Income (Loss) for $8 million of
which EchoStar only retained a certain portion.
Other Agreements
On November 4, 2009, Mr. Roger Lynch, became employed by both us and EchoStar as Executive Vice
President. Mr. Lynch reports to Mr. Ergen and is responsible for the development and implementation of
advanced technologies that are of potential utility and importance to both us and EchoStar. Mr. Lynch’s
compensation consists of cash and equity compensation and is borne by both EchoStar and us.
Related Party Transactions with NagraStar L.L.C.
Prior to the Spin-off, we owned 50% of NagraStar L.L.C. (“NagraStar”), which was contributed to EchoStar in
connection with the Spin-off. NagraStar is a joint venture that is our provider of encryption and related security
systems intended to assure that only paying customers have access to our programming. During the years
ended December 31, 2009, 2008 and 2007, we purchased security access devices from NagraStar and incurred
other fees at an aggregate cost to us of $82 million, $59 million and $55 million, respectively. As of December
31, 2009 and 2008, amounts payable to NagraStar totaled $17 million and $44 million, respectively.