Dish Network 2010 Annual Report Download - page 35

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Environmental risks. Meteoroid events pose a potential threat to all in-orbit satellites. The probability that
meteoroids will damage those satellites increases significantly when the Earth passes through the particulate stream
left behind by comets. Occasionally, increased solar activity also poses a potential threat to all in-orbit satellites.
Some decommissioned spacecraft are in uncontrolled orbits which pass through the geostationary belt at various
points, and present hazards to operational spacecraft, including our satellites. We may be required to perform
maneuvers to avoid collisions and these maneuvers may prove unsuccessful or could reduce the useful life of the
satellite through the expenditure of fuel to perform these maneuvers. The loss, damage or destruction of any of our
satellites as a result of an electrostatic storm, collision with space debris, malfunction or other event could have a
material adverse effect on our business, financial condition and results of operations.
We generally do not have commercial insurance coverage on the satellites we use 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 generally do not use commercial insurance to mitigate the potential financial
impact of launch or in-orbit failures because we believe that the cost of insurance premiums is uneconomical relative
to the risk of such failures. 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:
• Cross officerships, directorships and stock ownership. We have significant overlap in directors and
executive officers with EchoStar, which may lead to conflicting interests. Two of our officers provide
management services to EchoStar pursuant to a management services agreement between EchoStar and us
and two executive officers are employees of both us and EchoStar. These individuals may have actual or
apparent conflicts of interest with respect to matters involving or affecting each company. Furthermore,
our Board of Directors and executive officers include persons who are members of the Board of Directors
of EchoStar, including Charles W. 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,
certain of 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 43.8% of the total equity (assuming conversion of only the Class B Common Stock held by
Mr. Ergen into Class A Common Stock) and controls approximately 56.0% of the voting power of
EchoStar. Mr. Ergen’s beneficial ownership of EchoStar excludes 18,900,405 shares of its Class A
Common Stock issuable upon conversion of shares of its Class B Common Stock currently held by certain
trusts established by Mr. Ergen for the benefit of his family. These trusts beneficially own approximately
33.5% of EchoStar’s total equity securities (assuming conversion of only the Class B Common Stock held
by such trusts into Class A Common Stock) and possess approximately 36.7% of EchoStar’s total voting
power. 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.
• Intercompany agreements related to the Spin-off. We have entered into certain agreements with EchoStar
pursuant to which we provide EchoStar with certain management, administrative, accounting, tax, legal and
other services, for which EchoStar pays 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, among other things, sells
set-top boxes and related equipment to us at specified prices. The terms of certain of these agreements
were established while EchoStar was a wholly-owned subsidiary of us and were not the result of arm’s