Dish Network 2011 Annual Report Download - page 38

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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 certain overlap in directors and executive
officers with EchoStar, which may lead to conflicting interests. 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 50.7% 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 75.6% of the voting power of EchoStar. Mr. Ergen’s beneficial
ownership of EchoStar excludes 8,734,250 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 18.3% 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 16.9% 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. Furthermore, Charles W. Ergen, our
Chairman, and Roger Lynch, Executive Vice President, Advanced Technologies, are employed by both us
and EchoStar and Paul Orban, our Senior Vice President and Controller, provides 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.
x 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
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 may have been different if agreed to by two
unaffiliated parties. 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 Additional intercompany transactions. EchoStar or its affiliates have and will continue to 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 a committee of the non-interlocking directors or in certain instances non-interlocking
management, there can be no assurance that the terms of any such transactions will be as favorable to us or
our subsidiaries or affiliates as may otherwise be obtained between unaffiliated parties.
x Business opportunities. We have retained interests in various companies that have subsidiaries or
controlled affiliates that own or operate domestic or foreign services that may compete with services
offered by EchoStar. We may also compete with EchoStar when we participate in auctions for spectrum or
orbital slots for our satellites. In addition, EchoStar may in the future use its satellites, uplink and
transmission assets to compete directly against us in the subscription television business.