Dish Network 2013 Annual Report Download - page 41

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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 satellites are in uncontrolled orbits that pass through the geostationary belt at various points,
and present hazards to operational satellites, 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 carry commercial insurance for any of the in-orbit satellites that we use, other than certain
satellites leased from third parties, and could face significant impairment charges if one of our satellites fails.
Generally, we do not carry launch or in-orbit insurance on the owned satellites we use. We currently do not carry
in-orbit insurance on any of our satellites, other than certain satellites leased from third parties, 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:
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. Mr. Ergen owns approximately
47.1% of EchoStar’s total equity securities (assuming conversion of all Class B Common Stock into Class
A Common Stock) and beneficially owns approximately 50.2% of EchoStar’s total equity securities
(assuming conversion of only the Class B Common Stock held by Mr. Ergen into Class A Common Stock).
Under either a beneficial or equity calculation method, Mr. Ergen controls approximately 80.8% of the
voting power of EchoStar. Mr. Ergen’s ownership of EchoStar excludes 5,738,471 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 own approximately 6.4% of
EchoStar’s total equity securities (assuming conversion of all Class B Common Stock into Class A
Common Stock) and beneficially own approximately 11.9% of EchoStar’s total equity securities (assuming
conversion of only the Class B Common Stock held by such trusts into Class A Common Stock). Under
either a beneficial or equity calculation method, these trusts possess approximately 11.0% 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. These individuals may have actual or apparent
conflicts of interest with respect to matters involving or affecting each company.
x Intercompany agreements with EchoStar. We have entered into certain agreements with EchoStar pursuant
to which we have provided or provide EchoStar with certain professional 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