Dish Network 2009 Annual Report Download - page 38

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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
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 significant overlap in directors and
executive officers with EchoStar, which may lead to conflicting interests. For instance, certain of our
executive officers, including Roger J. Lynch, our Executive Vice President, Advanced Technologies, 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 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 46.3% of the total equity and controls approximately 61.2% of the voting power of
EchoStar. Mr. Ergen’s beneficial ownership of EchoStar excludes 16,276,214 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
32.1% of EchoStar’s total equity securities and possess approximately 31.7% 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.
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
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.