Dish Network 2011 Annual Report Download - page 154

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-60
EchoStar is our primary supplier of set-top boxes and digital broadcast operations and our key supplier of
transponder capacity. Generally, the prices charged for products and services provided under the agreements are
based on pricing equal to EchoStar’s cost plus a fixed margin (unless noted differently below), which will vary
depending on the nature of the products and services provided.
Since the Spin-off, we and EchoStar have entered into certain agreements pursuant to which we obtain certain
products, services and rights from EchoStar, EchoStar obtains certain products, services and rights from us, and we
and EchoStar have indemnified each other against certain liabilities arising from our respective businesses. We also
may enter into additional agreements with EchoStar in the future. The following is a summary of the terms of the
principal agreements that we have entered into with EchoStar that may have an impact on our financial position and
results of operations.
“Equipment sales - EchoStar”
Remanufactured Receiver Agreement. In connection with the Spin-off, we entered into a remanufactured receiver
agreement with EchoStar pursuant to which EchoStar has the right, but not the obligation, to purchase
remanufactured receivers and accessories from us at cost plus a fixed margin, which varies depending on the nature
of the equipment purchased. In November 2011, we and EchoStar extended this agreement until December 31,
2012. EchoStar may terminate the remanufactured receiver agreement for any reason upon at least 60 days notice to
us. We may also terminate this agreement if certain entities acquire us.
“Services and other revenue - EchoStar”
Professional Services Agreement. Prior to 2010, in connection with the Spin-off, we entered into various
agreements with EchoStar including the Transition Services Agreement, Satellite Procurement Agreement and
Services Agreement, which all expired on January 1, 2010 and were replaced by a Professional Services Agreement.
During 2009, we and EchoStar agreed that EchoStar shall continue to have the right, but not the obligation, to
receive from us the following services, among others certain of which were previously provided under the
Transition Services Agreement: information technology, travel and event coordination, internal audit, legal,
accounting and tax, benefits administration, program acquisition services and other support services. Additionally,
we and EchoStar agreed that we shall continue to have the right, but not the obligation, to engage EchoStar to
manage the process of procuring new satellite capacity for DISH Network (previously provided under the Satellite
Procurement Agreement) and receive logistics, procurement and quality assurance services from EchoStar
(previously provided under the Services Agreement). The Professional Services Agreement automatically renewed
on January 1, 2012 for an additional one-year period until January 1, 2013 and renews automatically for successive
one-year periods thereafter, unless terminated earlier by either party upon at least 60 days notice. However, either
party may terminate the Professional Services Agreement in part with respect to any particular service it receives for
any reason upon at least 30 days notice.
Management Services Agreement. We entered into a Management Services Agreement with EchoStar pursuant to
which we make certain of our officers available to provide services (which are primarily legal and accounting
services) to EchoStar. Specifically, Paul W. Orban remains employed by us, but also serves as EchoStar’s Senior
Vice President and Controller. In addition, R. Stanton Dodge also served as EchoStar’s Executive Vice President,
General Counsel and Secretary through November 2011. EchoStar makes payments to us based upon an allocable
portion of the personnel costs and expenses incurred by us with respect to such officers (taking into account wages
and fringe benefits). These allocations are based upon the estimated percentages of time to be spent by our
executive officers performing services for EchoStar under the management services agreement. EchoStar also
reimburses us for direct out-of-pocket costs incurred by us for management services provided to EchoStar. We and
EchoStar evaluate all charges for reasonableness at least annually and make any adjustments to these charges as we
and EchoStar mutually agree upon.