Dish Network 2011 Annual Report Download - page 43

33
33
x a provision establishing advance notice requirements for nominations of candidates for election to our
Board of Directors or for proposing matters that can be acted upon by shareholders at shareholder meetings.
In addition, pursuant to our certificate of incorporation we have a significant amount of authorized and unissued
stock which would allow our Board of Directors to issue shares to persons friendly to current management, thereby
protecting the continuity of its management, or which could be used to dilute the stock ownership of persons
seeking to obtain control of us.
We are controlled by one principal stockholder who is also our Chairman.
Charles W. Ergen, our Chairman, currently beneficially owns approximately 53.2% of our total equity securities
(assuming conversion of only the Class B Common Stock held by Mr. Ergen into Class A Common Stock) and
possesses approximately 90.4% of the total voting power. Mr. Ergen’s beneficial ownership of shares of Class A
Common Stock excludes 4,245,151 shares of Class A Common Stock issuable upon conversion of shares of Class B
Common Stock currently held by certain trusts established by Mr. Ergen for the benefit of his family. These trusts
beneficially own approximately 2.0% of our total equity securities (assuming conversion of only the Class B
Common Stock held by such trusts into Class A Common Stock) and possess approximately 1.6% of the total voting
power. Through his voting power, Mr. Ergen has the ability to elect a majority of our directors and to control all
other matters requiring the approval of our stockholders. As a result, DISH Network is a “controlled company” as
defined in the Nasdaq listing rules and is, therefore, not subject to Nasdaq requirements that would otherwise require
us to have: (i) a majority of independent directors; (ii) a nominating committee composed solely of independent
directors; (iii) compensation of our executive officers determined by a majority of the independent directors or a
compensation committee composed solely of independent directors; and (iv) director nominees selected, or
recommended for the Board’s selection, either by a majority of the independent directors or a nominating committee
composed solely of independent directors.
Legal and Regulatory Risks Affecting our Business
If Voom prevails in its breach of contract suit against us, we could be required to pay substantial damages, which
would have a material adverse affect on our financial position and results of operations.
In January 2008, Voom HD Holdings (“Voom”) filed a lawsuit against us in New York Supreme Court, alleging
breach of contract and other claims arising from our termination of the affiliation agreement governing carriage of
certain Voom HD channels on the DISH pay-TV service. At that time, Voom also sought a preliminary injunction
to prevent us from terminating the agreement. The Court denied Voom’s request, finding, among other things, that
Voom had not demonstrated that it was likely to prevail on the merits. In April 2010, we and Voom each filed
motions for summary judgment. Voom later filed two motions seeking discovery sanctions. On November 9, 2010,
the Court issued a decision denying both motions for summary judgment, but granting Voom’s motions for
discovery sanctions. The Court’s decision provides for an adverse inference jury instruction at trial and precludes
our damages expert from testifying at trial. We appealed the grant of Voom’s motion for discovery sanctions to the
New York State Supreme Court, Appellate Division, First Department. On February 15, 2011, the appellate court
granted our motion to stay the trial pending our appeal. On January 31, 2012, the appellate court affirmed the order
imposing discovery sanctions and precluding our damages expert from testifying at trial. We are seeking leave to
appeal to New York’s highest state court, the Court of Appeals. A trial date has not been set. Voom is claiming
over $2.5 billion in damages. If we are unsuccessful in our suit with Voom, we may be required to pay substantial
damages, which would have a material adverse affect on our financial position and results of operations.