Dish Network 2000 Annual Report Download - page 74

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
F–23
However, as of December 31, 2000, approximately 2.1 million shares of Series C Preferred Stock have been
converted into approximately 34.2 million shares of EchoStar’s class A common stock, reducing the book value of
the Series C Preferred Stock to approximately $11 million. The Deposit Account provided quarterly cash payments
of approximately $0.844 per share of Series C Preferred Stock, from February 1, 1998 until November 1, 1999.
On November 2, 1999, dividends on the Series C Preferred Stock began to accrue. Each share of Series C
Preferred Stock has a liquidation preference of $50 per share. Holders of the Series C Preferred Stock are entitled to
receive cumulative dividends at an annual rate of 6 3/4% of the liquidation preference, payable quarterly in arrears
commencing February 1, 2000, or upon conversion. Dividends may, at the option of EchoStar, be paid in cash, by
delivery of fully paid and nonassessable shares of Class A common stock, or a combination thereof. Each share of
Series C Preferred Stock is convertible at any time, unless previously redeemed, at the option of the holder thereof,
into approximately 16.4 shares of Class A common stock, subject to adjustment upon the occurrence of certain
events. The Series C Preferred Stock is redeemable at any time on or after November 1, 2000, in whole or in part, at
the option of EchoStar, in cash, by delivery of fully paid and nonassessable shares of Class A common stock, or a
combination thereof, initially at a price of $51.929 per share and thereafter at prices declining to $50.000 per share
on or after November 1, 2004, plus in each case all accumulated and unpaid dividends to the redemption date.
7. Stock Compensation Plans
Stock Incentive Plan
In April 1994, EchoStar adopted a stock incentive plan to provide incentive to attract and retain officers,
directors and key employees. EchoStar currently has reserved up to 80 million shares of its Class A common stock
for granting awards under its 1995 Stock Incentive Plan and an additional 80 million shares of its Class A common
stock for granting awards under its 1999 Stock Incentive Plan. In general, stock options granted through
December 31, 2000 have included exercise prices not less than the fair market value of EchoStar’s Class A common
stock at the date of grant, and vest, as determined by EchoStar’s Board of Directors, generally at the rate of 20% per
year.
During 1999, EchoStar adopted the 1999 Incentive Plan which provided certain key employees a
contingent incentive including stock options and cash. The payment of these incentives was contingent upon the
achievement of certain financial and other goals of EchoStar. EchoStar met certain of these goals during 1999.
Accordingly, in 1999, EchoStar recorded approximately $179 million of deferred compensation related to post-grant
appreciation of options to purchase approximately 4.2 million shares, granted pursuant to the 1999 Incentive Plan.
The related deferred compensation will be recognized over the five-year vesting period. During the year ended
December 31, 1999 and 2000, EchoStar recognized $61 million and $51 million, respectively, under the 1999
Incentive Plan. The remainder will be recognized over the remaining vesting period.
Options to purchase an additional 11.2 million shares were granted at fair market value during 1999
pursuant to the Long Term Incentive Plan. Vesting of these options is contingent on meeting certain longer-term
goals, the achievement of which can not be reasonably predicted as of December 31, 2000. Accordingly, no
compensation was recorded during 1999 and 2000 related to these long-term options. EchoStar will continue to
evaluate the likelihood of achieving these long-term goals and will record the related compensation at the time
achievement of these goals becomes probable. During 2000, the Board of Directors approved a 2000 Incentive Plan.
The payment of these incentives was contingent upon the achievement of certain financial and other goals of
EchoStar. EchoStar did not meet any of these goals in 2000. Accordingly, no cash incentives were paid and all
stock options granted pursuant to the 2000 Incentive Plan were cancelled.