Dish Network 2001 Annual Report Download - page 95

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
F–30
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, 2001
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, 2000
and 2001, EchoStar recognized expense of $61 million, $51 million and $20 million, respectively, under the 1999
Incentive Plan. The remaining deferred compensation of $25 million, which will be reduced by future forfeitures, if
any, will be recognized over the remaining vesting period.
Options to purchase an additional 9.7 million shares are outstanding as of December 31, 2001 and were
granted at fair market value during 1999, 2000 and 2001 pursuant to a Long Term Incentive Plan. The weighted-
average exercise price of these options is $9.04. Vesting of these options is contingent on meeting certain longer-term
goals, which may be met upon the consummation of the proposed merger with Hughes. However, as the achievement
of these goals cannot be reasonably predicted through December 31, 2001, no compensation was recorded during 1999,
2000 and 2001 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.
Such compensation, if recorded, could result in material non-cash stock-based compensation expense in EchoStar’s
statements of operations.
A summary of EchoStar’s incentive stock option activity for the years ended December 31, 1999, 2000 and
2001 is as follows:
1999 2000 2001
Options
Weighted
-Average
Exercise
Price Options
Weighted
-Average
Exercise
Price Options
Weighted
-Average
Exercise
Price
Options outstanding, beginning of
year.......................................... 11,576,120 $ 2.04 27,843,640 $ 6.26 25,117,893 $ 10.81
Granted ........................................ 20,847,712 7.71 2,942,000 51.56 867,500 37.30
Exercised...................................... (3,808,114) 1.84 (3,591,209) 3.05 (1,579,324) 5.17
Forfeited....................................... (772,078) 4.92 (2,076,538) 20.78 (1,658,476) 10.86
Options outstanding, end of year .... 27,843,640 $ 6.26 25,117,893 $ 10.81 22,747,593 $ 13.18
Exercisable at end of year .............. 2,755,432 $ 1.86 2,911,256 $ 5.49 4,701,357 $ 10.77