Dish Network 2005 Annual Report Download - page 106

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
F–21
estimate. Therefore, the existing models do not provide as reliable of a single measure of the fair value of stock-based
compensation awards as a market-based model would. Changes in the intervals of our regular historical price
observations from daily to monthly, contributed to the 2005 reduction in our estimated volatility factor.
We will continue to evaluate the assumptions used to derive the estimated fair value of options for our stock as new
events or changes in circumstances become known.
Stock Incentive Plans
We have adopted stock incentive plans to attract and retain officers, directors and key employees. As of December
31, 2006, we had 66.6 million shares of our Class A common stock authorized for awards under our Stock Incentive
Plans. In general, stock options granted through December 31, 2006 have included exercise prices not less than the
market value of our Class A common stock at the date of grant and a maximum term of ten years. While historically
our Board of Directors has issued options that vest at the rate of 20% per year, some option grants have immediately
vested.
Effective January 26, 2005, we adopted a long-term, performance-based stock incentive plan (the “2005 LTIP”)
within the terms of our 1999 Stock Incentive Plan to provide incentive to our executive officers and certain other
key employees upon achievement of specified long-term business objectives. In general, employees participating in
the 2005 LTIP elect to receive a one-time award of: (i) an option to acquire a specified number of shares priced at
market value on the date of the awards; (ii) rights to acquire for no additional consideration a specified smaller
number of shares of our Class A common stock; or (iii) a corresponding combination of a lesser number of option
shares and such rights to acquire our Class A common stock. The options and rights are subject to certain
performance criteria and vest over a seven year period at the rate of 10% per year during the first four years, and at
the rate of 20% per year thereafter.
Options to purchase 5.7 million shares pursuant to a long-term incentive plan under our 1995 Stock Incentive Plan (the
“1999 LTIP”), and 5.3 million shares pursuant to the 2005 LTIP were outstanding as of December 31, 2006. These
options were granted with exercise prices at least equal to the market value of the underlying shares on the dates they
were issued. The weighted-average exercise price of these options is $8.80 under our 1999 LTIP and $29.78 under our
2005 LTIP. The weighted-average fair value of the options granted during 2006 pursuant to the 2005 LTIP was
$15.43. Further, pursuant to the 2005 LTIP, there were also 725,298 outstanding Restricted Performance Units as of
December 31, 2006 with a weighted-average grant date fair value of $30.80. Vesting of these options and Restricted
Performance Units is contingent upon meeting certain long-term goals which management has determined are not
probable as of December 31, 2006. Consequently, no compensation was recorded during the year ended December 31,
2006 related to these long-term options and Restricted Performance Units. In accordance with SFAS 123R, such
compensation, if recorded, would result in total non-cash, stock-based compensation expense of $138.0 million, of
which $115.7 million relates to performance based options and $22.3 million relates to Restricted Performance
Units. This would be recognized ratably over the remaining vesting period or expensed immediately, if fully vested,
in our Consolidated Statements of Operations and Comprehensive Income (Loss).