Dish Network 1999 Annual Report Download - page 70

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
F–22
approximately $15 million into an account (the “Deposit Account”). EchoStar recorded proceeds from the issuance of
the Series C Preferred Stock net of the amount placed in the Deposit Account. As of November 2, 1999, proceeds from
the issuance of the Series C Preferred Stock have been accreted to the face amount of $115 million. However, as of
December 31, 1999, approximately 1.4 million shares of Series C Preferred Stock have been converted into
approximately 11.0 million shares of EchoStar’s class A common stock, reducing the book value of the Series C
Preferred Stock to approximately $45 million. The Deposit Account provided quarterly cash payments of
approximately $0.844 per share of Series C Preferred Stock (the “Quarterly Return Amount”), 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 8.2 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.
8. 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 40 million shares of its Class A common stock
for granting awards under its 1995 Stock Incentive Plan and an additional 40 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, 1999 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, EchoStar accrued $675,000 related to cash incentives to be paid. EchoStar also recorded
approximately $179 million of deferred compensation related to post-grant appreciation of options to purchase
approximately 2.1 million shares, granted pursuant to the 1999 Incentive Plan. The related deferred compensation
will be recognized over the five-year vesting period. As a result of substantial post-grant appreciation of options,
variable plan accounting principles require that EchoStar recognize during 1999, $61 million of the total of $179
million of deferred stock-based compensation under this performance based plan. The remainder will be recognized
over the remaining vesting period.
Options to purchase an additional 5.6 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, 1999. Accordingly, no compensation
was recorded during 1999 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. The Board of Directors has approved a 2000 Incentive Plan. Any future payments under this
plan are contingent upon the achievement of certain financial and other goals.