--------------------------------------------------------------------------------
SEC 1913 POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTIONS OF INFORMATION
(02-02) CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM
DISPLAYS A CURRENTLY VALID OMB CONTROL NUMBER.
--------------------------------------------------------------------------------
--------------------------
OMB APPROVAL
--------------------------
OMB Number: 3235-0059
Expires: August 31, 2004
Estimated average burden
hours per response.. 14.73
--------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
ECHOSTAR COMMUNICATIONS CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
[ECHOSTAR LOGO]
April 9, 2002
DEAR SHAREHOLDER:
It is a pleasure for me to extend to you an invitation to attend the
2002 Annual Meeting of Shareholders of EchoStar Communications Corporation. The
Annual Meeting will be held on May 6, 2002, at 10:00 a.m. at EchoStar's
headquarters located at 5701 South Santa Fe Drive, Littleton, Colorado 80120.
The enclosed Notice of Meeting and Proxy Statement describe the
proposals to be considered and voted on at the Annual Meeting. During the Annual
Meeting, we also will review EchoStar's operations and other items of general
interest regarding the corporation.
We hope that all shareholders will be able to attend the Annual
Meeting. Whether or not you plan to attend the Annual Meeting personally, it is
important that you be represented. To ensure that your vote will be received and
counted, please promptly complete, date and return your proxy card in the
enclosed return envelope.
On behalf of the Board of Directors and Senior Management of the
Corporation, I would like to express our appreciation for your support and
interest in EchoStar. I look forward to seeing you at the Annual Meeting.
/s/ CHARLES W. ERGEN
CHARLES W. ERGEN
Chairman and Chief Executive Officer
5701 South Santa Fe Drive o Littleton, Colorado 80120 o Tel: (303) 723-1000 o Fax: (303) 723-1999
[ECHOSTAR LOGO]
NOTICE OF 2002 ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF ECHOSTAR COMMUNICATIONS CORPORATION:
Please take notice that the Annual Meeting of Shareholders of EchoStar
Communications Corporation ("EchoStar" or the "Corporation") will be held on May
6, 2002, at 10:00 a.m. at EchoStar's headquarters located at 5701 South Santa Fe
Drive, Littleton, Colorado 80120, to consider and vote upon:
1. The election of nine Directors of EchoStar;
2. A proposal to approve the EchoStar Communications Corporation 2002
Class B CEO Stock Option Plan; and
3. Any other business that may properly come before the Annual
Meeting or any adjournment thereof.
You may vote on these matters in person or by proxy. Whether or not you
plan to attend the Annual Meeting, we ask that you vote by one of the following
methods to ensure that your shares will be represented at the meeting in
accordance with your wishes:
o Vote by telephone, or electronically through the Internet, by
following the instructions included with your proxy card; or
o Vote by mail, by promptly completing and returning the enclosed
proxy card in the enclosed addressed stamped envelope.
Only shareholders of record at the close of business on March 28, 2002
are entitled to notice of, and to vote at, the Annual Meeting or any adjournment
thereof.
By Order of the Board of Directors
/s/ DAVID K. MOSKOWITZ
DAVID K. MOSKOWITZ
Senior Vice President, General Counsel,
Corporate Secretary and Director
April 9, 2001
5701 South Santa Fe Drive o Littleton, Colorado 80120 o Tel: (303) 723-1000 o Fax: (303) 723-1999
PROXY STATEMENT
OF
ECHOSTAR COMMUNICATIONS CORPORATION
GENERAL
This Proxy Statement is being furnished to the shareholders of EchoStar
Communications Corporation ("EchoStar" or the "Corporation") in connection with
the 2002 Annual Meeting of Shareholders of EchoStar (the "Annual Meeting") to be
held on Monday, May 6, 2002, at 10:00 a.m. at EchoStar's headquarters located at
5701 South Santa Fe Drive, Littleton, Colorado 80120.
EchoStar's mailing address is 5701 South Santa Fe Drive, Littleton,
Colorado 80120. This Proxy Statement and the accompanying proxy are first being
sent or given on or about April 9, 2002, to shareholders of record as of the
close of business on March 28, 2002 of EchoStar's Class A Common Stock, $0.01
par value ("Class A Shares"), EchoStar's Class B Common Stock, $0.01 par value
("Class B Shares"), and EchoStar's Series D Mandatorily Convertible
Participating Preferred Stock, $0.01 par value ("Series D Preferred Shares")
(collectively, the "Shares").
The accompanying proxy is being solicited by EchoStar's Board of
Directors. It may be revoked by written notice given to the Corporate Secretary
at any time before being voted. The proxy card, which is attached to this form,
if properly executed, duly sent to EchoStar and not revoked will be voted for
the proposals described in this Proxy Statement, in accordance with the
instructions set forth on the proxy card. The Board of Directors is not aware of
any matters proposed to be presented at the Annual Meeting other than the
election of Directors of the Corporation and a proposal to adopt the EchoStar
2002 Class B CEO Stock Option Plan. If any other matter is properly presented at
the Annual Meeting, the persons named in the accompanying form of proxy will
have discretionary authority to vote thereon in accordance with their best
judgment. Presence at the Annual Meeting does not of itself revoke the proxy.
ATTENDANCE AT THE MEETING
All stockholders as of the record date, or their duly appointed
proxies, may attend the Annual Meeting. Seating, however, is limited. Admission
to the Annual Meeting will be on a first-come, first-served basis. Registration
and seating will begin at 9:30 a.m. (local time) and the Annual Meeting will
begin at 10:00 a.m. (local time). Each stockholder may be asked to present valid
photo identification, such as a driver's license or passport. Cameras, recording
devices, and other electronic devices will not be permitted at the Annual
Meeting.
Stockholders whose stock is held by a broker, bank or other nominee
(often referred to as holding in "street name") and who desire to attend the
Annual Meeting will need to bring a legal proxy or a copy of a brokerage or bank
statement reflecting the stockholder's stock ownership as of the record date,
March 28, 2002, and check in at the registration desk at the Annual Meeting.
SECURITIES ENTITLED TO VOTE
Shareholders of record on March 28, 2002 are entitled to notice of the
Annual Meeting and to vote their Shares at the Annual Meeting. On that date,
241,375,825 Class A Shares, 238,435,208 Class B Shares, and 5,760,479 Series D
Preferred Shares were issued and outstanding. Each of the Class A Shares is
entitled to one vote per share on each proposal to be considered by
shareholders. Each of the Class B Shares is entitled to ten votes per share on
each proposal to be considered by shareholders. Each Series D Preferred Share is
convertible into 10 Class A Shares and thus is entitled to ten votes per Series
D Share on each proposal to be considered by shareholders.
VOTE REQUIRED
In accordance with EchoStar's Amended and Restated Articles of
Incorporation (the "Articles"), the presence at the Annual Meeting, in person or
by proxy, of the holders of a majority of the total voting power of all classes
of EchoStar's voting stock taken together shall constitute a quorum for the
transaction of business at the Annual Meeting.
2
The affirmative vote of a plurality of the votes cast at the Annual
Meeting is necessary to elect a Director. No cumulative voting is permitted. In
accordance with the Articles, the affirmative vote of a majority of the voting
power represented at the Annual Meeting is required to approve the proposal to
adopt the 2002 Class B CEO Stock Option Plan.
The total number of votes cast "for" will be counted for purposes of
determining whether sufficient affirmative votes have been cast to approve each
proposal. Abstentions from voting on a proposal by a shareholder at the Annual
Meeting, as well as broker non-votes, will be considered for purposes of
determining the number of total votes present at the Annual Meeting. Abstentions
will have the same effect as votes against proposals, but will not affect the
election of Directors. Broker non-votes will not be considered as votes "for" or
"against" proposals, and will therefore not be considered in determining the
election of Directors or whether the proposal to adopt the 2002 Class B CEO
Stock Option Plan has passed.
Through his ownership of Class B Shares, Charles W. Ergen, the
Chairman, Chief Executive Officer and President of EchoStar, possesses
approximately 89% of the total voting power of the Corporation. Mr. Ergen has
stated that he will vote for the election of each of the nominee Directors and
in favor of the proposal to adopt the 2002 Class B CEO Stock Option Plan.
Accordingly, the election of each of the Directors and approval of the proposal
to adopt the 2002 Class B CEO Stock Option Plan are assured notwithstanding a
negative vote by any or all shareholders other than Mr. Ergen.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting, EchoStar's shareholders will elect nine
Directors, in each case to hold office until the next annual meeting of
shareholders of EchoStar or until their respective successors shall be duly
elected and qualified. The affirmative vote of a plurality of the total votes
cast is necessary to elect a Director. Each nominee has consented to their
nomination and has advised EchoStar that they intend to serve the entire term,
if elected. In January 2002, Jean-Marie Messier was added as the eighth member
of EchoStar's Board of Directors. In order to help prevent the potential for tie
votes of the Board of Directors, EchoStar prefers to have an odd number of
Directors on the Board. As a result, in April 2002, EchoStar's Board of
Directors approved an increase in the size of the Board of Directors from eight
Directors to nine Directors and approved the nomination of Michael T. Dugan to
fill the additional seat on the Board.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION
OF THE NOMINEES NAMED HEREIN (ITEM NO. 1 ON THE ENCLOSED PROXY CARD).
The nominees for Director of EchoStar are as follows:
NAME AGE FIRST BECAME DIRECTOR POSITION WITH THE CORPORATION
---------------------------- --- --------------------- ----------------------------------------
O. Nolan Daines 42 1998 Director
Peter A. Dea 48 2001 Director
James DeFranco 49 1980 Director and Executive Vice President
Michael T. Dugan 53 -- Director Nominee, President and Chief
Operating Officer
Cantey Ergen 47 2001 Director
Charles W. Ergen 49 1980 Chairman of the Board of Directors and
Chief Executive Officer
Raymond L. Friedlob 57 1995 Director
Jean-Marie Messier 45 2002 Director
David K. Moskowitz 43 1998 Director, Senior Vice President, General
Counsel and Secretary
The following sets forth the business experience of each of the
nominees over the last five years:
O. Nolan Daines. Mr. Daines is currently consulting for various
privately-held companies. In 1993, Mr. Daines founded DiviCom, Inc. ("DiviCom"),
where he held various executive officer positions from the formation of DiviCom
until October 1999. DiviCom is a global provider of standards-based MPEG-2
encoding product systems for digital video broadcasting. DiviCom's product lines
include audio/video/data encoding and networking systems, as well as integration
consulting and implementation services. Mr. Daines was appointed to EchoStar's
3
Board of Directors in March 1998, and has served as a member of the
Corporation's Audit Committee and Executive Compensation Committee since such
date.
Peter A. Dea. Since June 2001, Mr. Dea has served on EchoStar's Board
of Directors and as a member of the Audit Committee. Mr. Dea has served as
President, Chief Executive Officer and a director of Western Gas Resources since
November 1 2001. He previously served as Chairman of the Board of Directors of
Barrett Resources Corporation from April 2000 to August 2001 and as Chief
Executive Officer from November 1999 to August 2001. In addition, Mr. Dea served
as Vice Chairman of Barrett Resources from November 1999 until April 1 2000, as
Executive Vice President-Exploration from December 1998 until November 1999 and
as Senior Vice President-Exploration of Barrett Resources from June 1996 until
December 1998.
James DeFranco. Mr. DeFranco, currently the Executive Vice President of
EchoStar, has been a Vice President and a Director of EchoStar since its
formation in 1980 and, during the past five years, has held various executive
officer and director positions with EchoStar's subsidiaries.
Michael T. Dugan. Mr. Dugan has served as President and Chief Operating
Officer of EchoStar since April 2000 and, in that capacity, is responsible for,
among other things, all operations at EchoStar. Prior to that time, he served as
President of EchoStar Technologies Corporation. Previously, Mr. Dugan served as
Senior Vice President of the consumer products division of EchoStar. Mr. Dugan
has been with EchoStar since 1990.
Cantey Ergen. Mrs. Ergen has served on EchoStar's Board of Directors
since May 2001. Over the past 21 years, Mrs. Ergen has had a variety of
operational and administrative responsibilities at EchoStar. Since 2000, Mrs.
Ergen has also served on the Board of Directors of The Children's Hospital
Foundation, a Denver, Colorado based non-profit organization dedicated to
improving the health of children in Denver, in Colorado, and in the region, as
well as the Advisory Board and Nominating Committee of the Girl Scouts USA Mile
Hi Council, also based in Denver, Colorado. Mrs. Ergen, along with Charles
Ergen, her spouse, and James DeFranco, was a co-founder of EchoStar in 1980.
Charles W. Ergen. Mr. Ergen has been Chairman of the Board of Directors
and Chief Executive Officer of EchoStar since its formation and, during the past
five years, has held various executive officer and director positions with
EchoStar's subsidiaries. Mr. Ergen, along with Cantey Ergen, his spouse, and
James DeFranco, was a co-founder of EchoStar in 1980.
Raymond L. Friedlob. Mr. Friedlob has been a Director of EchoStar and a
member of its Audit and Executive Compensation Committees since October 1995.
Mr. Friedlob has been a member of the law firm of Friedlob Sanderson Paulson &
Tourttillott, LLC since 1995, where he specializes in federal securities law,
corporate law, transportation and taxation.
Jean-Marie Messier. Mr. Messier has served as Chairman of the Board of
Directors and Chief Executive Officer of Vivendi Universal, S. A. since December
2000 and as a Director of EchoStar since January 2002. He served as Chairman of
the Board of Directors and Chief Executive Officer of Vivendi from June 1996
until December 2000. Mr. Messier joined Compagnie Generale des Eaux (renamed
Vivendi in 1998) in November 1994 as Chief Executive Officer and Chairman of the
Executive Committee. Prior to his appointment at Vivendi, Mr. Messier was
General Partner of the investment bank Lazard Freres et Cie from 1989 to 1994.
Mr. Messier is a member of the boards of directors of Alcatel, BNP-Paribas,
Cegetel Compagnie de Saint-Gobain, LVMH-Moet Hennessy Louis Vuitton, The New
York Stock Exchange, UGC and USA Networks and is Chairman of the Supervisory
Board of Groupe Canal+.
On January 22, 2002, a subsidiary of Vivendi Universal, S.A. acquired
5,760,479 shares of EchoStar Series D Convertible Preferred Stock for $1.5
billion, or approximately $260.40 per share. Each share of the Series D
Preferred Stock has the same economic (other than liquidation) and voting rights
as the ten shares of EchoStar Class A Common Stock into which it is convertible
and has a liquidation preference equal to approximately $260.40 per share. In
addition, Vivendi and EchoStar announced an eight-year strategic alliance in
which Vivendi will develop and provide EchoStar's DISH Network customers in the
U.S. a variety of programming and interactive television services. As part of
this alliance, Jean-Marie Messier, Chairman and CEO of Vivendi, has become a
member of EchoStar's Board of Directors. Under a stockholder voting agreement
signed by Charles W. Ergen, a family trust controlled by Mr. Ergen (together,
the "Stockholders"), and Vivendi, each Stockholder will generally take such
actions as are necessary to ensure that Jean-Marie Messier continues to be a
member of EchoStar's Board of
4
Directors, until the earlier to occur of the completion of the Hughes/Echostar
merger and the first date on which Vivendi ceases to beneficially own the
equivalent of a certain minimum number of Class A Shares.
David K. Moskowitz. Mr. Moskowitz is the Senior Vice President,
Secretary and General Counsel of EchoStar. Mr. Moskowitz joined EchoStar in
March 1990 and is responsible for all legal and regulatory affairs and certain
business functions for EchoStar and its subsidiaries. Mr. Moskowitz was
appointed to EchoStar's Board of Directors in March 1998. During the past five
years, Mr. Moskowitz also has held various executive officer and director
positions with EchoStar's subsidiaries.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors currently has an Executive Compensation
Committee and an Audit Committee, both of which were established in October 1995
and both of which consist entirely of non-employee Directors. Mr. Daines and Mr.
Friedlob were the sole members of the Executive Compensation Committee during
2001. Mr. Daines, Mr. Dea and Mr. Friedlob each served as members of the Audit
Committee during 2001. The principal functions of the Executive Compensation
Committee are to approve compensation of Executive Officers of EchoStar and to
award grants to Executive Officers under EchoStar's 1995 Stock Incentive Plan
(the "1995 Incentive Plan"), 1999 Incentive Plan and Long Term Incentive Plan
(collectively, the "Incentive Plans"). The principal functions of the Audit
Committee are to: (i) recommend to the Board of Directors the selection of
independent public accountants; (ii) review management's plan for engaging
EchoStar's independent public accountants during the year to perform non-audit
services and consider what effect these services will have on the independence
of the accountants; (iii) review the annual financial statements and other
financial reports which require approval by the Board of Directors; (iv) review
the adequacy of EchoStar's system of internal accounting controls; and (v)
review the scope of the independent public accountants' audit plans and the
results of the audit. The Audit Committee operates under an Audit Committee
Charter adopted by EchoStar's Board of Directors. The Board of Directors, in its
business judgement, has determined that each of Mr. Daines, Mr. Dea and Mr.
Friedlob is an "independent Director" as defined in Rule 4200 of the listing
standards of the National Association of Securities Dealers, Inc.
During the fiscal year ended December 31, 2001, the Board of Directors
held seven meetings and acted by unanimous written consent in lieu of a meeting
on 14 occasions. The Executive Compensation Committee held two meetings and
acted by unanimous written consent in lieu of a meeting on six occasions during
2001. The Audit Committee held four meetings during 2001. Each Director attended
at least 75% of the aggregate of: (i) the total number of meetings of the Board
of Directors held during the period in which he was a Director, and (ii) the
total number of meetings held by all committees of the Board of Directors on
which he served.
Directors are elected annually and serve until their successors are
duly elected and qualified. Officers serve at the discretion of the Board of
Directors.
EQUITY SECURITY OWNERSHIP
The following table sets forth, to the best knowledge of EchoStar, the
beneficial ownership of EchoStar's voting securities as of March 28, 2002 by:
(i) each person known by EchoStar to be the beneficial owner of more than five
percent of any class of EchoStar's voting Shares; (ii) each Director of
EchoStar; (iii) the five most highly compensated persons acting as an Executive
Officer of EchoStar (collectively, the "Named Executive Officers"); and (iv) all
Directors and Executive Officers as a group. Unless otherwise indicated, each
person listed in the following table (alone or with family members) has sole
voting and dispositive power over the shares listed opposite such person's name.
5
NUMBER OF PERCENTAGE OF
NAME (1) SHARES CLASS
------------------------------------------------------------------------------- ----------- -------------
CLASS A COMMON STOCK(2):
Charles W. Ergen(3), (4), (19), (20) ....................................... 241,026,367 44.3%
Cantey Ergen(5), (19), (20) ................................................ 240,854,367 44.3%
Vivendi Universal(6) ....................................................... 57,604,790 10.6%
FMR Corp.(7) ............................................................... 38,393,945 7.1%
Massachusetts Financial Services Company(8) ................................ 32,602,600 6.0%
Putnam Investments, LLC(9) ................................................. 17,579,830 3.2%
James DeFranco(10), (19), (20) ............................................. 7,867,519 1.5%
Michael T. Dugan(11), (19), (20) ........................................... 1,007,367 *
David K. Moskowitz(12), (19), (20) ......................................... 878,969 *
Soraya Hesabi-Cartwright(13), (19), (20) ................................... 615,160 *
O. Nolan Daines(14), (20) .................................................. 58,000 *
Raymond L. Friedlob(15), (20) .............................................. 38,000 *
Michael R. McDonnell(16), (19), (20) ....................................... 10,454 *
Peter A. Dea(17), (20) ..................................................... 10,000 *
Jean-Marie Messier(20) ..................................................... -- *
All Directors and Executive Officers as a Group
(14 persons)(18), (19), (20) ............................................. 251,683,820 46.2%
CLASS B COMMON STOCK:
Charles W. Ergen ........................................................... 238,435,208 100.0%
Cantey Ergen ............................................................... 238,435,208 100.0%
All Directors and Executive Officers as a Group (14 persons) ............... 238,435,208 100.0%
SERIES D PREFERRED STOCK::
Vivendi Universal(6) ....................................................... 5,760,479 100.0%
----------
* Less than 1%.
(1) Except as otherwise noted below, the address of each such person is 5701
Santa Fe Drive, Littleton, Colorado 80120.
(2) The following table sets forth, to the best knowledge of the Corporation,
the actual ownership of the Corporation's Class A Common Stock (including
options exercisable within 60 Days) as of March 28, 2002 by: (i) each
person known by the Corporation to be the beneficial owner of more than
five percent of any class of the Corporation's voting Shares; (ii) each
Director or Director nominee of the Corporation; (iii) each Named Executive
Officer; and (iv) all Directors and Executive Officers as a group:
NUMBER OF PERCENTAGE OF
NAME SHARES CLASS
------------------------------------------------------- ---------- ----------------
CLASS A COMMON STOCK:
FMR Corp. .......................................... 38,393,945 15.5%
Massachusetts Financial Services Company ........... 32,602,600 13.1%
Putnam Investments, LLC ............................ 17,579,830 7.1%
James DeFranco ..................................... 7,867,519 3.2%
Charles W. Ergen ................................... 2,591,159 1.0%
Cantey Ergen ....................................... 2,419,159 *
Michael T. Dugan ................................... 1,007,367 *
David K. Moskowitz ................................. 878,969 *
Soraya Hesabi-Cartwright ........................... 615,160 *
O. Nolan Daines .................................... 58,000 *
Raymond L. Friedlob ................................ 38,000 *
Michael R. McDonnell ............................... 10,454 *
Peter A. Dea ....................................... 10,000 *
Jean-Marie Messier ................................. -- *
All Directors and Executive Officers as a Group
(14 persons) ..................................... 13,248,612 5.3%
(3) Mr. Ergen beneficially owns all of the EchoStar Class A common stock owned
by his spouse, Mrs. Ergen. Includes: (i) 18,336 Class A Shares held in the
401(k) Employee Savings Plan (the "401(k) Plan"), (ii) the right to acquire
172,000 Class A Shares within 60 days upon the exercise of employee stock
options, (iii) 238,435,208 Class A Shares issuable upon conversion of Mr.
Ergen's Class B Shares, and (iv) 4,800 Class A Shares held as custodian for
his minor children.
6
(4) The percentage of total voting power held by Mr. Ergen is approximately
89%, after giving effect to the exercise of Mr. Ergen's options exercisable
within 60 days.
(5) Mrs. Ergen beneficially owns all of the EchoStar Class A common stock owned
by her spouse, Mr. Ergen. Includes: (i) 18,336 Class A Shares held in the
401(k) Plan, (ii) 238,435,208 Class A Shares issuable upon conversion of
Mr. Ergen's Class B Shares, and (iv) 4,800 Class A Shares held as custodian
for her minor children.
(6) The address of Vivendi Universal is 375 Park Avenue, New York, New York
10152. Vivendi Universal is the parent company of Groupe Canal+, a wholly
owned subsidiary of Vivendi Universal. Financiere De Videocommunication is
a wholly owned subsidiary of Groupe Canal+, and the owner of record of
5,760,479 shares of series D preferred stock of EchoStar. Each share of
series D preferred stock is immediately convertible into 10 shares of
EchoStar class A common stock.
(7) The address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts
02109.
(8) The address of Massachusetts Financial Services Company is 500 Boylston
Street, Boston, Massachusetts 02116.
(9) The address of Putnam Investments, LLC is One Post Office Square, Boston,
Massachusetts 02109.
(10) Includes: (i) 17,825 Class A Shares held in the 401(k) Plan; (ii) the right
to acquire 104,000 Class A Shares within 60 days upon the exercise of
employee stock options; (iii) 56,008 Class A Shares held as custodian for
his minor children; and (iv) 2,200,000 Class A Shares controlled by Mr.
DeFranco as general partner of a partnership.
(11) Includes: (i) 17,017 Class A Shares held in the 401(k) Plan; and (ii) the
right to acquire 880,000 Class A Shares within 60 days upon the exercise of
employee stock options.
(12) Includes: (i) 17,009 Class A Shares held in the 401(k) Plan; (ii) the right
to acquire 377,398 Class A Shares within 60 days upon the exercise of
employee stock options; (iii) 1,328 Class A Shares held as custodian for
his minor children; (iv) 8,184 Class A Shares held as trustee for Mr.
Ergen's children; (v) 100,350 Class A Shares held in trust for the
Moskowitz Family; and (vi) 38,785 Class A Shares held by a charitable
foundation for which Mr. Moskowitz is a member of the Board of Directors.
(13) Includes: (i) 2,129 Class A Shares held in the 401(k) Plan; and (ii) the
right to acquire 553,444 Class A Shares within 60 days upon the exercise of
employee stock options.
(14) Includes the right to acquire 58,000 Class A Shares within 60 days upon the
exercise of non-employee director stock options.
(15) Includes the right to acquire 38,000 Class A Shares within 60 days upon the
exercise of non-employee director stock options.
(16) Includes the right to acquire 10,000 Class A Shares within 60 days upon the
exercise of employee stock options.
(17) Includes the right to acquire 10,000 Class A Shares within 60 days upon the
exercise of non-employee director stock options.
(18) Class A and Class B common stock beneficially owned by both Mr. and Mrs.
Ergen is only included once in calculating the aggregate number of shares
owned by directors and executive officers, as a group. Includes: (i) 93,375
Class A Shares held in the 401(k) Plan; (ii) the right to acquire 3,311,653
Class A Shares within 60 days upon the exercise of employee stock options;
(iii) 2,200,000 Class A Shares held in a partnership; (iv) 238,435,208
Class A Shares issuable upon conversion of Class B Shares; (v) 173,670
Class A Shares held in the name of, or in trust for, minor children and
other family members; and (vi) 38,785 Class A Shares held by a charitable
foundation for which Mr. Moskowitz is a member of the Board of Directors.
(19) Includes 1,387,011 Class A Shares over which Mr. and Mrs. Ergen has voting
power as Trustee for EchoStar's 401(k) Plan. These shares also are
beneficially owned through investment power by each individual 401(k) Plan
participant. The Class A Shares individually owned by each of the Named
Executives through their participation in the 401(k) Plan are included in
each respective Named Executive's information above.
(20) Beneficial ownership percentage was calculated assuming exercise or
conversion of all Class B Shares, Series D Preferred Shares, Warrants and
employee stock options exercisable within 60 days (collectively, the
"Derivative Securities") into Class A Shares by all holders of such
Derivative Securities. Assuming exercise or conversion of Derivative
Securities by such person, and only by such person, the beneficial
ownership of Class A Shares would be as follows: Mr. Ergen, 50.2%; Mrs.
Ergen, 50.2%, Mr. DeFranco, 3.3%, less than one percent for Mr. Dugan, Mr.
Moskowitz, Ms. Hesabi-Cartwright, Mr. Daines, Mr. Friedlob, Mr. McDonnell,
Mr. Dea and Mr. Messier, and all Officers and Directors as a group, 52.1%.
7
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires EchoStar's Executive Officers, Directors, and any
person who directly or indirectly owns more than ten percent of a registered
class of EchoStar's equity securities (collectively, "Reporting Persons") to
file with the Securities and Exchange Commission ("SEC") initial reports of
ownership and reports of changes in ownership of Class A Shares and other equity
securities of the Corporation. Reporting Persons are required by SEC regulations
to furnish EchoStar with copies of all Section 16(a) forms that are filed with
the SEC. Based solely on a review of the copies of such forms and amendments, if
any, thereto, furnished to EchoStar for the 2001 fiscal year and written
representations that no other reports were required, all Reporting Persons made
all required filings in a timely manner.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION SUMMARY
Executive Officers are compensated by certain subsidiaries of EchoStar.
The following table sets forth the cash and non-cash compensation for the fiscal
years ended December 31, 2001, 2000 and 1999 for the Named Executive Officers.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
AWARDS
------------
SECURITIES
UNDERLYING
OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION (#)(2) COMPENSATION(3)
------------------------------- ---- --------- --------- ------------ ------------ ---------------
Charles W. Ergen 2001 $ 250,006 $ 750,000 $ -- -- $ 13,794
Chairman and Chief Executive 2000 250,000 750,000 -- 500,000 28,813
Officer 1999 250,007 500,000 -- 520,000 26,798
David K. Moskowitz 2001 $ 119,230 $ 187,500 $ -- -- $ 4,499
Senior Vice President, General 2000 192,307 -- -- -- 14,328
Counsel and Director 1999 194,789 500,000 -- 520,000 15,303
Michael R. McDonnell(4) 2001 $ 200,000 $ 93,750 $ -- -- $ 4,070
Senior Vice President and Chief 2000 96,923 30,000 -- 50,000 --
Financial Officer 1999 -- -- -- -- --
Michael T. Dugan 2001 $ 250,000 $ -- $ -- -- $ 4,499
President and Chief Operating . 2000 242,311 -- -- 500,000 14,328
Officer 1999 221,154 -- -- 520,000 15,303
Soraya Hesabi-Cartwright 2001 $ 225,000 $ -- $ -- -- $ 4,499
Executive Vice President - 2000 216,365 -- -- 250,000 14,328
DISH Network 1999 196,971 -- -- 1,160,000 15,303
----------
(1) A portion of the bonuses included in each year were earned in that year,
but not paid until the following year.
(2) During the year ended December 31, 2001, there were no stock options
granted to the Named Executive Officers.
(3) "All Other Compensation" includes amounts contributed to EchoStar's
401(k) Plan on behalf of the Named Executive Officers and compensation
related to the EchoStar VI Launch Bonus stock award during April 2001
(See "Launch Bonus Plan"). With respect to Messrs. Ergen and McDonnell
for 2001 and 2000, "All Other Compensation" also includes payments made
in connection with a tax indemnification agreement between EchoStar and
these individuals.
(4) Mr. McDonnell joined EchoStar in August 2000.
8
The following table provides information as of December 31, 2001,
concerning unexercised options to purchase Class A Shares:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES
NUMBER OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 2001(#) DECEMBER 31, 2001($)(1)
ON EXERCISE VALUE REALIZED --------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------ ----------- -------------- --------------------------- ----------- -------------
Charles W. Ergen 43,603 $ 1,149,685 207,649 520,000 $ 2,503,945 $ 2,711,460
David K. Moskowitz -- -- 305,398 120,000 7,624,835 2,762,400
Michael R. McDonnell -- -- 10,000 40,000 -- --
Michael T. Dugan -- -- 793,888 534,112 17,400,591 3,120,068
Soraya Hesabi-Cartwright -- -- 384,764 679,952 7,308,713 10,388,293
----------
(1) The dollar value of each exercisable and unexercisable option was
calculated by multiplying the number of Class A Shares underlying the
option by the difference between the exercise price of the option and the
closing price (as quoted in the Nasdaq National Market) of a Class A Share
on December 31, 2001.
EXECUTIVE COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to October 1995, EchoStar did not have an Executive Compensation
Committee, and its Board of Directors determined all matters concerning
executive compensation. During 2001, the Executive Compensation Committee
consisted of Messrs. Friedlob and Daines. Mr. Friedlob is a partner in the law
firm of Friedlob, Sanderson, Paulson & Tourtillot, LLC, which billed EchoStar
approximately $137,000 in fees related to legal services and securities
offerings in 2001, of which approximately $88,000 was ultimately paid by third
parties.
DIRECTOR COMPENSATION
EchoStar's Directors who are not also employees receive $1,000 for each
meeting of the Board of Directors attended. Except with respect to EchoStar's
Annual Meetings, EchoStar's Directors who are not also employees do not receive
separate reimbursement of travel costs to attend Board of Director meetings.
EchoStar's Directors who are employees are not compensated for their services as
Directors. EchoStar's Directors are elected annually by the shareholders of the
Corporation. Directors who are not also employees of EchoStar are granted
options under the 1995 (the "1995 Director Plan") or 2001 (the "2001 Director
Plan") Non-employee Director Stock Option Plans to acquire Class A Shares upon
election to the Board.
Mr. Friedlob was granted an option to acquire 8,000 Class A Shares on
December 22, 1995 pursuant to the 1995 Director Plan. These options were 100%
vested upon issuance and had an exercise price of $2.53125 per share and a term
of five years. These options were repriced to $2.1250 per share during July
1997, as discussed below. In February 1997, Mr. Friedlob was granted an option
to acquire 40,000 Class A Shares. These options were 100% vested upon issuance
and have an exercise price of $2.1250 and a term of five years. In February
1999, Mr. Friedlob was granted an option to acquire 40,000 Class A Shares. These
options were 100% vested upon issuance and have an exercise price of $6.00 and a
term of five years. Mr. Friedlob was granted an option to acquire an additional
10,000 Class A Shares during June 2000. These options were 100% vested upon
issuance and have an exercise price of $33.109 and a term of five years.
9
In March 1998, upon appointment to EchoStar's Board of Directors, Mr.
Daines was granted an option to acquire 8,000 Class A Shares, pursuant to the
1995 Director Plan. These options were 100% vested upon issuance, have an
exercise price of $2.75, and a term of five years. Additionally, in February
1999, Mr. Daines was granted an option to acquire 40,000 Class A Shares. These
options were 100% vested upon issuance, have an exercise price of $6.00, and a
term of five years. Mr. Daines was granted an option to acquire an additional
10,000 Class A Shares during June 2000. These options were 100% vested upon
issuance and have an exercise price of $33.109 and a term of five years.
In June 2001, upon appointment to EchoStar's Board of Directors, Mr.
Dea was granted an option to acquire 10,000 Class A Shares pursuant to the 2001
Director Plan. These options were 100% vested upon issuance, have an exercise
price of $32.42, and a term of five years.
STOCK INCENTIVE PLANS
EchoStar has adopted Incentive Plans to provide incentives to attract
and retain Executive Officers and other key employees. EchoStar's Executive
Compensation Committee administers the Incentive Plans. Key employees are
eligible to receive awards under the Incentive Plans at the Committee's
discretion.
Awards available under the Incentive Plans include: (i) common stock
purchase options; (ii) stock appreciation rights; (iii) restricted stock and
restricted stock units; (iv) performance awards; (v) dividend equivalents; and
(vi) other stock-based awards. EchoStar has reserved up to 160 million Class A
Shares for granting awards under the Incentive Plans. Under the terms of the
Incentive Plans, the Executive Compensation Committee retains discretion,
subject to plan limits, to modify the terms of outstanding awards and to reprice
awards.
Pursuant to the Incentive Plans, EchoStar has granted options to its
Executive Officers and other key employees for the purchase of a total of
51,596,900 Class A Shares. Options to purchase 22,747,593 Class A Shares were
outstanding as of December 31, 2001. These options generally vest at the rate of
20% per year, commencing one year from the date of grant and 20% thereafter on
each anniversary of the date of grant. The exercise prices of these options,
which have generally been equal to or greater than the fair market value at the
date of grant, have ranged from $1.16625 to $79.00 per Class A Share. Certain of
these stock options were repriced as described below.
Effective July 1, 1997, the Executive Compensation Committee voted to
reprice all outstanding options with an exercise price greater than $2.125 per
Class A Share to $2.125 per Class A Share. The price to which the options were
repriced exceeded the fair market value of a Class A Share as of the date of
repricing. The market value of Class A Shares on the date of repricing was
$1.90625 per Class A Share. The Executive Compensation Committee and the Board
of Directors indicated that they would not typically consider reducing the
exercise price of previously granted options. However, the Executive
Compensation Committee and the Board of Directors recognized that certain events
beyond the reasonable control of the employees of EchoStar had significantly
reduced the incentive those options were intended to create. It was the
expectation of the Executive Compensation Committee and the Board of Directors
that by reducing the exercise price of these options to $2.125, the intended
incentive would be restored in part.
10
The following table provides information concerning the repricing of
Incentive Plan stock options:
TEN-YEAR OPTION REPRICING
MARKET
PRICE OF EXERCISE
SECURITIES STOCK AT PRICE AT LENGTH OF ORIGINAL
UNDERLYING TIME OF TIME OF NEW OPTION TERM
OPTIONS REPRICING REPRICING EXERCISE REMAINING AT DATE
NAME AND POSITION DATE REPRICED(#) ($) ($) PRICE ($) OF REPRICING
----------------- ------------ ----------- --------- --------- ---------- ------------------
Charles W. Ergen July 1, 1997 117,640 $ 1.90625 $ 2.3375 $ 2.125 3 years, 354 days
Chairman and Chief Executive July 1, 1997 136,240 1.90625 3.6700 2.125 5 years, 31 days
Officer
Michael T. Dugan July 1, 1997 79,016 1.90625 2.5313 2.125 4 years, 174 days
President, EchoStar Technologies July 1, 1997 149,880 1.90625 3.3359 2.125 5 years, 31 days
Corporation
Steven B. Schaver July 1, 1997 118,512 1.90625 2.5313 2.125 4 years, 174 days
Chief Operating Officer and Chief
Financial Officer
David K. Moskowitz July 1, 1997 118,512 1.90625 2.5313 2.125 4 years, 174 days
Senior Vice President, General July 1, 1997 59,960 1.90625 3.3359 2.125 5 years, 31 days
Counsel and Director
Mark W. Jackson July 1, 1997 79,016 1.90625 2.5313 2.125 4 years, 174 days
Senior Vice President - Satellite July 1, 1997 89,920 1.90625 3.3359 2.125 5 years, 31 days
Services
Michael S. Schwimmer July 1, 1997 59,960 1.90625 3.3359 2.125 5 years, 31 days
Vice President - Programming
LAUNCH BONUS PLAN
During 2000, in connection with the launch of EchoStar's sixth
satellite, EchoStar granted a performance award of ten Class A Shares to all
eligible employees. Eligible employees included full-time employees of EchoStar
or one of its subsidiaries, with a hire date on or before April 1, 2000, and
part-time employees of EchoStar or one of its subsidiaries with a hire date on
or before April 1, 2000 who had worked at least 1,000 hours prior to April 1,
2001. All eligible employees must have also been continuously employed with
EchoStar or one of its subsidiaries from April 1, 2000 through March 31, 2001.
Issuance of the Class A Shares was contingent upon the successful launch and
operation of EchoStar VI and was also contingent on there being no insurance
claims and no losses prior to the issuance date related to EchoStar IV,
including in-orbit performance. During 2001, EchoStar distributed approximately
35,000 Class A Shares pursuant to the EchoStar VI launch bonus plan.
401(k) PLAN
In 1983, EchoStar adopted a defined-contribution tax-qualified 401(k)
Plan. EchoStar's employees become eligible for participation in the 401(k) Plan
upon completing six months of service with EchoStar and reaching age 19. 401(k)
Plan participants may contribute between 1% and 15% of their compensation in
each contribution period, subject to the maximum deductible limit provided by
the Internal Revenue Code. EchoStar may make a 50% matching contribution up to a
maximum of $1,000 per participant per calendar year. EchoStar may also make an
annual discretionary profit sharing or employer stock contribution to the 401(k)
Plan with the approval of the Board of Directors. During 2001 EchoStar
contributed approximately $2 million in cash to the 401(k) Plan related to its
2000 discretionary contribution and accrued approximately $6.7 million related
to its 2002 discretionary contribution.
11
401(k) Plan participants are immediately vested in their voluntary
contributions, plus actual earnings thereon. The balance of the vesting in
401(k) Plan participants' accounts is based on years of service. A participant
becomes 20% vested after one year of service, 40% vested after two years of
service, 60% vested after three years of service, 80% vested after four years of
service, and 100% vested after five years of service.
PERFORMANCE GRAPH
The graph below sets forth the cumulative total return to EchoStar's
shareholders during the period from December 29, 1996 to December 29, 2001. The
graph appearing below assumes the investment on December 29, 1996 of $100 in
Class A Shares of the Corporation, the Nasdaq Stock Market Index, and an
industry peer group. The industry peer group consists of: Adelphia
Communications Corporation, Cablevision Systems Corporation, Comcast
Corporation, Cox Communications Inc., Hughes Electronics Corporation, Pegasus
Communications Corporation, AT&T Corp. and AOL Time Warner, Inc. ("Industry Peer
Group"). Although the companies included in the industry peer group were
selected because of similar industry characteristics, they are not entirely
representative of the Corporation's business.
[TOTAL RETURN TO STOCKHOLDERS]
(ASSUMES $100 INVESTMENT ON 12/29/96)
[PERFORMANCE GRAPH]
TOTAL RETURN ANALYSIS
12/29/96 12/31/97 12/31/98 12/31/99 12/31/00 12/29/01
--------- --------- --------- --------- ---------- ---------
ECHOSTAR COMMUNICATIONS $ 100.00 $ 75.89 $ 219.20 $1,767.19 $ 824.69 $ 995.79
PEER GROUP $ 100.00 $ 193.95 $ 357.25 $ 639.47 $ 351.18 $ 358.50
NASDAQ COMPOSITE $ 100.00 $ 121.63 $ 170.52 $ 317.38 $ 192.68 $ 152.12
The preceding graph and table shall not be deemed to be "solicited
material" or "filed" or incorporated by reference in any filing by the
Corporation under the Securities Act or under the Exchange Act irrespective of
any general statement incorporating by reference this Proxy Statement into any
such filing, or subject to the liabilities of Section 18 of the Exchange Act,
except to the extent that EchoStar specifically incorporates this information by
reference into a document filed under the Securities Act or the Exchange Act.
12
EXECUTIVE COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
GENERAL
The purpose of EchoStar's compensation policy is to offer compensation
packages to attract, retain and motivate Executive Officers over the long term.
Since 1996, executive compensation has been reviewed by the Executive
Compensation Committee (the "Committee"). The primary components of EchoStar's
executive compensation program are base salary and bonuses, conditional
incentive-based bonuses and long-term incentive compensation in the form of
stock options and other awards offered under EchoStar's Incentive Plans.
BASE SALARIES AND BONUSES
Annual base salaries paid to EchoStar's Executive Officers have
historically been at levels significantly below those generally paid to
Executive Officers with comparable experience and responsibilities in the
telecommunications industry or other similarly sized companies. Because of the
levels of compensation, EchoStar may experience difficulty in attracting and
retaining Executives at the highest performance levels. The Committee reviews
all adjustments to annual base salaries paid to EchoStar's Executive Officers.
Compensation adjustments are determined based on recommendations from the Chief
Executive Officer. Factors considered by Mr. Ergen in making his recommendation
to the Committee are typically based on his perception of the individual's
performance, success in achieving company and personal goals, and planned
changes in responsibilities. An individual's extraordinary efforts resulting in
tangible increases in corporate, division or department success are also
considered by Mr. Ergen in recommending increases in base salary and annual
bonuses.
INCENTIVE COMPENSATION
Stock option grants under EchoStar's Incentive Plans are designed to
provide an additional incentive to attract and retain Executive Officers. In
addition, stock options provide an incentive to Executive Officers to increase
shareholder value on a long-term and sustained basis. Management believes that
Executive Officers who are in a position to contribute to the long-term success
of EchoStar and to build incremental shareholder value, should have a stake in
EchoStar's future success. This focuses attention on managing EchoStar as an
owner with an equity position in EchoStar's business and seeks to align the
Executive Officer's interests with the long-term interests of shareholders.
Stock options represent an important part of EchoStar's compensation program for
Executive Officers, and, similar to other growing technology companies,
represents a significant component of overall compensation.
General Incentives. Awards under the 1995 Incentive Plan follow a
review of the individual employee's performance, years of service, position with
EchoStar, and long-term potential contribution to EchoStar. The number of
options to be granted to an employee are determined based upon the key
employee's level of responsibility, position in EchoStar and potential to
contribute to the long-term success of EchoStar and on the number of options
previously granted to the employee. Neither Management nor the Board of
Directors assigns specific weights to these factors, although the employee's
position and a subjective evaluation of his performance are considered most
important.
Stock options were awarded under the 1995 Incentive Plan to certain key
employees on March 31, June 30, September 30, and December 31, 2001. To
encourage Executive Officers to remain employed by EchoStar or its subsidiaries,
options granted under the 1995 Incentive Plan generally vest at the rate of 20%
per year and generally are granted at exercise prices not less than fair market
value.
13
Conditional Incentives. On February 17, 1999, each of the Named
Executives also was granted an option to purchase 400,000 Class A Shares under
the Corporation's Long Term Incentive Plan. The plan, which provided key
employees with stock options, the exercise of which is contingent on the
achievement of certain long-term goals, was adopted by the Corporation during
February 1999. As of the date of this Proxy Statement the achievement of those
goals and consequent exercisability of the options, cannot reasonably be
predicted. These goals may, however, be met upon consummation of the proposed
merger with Hughes Electronics Corporation ("Hughes"). Subject to the
achievement of such goals, the options vest at the rate of 20% per year,
commencing March 31, 2000 and expire ten years from the date of grant, subject
to early termination in certain circumstances.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee believes that the compensation paid to Charles W. Ergen,
EchoStar's Chief Executive Officer, has generally been at a level that is
substantially below amounts paid to Chief Executive Officers at other companies
of similar size and in comparable industries.
Mr. Ergen's base salary for each of fiscal 2001, 2000 and 1999 was
$250,000. Since 1996, changes in Mr. Ergen's base salary are reviewed annually
by the Committee based on recommendations from the Board of Directors. During
2001, Mr. Ergen was awarded a bonus of $750,000 to reward him for his efforts
over the past year.
The report of the Compensation Committee and the information contained
therein shall not be deemed to be "solicited material" or "filed" or
incorporated by reference in any filing by the Corporation under the Securities
Act or under the Exchange Act irrespective of any general statement
incorporating by reference this Proxy Statement into any such filing, or subject
to the liabilities of Section 18 of the Exchange Act, except to the extent that
EchoStar specifically incorporates this information by reference into a document
filed under the Securities Act or the Exchange Act.
Respectfully submitted,
The EchoStar Executive Compensation Committee
Raymond L. Friedlob
O. Nolan Daines
14
INFORMATION ABOUT OUR INDEPENDENT PUBLIC ACCOUNTANTS AND AUDIT COMMITTEE REPORT
Independent Public Accountants. The firm of Arthur Andersen LLP
("Andersen") served as our independent public accountants for the fiscal year
ended December 31, 2001. The Audit Committee, in its discretion, may direct the
appointment of different independent public accountants at any time during the
year if the Audit Committee believes that a change would be in the best
interests of our stockholders. Although members of the Audit Committee have not
reached a final decision regarding our independent public accountants for 2002,
they are considering engaging another independent accounting firm for reasons
that are unrelated to Andersen's audit of our financial statements. For this
reason, we do not intend to ask stockholders to ratify Andersen or any other
independent accounting firm as our independent public accountants at the Annual
Meeting. If members of the Audit Committee decide to change our independent
public accountants, we will promptly provide the disclosure required by the
regulations of the Securities and Exchange Commission.
A representative of Andersen is expected to be present at the Annual
Meeting, will have the opportunity to make a statement if he or she desires to
do so, and will be available to respond to appropriate questions. If members of
the Audit Committee select new independent public accountants prior to the date
of the Annual Meeting, EchoStar intends to also invite a representative of the
new accounting firm to attend the Annual Meeting and answer questions from
stockholders.
Audit and Non-Audit Fees. Andersen served as our independent auditors
for the fiscal year ended December 31, 2001. During 2001 and 2002, Andersen
billed EchoStar approximately $225,000 in fees for the audit of the
Corporation's annual financial statements for the year ended December 31, 2001
and for reviews of EchoStar's quarterly financial statements issued during 2001.
Andersen also billed EchoStar approximately $271,000 in audit-related fees and
approximately $132,000 in other fees. Audit related fees relate primarily to
certain of the Corporation's 2001 securities offerings, acquisition due
diligence and accounting consultation. Other fees related to tax services. There
were no financial information systems design and implementation fees incurred in
2001.
Audit Committee Report. The report of the Audit Committee and the
information contained therein shall not be deemed to be "solicited material" or
"filed" or incorporated by reference in any filing by the Corporation under the
Securities Act or under the Exchange Act irrespective of any general statement
incorporating by reference this Proxy Statement into any such filing, or subject
to the liabilities of Section 18 of the Exchange Act, except to the extent that
EchoStar specifically incorporates this information by reference into a document
filed under the Securities Act or the Exchange Act.
REPORT OF THE AUDIT COMMITTEE
The role of the Audit Committee is to assist the Board of Directors in
its oversight of the Corporation's financial reporting process. Management is
responsible for the Corporation's financial reporting process including its
system of internal control, and for the preparation, presentation and integrity
of consolidated financial statements in accordance with generally accepted
accounting principles. The Corporation's independent auditors are responsible
for auditing those financial statements and expressing an opinion as to their
conformity with generally accepted accounting principles. Our responsibility is
to monitor and review these processes. It is not our duty or our responsibility
to conduct auditing or accounting reviews or procedures. We are not employees of
the Corporation and we may not be, and we may not represent ourselves to be or
to serve as, accountants or auditors by profession or experts in the fields of
accounting or auditing. Therefore, we have relied, without independent
verification, on management's representation that the financial statements have
been prepared with integrity and objectivity and in conformity with accounting
principles generally accepted in the United States of America and on the
representations of the independent auditors included in their report, on the
Corporation's financial statements. Our oversight does not provide us with an
independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or policies, or appropriate
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, our considerations
and discussions with management and the independent auditors do not assure that
the Corporation's financial statements are presented in accordance with
generally accepted accounting principles, that the audit of our Company's
financial statements has been carried out in accordance with generally accepted
auditing standards or that our Company's independent accountants are in fact
"independent."
15
In the performance of our oversight function, we have reviewed and
discussed the audited financial statements of EchoStar for fiscal 2001 with
management. We also have discussed the audited financial statements with
EchoStar's independent auditors. Our discussions with the independent auditors
included, among other things, the matters required to be discussed by Statement
of Auditing Standards No. 61, Communication with Audit Committees, as currently
in effect, discussions relating to the auditor's responsibility under generally
accepted auditing standards, the processes used by our management in formulating
accounting estimates, significant adjustments made during the audit, any
disagreements with our management and any difficulties encountered by the
independent auditors in performing the audit. We also received and reviewed
written disclosures from the independent auditors relating to any and all
relationships between them and EchoStar, including the written disclosures and
the letter from Arthur Andersen LLP required by Independence Standards Board
Standards No. 1, Independence Discussions with Audit Committees, as currently in
effect, has considered whether the non-audit services provided by Arthur
Andersen LLP is compatible with maintaining the independence of Arthur Andersen
LLP, and we discussed with the auditors their independence, including any
relationship that might affect the objectivity or independence of the
independent auditors.
Based on those discussions, we are not aware of any relationship
between the independent auditors and EchoStar that affects the objectivity or
independence of the independent auditors. Based on the discussions and our
review discussed above, and subject to the limitations on the role and
responsibilities of the Audit Committee referred to above and in the Audit
Committee Charter, we recommended to the Board of Directors that the audited
financial statements for fiscal 2001 be included in EchoStar's 2001 Annual
Report on Form 10-K for the year ended December 31, 2001 for filing with the
Securities and Exchange Commission.
Respectfully submitted,
The EchoStar Audit Committee
O. Nolan Daines
Peter A. Dea
Raymond L. Friedlob
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2001, the law firm of Friedlob, Sanderson, Paulson &
Tourtillott, LLC billed EchoStar approximately $137,000 in fees related to
certain of the Corporation's 2000 and 2001 securities offerings and other
corporate legal advice, of which approximately $88,000 was ultimately paid by
third parties. Mr. Friedlob, a member of EchoStar's Board of Directors, is a
member in that law firm.
For a more detailed description of the Vivendi transactions, please see
our Annual Report on Form 10-K for the year ended December 31, 2001. We also
filed copies or forms of certain definitive agreements relating to the Vivendi
transactions with the Securities and Exchange Commission on December 21, 2001 on
Current Report on Form 8-K. For more information on how to obtain copies of our
Annual Report on Form 10-K for the year ended December 31, 2001 and our Current
Report on Form 8-K, see "Where To Get Additional Information".
PROPOSAL NO. 2 - APPROVAL OF THE 2002 CLASS B CEO STOCK OPTION PLAN
On April 2, 2002, the Board of Directors adopted the EchoStar
Communications Corporation 2002 Class B CEO Stock Option Plan (the "Plan") to
become effective on May 6, 2002, subject to stockholder approval of the Plan by
the affirmative vote of a majority of the total votes cast at the Annual Meeting
in person or by proxy. The purpose of the Plan is to promote the interests of
the Corporation and its subsidiaries by aiding the Corporation in retaining and
incentivizing Charles W. Ergen, the Chairman, Chief Executive Officer and
President of EchoStar, who the Board of Directors believes is crucial to
assuring the future success of the Corporation; to permit the Board of Directors
to reward Mr. Ergen for his extraordinary efforts on behalf of the Corporation
in the past to offer Mr. Ergen incentives to put forth maximum efforts for the
future success of the Corporation's business and to afford Mr. Ergen an
opportunity to acquire additional proprietary interests in the Corporation. Mr.
Ergen and Mrs. Ergen both abstained from the Board of Directors vote on this
matter.
16
The proposed Plan is set forth in Appendix A. The principal provisions
of the Plan are summarized below. This summary, however, does not purport to be
complete and is qualified in its entirety by reference to the provisions of the
Plan.
GENERAL INFORMATION
The Plan would authorize the Board of Directors or a committee
appointed by the Board of Directors (the "Committee") to grant incentive stock
options under the Internal Revenue Code of 1986, as amended (the "Code"),
nonqualified stock options and dividend equivalent rights with respect to the
Corporation's Class B Common Stock (collectively, "Awards") to Charles W. Ergen.
Under the Plan, the Committee also has the authority to, among other things: (i)
determine the type, size and the terms and conditions of Awards, (ii) amend the
terms and conditions of Awards, (iii) accelerate the exercisability of options
or the lapse of restrictions relating to Awards and (iv) interpret and
administer the Plan and Award agreements thereunder.
As used in this summary, the term "Committee" will include the Board of
Directors in the event that it performs the functions described. If the
Committee consists of less than the entire Board of Directors, each member must
be a "non-employee director" within the meaning of Rule 16b-3 promulgated under
the Exchange Act. To the extent necessary for any Award to qualify as
performance-based compensation under Section 162(m) of the Code, each Committee
member must be an "outside director" within the meaning of Section 162(m) of the
Code.
The aggregate number of Class B Shares that may be issued subject to
Awards under the Plan shall not exceed 20,000,000 shares. EchoStar may continue
to grant awards (which may include stock options, restricted stock and other
equity awards with respect to the Corporation's Class A Common Stock) under the
1995 Stock Incentive Plan for Class A Common Stock authorized but unissued under
that plan, until the 1995 Stock Incentive Plan expires on June 20, 2005 and
under the 1999 Stock Incentive Plan for Class A Common Stock unissued under that
plan, until the 1999 Stock Incentive Plan expires on April 16, 2009. If there is
a stock split, stock dividend or other relevant change affecting EchoStar's
shares, appropriate adjustments will be made in the number of shares that may be
issued or transferred in the future and in the number of shares and price in all
outstanding grants made before such event. If shares under a grant are not
issued or transferred, those shares would again be available for inclusion in
future grants.
GRANTS UNDER THE PLAN
STOCK OPTIONS
The Committee will determine whether any option is intended to be a
nonqualified or incentive stock option at the time of grant. The per share
exercise price of an option granted under the Plan will be determined by the
Committee at the time of grant, provided that the purchase price per share under
each incentive stock option must not be less than 100% of the fair market value
of a share of Class A Common Stock (adjusted as may be necessary to take into
account the different voting rights of the two classes of stock) at the date of
grant (110% in the case of an incentive stock option granted to a Ten-percent
Stockholder, as defined in the Plan). Each option will be exercisable at such
dates and in such installments as determined by the Committee. Each option
terminates at the time determined by the Committee, provided that the term of
each incentive stock option may not exceed ten years (five years in the case of
an incentive stock option granted to a Ten-Percent Stockholder, as defined in
the Plan).
The Committee may grant restoration options, separately or together
with another option, under which the grantee would be granted a new option when
the grantee pays the exercise price of the original option by delivery of
previously owned shares. The restoration option would permit the grantee to
purchase a number of shares not exceeding the sum of (i) the number of shares
provided as consideration upon the exercise of the previously granted option to
which such restoration option relates and (ii) the number of shares, if any,
tendered or withheld as payment of the amount to be withheld under applicable
tax laws in connection with the exercise of the option to which the restoration
option relates.
17
FEDERAL INCOME TAX CONSEQUENCES
STOCK OPTIONS
The grant of an incentive stock option or a nonqualified stock option
would not result in income for the grantee or in a deduction for EchoStar.
The exercise of a nonqualified stock option would result in ordinary
income for the grantee and, subject to deduction limitations under Code Section
162(m), a deduction for EchoStar measured by the difference between the option
price and the fair market value of the shares received at the time of exercise.
Income tax withholding would be required.
The exercise of an incentive stock option would not result in income
for the grantee if the grantee (i) does not dispose of the shares within two
years after the date of grant or one year after the transfer of shares upon
exercise and (ii) is an employee of EchoStar or a subsidiary of EchoStar from
the date of grant until three months before the exercise date. If these
requirements are met, the basis of the shares upon later disposition would be
the option exercise price for such shares. Any gain will be taxed to the
employee as long-term capital gain and EchoStar would not be entitled to a
deduction. The excess of the fair market value on the exercise date over the
option exercise price is an item of tax preference, potentially subject to the
alternative minimum tax.
If the grantee disposes of the shares prior to the expiration of either
of the holding periods, the grantee would recognize ordinary income and, subject
to deduction limitations under Code Section 162(m), EchoStar would be entitled
to a deduction equal to the lesser of the fair market value of the shares on the
exercise date minus the option exercise price or the amount realized on
disposition minus the option exercise price. Any gain in the excess of the
ordinary income portion would be taxable as long-term or short-term capital
gain.
OTHER INFORMATION
The Plan will continue until terminated by the Board of Directors. The
Board of Directors may amend the Plan as it deems advisable. During the term of
the Plan, Charles W. Ergen may not be granted Awards under the Plan in the
aggregate in respect of more than 5,000,000 shares in any one calendar year.
There have been no determinations and no commitments about whether Awards will
be granted to Charles W. Ergen under the Plan.
Charles W. Ergen beneficially owns shares of EchoStar common stock
representing approximately 89% of the total voting power of EchoStar. Approval
of Proposal No. 2 requires the affirmative vote of a majority of the total votes
cast at the Annual Meeting in person or by proxy. Mr. Ergen has indicated his
intention to vote the shares of EchoStar common stock beneficially owned by him
in favor of Proposal No. 2. Accordingly, approval of Proposal No. 2 is assured
notwithstanding a negative vote by shareholders other than Mr. Ergen.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
THE 2002 CLASS B CEO STOCK OPTION PLAN (ITEM NO. 2 ON THE ENCLOSED PROXY CARD).
18
WHERE TO GET ADDITIONAL INFORMATION
EchoStar files annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements, or other information EchoStar files at the SEC's public reference
room in Washington, D.C. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. The SEC filings of EchoStar are also
available to the public from commercial document retrieval services and on the
Internet through the website maintained by the SEC at http://www.sec.gov.
EchoStar Class A Shares are traded on the NASDAQ National Market System and
reports and other information concerning EchoStar can also be inspected at the
NASDAQ National Market, 1735 K Street, NW, Washington, D.C. 20546.
COST OF PROXY STATEMENT
The cost of the solicitation of proxies will be borne by EchoStar. In
addition to the use of the mail, proxies may be solicited by EchoStar
personally, by telephone or by similar means. No Director, officer or employee
of EchoStar will be specifically compensated for those activities. EchoStar does
not expect to pay any compensation for the solicitation of proxies but will
reimburse brokerage firms, custodians, nominees, fiduciaries and other persons
holding stock in their names, or in the names of nominees, at approved rates,
for their reasonable expenses in forwarding proxy materials to beneficial owners
of securities held of record by such persons and obtaining their proxies.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Shareholders who intend to have a proposal considered for inclusion in
EchoStar's proxy materials for presentation at the 2003 Annual Meeting of
Shareholders must submit the proposal to EchoStar no later than December 26,
2002. EchoStar reserves the right to reject, rule out of order or take other
appropriate action with respect to any proposal that does not comply with these
and other applicable requirements.
OTHER BUSINESS
Management knows of no other business that will be presented to the
Annual Meeting other than that which is set forth in this Proxy Statement.
However, if any other matter is properly presented at the Annual Meeting, the
persons named in the accompanying form of proxy will have discretionary
authority to vote thereon in accordance with their best judgement.
By Order of the Board of Directors
/s/ DAVID K. MOSKOWITZ
DAVID K. MOSKOWITZ
Senior Vice President, General Counsel,
Corporate Secretary and Director
19
APPENDIX A
ECHOSTAR COMMUNICATIONS CORPORATION
2002 CLASS B CEO STOCK OPTION PLAN
Section 1. Purpose
The purpose of this Stock Option Plan (the "Plan") is to promote the
interests of EchoStar Communications Corporation (the "Corporation") and its
Subsidiaries by aiding the Corporation in retaining and incentivizing Charles W.
Ergen, who the Board of Directors believes is capable of assuring the future
success of the Corporation; to permit the Board of Directors to reward Mr. Ergen
for his extraordinary efforts on behalf of the Corporation in the past to offer
Mr. Ergen incentives to put forth maximum efforts for the future success of the
Corporation's business and to afford Mr. Ergen an opportunity to acquire
additional proprietary interest in the Corporation.
Section 2. Definitions
As used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Award" shall mean an award granted to Mr. Ergen in accordance with
the terms of this Plan in the form of Options or Dividend Equivalents granted
under the Plan.
(b) "Award Agreement" shall mean any written agreement, contract or
other instrument or document evidencing any Award granted under the Plan.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any regulations promulgated thereunder.
(d) "Committee" shall mean the committee described in Section 3 of the
Plan.
(e) "Company" shall mean EchoStar Communications Corporation, a Nevada
corporation, and any successor corporation.
(f) "Dividend Equivalent" shall mean any right granted under Section
6(b) of the Plan.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(h) "Fair Market Value" shall mean, with respect to Shares, the last
sale price of the Class A Common Stock, $.01 par value, of the Corporation, as
reported on the consolidated tape for securities listed on the Nasdaq Stock
Market ("NASDAQ") or any national securities exchange on which the Shares are
then traded, for the date in question (with any adjustments that the Committee,
in its sole discretion, determines are necessary or appropriate to take into
account the difference in voting rights between the Class A Common Stock and the
Shares). If Fair Market Value is in reference to property other than Shares, the
Fair Market Value of such other property shall be determined by such methods or
procedures as shall be established from time to time by the Committee.
(i) "Incentive Stock Option" shall mean an option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422 of the
Code or any successor provision.
(j) "Nonemployee Director" shall mean a director of the Corporation who
is a "nonemployee director" within the meaning of Rule 16b-3.
(k) "Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.
(l) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option, and shall include Restoration Options.
(m) "Outside Director" shall mean a director of the Corporation who is
an "outside director" within the meaning of Section 162(m) of the Code.
(n) "Person" shall mean any individual, corporation, partnership,
association or trust.
(o) "Plan" shall mean this 2002 Class B CEO Stock Option Plan, as
amended from time to time.
(p) "Restoration Option" shall mean any Option granted under Section
6(a)(iv) of the Plan which confers upon Mr. Ergen the right to receive a new
Option upon the payment of the exercise price of a previously held Option by
delivery of previously owned Shares or previously owned shares of Class A Common
Stock of the Corporation.
(q) "Retirement" shall mean becoming eligible to receive immediate
retirement benefits under a retirement or pension plan of the Corporation or any
Subsidiary.
(r) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended,
or any successor rule or regulation.
(s) "Shares" shall mean shares of Class B Common Stock, $.01 par value,
of the Corporation or such other securities or property as may become subject to
Awards pursuant to an adjustment made under Section 4(c) of the Plan.
(t) "Subsidiary" shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the Corporation
if each of the corporations other than the last corporation in the unbroken
chain owns more than 50% of the voting stock in one of the other corporations in
such chain.
(u) "Ten-Percent Stockholder" shall mean an individual who owns (within
the meaning of Section 422(b)(6) of the Code) stock possessing more than 10% of
the total combined voting power of all classes of stock of the Corporation or of
a Subsidiary.
(v) "Total Disability" shall mean the complete and permanent inability
of Mr. Ergen to perform his duties under the terms of his employment with the
Corporation or any Subsidiary, as determined by the Committee upon the basis of
such evidence, including independent medical reports and data, as the Committee
deems appropriate or necessary.
Section 3. Administration.
(a) Power and Authority of the Committee.
(i) The Committee. The Committee shall consist of at least two
directors of the Corporation and may consist of the entire Board of
Directors; provided, however, that (i) if the Committee consists of less
than the entire Board of Directors, each member shall be a Nonemployee
Director and (ii) to the extent necessary for any Award intended to
qualify as performance-based compensation under Section 162(m) of the
Code, to so qualify, each member of the Committee, whether or not it
consists of the entire Board of Directors, shall be an Outside Director.
(ii) Power and Authority. Subject to the express provisions of the
Plan and to applicable law, the Committee or the Board of Directors, as
the case may be, shall have full power and authority to: (i) determine the
type or types of Awards to be granted to Mr. Ergen under the Plan; (ii)
determine the number of Shares to be
A-2
covered by (or with respect to which payments, rights or other matters are
to be calculated in connection with) each Award; (iii) determine the terms
and conditions of any Award or Award Agreement; (iv) amend the terms and
conditions of any Award or Award Agreement and accelerate the
exercisability of Options; (v) determine whether, to what extent and under
what circumstances Awards may be exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited or
suspended; (vi) determine whether, to what extent and under what
circumstances cash, Shares, other securities, other Awards, other property
and other amounts payable with respect to an Award under the Plan shall be
deferred either automatically or at the election of the holder thereof or
the Committee; (vii) interpret and administer the Plan and any instrument
or agreement relating to, or Award made under, the Plan; (viii) establish,
amend, suspend or waive such rules and regulations and appoint such agents
as it shall deem appropriate for the proper administration of the Plan;
and (ix) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
Section 4. Shares Available for Awards.
(a) Shares Available. Subject to adjustment as provided in Section
4(c), the number of Shares that may be issued subject to Awards under the Plan
shall not exceed 20,000,000; provided, however, that (i) Mr. Ergen may not be
granted Awards in the aggregate in respect of more than 5,000,000 Shares in any
one calendar year. Shares to be issued under the Plan may be either Shares
reacquired and held in the treasury or authorized but unissued Shares. If any
Shares covered by an Award or to which an Award relates are not purchased or are
forfeited, or if an Award otherwise terminates without delivery of any Shares,
or if Shares are surrendered or withheld from any Award to satisfy Mr. Ergen's
income tax or other withholding obligations, or Shares owned by Mr. Ergen are
tendered to pay the exercise price of any Award granted under the Plan, then the
number of Shares counted against the aggregate number of Shares available under
the Plan with respect to such Award, to the extent of any such forfeiture,
termination, surrender, withholding or tender shall again be available for
granting Awards under the Plan. The Corporation shall at all times keep
available out of authorized but unissued Shares the number of Shares to satisfy
Awards granted under the Plan.
(b) Adjustments. In the event that the Committee shall determine that
any dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Corporation,
issuance of warrants or other rights to purchase Shares or other securities of
the Corporation or other similar corporate transaction or event affects the
Shares such that an adjustment is determined by the Committee to be appropriate
in order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the Committee shall,
in such manner as it may deem equitable, adjust any or all of (i) the number and
type of Shares (or other securities or other property) which thereafter may be
made the subject of Awards, (ii) the number and type of Shares (or other
securities or other property) subject to outstanding Awards and (iii) the
purchase or exercise price with respect to any Award; provided, however, that
the number of Shares covered by any Award or to which such Award relates shall
always be a whole number.
Section 5. Eligibility.
Only Mr. Ergen shall be eligible to participate in the Plan.
Notwithstanding the foregoing, an Incentive Stock Option may only be granted to
full or part-time employees (which term as used herein includes, without
limitation, officers and directors who are also employees) of the Corporation
and its Subsidiaries.
Section 6. Awards.
(a) Options. The Committee is hereby authorized to grant Options to Mr.
Ergen with the following terms and conditions and with such additional terms and
conditions not inconsistent with the provisions of the Plan as the Committee
shall determine, which terms and conditions shall be set forth in a form
approved by the Committee.
(i) Exercise Price. The exercise price per Share purchasable
under an Option shall be determined by the Committee; provided,
however, that, in the case of an Incentive Stock Option, such exercise
price shall not be less than 100% of the Fair Market Value of a Share
on the date of grant of such Option (110% in the case of an Incentive
Stock Option granted to a Ten-Percent Stockholder); provided,
A-3
further, that to the extent that the aggregate Fair Market Value,
determined at the time an Incentive Stock Option is granted, of the
Shares with respect to which Incentive Stock Options may be exercisable
for the first time by Mr. Ergen in any calendar year under all plans of
the Corporation and any parent corporation of the Corporation and any
Subsidiary shall exceed $100,000, such Incentive Stock Options shall be
treated as Non-Qualified Stock Options.
(ii) Option Term. The term of each Option shall be set forth
in the applicable Award Agreement; provided, however that no Incentive
Stock Option shall be exercisable more than ten years after the date of
grant (5 years in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder), unless the Option shall cease to be
exercisable pursuant to this Section 6. If Mr. Ergen's employment with
the Corporation and all Subsidiaries terminates other than by reason of
his death, Total Disability or Retirement, his Option shall terminate
and cease to be exercisable upon termination of employment, unless (A)
the Committee shall determine otherwise or (B) otherwise specified in
the applicable Award Agreement or in his employment agreement.
(iii) Time and Method of Exercise. The Committee shall
determine the time or times at which an Option may be exercised in
whole or in part and the method or methods by which, and the form or
forms (including, without limitation, cash, Shares or shares of Class A
Common Stock of the Corporation (that, in either case, have been held
by Mr. Ergen for at least six months), promissory notes, other
securities, other Awards or other property, or any combination thereof,
having a Fair Market Value on the exercise date equal to the relevant
exercise price) in which, payment of the exercise price with respect
thereto may be made or deemed to have been made. The Committee may also
permit Mr. Ergen, in accordance with such procedures as the Committee
may in its sole discretion establish, including those set forth in
Section 6(c) hereof, to exercise Options and sell Shares acquired
pursuant to a brokerage or similar arrangement approved in advance by
the Committee, and to use the proceeds from such sale as payment of the
exercise price of such Options.
(iv) Restoration Options. The Committee may grant Restoration
Options, separately or together with another Option, pursuant to which,
subject to the terms and conditions established by the Committee and
any applicable requirements of Rule 16b-3 or any other applicable law,
Mr. Ergen would be granted a new Option when the payment of the
exercise price of the Option to which such Restoration Option relates
is made by the delivery of Shares or shares of Class A Common Stock of
the Corporation owned by Mr. Ergen pursuant to the relevant provisions
of the Plan or agreement relating to such Options, which new Option
would be an Option to purchase the number of Shares not exceeding the
sum of (A) the number of Shares or shares of Class A Common Stock of
the Corporation so provided as consideration upon the exercise of the
previously granted Option to which such Restoration Option relates and
(B) the number of Shares, if any, tendered or withheld as payment of
the amount to be withheld under applicable tax laws in connection with
the exercise of the Option to which such Restoration Option relates
pursuant to the relevant provisions of the Plan or agreement relating
to such Option. Restoration Options may be granted with respect to
Options previously granted under the Plan or any other stock option
plan of the Corporation, and may be granted in connection with any
Option granted under the Plan or any other stock option plan of the
Corporation at the time of such grant.
(v) Incentive and Non-Qualified Stock Options. Each Option
granted pursuant to the Plan shall specify whether it is intended to be
an Incentive Stock Option or a Non-Qualified Stock Option, provided
that the Committee may in the case of the grant of an Incentive Stock
Option give Mr. Ergen the right to receive in its place a Non-Qualified
Stock Option.
(b) Dividend Equivalents. The Committee is hereby authorized to grant
to Mr. Ergen Dividend Equivalents under which he shall be entitled to receive
payments (in cash, Shares, other securities, other Awards or other property as
determined in the discretion of the Committee) equivalent to the amount of cash
dividends paid by the Corporation to holders of Shares with respect to a number
of Shares determined by the Committee. Subject to the terms of the Plan and any
applicable Award Agreement, such Dividend Equivalents may have such terms and
conditions as the Committee shall determine.
A-4
(c) General.
(i) No Cash Consideration for Awards. Awards shall be granted
for no cash consideration or for such minimal cash consideration as may
be required by applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may,
in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award or
any award granted under any plan of the Corporation or any Subsidiary
other than the Plan. Awards granted in addition to or in tandem with
other Awards or in addition to or in tandem with awards granted under
any such other plan of the Corporation or any Subsidiary may be granted
either at the same time as, or at a different time from, the grant of
such other Awards or awards.
(iii) Forms of Payment Under Awards. Subject to the terms of
the Plan and of any applicable Award Agreement, payments or transfers
to be made by the Corporation or a Subsidiary upon the grant, exercise
or payment of an Award may be made in such form or forms as the
Committee shall determine (including, without limitation, cash, Shares,
promissory notes, other securities, other Awards or other property or
any combination thereof), and may be made in a single payment or
transfer, in installments or on a deferred basis, in each case in
accordance with rules and procedures established by the Committee. Such
rules and procedures may include, without limitation, provisions for
the payment or crediting of reasonable interest on installment or
deferred payments or the grant or crediting of Dividend Equivalents
with respect to installment or deferred payments.
(iv) Cashless Exercise. Options may be exercised in whole or
in part upon delivery to the Secretary of the Corporation of an
irrevocable written notice of exercise. The date on which such notice
is received by the Secretary shall be the date of exercise of the
Option, provided that within three business days of the delivery of
such notice the funds to pay for exercise of the Option are delivered
to the Corporation by a broker acting on behalf of the optionee either
in connection with the sale of the Shares underlying the Option or in
connection with the making of a margin loan to the optionee to enable
payment of the exercise price of the Option. In connection with the
foregoing, the Corporation will provide a copy of the notice of
exercise of the Option to the aforesaid broker upon receipt by the
Secretary of such notice and will deliver to such broker, within three
business days of the delivery of such notice to the Corporation, a
certificate or certificates (as requested by the broker) representing
the number of Shares underlying the Option that have been sold by such
broker for the optionee.
(v) Limits on Transfer of Awards. No Award and no right under
any such Award shall be transferable by Mr. Ergen otherwise than by
will, the laws of descent and distribution; provided, however, that, if
so determined by the Committee, Mr. Ergen may, in the manner
established by the Committee, designate a beneficiary or beneficiaries
to exercise his rights and receive any property distributable with
respect to any Award upon his death. Each Award or right under any
Award shall be exercisable during Mr. Ergen's lifetime only by Mr.
Ergen or, if permissible under applicable law, by his guardian or legal
representative. No Award or right under any such Award may be pledged,
alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and
unenforceable against the Corporation or any Subsidiary.
(vi) Term of Awards. Unless otherwise expressly set forth in
the Plan, the term of each Award shall be for such period as may be
determined by the Committee.
(vii) Restrictions; Securities Listing. All certificates for
Shares or other securities delivered under the Plan pursuant to any
Award or the exercise thereof shall be subject to such stop transfer
orders, obtaining any consents (as defined below) and other
restrictions as the Committee may deem advisable under the Plan or the
rules, regulations and other requirements of the Securities and
Exchange Commission and any applicable federal or state securities
laws, and the Committee may cause a legend or legends to be placed on
any such certificates to make appropriate reference to such
restrictions. The term "consent" as used herein with respect to any
plan action includes (A) any and all listings, registrations or
qualifications in respect thereof upon any securities exchange, or law,
rule or regulation of a jurisdiction outside the United States, (B) any
and all written agreements and representations by Mr. Ergen with
respect to the disposition of Shares, or with respect to any other
matter, which the Committee may deem necessary or desirable to comply
with the terms of any such listing, registration or qualification or to
obtain an
A-5
exemption from the requirement that any such listing, qualification or
registration be made, (C) any and all other consents, clearances and
approvals in respect of a plan action by any governmental or other
regulatory body or any stock exchange or self-regulatory agency and (D)
any and all consents or authorizations required to comply with, or
required to be obtained under, applicable local law or otherwise
required by the Committee.
Section 7. Amendment and Termination; Adjustments.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the Corporation
may amend, alter, suspend, discontinue or terminate the Plan; provided, however,
that, notwithstanding any other provision of the Plan or any Award Agreement,
without the approval of the stockholders of the Corporation, no such amendment,
alteration, suspension, discontinuation or termination shall be made that,
absent such approval:
(i) would violate the rules or regulations of NASDAQ or any
securities exchange that are applicable to the Corporation; or
(ii) would cause the Corporation to be unable, under the Code,
to grant Incentive Stock Options under the Plan.
(b) Amendments to Awards. The Committee may waive any conditions of or
rights of the Corporation under any outstanding Award, prospectively or
retroactively. Neither the Committee nor the Board of Directors may amend,
alter, suspend, discontinue or terminate any outstanding Award, prospectively or
retroactively, in a manner that is adverse to Mr. Ergen without his consent or
the consent of the beneficiary thereof, except as otherwise herein provided.
(c) Correction of Defects, Omissions and Inconsistencies. The Committee
may correct any defect, supply any omission or reconcile any inconsistency in
the Plan or any Award in the manner and to the extent it shall deem desirable to
carry the Plan into effect.
Section 8. Income Tax Withholding; Tax Bonuses.
(a) Withholding. In order to comply with all applicable federal or
state income tax laws or regulations, the Corporation may take such action as it
deems appropriate to ensure that all applicable federal or state payroll,
withholding, income or other taxes, which are the sole and absolute
responsibility of Mr. Ergen, are withheld or collected from him. In order to
assist Mr. Ergen in paying all or a portion of the federal and state taxes to be
withheld or collected upon exercise or receipt of (or the lapse of restrictions
relating to) an Award, the Committee, in its discretion and subject to such
additional terms and conditions as it may adopt, may permit him to satisfy such
minimum tax obligation by (i) electing to have the Corporation withhold a
portion of the Shares otherwise to be delivered upon exercise of such Award with
a Fair Market Value equal to the amount of such taxes or (ii) delivering to the
Corporation Shares or shares of Class A Common Stock of the Corporation (other
than Shares issuable upon exercise of such Award) with a Fair Market Value equal
to the amount of such taxes.
(b) Tax Bonuses. The Committee, in its discretion, shall have the
authority, at the time of grant of any Award under this Plan or at any time
thereafter, to approve cash bonuses to Mr. Ergen to be paid upon their exercise
of Awards in order to provide funds to pay all or a portion of federal and state
taxes due as a result of such exercise. The Committee shall have full authority
in its discretion to determine the amount of any such tax bonus.
Section 9. General Provisions.
(a) No Rights to Awards. Mr. Ergen shall not have any claim to be
granted any Award under the Plan. The terms and conditions of Awards need not be
the same with respect to separate grants to Mr. Ergen.
(b) Award Agreements. Mr. Ergen will not have rights under an Award
granted to him unless and until an Award Agreement shall have been duly executed
on behalf of the Corporation.
A-6
(c) No Limit On Other Compensation Arrangements. Nothing contained in
the Plan shall prevent the Corporation or any Subsidiary from adopting or
continuing in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.
(d) No Right to Employment. The grant of an Award shall not be
construed as giving Mr. Ergen the right to be retained in the employ of the
Corporation or any Subsidiary, nor will it affect in any way the right of the
Corporation or a Subsidiary to terminate such employment at any time, with or
without cause. In addition, the Corporation or a Subsidiary may at any time
dismiss Mr. Ergen from employment free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.
(e) Assignability. No Award granted under this Plan, nor any other
rights acquired by Mr. Ergen under this Plan, shall be assignable or
transferable by him, other than by will or the laws of descent and distribution,
Title I of the Employee Retirement Income Security Act, or the rules promulgated
thereunder.
(f) Governing Law. The validity, construction and effect of the Plan or
any Award, and any rules and regulations relating to the Plan or any Award,
shall be determined in accordance with the laws of the State of Colorado.
(g) Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction
or would disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the purpose or intent of
the Plan or the Award, such provision shall be stricken as to such jurisdiction
or Award, and the remainder of the Plan or any such Award shall remain in full
force and effect.
(h) No Trust Or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Corporation or any Subsidiary and Mr. Ergen
or any other Person. To the extent that any Person acquires a right to receive
payments from the Corporation or any Subsidiary pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Corporation or any Subsidiary.
(i) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash shall be paid in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(j) Transfers and Leaves of Absence. Solely for the purposes of the
Plan: (a) a transfer of Mr. Ergen's employment without an intervening period
from the Corporation to a Subsidiary or vice versa, or from one Subsidiary to
another, shall not be deemed a termination of employment, and (b) if Mr. Ergen
is granted in writing a leave of absence he shall be deemed to have remained in
the employ of the Corporation or a Subsidiary, as the case may be, during such
leave of absence.
(k) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
Section 10. Effective Date of the Plan.
The Board of Directors adopted the Plan on April 2, 2002 to become
effective on May 6, 2002, subject to approval by the stockholders of the
Corporation at the 2002 annual stockholder meeting.
A-7
Section 11. Term of the Plan.
The Plan shall continue until the Plan shall have been discontinued or
terminated as provided in Section 7(a), provided that no Incentive Stock Options
shall be granted after the tenth anniversary of the date the stockholders of the
Corporation approve the Plan. However, unless otherwise expressly provided in
the Plan or in an applicable Award Agreement, any Award theretofore granted may
extend beyond the termination of the Plan, and the authority of the Committee
provided for hereunder with respect to the Plan and any Awards, and the
authority of the Board of Directors of the Corporation to amend the Plan, shall
extend beyond the termination of the Plan.
A-8
ECHOSTAR COMMUNICATIONS CORPORATION
5701 S. SANTA FE DRIVE
LITTLETON, COLORADO 80120
ADMISSION TICKET
ECHOSTAR COMMUNICATIONS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
May 6, 2002
10:00 a.m., MDT
Corporate Headquarters
5701 S. Santa Fe Drive
Littleton, Colorado 80120
PLEASE BRING THIS ADMISSION
TICKET TO THE MEETING WITH YOU.
THE BOTTOM PORTION OF THIS FORM IS THE PROXY CARD. Each proposal is fully
explained in the enclosed Notice of Annual Meeting of Shareholders and Proxy
Statement. To vote your proxy, please MARK by placing an "X" in the appropriate
box, SIGN and DATE the proxy. Then please DETACH and RETURN the completed proxy
promptly in the enclosed envelope.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Charles W. Ergen and David K. Moskowitz,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote as designated below, all Class A Shares, Class B Shares
and Series D Preferred Shares of EchoStar Communications Corporation held of
record by the undersigned on March 28, 2002, at the Annual Meeting of
Shareholders to be held on May 6, 2002, or any adjournment thereof.
1. ELECTION OF NINE DIRECTORS.
[ ] FOR all nominees listed below (except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for all the nominees listed below
O. Nolan Daines Peter A. Dea James DeFranco Michael T. Dugan
Cantey Ergen Charles W. Ergen Raymond L. Friedlob Jean-Marie Messier
David K. Moskowitz
(INSTRUCTION: To withhold authority to vote for an individual nominee,
cross out that nominee's name above.)
2. TO APPROVE THE ECHOSTAR COMMUNICATIONS CORPORATION 2002 CLASS B CEO
STOCK OPTION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING OR ANY ADJOURNMENT THEREOF.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE THIS PROXY WILL
BE VOTED FOR THE ELECTION OF EACH OF THE NINE (9) DIRECTORS SET FORTH ABOVE AND
FOR THE ADOPTION OF THE 2002 CLASS B CEO STOCK OPTION PLAN. THIS PROXY CONFERS
DISCRETIONARY AUTHORITY WITH RESPECT TO PROPOSALS NOT KNOWN OR DETERMINED AT THE
TIME OF THE MAILING OF THE NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO THE
UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders and Proxy Statement furnished herewith.
Dated: ,2002
----------------------------------
-----------------------------------------------
Signature
-----------------------------------------------
Signature if held jointly
Signatures should agree with the name(s)
stenciled hereon. Executors, administrators,
trustees, guardians and attorneys should
indicate when signing. Attorneys should submit
powers of attorney.
PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED PRE-ADDRESSED
ENVELOPE. THE TENDER OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF
YOU ATTEND THE MEETING OR TO SUBMIT A LATER DATED REVOCATION OR AMENDMENT TO
THIS PROXY ON ANY OF THE ISSUES SET FORTH ABOVE.