|
|
|
No Liberal Share Recycling. The 2020 Plan contains responsible share recycling provisions. Any shares surrendered or withheld to satisfy tax withholding on awards or to pay the exercise price or purchase price of
any award will not become available for future grant or sale under the 2020 Plan. The 2020 Plan also provides that the gross number of stock appreciation rights exercised or settled in Shares will not become available for future issuance under the
2020 Plan. |
Additional Information Regarding Share Increase
Compared with the 2011 Plan, the 2020 Plan would increase the number of Shares reserved for issuance by 17,500,000 new Shares, which would help ensure that a sufficient
reserve of Shares remains available for issuance to allow the Company to use equity incentives to attract, retain and motivate key employees, consultants and directors, who are essential to the Companys long-term growth and financial success.
The Company relies on equity incentives in the form of stock options, and the Board, the Committee and management believe that these equity incentives are necessary for the Company to maintain a competitive equity compensation program. The 2011 Plan
was designed to be effective for a maximum term of 10 years, with the intent of having the equity incentive share reserve replenished thereafter. It is difficult to precisely estimate when the shares under the 2011 Plan will be exhausted, since the
number of shares granted under our program is dependent on our stock price, employee population and the participation of employees in allocating compensation to stock options. Given the importance of offering competitive equity compensation to our
employees, directors and other service providers, the Company proposes that no more than 41,724,628 Shares may be issued under the 2020 Plan, which is the sum of the 17,500,000 new Shares, plus the number of Shares available under the 2011 Plan for
additional award grant purposes as of the Effective Time, plus the aggregate number of Shares subject to outstanding awards under the 2011 Plan as of the Effective Time to account for the maximum potential amount of Returning Shares.
In determining the number of Shares to reserve under the 2020 Plan, management and the Committee, in consultation with an
independent compensation consultant, evaluated share usage, dilution, overhang, burn rate, and the existing terms of outstanding equity awards, as discussed further in the Share Usage, Dilution, Burn Rate, and Overhang section below. The
Board, the Committee and management believe the increased dilution resulting from the approval of the 2020 Plan remains consistent with stockholder interests, in particular since our three-year average dilution rate of 0.55% is extremely low as
compared to S&P 500 Media and Entertainment companies.
Incentive Equity Awards in Fiscal 2019
The Company grants stock options to more than 82% of all our employees annually. In fiscal 2019, we granted stock options covering 2,588,380 Shares under the 2011 Plan,
of which awards for 466,961 Shares, or 18%, were granted to our named executive officers; awards for 23,431 Shares, or 1%, were granted to our non-employee directors; and awards for 2,097,998 Shares, or 81%,
were granted to our broad-based employee population. We did not grant any other form of equity awards or equity-based awards.
As of December 31, 2019, the
total number of Shares underlying outstanding options under the 2011 Plan was 18,658,946. The outstanding options have exercise prices ranging from $7.79 to $398.18, and the aggregate intrinsic value of these options that were in the money on
December 31, 2019 was $3,562,686,526. The outstanding options generally are vested on the date of grant, pursuant to the Companys monthly option grant program. Vested stock options can be exercised up to ten years following grant
regardless of employment status. The 2020 Plan was adopted on the Board Approval Date and no awards were granted thereunder prior to the Annual Meeting.
Equity
Grants in Fiscal 2020
Pursuant to past practice, on the first trading date of each month in fiscal 2020, the Company granted vested options to our named
executive officers. For such options, the weighted average exercise price