Go Daddy 2015 Annual Report Download - page 105

Table of Contents
GoDaddy Inc.
Notes to Consolidated Financial Statements
(In millions, except share amounts which are reflected in thousands and per share amounts)
We primarily used the net IPO proceeds to make certain payments to the Sponsors and Bob Parsons as described in Note 15 and to repay the senior note
payable to Holdings and all amounts drawn on our revolving credit loan as described in Note 9 .
Distribution to Holders of LLC Units
In May 2014, Desert Newco’s board of directors authorized a $350.0 million distribution to holders of LLC Units and to holders of certain assumed options,
including amounts to be paid in future periods as certain restricted units vest. During 2015 and 2014 , Desert Newco paid $0.5 million and $349.0 million of the
distribution, respectively. Holders of other equity-based awards received an approximate $2.60 per unit adjustment to the exercise price of their awards, in
accordance with the antidilution provisions of the Desert Newco, LLC 2011 Unit Incentive Plan (the 2011 Plan), which is equivalent to the per unit amount of the
cash distribution. These equitable adjustments preserved the intrinsic value among all equity-based awards. The distribution was considered an equity restructuring,
and accordingly, modification accounting was applied. We evaluated whether any additional equity-based compensation expense would need to be recognized, to
the extent the fair value of any modified awards plus the cash to be received (if applicable) exceeded the fair value of the original awards before the modification.
No material additional equity-based compensation expense was required as a result of the modification.
The equity restructuring was in accordance with a pre-existing contractual antidilution provision; therefore, the cash paid did not impact our earnings per
share computation and the changes to the options not receiving a cash award were accounted for by increasing the denominator in our earnings per share
computation using the treasury stock method.
6. Equity-Based Compensation Plans
Our Board adopted the 2015 Equity Incentive Plan (the 2015 Plan), which became effective on March 31, 2015 upon the effectiveness of the Registration
Statement. We reserved a total of 6,050 shares of Class A common stock for issuance pursuant to the 2015 Plan. In addition, the shares reserved for issuance
include 4,235 shares reserved but unissued under the 2011 Plan plus up to 28,133 shares rolled over from the 2011 Plan and from certain other option plans
assumed in connection with acquisitions. The number of shares reserved for issuance will be increased automatically on January 1st of each year, beginning in
2016 , by a number equal to the least of (i) 20,571 shares, (ii) 4% of the total shares of all classes of common stock outstanding as of the last day of the preceding
year or (iii) such other amount as may be determined by our Board. As of December 31, 2015, 9,581 shares were available for issuance as future awards under the
2015 Plan.
Our Board adopted the 2015 Employee Stock Purchase Plan (the ESPP), which became effective on March 31, 2015 upon the effectiveness of the
Registration Statement. We reserved a total of 2,000 shares of Class A common stock for issuance pursuant to the ESPP. The number of shares reserved for
issuance will be increased automatically on January 1st of each year, beginning in 2016 , by a number equal to the least of (i) 1,000 shares, (ii) 1% of the total
shares of all classes of common stock outstanding as of the last day of the preceding year or (iii) such other amount as may be determined by our Board. As of
December 31, 2015, 1,325 shares were available for issuance as future awards under the ESPP.
We grant options at exercise prices equal to the fair market value of our Class A Common Stock on the grant date. We recognize the grant date fair value
of equity-based awards as compensation expense over the required service period of each award, taking into the account the probability of our achievement of
associated predetermined performance targets.
We apply the straight-line attribution method to recognize equity-based compensation expense associated with awards not subject to graded vesting. For
awards subject to graded vesting and performance based awards, we recognize compensation expense separately for each vesting tranche. We also estimate when
and if performance based awards will be earned. If an award is not considered probable of being earned, no amount of compensation expense is recognized. If the
award is deemed probable of being earned, compensation expense is recorded over the estimated service period.
We grant options vesting solely upon the continued employment of the recipient (Time Options) as well as options vesting upon the achievement of
predetermined annual or cumulative financial-based targets coinciding with our fiscal year (Performance Options). According to the award terms, Time Options
vest equally on each of the four or five successive anniversaries of the vesting commencement date, and Performance Options vest based on the achievement of
predetermined performance targets in each of the successive four or five fiscal years. In the event the performance targets are not achieved in any given year, the
Performance Options for such year will subsequently vest upon the achievement of cumulative performance targets in the following fiscal year. Vesting of the
Time Options and Performance Options is also subject to acceleration in the
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