Twenty-First Century Fox 2006 Annual Report Download - page 95

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News Corporation
Notes totheConsolidated Financial Statements (CONTINUED)
NOTE 13. EQUITY BASED COMPENSATION
News Corporation 2005 Long-Term Incentive Plan
The Company has adopted the News Corporation 2005 Long-Term Incentive Plan (the “2005 Plan”) under which equity
based compensation, including stock options, restricted stock, restricted stock units (“RSUs”) and other types of awards,
may be granted. Such equity grants under the 2005 Plan will generally vest over a four-year period and expire ten years
from the date of grant. The Company’s employees and directors are entitled to participate in the 2005 Plan. The
Compensation Committee of the Board (the “Compensation Committee”) will determine the recipients, type of award to
be grantedandamounts of awards to be grantedunder the 2005 Plan. Stock options awarded under the 2005 Plan will be
granted at exercise prices which are equal to or exceed the marketprice at the date of grant. The 2005 Plan replaced the
Company’s News Corporation 2004 Stock Option Plan under which no additional stock options will be granted. The
maximum number of shares of Class ACommon Stock that may be issued under the 2005 Plan is 165 million shares. The
remaining shares available for issuance underthe2005 Plan at June 30, 2006 were approximately 149 million. The Com-
pany will issue newshares of Class ACommon Stock for awardupon exercises of stock options or vesting of stock-settled
RSUs.
The fair value of equity based compensation under the 2005 Plan will be calculatedaccording to the type of award
issued.
Stock options and Stock Appreciation Rights (“SARs”) issued under the 2005 Plan or under the NDS Group plc execu-
tive share option schemes will be fair valued using aBlack-Scholes option valuation method that uses the following
assumptions: expected volatility is based on the historical volatility of the Class ACommon Stock; expected term of awards
granted is derived from the historical activity of the Company’s awards and represents the period of time that the awards
granted are expected to be outstanding; weighted average risk-free interest rate is an average of the interest rates of U.S.
government bonds with similar lives on the datesofthe stock option grants; and dividend yield was calculated as an aver-
age of atenyear historyofthe Company’s yearly dividend divided by the fiscal year’s closing stock price.
RSU awards are grants that entitle the holderto shares of Class ACommon Stock as the award vests, subject tothe2005
Plan andsuch other terms and conditions as the Compensation Committee may establish. RSUs issued under the 2005 Plan
are fair valued based upon the fair market value of Class ACommon Stock on the grant date. Any person who holds RSUs
shall have no ownership interest in the shares of Class ACommon Stock to which such RSUs relate until and unless shares
of Class ACommon Stock are delivered to the holder. All shares of Class ACommon Stock reserved for cancelled or for-
feited stock-based compensation awards or for awards that are settled in cash become available for future grants. Certain
RSU awards are settled in cash and are subject toterms and conditions of the 2005 Plan andsuch other terms and con-
ditions as the Compensation Committee may establish. During the year ended June 30, 2006, the Company issued
16.2 million RSUs which primarily vest over four years. The RSUs are payable in shares of the Class ACommon Stock, upon
vesting, except for approximately 3.0 million RSUs that will be settled in cash. During the year ended June 30, 2006,
approximately 295,000 RSUs vested, of which approximately 125,000 were settled in stock and 170,000 were settled in
cash.
The following table summarizestheactivity related to the Company’s RSUs to be settled in stock:
Restricted
Stock Units
Weighted
Average
Grant-Date
Fair Value
(Shares in thousands)
Unvested restricted stock units at July 1, 2005 —$—
Granted 13,187 15.38
Vested (125) 16.93
Cancelled (201) 15.24
Unvested restricted stock units at June 30, 2006 12,861 $15.37
News Corporation 2004 Stock Option Plan and 2004 Replacement Stock Option Plan
As a result of the Reorganization, all preferred limited voting ordinary shares which the Company issued stock options over
were cancelled and holders received in exchange stock options for shares of Class ACommon Stock of the Company on a
one-for-two basis with no change in the original terms under the News Corporation 2004 Stock Option Plan and2004
Replacement Stock Option Plan (collectively, the “2004 Plan”). In addition, all other outstanding stock options to purchase
preferred limited voting ordinary shares were adjusted to be exercisable into shares of Class ACommon Stock subject tothe
one-for-two share exchange. Prior to the Reorganization, stock options were granted to employees with Australian dollar
exercise prices.
ANNUAL REPORT 95