Express Options Forfeiture Summary Report Updated as of: March 11, 2010 Contents 1. Overview... 2 2. Differences between 12.00 and prior version (10.00)... 2 3. Report Parameters... 2 4. Calculations... 5 5. Specific Scenario Handling... 7 6. About this Document... 8 Last Updated: March 2010 Page 1 of 8
1.Overview The US GAAP Accounting Standards Codification 718 (ASC 718), formally known as Statement of Financial Accounting Standards No. 123R (SFAS 123R) requires that companies calculate and disclose in financial statements the compensation cost of stock options. This cost, or expense, is based on the fair value of those options at grant date, as determined using an acceptable option pricing model (e.g., Black- Scholes, binomial, etc.). The fair value-based expense of the options is then recognized over the vesting period. When unvested shares are forfeited, a company may take an adjustment to expense that is already recognized for those shares. The Forfeiture Summary report in Express Options provides information on unvested shares, SARS, restricted stock, and performance stock that have been forfeited during a specified time period, along with the grant-date fair values, aggregate option values, and deferred tax asset values calculated for the forfeited shares. 2.Differences between 12.00 and prior version (10.00) The report has been updated to include PSA and PSU awards. (M) and (V) have been added to the Grant Type column to show if the award has a Market Condition (M) or is a Variable award (V). Unvested Canceled column has been added to the report. Ignore Retirement Eligibility parameter has been added as a selection when running the report. Cancel Order column can now display an additional value of Tranche. 3.Report Parameters The Forfeiture Summary report provides details of grants that have cancellations that result in forfeiture of shares, provided the cancellation is not the result of a transfer, vested cancellation, or an expiration 1 of shares. Before running the Forfeiture Summary report; you should run the Cancel Expired Grants function and the Missing Valuation report to ensure that all required data has been entered into the system. The Forfeiture Summary report returns data based on the following user-defined criteria: General Tab Grants Included From / To range Cancellation Date From / To range Deferred Tax Asset Includes grants with a grant date later than or equal to the report From Date and earlier than or equal to the report To Date. Includes grants with a grant date later than or equal to the report From Date and earlier than or equal to the report To Date. Determines what tax rate to use to calculate period DTA. Use Corporate Tax Rate: The report will use the corporate tax rate that is attached to each optionee. Breakout Grants By Override: The report will use the user-defined percentage that is entered at the time the report is being run. This control allows the user to specify grouping of data on the report by Plan, Grant Date, Grant Codes, or Optionee data, including Optionee Codes. You can select up to two levels of grouping. These selections are optional and, if not selected, the grants are listed in order of Cancellation Date. 1 The grant will continue to appear in the report after it has expired until the Cancelled Expired Grants function is invoked. Last Updated: March 2010 Page 2 of 8
Include Grants with no FAS Valuations Ignore Retirement Eligibility Plan Tab Plan Selection Include Expired Plans Grant Types Grant Sub Types Performance Optionee Tab Select All Optionees Listed Select Individual Optionee Employee / Non- Employee Optionees Selected / Excluded Filter This control allows the user to specify if grants that have not had a fair value calculated (missing a valuation) should appear on the report. When selected, the impact of retirement eligibility is completely ignored. Amortization of an award is applied as if retirement eligibility was not enabled on a plan level and as if no retirement eligible dates were on file for the optionee or grant. You can select one, multiple or all plans for inclusion of grants in the report. Defaults to All Plans selected. When this box is selected, expired plans appear in the Plan dialog box. The default value is set under the System Parameters menu. The selection allows the user to specify grant types. Check box values ISO, NQ, PSA, PSU, RSA, RSU, SAR. Defaults to All. The selection allows the user to specify grant sub types. Checkbox Values: /C (cash-settled PSU, RSU or SARs), /RL, /$, /R, /S (stock-settled PSU, RSU or SARs), /SAR, /XFR Defaults to All. This selection allows the user to specify to include Variable Awards, Non- Variable Awards, Awards with a Market Condition, or Awards without a Market Condition. Defaults to All selected. Defaults to selected. If selected, report includes all optionees displayed in the optionee selection list. If not selected, you can choose specific optionees to be included on the report. You can enter an optionee name / ID to select for inclusion on the report. Employee designation is based upon how the Employee field is completed for each optionee. When the Employee field is checked, this means the optionee is flagged as an employee; if this box is not checked, the optionee is considered a non-employee. Defaults to Both. Allows the inclusion or exclusion of the specific optionees selected. Allows you to default to include active / terminated or both in the optionee list presented. Default value matches selections in the System Parameters > Optionee Parameters menu. Allows you to sort the optionee list by last name or optionee ID. Allows you to include optionees and/or transferees. Last Updated: March 2010 Page 3 of 8
Codes Tab Code Types Available Codes Selected Codes and applied criteria Vesting Tab Select All Vesting Schedules Listed Select Individual Vesting Schedule Vesting Schedules Selected / Excluded Include Special Vesting Include Inactive Schedules Used to filter grants and or optionees to include on the report. You can filter by creating logic statements using AND/OR, NOT and parenthesis to filter by multiple codes. You can create multiple logic statements. You can use the following codes/fields for filtering: o Corporate Tax Code o Cost Center o Country of Citizenship o Country of Residence o Department o Grant 1-10 o Language o Location o Officer o Subsidiary o Title o User 1-10 Defaults to All. Upon selection of Code Types, list box populates with all available codes for that code type. User can choose to select all, or click on an individual code and choose Select. Defaults to All. Displays the specific codes selected for inclusion or exclusion on the report. Defaults to display specific inclusion. Defaults to Select All Vesting Schedules Listed. If selected, report includes all vesting schedules displayed in the list. If not selected, you can choose specific vesting schedules to be included on the report. User can enter a vesting schedule name to select for inclusion on the report. Allows the inclusion or exclusion of the specific vesting schedules selected. When selected All Vesting Schedules Listed is deselected. Defaults to Include Special Vesting. Allows users to include grants with special vesting. Allows users to include or exclude vesting schedules that have the Schedule is Active checkbox on the Vesting Schedule unchecked. Last Updated: March 2010 Page 4 of 8
4.Calculations The data fields and calculations displayed on this report include: Report Field Field Explanation/Calculation Company Name Report Title For Grants With Assumptions Between For Cancellations Between FAS 123R Adoption Date Group Details Cancellation Date Cancel Order Grant Date Grant ID Grant Type Name of the company for which the report is being run. This is the Company Name in the Company Profile Value is always Forfeiture Summary Report. Grant date range of grants to be included in the report. Date range is specified on the input screen. Cancellation date range for transactions to be included on the report. Date range is specified on the input screen. That is set in the Financial Parameters screen as the company s FAS123R Adoption Date. Each group for the selected grant break-out(s) has a header line, with the details listed below followed by sub-totals for each group. This will only appear if the user selected a Breakout value on the report parameter page. The date of the cancellation. The order in which shares were cancelled FIFO, First in First Out. This selection will cancel shares from earlier vesting increments first. LIFO, Last in First Out. This selection will cancel shares from the last vesting increments first. Tranche, this selection will display when there is a cancellation of shares due to a below target payout. The date the grant was issued. Displays the Grant ID from the Optionee table Grant type issued, ISO, NQ, PSA, PSU, RSA, RSU, SAR Plan ID Granted (M) and/or (V) will show in this column, if the award has a Market Condition (M) or is a Variable award (V). Plan ID from which the grant(s) were issued Report includes only grants that have a forfeiture. o Total Options Granted = Granted Options associated with each cancel record o If a grant has multiple cancellations on different dates, each cancellation date will be displayed as a separate line item for that grant o Options granted for each line item reflect total granted, but only count options granted from that grant once in the group totals. Example: Grant Date 1/1/09, 1000 shares granted Cancel date 1/15/09, 200 shares cancelled Cancel date 3/1/09, 100 shares cancelled Report displays each cancellation as a separate line item, showing Granted as 1000 for each. Total options granted in the group totals would equal 1000. Last Updated: March 2010 Page 5 of 8
Grant Price Canceled The price at which the grant was issued. Total number of shares canceled on a given date. The only cancellation records that appear on this report are those that have resulted in a forfeiture of shares. The cancellation record could have resulted in a partial forfeiture, in which case the Canceled column will show the total number of shares canceled as part of that transaction. Unvested Canceled Forfeited o If a grant has multiple cancellations on different dates, each cancellation date is displayed as a separate line item for that grant. o Options granted for each line item will reflect total granted, but will only count options granted from that grant once in the group totals. Total number of unvested shares that are not considered forfeited. Shares that were canceled prior to vesting, but the cancellation date is after the retirement eligibility date. Shares that were canceled prior to a vesting date and had a market condition flagged on the cancellation record. Shares that were unvested at the time of cancellation. Note: Shares that have a market condition on the cancellation record are not considered forfeited Shares that are canceled after the retirement eligible date but before the vesting date are not considered forfeited. FASB Fair Value per share The fair value that was created for the grant. If grant has multiple option value, this field displays the text Multiple. Aggregate Fair Value Aggregate Value = Forfeited * Fair Value per Share Pct. of Grant Forfeited If Multiple Option Value was used to create Fair Value per Share, the fair value from the time period when the options would have vested is used. Reflects the percent that was forfeited for each cancellation record. o Forfeiture Percentage = (Forfeited / Options) x 100 Corporate Tax Rate Aggregate DTA Report Totals Total Granted Example: Grant of 100 shares, with 30 forfeited, forfeiture % would = 30% Displays the tax rate in effect as of the cancellation date. Tax rate is either the user-entered override rate or the rate stored in the Corporate Tax Rate table under the Financials menu. Aggregate Fair Value * Corporate Tax Rate Note: This value is only calculated for periods post the company s FAS 123R Adoption Date. Also, this value is not calculated for ISO awards unless said ISO award has become disqualified. Total granted for all grants that meet the selection criteria (only those grants with forfeitures included). Last Updated: March 2010 Page 6 of 8
Total Canceled Total Unvested Canceled Total Forfeited Aggregate Fair Value Pct. Of Grant Forfeited Total canceled shares for grants with forfeitures that meet the report criteria. Total unvested shares that are not considered forfeited grants with forfeitures that meet the report criteria. Total forfeited shares that meet the report criteria. Total Aggregate Fair Value for all forfeitures Total Forfeited / Total Granted Aggregate DTA Total Forfeiture Rate for Period Total Granted For Period Total Aggregate DTA Total Forfeited / Total Granted in Period * 100 Includes all grants issued within the dates selected, not just those with forfeitures. 5.Specific Scenario Handling Treatment of Terminations If, upon termination, there is no grace period and no acceleration of vesting, unvested shares are considered forfeited. If, upon termination, a grace period applies and vesting acceleration does occur, unvested shares are not considered forfeited. Those shares are considered immediately vested, and expire on their indicated expiration date if not exercised. If, upon termination, the schedule allows for vesting to continue for a specified grace period, those shares are not accelerated or vested immediately, but instead remain outstanding until the vesting date is reached, at which point they become vested/exercisable. If they are cancelled before that vest date is reached, they are considered forfeited. If they are not cancelled before the vest date is reached, they are considered outstanding. Calculation of Forfeited Shares and Acceleration of Vesting The Forfeiture Summary report calculates forfeitures and accelerated shares by looking at cancellation and termination dates, the internal system defined reason for the cancellation of shares, and whether or not there is a cancellation record on the same date as a termination. Cancellations can result from terminations, expiration, transfer, below target payout and manual cancellations. It is very important to process cancellations in a manner consistent with the reason for the cancellation. For example, if shares are to be canceled as a result of a termination, the Terminate Optionee function should be used to process those shares, not the Grant/Cancel function. Manually entering a cancellation using the Grant/Cancel feature and then processing a termination for the same date can result in incorrect forfeitures being reported on financial reports. Last Updated: March 2010 Page 7 of 8
6.About this Document If you have any questions regarding this information, please contact Support Services. 2010 Computershare Limited All rights reserved. Express Equity Suite, Express Stock Purchase, Express Options, Express Share Tracking, Express Desktop, Express Connect, Express API Server, and Transcentive e-forms are trademarks of Computershare "Transcentive" and World Records are registered trademarks of Computershare. Windows is a registered trademark of Microsoft Corporation in the United States and other countries. All other company and product names mentioned may be trademarks of the respective companies with which they are associated. Computershare makes a sincere effort to ensure the accuracy of the material. The content of this manual is furnished for informational use only, is subject to change without notice, and should not be construed as a commitment by Computershare. Computershare assumes no responsibility or liability for any errors or inaccuracies that may appear in this book. Except as permitted by such license, no part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means without the prior written permission of Computershare. Computershare Transcentive Two Enterprise Drive Shelton, CT 06484 USA General 203-944-7300 General Fax 203-944-7315 Support Services E-mail support@transcentive.com Consulting Services 203-944-7300 Internet / Solutions Central http://www.transcentive.com Last Updated: March 2010 Page 8 of 8