EFTA01378028.pdf

Grant date fair value of shares $ 238.28 $ 325.06 $ 418.68 Expected term (in years) 4.2 4.2 4.0 Expected volatility 41% 29% 28% Risk-free interest rate 0.8% 1.3% 1.3% Expected dividend yield —% —% —% In addition to the above assumptions, we also estimate a forfeiture rate to calculate stock-based compensation expense, which is based on an analysis of our historical forfeitures. We will continue to evaluate the appropriateness of the forfeiture rate based on our actual forfeiture experience, analysis of employee turnover and other factors. Changes in the estimated forfeiture rate can have a significant impact on our stock-based compensation expense as the cumulative effect of adjusting the forfeiture rate is recognized in the period in which the estimate is changed. If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made resulting in a decrease to the stock-based compensation expense recognized in our combined financial statements. If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made resulting in an increase to the stock-based compensation expense recognized in our combined financial statements. We wit continue to use judgment in evaluating the assumptions related to our stock-based awards on a prospective basis. As we continue to accumulate additional data related to our awards, we may have refinements to our estimates and forfeiture rates, which could materially impact our future stock-based compensation expense. Based on the Black-Scholes assumptions in the table above. the weighted average fair value of stock options granted during the years ended December 31. 2013 and 2014 and for the nine months ended September 30. 2015. are $79.57. $63.24 and $102.26. respectively. 97 Table of Contents Stock option grants and common stock valuations We granted stock options with the following exercise paces between January 1, 2014 and September 30, 2015CD: Number of awards granted Grunt date fair Grant deb yry_ ficereise pie* ($1 value per unit µ) January 20, 2014 144,534 5 319.76 S 319.76 February 11, 2014 163,375 $ 319.76 S 319.76 April 22, 2014 500 $ 319.76 S 319.76 May 27, 2014 1,000 $ 319.76 $ 319.76 June 9. 2014 300 $ 319.76 S 319.76 July 7, 2014 5,000 $ 319.76 $ 319.76 August 11, 2014 11300 $ 319.76 S 319.76 October 6, 2014 25.100 $ 393.90 S 393.90 February 11. 2015 345,150 $ 403.78 $ 403.78 June 15, 2015 26.445 $ 403.78 $ 403.78 September 17, 2015 199,500 $ 446.43 $ 446.43 (1) The nurrter or opt;COs c 14 r value per share tor Mese aware reflects informalon before swing eyed to the adjustments to be made in connecton with the recaptattzation d our equty many I odes prior to the completion of tors cdferrig and the cbstnbutees to be made by us to IC Prior to tits offering. these optons were and are settleable in shares of RC comrron stock having a value equal to the difference between the option exercise price and the fair market value of our common stock Upon completion of me offering, these options win be a4usted in accordance with thee terms and conditions to provide that the awards ale exercisable SOI shares of our coalman stock We are required to estimate the fair value of our common stock when performing fair value calculations with the Black-Scholes option-pricing model. The fair values of our common stock were approved by the Compensation and Human Resources Committee of the ?AC Board of Directors, or the IAC Committee, after consultation with IAC management and based on valuations prepared by IAC management and valuations prepared by an unrelated third party valuation advisory firm. The IAC Committee intended all options granted to be exercisable at a price per share not less than the per share fair value of our common stock on the grant date. In the absence of a public trading market of our shares. the IAC Committee exercised its reasonable judgment and considered numerous objective and subjective factors to determine what it believed to be the best estimate of the fair value of our shares. These factors generally included the following: our actual operating and financial performance, current business conditions and our financial projections: the market performance of comparable publicly-traded companies, recent valuations performed at periodic intervals by an unrelated third-party valuation advisory firm: and the U.S. capital market conditions. Estimates and assumptions will no longer be necessary to determine the fair value of our common stock once it begins trading. IAC management performed valuations of our company as of January 2014, February 2014, October 2014, February 2015. June 2015 and September 2015 The valuation advisory firm prepared valuations of our company as of January 1, 2014, February 1, 2015 and September 1. 2015. The dates of our valuation reports hap: ive.eov•An:Iiiws daW1575189,00010474691500643112226458^-talfintiI 1,9,2013 911:17 Ail) CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0075188 CONFIDENTIAL SONY GM_00221372 EFTA01378028