United states securities and exchange commission



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On August 30, 2011, the Company entered into an agreement with certain shareholders, whereby the Company repurchased 11,040,493 of its common shares at a price of $7.00 per share, for aggregate cash consideration of $77.1 million . The shares repurchased under the agreement are included in treasury shares in the accompanying consolidated balance sheets and statements of shareholders' equity.

On October 18, 2011, pursuant to the terms of an underwriting agreement, certain selling shareholders sold an aggregate of 19,201,000 common shares of the Company, at a price of $7.00 per share. The Company did not receive any proceeds from the sale of the shares in the offering. The Company paid the underwriter a fee of approximately $3.4 million at the close of the transaction.



(b) Share-Based Compensation

The Company has two stock option and long-term incentive plans that permit the grant of stock options and other equity awards to certain employees, officers, non-employee directors and consultants for up to 23.0 million shares of the Company’s common stock.

      Employees’ and Directors’ Equity Incentive Plan (the “Plan”): The plan provides for the issuance of up to 9.0 million shares of common stock of the Company to eligible employees, directors, and service providers. Of the 9.0 million common shares allocated for issuance, up to a maximum of 250,000 common shares may be issued as discretionary bonuses in accordance with the terms of a share bonus plan. No new awards were granted under the Plan subsequent to the 2004 Annual General Meeting of Shareholders. Any remaining shares available for additional grant purposes under the Plan may be issued under the 2004 Plan. At March 31, 2012 , 101,351 common shares were available for grant under the 2004 Plan.

      2004 Performance Incentive Plan (the “2004 Plan”): The 2004 Plan provides for the issuance of up to an additional 14.0 million common shares, stock options, share appreciation rights, restricted shares, share bonuses or other forms of awards granted or denominated in common shares of the Company to eligible employees, directors, officers and other eligible persons through the grant of awards and incentives for high levels of individual performance and improved financial performance of the Company. The per share exercise price of an option granted under the 2004 Plan generally may not be less than the fair market value of a common share of the Company on the date of grant. The maximum term of an option granted under the 2004 Plan is ten years from the date of grant. At March 31, 2012 , 1,882,232 common shares were available for grant under the 2004 Plan.

The Company accounts for stock-based compensation in accordance with accounting standards that require the measurement of all stock-based awards using a fair value method and the recognition of the related stock-based compensation expense in the consolidated financial statements over the requisite service period. Further, the Company estimates forfeitures for share-based awards that are not expected to vest. As stock-based compensation expense recognized in the Company’s consolidated financial statements is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures.

The Company recognized the following share-based compensation expense during the years ended March 31, 2012 , 2011 , and 2010 :

 
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LIONS GATE ENTERTAINMENT CORP.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)








































 

Year Ended

 

Year Ended

 

Year Ended

 

March 31,
2012


 

March 31,
2011


 

March 31,
2010


 

(Amounts in thousands)

Compensation Expense:

 

 

 

 

 

Stock Options

$

179




 

$

2,644




 

$

3,213




Restricted Share Units and Other Share-based Compensation

9,546




 

26,032




 

14,385




Stock Appreciation Rights

15,289




 

3,829




 

1,225




Total

$

25,014




 

$

32,505




 

$

18,823



On June 30, 2010, certain unvested equity awards of certain executive officers immediately vested as a result of the triggering of “change in control” provisions in their respective employment agreements. For purposes of the employment agreements with such executive officers, a “change in control” occurred on June 30, 2010, when a certain shareholder became the beneficial owner of 33% or more of the Company’s common shares. As a result, the Company recognized $21.9 million in additional compensation expense during the year ended March 31, 2011 , which is included in the table above.

There was no income tax benefit recognized in the statements of operations for share-based compensation arrangements during the year ended March 31, 2012 ( 2011 - nil ; 2010 - nil ).

Stock Options

A summary of option activity under the various plans as of March 31, 2012 , 2011 and 2010 and changes during the years then ended is presented below:






































































 

 

Number of

 

Number of

 

Total

Number of

 

Weighted-

Average

Exercise

 

Weighted

Average

Remaining

Contractual

 

Aggregate

Intrinsic

Value as of

March 31,

Options:

 

Shares (1)

 

Shares (2)

 

Shares

 

Price

 

Term In Years

 

2012

Outstanding at April 1, 2009

 

3,299,166




 

600,000




 

3,899,166




 

$

9.75




 

 

 

 

Granted

 

110,000




 






 

110,000




 

5.41




 

 

 

 

Exercised

 






 






 






 






 

 

 

 

Forfeited or expired

 

(649,166

)

 






 

(649,166

)

 

8.97




 

 

 

 

Outstanding at March 31, 2010

 

2,760,000




 

600,000




 

3,360,000




 

$

9.75




 

 

 

 

Granted

 






 






 






 






 

 

 

 

Exercised

 






 






 






 






 

 

 

 

Forfeited or expired

 

(50,000

)

 






 

(50,000

)

 

10.00




 

 

 

 

Outstanding at March 31, 2011

 

2,710,000




 

600,000




 

3,310,000




 

$

9.75




 

 

 

 

Granted

 

250,000




 






 

250,000




 

13.80




 

 

 

 

Exercised

 

(53,332

)

 

(350,000

)

 

(403,332

)

 

8.73




 

 

 

 

Forfeited or expired

 






 






 






 






 

 

 

 

Outstanding at March 31, 2012

 

2,906,668




 

250,000




 

3,156,668




 

$

10.20




 

5.12




 

$

11,738,678




Outstanding as of March 31, 2012, vested or expected to vest in the future

 

2,904,835




 

250,000




 

3,154,835




 

$

10.20




 

5.12




 

$

11,723,070




Exercisable at March 31, 2012

 

2,620,002




 

250,000




 

2,870,002




 

$

9.95




 

4.67




 

$

11,396,516




____________________________







(1)

Issued under our long-term incentive plans.










(2)

On September 10, 2007, in connection with the acquisition of Mandate Pictures (see Note 15), two executives entered into employment agreements with LGF. Pursuant to the employment agreements, the executives were granted an aggregate of 600,000 stock options, all of which have vested. The options were granted outside of our long-term incentive plans.

The fair value of each option award is estimated on the date of grant using a closed-form option valuation model (Black-Scholes) based on the assumptions noted in the following table. Expected volatilities are based on implied volatilities from
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