CNET » Topics » Equity Compensation Grants for New Hires and Awards Based Upon Performance

This excerpt taken from the CNET DEF 14A filed Apr 30, 2007.

Equity Compensation Grants for New Hires and Awards Based Upon Performance

In connection with our annual and periodic compensation reviews, named executive officers traditionally receive an annual stock option award based upon performance at the same time that other employees receive annual stock option awards based upon performance, generally in late July or early August. The Committee believes that stock options are an important part of overall total compensation because they align the interests of named executive officers and other employees with those of stockholders and create incentives to maximize long-term stockholder value. We have maintained a compensation structure that ties a significant portion of compensation to individual and business performance.

We believe that equity awards have played, and will continue to play, a key role in enabling the Company to achieve its growth objectives. First, they permit us to attract, retain and motivate outstanding and highly skilled individuals in an industry where employees with experience in online media and commerce are in high demand and in a geographic region where many of our competitors have devoted significant resources to attracting, hiring and retaining talented employees. Second, equity compensation aligns the interests of management and employees with the stockholders to create long-term stockholder value. To date, we have exclusively granted stock options and have not granted any full value awards (such as restricted stock or restricted stock units) based on our belief that stock options effectively align the interests of employees and stockholders.

In determining the total amount of stock options to be granted annually to all recipients, including those to named executive officers, the Committee considers each employee’s performance, responsibility and overall compensation; the amount of stock options already held by employees and named executive officers; potential dilution to net income; the number of stock options outstanding and available for grant; the number of shares of common stock outstanding; our performance during the immediately preceding year; and option granting practices (such as grant rates) at peer companies and competitors.

In considering these factors, we targeted a gross grant rate for 2006 under our equity compensation plans of between 2.0% and 3.0% of the number of shares outstanding as of the beginning of the year which we believed to be consistent with other companies in our industry. Certain 2006 stock option grant data is set forth below. The percentages below are based on the number of shares outstanding as of December 31, 2005.

 

   

Stock option grants to all recipients: 5,027,774, or 3.3% of shares outstanding, including a promotional stock option grant of 1,500,000 shares to Mr. Ashe upon his appointment to Chief Executive Officer. Excluding Mr. Ashe’s grant, the percentage would be 2.3% of shares outstanding.

 

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Stock option grants to named executive officers: 1,875,000 shares, or 1.2% of shares outstanding, including Mr. Ashe’s stock option grant mentioned above. This figure does not include a promotional stock option grant of 300,000 shares approved in December 2006 for Mr. Mazzotta that was effective on January 5, 2007. Please see the “Employment Contracts, Termination of Employment and Change of Control Arrangements” section of this proxy statement for more information about these grants to Mr. Ashe and Mr. Mazzotta.

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