Prior to the Distribution, the Company’s employees participated in 21CF’s equity plans. 21CF had plans authorized to grant equity awards of 21CF stock to the Company’s employees. The equity-based compensation expense recorded by the Company, in the periods presented, includes the expense associated with the employees historically attributable to the Company’s operations, as well as the expense associated with the allocation of equity-based compensation expense for corporate employees.

In connection with the Distribution, the Company adopted the Fox Corporation 2019 Shareholder Alignment Plan (the “SAP”), under which equity-based compensation, including stock options, stock appreciation rights, restricted and unrestricted stock, RSUs and other types of FOX equity awards may be granted. The Company’s officers, directors and employees are eligible to participate in the SAP. The maximum number of shares of Class A Common Stock that may be issued under the SAP is 65 million shares. As of March 31, 2019, the remaining number of shares of Class A Common Stock available for issuance under the SAP was approximately 59.5 million.

In connection with the Distribution, 21CF performance stock units (“PSUs”) scheduled to vest in 2019 and 50% of 21CF retention RSUs were accelerated and paid out in shares of 21CF class A common stock in March 2019. 21CF RSUs and PSUs scheduled to vest after 2019 were converted into new equity awards of the Company, using a formula designed to preserve the intrinsic value of the awards immediately prior to the Distribution. Converted awards have the same terms and features as the original 21CF awards, except for the PSUs, which were converted into RSUs that are subject only to time-based vesting conditions and are no longer subject to achievement of applicable performance goals. In addition, the remaining 50% of the 21CF retention RSUs were converted into new FOX RSUs and Disney RSUs on the same pro rata basis accorded to shareholders of 21CF common stock in the mergers contemplated by the 21CF Disney Merger Agreement. All of the converted FOX RSUs were granted under the SAP and the approximately 5.5 million shares of Class A Common Stock that may be issued under the converted FOX RSUs do not count against the maximum number of shares that may be issued under the SAP described above.

Awards granted under the SAP (other than a stock option or stock appreciation right) entitle the holder to receive Dividend Equivalents (as defined in the SAP) for each regular cash dividend on the common stock underlying the award paid by the Company during the award period. Dividend equivalents granted with respect to equity awards will be accrued during the applicable vesting period and such dividend equivalents will vest and be paid only if and when the underlying award vests.

RSUs are awards that represent the potential to receive shares of Class A Common Stock at the end of the applicable vesting period, subject to the terms and conditions of the SAP, the applicable award documents and such other terms and conditions as the Compensation Committee of the Board of Directors of FOX (the “Compensation Committee”) may establish. RSUs awarded under the SAP are fair valued based upon the fair market value of Class A Common Stock on the grant date. Any person who holds RSUs shall have no ownership interest in the shares of Class A Common Stock to which such RSUs relate until and unless shares of Class A Common Stock are delivered to the holder.

In March 2019, in connection with the Distribution, the Compensation Committee granted approximately 2.4 million RSUs under the SAP, which will primarily vest in two tranches. Approximately 50% of the RSUs will vest on June 15, 2020 and the remaining RSUs will vest on June 15, 2021, in each case, subject to a service requirement through the vesting dates.

The following table summarizes the activity related to target PSUs and RSUs granted to the Company’s employees to be settled in stock (PSUs and RSUs in thousands):

	For the nine months ended March 31, 2019
	Number of shares			Weighted average grant- date fair value⁽^a⁾
PSUs and RSUs
Unvested units at beginning of the year		10,896		$	29.77
Granted prior to the Distribution		1,565			46.11
Vested		(4,882	)		29.54
Cancelled		(3,121	)		29.73
Net units granted in conversion, as a result of the Separation⁽^b⁾		1,011		N/A
Subtotal of unvested units after the conversion		5,469			29.17
Granted after the Distribution		2,405			40.14

Unvested units at the end of the period⁽^c⁾		7,874		$	32.52

⁽^a⁾

The weighted average grant date fair value prior to the Distribution represents the fair value of awards granted with respect to 21CF Class A Common Stock prior to the conversion of the awards to FOX equity awards. The weighted average grant date fair value of the unvested units after the conversion represents the fair value of awards using the applicable conversion ratio.

⁽^b⁾

As disclosed above, 21CF RSUs and PSUs scheduled to vest after 2019 were converted into new equity awards of the Company, using a formula designed to preserve the value of the awards immediately prior to the Distribution. In addition, the 50% of the 21CF retention RSUs that were not accelerated and paid out in shares of 21CF class A common stock were converted into new FOX RSUs and Disney RSUs on the same pro rata basis accorded to shareholders of 21CF common stock in the mergers contemplated by the 21CF Disney Merger Agreement.

⁽^c⁾	The intrinsic value of these unvested RSUs was approximately $290 million as of March 31, 2019.

Stock options are awards that entitle the holder to purchase a specified number of shares of Class A Common Stock at a specified price for a specified period of time and become exercisable over time, subject to the terms and conditions of the SAP, the applicable award documents and such other terms and conditions as the Compensation Committee may establish. Stock Options granted under the SAP were fair valued using a Black-Scholes option valuation model that uses the following assumptions: (i) expected volatility was based on historical volatility of 21CF and the Company’s peer group over the expected term of the stock options; (ii) expected term of stock options granted was determined by analyzing historical data of the Company’s peer group and represented the period of time that stock options granted were expected to be outstanding; (iii) risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award; and (iv) expected dividend yield.

In March 2019, in connection with the Distribution, the Compensation Committee granted approximately 3.1 million stock options with an exercise price of $40.26 and grant-date fair value of $8.67 under the SAP. The stock options will vest 50% on June 15, 2020 and 50% on June 15, 2021, in each case, subject to a service requirement through the vesting dates. The options will expire approximately seven years from the grant date.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for grants during the nine months ended March 31, 2019:

	For the three months ended March 31,				For the nine months ended March 31,
	2019		2018		2019		2018
	(in millions)
Equity-based compensation^(a)	$	38	$	41	$	71	$	69

Intrinsic value of all settled equity-based awards	$	130	$	-	$	240	$	31

^(a)	Prior to the Distribution, equity-based compensation included allocated expense for both executive directors and corporate executives of 21CF, allocated using a proportional allocation driver, which management has deemed to be reasonable.

As of March 31, 2019, the Company’s total estimated compensation cost, not yet recognized, related to non-vested equity awards held by the Company’s employees for all plans presented was approximately $210 million and is expected to be recognized over a weighted average period between two and three years. For awards granted under the SAP that have only service requirements and a graded vesting schedule, the Company recognizes this compensation cost on a straight-line basis over the requisite service period for the entire award.