Ann: Change of Director's Interest Notice - William Johnson, page-13

In a cashless exercise facility for stock options, the process typically works as follows:

1. Exercise of Options: When an option holder decides to exercise their stock options, they notify their brokerage or company's stock plan administrator of their intent to exercise.

2. Calculation of Shares: The number of shares the option holder will receive is calculated based on the difference between the exercise price per option and the market value of the shares at the time of exercise. This market value is often determined using the volume-weighted average price of shares over a specified period, such as the five trading days prior to exercise.

3. Cashless Exercise: In a cashless exercise, the option holder doesn't need to pay the exercise price in cash upfront. Instead, they can use the value of their options to acquire shares. This is done by subtracting the exercise price per option from the number of shares they would receive, resulting in a "net" number of shares.

4. Purchase of Shares: The brokerage or stock plan administrator then purchases these net shares on behalf of the option holder. The funds required to purchase these shares are typically obtained through a loan or margin account provided by the brokerage.

5. Realization of Money: Money is realized from the exercise of these options in several ways:

   • If the option holder sells some or all of the acquired shares immediately, they receive cash from the sale.
   • If the option holder holds onto the shares, they can realize money by selling them at a later date when the market price is higher than the exercise price per option.

Overall, the cashless exercise facility allows option holders to exercise their stock options without the need for upfront cash payment, using the value of the options to acquire shares and potentially realize money through subsequent sales or holding of the shares.

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