Note 14 — Stock-Based Employee Compensation

The Company has three nonqualified stock option plans, the 1997 Plan, the 2004 Plan and the SCL Equity Plan, which are described below. The plans provide for the granting of stock options pursuant to the applicable provisions of the Internal Revenue Code and regulations.

LVSLLC 1997 Fixed Stock Option Plan

The 1997 Plan provides for 19,952,457 shares (on a post-split basis) of common stock of LVSLLC to be reserved for issuance to officers and other key employees or consultants of LVSLLC or any LVSLLC affiliates or subsidiaries (each as defined in the 1997 Plan) pursuant to options granted under the 1997 Plan.

The 1997 Plan provides that the Principal Stockholder may, at any time, assume the 1997 Plan or certain obligations under the 1997 Plan, in which case the Principal Stockholder will have all the rights, powers and responsibilities granted LVSLLC or its Board of Directors under the 1997 Plan with respect to such assumed obligations. The Principal Stockholder assumed LVSLLC’s obligations under the 1997 Plan to sell shares to optionees upon the exercise of their options with respect to options granted prior to July 15, 2004. LVSLLC is responsible for all other obligations under the 1997 Plan. LVSC assumed all of the obligations of LVSLLC and the Principal Stockholder under the 1997 Plan (other than the obligation of the Principal Stockholder to issue 984,321 shares under options granted prior to July 15, 2004), in connection with its initial public offering.

The Board of Directors agreed not to grant any additional stock options under the 1997 Plan following the initial public offering and there were no options outstanding under it during the years ended December 31, 2012 and 2011. [Subsequent to December 31, 2012, the Board of Directors approved the dissolution of the 1997 Plan.]

Las Vegas Sands Corp. 2004 Equity Award Plan

The Company adopted the 2004 Plan for grants of options to purchase its common stock. The purpose of the 2004 Plan is to give the Company a competitive edge in attracting, retaining and motivating employees, directors and consultants and to provide the Company with a stock plan providing incentives directly related to increases in its stockholder value. Any of the Company’s subsidiaries’ or affiliates’ employees, directors or officers and many of its consultants are eligible for awards under the 2004 Plan. The 2004 Plan provides for an aggregate of 26,344,000 shares of the Company’s common stock to be available for awards. The 2004 Plan has a term of ten years and no further awards may be granted after the expiration of the term. The compensation committee may grant awards of nonqualified stock options, incentive (qualified) stock options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards or any combination of the foregoing. As of December 31, 2012, there were 6,454,680 shares available for grant under the 2004 Plan.

Stock option awards are granted with an exercise price equal to the fair market value (as defined in the 2004 Plan) of the Company’s stock on the date of grant. The outstanding stock options generally vest over four years and have ten-year contractual terms. Compensation cost for all stock option grants, which all have graded vesting, is net of estimated forfeitures and is recognized on a straight-line basis over the awards’ respective requisite service periods. The Company estimates the fair value of stock options using the Black-Scholes option-pricing model. For stock options granted during the year ended December 31, 2010, expected volatilities are based on a combination of the Company’s historical volatility and the historical volatilities from a selection of companies from the Company’s peer group due to the Company’s lack of historical information. For stock options granted subsequent to December 31, 2010, expected volatilities are based on the Company’s historical volatility for a period equal to the expected life of the stock options. The expected option life is based on the contractual term of the option as well as historical exercise and forfeiture behavior. The risk-free interest rate for periods equal to the expected term of the stock option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is based on the estimate of annual dividends expected to be paid at the time of the grant.

Sands China Ltd. Equity Award Plan

The Company’s subsidiary, SCL, adopted an equity award plan (the “SCL Equity Plan”) for grants of options to purchase ordinary shares of SCL. The purpose of the SCL Equity Plan is to give SCL a competitive edge in attracting, retaining and motivating employees, directors and consultants and to provide SCL with a stock plan providing incentives directly related to increases in its stockholder value. Subject to certain criteria as defined in the SCL Equity Plan, SCL’s subsidiaries’ or affiliates’ employees, directors or officers and many of its consultants are eligible for awards under the SCL Equity Plan. The SCL Equity Plan provides for an aggregate of 804,786,508 shares of SCL’s common stock to be available for awards. The SCL Equity Plan has a term of ten years and no further awards may be granted after the expiration of the term. SCL’s compensation committee may grant awards of stock options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards or any combination of the foregoing. As of December 31, 2012, there were 773,913,693 shares available for grant under the SCL Equity Plan.

Stock option awards are granted with an exercise price not less than (i) the closing price of SCL’s stock on the date of grant or (ii) the average closing price of SCL’s stock for the five business days immediately preceding the date of grant. The outstanding stock options generally vest over four years and have ten-year contractual terms. Compensation cost for all stock option grants, which all have graded vesting, is net of estimated forfeitures and is recognized on a straight-line basis over the awards’ respective requisite service periods. The Company estimates the fair value of stock options using the Black-Scholes option-pricing model. Expected volatilities are based on the historical volatilities from a selection of companies from SCL’s peer group due to SCL’s lack of historical information. The Company used the simplified method for estimating expected option life, as the options qualify as “plain-vanilla” options. The risk-free interest rate for periods equal to the expected term of the stock option is based on the Hong Kong Exchange Fund Note rate in effect at the time of grant. The expected dividend yield is based on the estimate of annual dividends expected to be paid at the time of the grant.

Stock-Based Employee Compensation Activity

The fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:


	2012			2011			2010
LVSC 2004 Plan:
Weighted average volatility		95.2	%		94.4	%		89.2	%
Expected term (in years)		5.5			6.3			5.4
Risk-free rate		1.1	%		2.7	%		2.9	%
Expected dividends		1.9	%		—			—
SCL Equity Plan:
Weighted average volatility		70.0	%		69.2	%		73.5	%
Expected term (in years)		6.2			6.3			6.2
Risk-free rate		0.5	%		1.3	%		1.9	%
Expected dividends		4.0	%		—			—

A summary of the stock option activity for the Company’s equity award plans for the year ended December 31, 2012, is presented below:


	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
LVSC 2004 Plan:
Outstanding as of January 1, 2012		12,046,742		$	37.38
Granted		532,922			55.28
Exercised		(1,707,956	)		16.40
Forfeited		(365,550	)		64.00

Outstanding as of December 10, 2012		10,506,158			40.78
Outstanding as of December 11, 2012 ⁽¹⁾		10,506,158			38.15
Granted		3,677			44.54
Exercised		(679,875	)		9.78
Forfeited		(39,500	)		29.00

Outstanding as of December 31, 2012		9,790,460		$	40.16		5.02	$	171,619,765

Exercisable as of December 31, 2012		6,896,006		$	45.09		4.12	$	109,549,967

SCL Equity Plan:
Outstanding as of January 1, 2012		23,816,666		$	2.07
Granted		7,761,800			3.74
Exercised		(6,130,975	)		1.88
Forfeited		(2,123,851	)		2.23

Outstanding as of December 31, 2012		23,323,640		$	2.66		8.41	$	39,367,728

Exercisable as of December 31, 2012		2,834,172		$	2.03		7.81	$	6,582,618

(1)

As a result of the Company paying a special cash dividend of $2.75 per common share on December 18, 2012, to common stockholders of record on December 10, 2012, the Company reduced the exercise price of all stock options outstanding on December 10, 2012, by approximately $2.75. This adjustment was the result of an antidilution provision in the Company’s 2004 Plan and did not result in any additional compensation expense.

A summary of the unvested restricted shares under the Company’s 2004 Plan for the year ended December 31, 2012, is presented below:


	Shares			Weighted Average Grant Date Fair Value
Unvested as of January 1, 2012		1,242,205		$	45.30
Granted		516,556			52.97
Vested		(630,064	)		47.02
Forfeited		(12,000	)		51.07

Unvested as of December 31, 2012		1,116,697		$	47.82

A summary of the unvested restricted stock units under the Company’s 2004 Plan for the year ended December 31, 2012, is presented below:


	Shares		Weighted Average Grant Date Fair Value
Unvested as of January 1, 2012		42,000	$	47.15
Granted		332,500		25.98
Vested		—		—
Forfeited		—		—

Unvested as of December 31, 2012		374,500	$	28.35

As of December 31, 2012, under the 2004 Plan there was $31.5 million of unrecognized compensation cost, net of estimated forfeitures of 8.0% per year, related to unvested stock options and there was $38.5 million of unrecognized compensation cost, net of estimated forfeitures of 8.0% per year, related to unvested restricted stock and stock units. The stock option and restricted stock and stock unit costs are expected to be recognized over a weighted average period of 2.1 years and 2.8 years, respectively.

As of December 31, 2012, under the SCL Equity Plan there was $18.7 million of unrecognized compensation cost, net of estimated forfeitures of 8.8% per year, related to unvested stock options that are expected to be recognized over a weighted average period of 2.4 years.

The stock-based compensation activity for the 2004 Plan and SCL Equity Plan is as follows for the three years ended December 31, 2012 (in thousands, except weighted average grant date fair values):


	Year Ended December 31,
	2012		2011		2010
Compensation expense:
Stock options	$	35,777	$	44,691	$	56,462
Restricted stock and stock units		29,651		18,023		1,559

	$	65,428	$	62,714	$	58,021

Income tax benefit recognized in the consolidated statements of operations	$	—	$	—	$	—

Compensation cost capitalized as part of property and equipment	$	938	$	576	$	2,797

LVSC 2004 Plan:
Stock options granted		537		263		4,497

Weighted average grant date fair value	$	36.17	$	36.31	$	15.95

Restricted shares granted		517		1,250		16

Weighted average grant date fair value	$	52.97	$	45.42	$	25.37

Restricted stock units granted		333		42		—

Weighted average grant date fair value	$	25.98	$	47.15	$	—

Stock options exercised:
Intrinsic value	$	84,761	$	89,814	$	47,529

Cash received	$	34,668	$	23,238	$	16,455

Tax benefit realized for tax deductions from stock-based compensation	$	—	$	—	$	—

SCL Equity Plan:
Stock options granted		7,762		9,987		26,189

Weighted average grant date fair value	$	1.65	$	1.71	$	1.06

Stock options exercised:
Intrinsic value	$	12,261	$	1,699	$	—

Cash received	$	11,572	$	2,267	$	—

Tax benefit realized for tax deductions from stock-based compensation	$	—	$	—	$	—