Equity and Long-Term Incentive Plans

In connection with the Distribution, the Company adopted the AMC Networks Inc. 2011 Employee Stock Plan (the “2011 Employee Stock Plan”), the AMC Networks Inc. 2011 Stock Plan for Non-Employee Directors (the “2011 Non-Employee Director Plan”) and the AMC Networks Inc. 2011 Cash Incentive Plan (the “2011 Cash Incentive Plan”). All Plans were amended and restated and approved by the Company’s shareholders on June 5, 2012.

Equity Plans

Under the 2011 Employee Stock Plan, the Company is authorized to grant incentive stock options, non-qualified stock options, restricted shares, restricted stock units, SARs and other equity-based awards. The Company may grant awards for up to 5,000,000 shares of AMC Networks Class A Common Stock (subject to certain adjustments). Stock options and SARs under the 2011 Employee Stock Plan must be granted with an exercise price of not less than the fair market value of a share of AMC Networks Class A Common Stock on the date of grant and must expire no later than 10 years from the date of grant. The terms and conditions of awards granted under the 2011 Employee Stock Plan, including vesting and exercisability, are determined by the Compensation Committee of the Board of Directors (“Compensation Committee”) and may include terms or conditions based upon performance criteria.

Subsequent to the Distribution through December 31, 2012, the Company granted 893,877 restricted share awards to certain employees under the 2011 Employee Stock Plan, that vest on the third anniversary of the grant date. The vesting criteria for 284,086 of those restricted shares also includes the achievement of certain performance targets. As of December 31, 2012, there are 2,404,917 share awards available for future grant under the 2011 Employee Stock Plan.

Under the 2011 Non-Employee Director Plan, the Company is authorized to grant non-qualified stock options, restricted stock units, restricted shares, SARs and other equity-based awards. The Company may grant awards for up to 465,000 shares of AMC Networks Class A Common Stock (subject to certain adjustments). Stock options under the 2011 Non-Employee Director Plan must be granted with an exercise price of not less than the fair market value of a share of AMC Networks Class A Common Stock on the date of grant and must expire no later than 10 years from the date of grant. The terms and conditions of awards granted under the 2011 Non-Employee Director Plan, including vesting and exercisability, are determined by the Compensation Committee. Unless otherwise provided in an applicable award agreement, stock options granted under this plan will be fully vested and exercisable, and restricted stock units granted under this plan will be fully vested, upon the date of grant.

In connection with the Distribution, non-employee directors were issued 61,546 shares of AMC Networks Class A Common Stock and 17,981 AMC Networks stock options under the 2011 Non-Employee Director Plan. In 2012 and 2011, the Company granted 30,393 and 38,951 restricted stock units, respectively, to non-employee directors under the 2011 Non-Employee Director Plan, which vested on the grant date. As of December 31, 2012, there are 316,129 share awards available for future grant under the 2011 Non-Employee Director Plan.

Stock Option Award Activity

The following table summarizes activity relating to Company employees who held AMC Networks stock options for the year ended December 31, 2012:



	Shares Under Option			Weighted Average Exercise Price Per Share		Weighted Average Contractual Term (in years)	Aggregate Intrinsic Value(a)
	Time Vesting Options		Performance Vesting Options	Weighted Average Exercise Price Per Share		Weighted Average Contractual Term (in years)	Aggregate Intrinsic Value(a)
Balance, December 31, 2011	136,541		2,500	$	10.74	3.08	$	3,732
Exercised	(7,390	)	—	$	13.43
Balance, December 31, 2012	129,151		2,500	$	10.59	2.05	$	5,123
Options exercisable at December 31, 2012	129,151		2,500	$	10.59	2.05	$	5,123
Options expected to vest in the future	—		—	n/a		n/a	n/a


(a)	The aggregate intrinsic value is calculated as the difference between (i) the exercise price of the underlying award and (ii) the quoted price of AMC Networks Class A Common Stock on December 31, 2012 or December 31, 2011, as indicated.

In addition, the following table summarizes activity relating to Cablevision and MSG employees who held AMC Networks stock options for the year ended December 31, 2012:



	Shares Under Option				Weighted Average Exercise Price Per Share		Weighted Average Contractual Term (in years)	Aggregate Intrinsic Value(a)
	Time Vesting Options		Performance Vesting Options		Weighted Average Exercise Price Per Share		Weighted Average Contractual Term (in years)	Aggregate Intrinsic Value(a)
Balance, December 31, 2011	1,144,465		78,400		$	12.02	3.29	$	31,253
Exercised	(818,089	)	(42,800	)	$	10.11
Balance, December 31, 2012	326,376		35,600		$	16.57	3.42	$	11,918
Options exercisable at December 31, 2012	276,376		35,600		$	15.05	3.00	$	10,748
Options expected to vest in the future	50,000		—		$	26.11	6.06	$	1,170


(a)	The aggregate intrinsic value is calculated as the difference between (i) the exercise price of the underlying award and (ii) the quoted price of AMC Networks Class A Common Stock on December 31, 2012 or December 31, 2011, as indicated, and December 31, 2012 in the case of the stock options expected to vest in the future.

Restricted Share Award Activity

The following table summarizes activity relating to Company employees who held AMC Networks restricted shares for the year ended December 31, 2012:



	Number of Restricted Shares		Number of Performance Restricted Shares	Weighted Average Fair Value Per Share at Date of Grant
Unvested award balance, December 31, 2011	679,572		205,193	$	28.23
Vested	(207,994	)	—	$	9.01
Forfeited	(38,548	)	—	$	33.77
Unvested award balance, December 31, 2012	433,030		205,193	$	34.16

The following table summarizes activity relating to Cablevision and MSG employees who held AMC Networks restricted shares for the year ended December 31, 2012:



	Number of Restricted Shares		Number of Performance Restricted Shares	Weighted Average Fair Value Per Share at Date of Grant
Unvested award balance, December 31, 2011	1,366,011		135,175	$	18.67
Vested	(825,155	)	—	$	9.05
Forfeited	(70,495	)	—	$	30.45
Unvested award balance, December 31, 2012	470,361		135,175	$	30.41

During the year ended December 31, 2012, 1,033,149 shares of AMC Networks Class A Common Stock previously issued to employees of AMC Networks, Cablevision and MSG vested. In connection with the employees’ satisfaction of the statutory minimum tax withholding obligations for the applicable income and other employment taxes, 352,910 of these shares, with an aggregate value of $15,988, were surrendered to the Company. These acquired shares, as well as 109,043 forfeited unvested restricted shares have been classified as treasury stock.

Restricted Share Unit Activity

The following table summarizes activity relating to Company employees who held AMC Networks restricted share units for the year ended December 31, 2012:



	Number of Restricted Share Units		Number of Performance Restricted Share Units	Weighted Average Fair Value Per Share Unit at Date of Grant
Unvested award balance, December 31, 2011	—		—	$	—
Granted	353,827		97,915	$	45.01
Forfeited	(16,193	)	—	$	45.08
Unvested award balance, December 31, 2012	337,634		97,915	$	45.01

Share-based Compensation Expense

The following table presents the share-based compensation expense reduced for forfeitures recorded during the year ended December 31, 2012, 2011 and 2010. Forfeitures were estimated based on historical experience. To the extent actual results of forfeitures differ from those estimates, such amounts will be recorded as an adjustment in the period the estimates are revised.



	Years ended December 31,
	2012		2011			2010
Stock options (including performance based options)	$	69	$	839		$	1,329
Stock appreciation rights	—		(423		)	939
Restricted shares/units (including performance based shares/units)	17,133		15,173			14,938
Share-based compensation	$	17,202	$	15,589		$	17,206

For periods prior to the Distribution, the Company’s share-based compensation includes amounts related to Company employees participating in the Cablevision equity awards programs, as well as amounts related to Cablevision corporate employees and non-employee directors to the extent allocated to the Company. For periods after the Distribution, the Company no longer receives an allocation of share-based compensation expense for Cablevision corporate employees and non-employee directors, including expense related to the Company’s Executive Chairman with respect to his participation in the Cablevision equity awards program (since he remained an executive officer of Cablevision). The Company does not record any share-based compensation expense for AMC Networks stock options or restricted shares held by Cablevision and MSG employees, however such stock options or restricted shares do have a dilutive effect on the Company’s net income per share. The Company records share-based compensation expense for Cablevision and MSG stock options and restricted shares/units held by the Company’s employees.

Share-based compensation expense is recognized in the consolidated statements of income as part of selling, general and administrative expenses. As of December 31, 2012, there was $24,843 of total unrecognized share-based compensation costs related to Company employees who held unvested AMC Networks and Cablevision restricted shares/units. The unrecognized compensation cost is expected to be recognized over a weighted-average remaining period of approximately 1.84 years. There were no costs related to share-based compensation that were capitalized.

The Company receives income tax deductions related to restricted share/units, stock options or other equity awards granted to its employees by the Company, Cablevision or MSG, but does not receive income tax deductions for Company equity awards held by Cablevision or MSG employees. The Company uses the 'with-and-without' approach to determine the recognition and measurement of excess tax benefits.

Cash flows resulting from excess tax benefits are classified as cash flows from financing activities. Excess tax benefits are realized tax benefits from tax deductions for options exercised and restricted shares issued in excess of the deferred tax asset attributable to stock compensation costs for such awards. Excess tax benefits of $7,484 were recorded for the year ended December 31, 2012.

Treatment of Previously Outstanding Share-Based Payment Awards After the AMC Networks Distribution

In connection with the Distribution and as provided for in Cablevision’s equity plans, each stock option and SAR outstanding at the effective date of the Distribution became two stock options or two SARs, as the case may be: (i) one with respect to Cablevision’s CNYG Class A Common Stock and (ii) one with respect to the Company’s Class A Common Stock. The existing exercise price of each stock option/SAR was allocated between the existing Cablevision stock option/SAR and the Company’s new stock option/SAR based on the weighted average trading price of Cablevision’s and the Company’s common shares for the 10 trading days subsequent to the Distribution and the underlying share amount took into account the 1:4 distribution ratio. As a result of this adjustment, approximately 73.59% of the pre-Distribution exercise price of stock options/SARs was allocated to the Cablevision stock options/SARs and approximately 26.41% was allocated to the Company’s new stock options/SARs.

On February 9, 2010, Cablevision distributed to its stockholders all of the outstanding common stock of MSG (the “MSG Distribution”). As a result of the Distribution and the MSG Distribution, certain employees of MSG hold stock options, SARs and restricted stock with respect to AMC Networks Class A Common Stock. In addition, as a result of the MSG Distribution, certain employees of the Company held MSG stock options, SARs and restricted shares with respect to MSG Class A Common Stock as of the MSG Distribution date.

Long-Term Incentive Plans

Under the terms of the 2011 Cash Incentive Plan, the Company is authorized to grant a cash award to certain employees. The terms and conditions of such awards are determined by the Compensation Committee of the Company’s Board of Directors, may include the achievement of certain performance criteria and may extend for a period not to exceed ten years.

In connection with the long-term incentive awards outstanding, the Company recorded expense of $11,001, $11,392 and $16,207 for the years ended December 31, 2012, 2011 and 2010, respectively. Accrued liabilities for long-term incentive awards of $20,673 and $18,137 are included in accrued employee related costs and other liabilities in the consolidated balance sheets at December 31, 2012 and 2011, respectively. These liabilities include certain performance-based awards for which the performance criteria had not yet been met as of December 31, 2012 as such awards are based on achievement of certain performance criteria through December 31, 2013 or 2014. The Company has accrued the pro-rata amount earned that it currently believes will ultimately be paid based upon the performance criteria established for these performance-based awards. If the Company subsequently determines that the performance criteria for such awards is not probable of being achieved, the Company would reverse the accrual in respect of such award at that time.