Delta Airlines 2007 Annual Report Download - page 119

Table of Contents
Index to Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Restricted Stock. We granted approximately eight million shares of restricted stock to eligible employees under the Management Program. Restricted
stock is common stock that may not be sold or otherwise transferred for a period of time (the "Restriction"), and that is subject to forfeiture in certain
circumstances until the Restriction lapses. The Restriction will generally lapse in three equal installments six, 18 and 30 months after the date of grant, subject
to the employee's continued employment on that date. The Restriction on the third installment of the restricted stock will instead lapse 18 months after the
Effective Date if, during the period beginning six months and ending 18 months after the Effective Date, the aggregate market value of our outstanding
common stock is at least $14.0 billion for 10 consecutive trading days. The fair value of the restricted stock awards is based on the closing price of the
common stock on the date of grant. We expect substantially all unvested restricted stock awards at December 31, 2007 to vest.
The following table summarizes restricted stock activity for the eight months ended December 31, 2007:
Shares
(000)
Weighted
Average
Grant Date
Fair Value
Granted 7,876 $ 20.20
Vested (2,589) 20.36
Forfeited (92) 20.41
Unvested at December 31, 2007 5,195 $ 20.11
Stock Options. We granted options to purchase approximately four million shares of common stock to eligible employees under the Management
Program. These options (1) have an exercise price equal to the closing price of the common stock on the grant date, (2) generally become exercisable in three
equal installments on the first, second, and third anniversary of the Effective Date, subject to the employee's continued employment and (3) expire on the
tenth anniversary of the Effective Date.
The fair value of stock options are determined at the grant date using a Black-Scholes model, which requires us to make several assumptions. The risk-
free rate is based on the U.S. Treasury yield in effect for the expected term of the options at the time of grant. The dividend yield on our common stock is
assumed to be zero since we do not pay dividends and have no current plans to do so. Due to the impact of our bankruptcy on our stock price and employees,
our historical volatility data and employee stock option exercise patterns were not considered in determining the volatility and expected life assumptions. The
volatility assumptions were based on (1) historical volatilities of the stock of comparable airlines whose shares are traded using daily stock price returns
equivalent to the expected term of the options and (2) implied volatility. The expected life of an option was determined based on a simplified assumption that
the option will be exercised evenly from the time it becomes exercisable to expiration, as allowed by Staff Accounting Bulletin No. 107, "Share Based
Payments."
The weighted average fair value of options granted during the eight months ended December 31, 2007 was $10.82 and determined based on the
following weighted average assumptions:
Risk-free interest rate 3.6-4.9%
Average expected life of stock options (in years) 6.0
Weighted average expected volatility 56%
Expected volatility of common stock 55-60%
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