Motorola 2009 Annual Report Download - page 117

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109
The Company uses the implied volatility for traded options on the Company’s stock as the expected volatility
assumption required in the Black-Scholes model. The selection of the implied volatility approach was based upon
the availability of actively traded options on the Company’s stock and the Company’s assessment that implied
volatility is more representative of future stock price trends than historical volatility.
The risk-free interest rate assumption is based upon the average daily closing rates during the year for U.S.
treasury notes that have a life which approximates the expected life of the option. The dividend yield assumption
is based on the Company’s future expectation of dividend payouts. The expected life of employee stock options
represents the average of the contractual term of the options and the weighted-average vesting period for all
option tranches.
The Company has applied a forfeiture rate, estimated based on historical data, of 13%-45% to the option
fair value calculated by the Black-Scholes option pricing model. This estimated forfeiture rate is applied to grants
based on their remaining vesting term and may be revised in subsequent periods if actual forfeitures differ from
this estimate.
Stock option activity was as follows (in thousands, except exercise price and employee data):
2009 2008 2007
Shares Wtd. Avg. Shares Wtd. Avg. Shares Wtd. Avg.
Subject to Exercise Subject to Exercise Subject to Exercise
Years Ended December 31 Options Price Options Price Options Price
Options outstanding at January 1 228,145 $17 224,255 $19 233,445 $18
Options granted 62,576 6 39,764 8 40,257 18
Options exercised (1,439) 6 (1,920) 7 (26,211) 11
Options terminated, canceled or
expired (127,855) 18 (33,954) 18 (23,236) 19
Options outstanding at December 31 161,427 12 228,145 17 224,255 19
Options exercisable at December 31 77,260 17 148,072 19 138,741 19
Approx. number of employees
granted options 22,095 3,300 32,000
At December 31, 2009, the Company had $171 million of total unrecognized compensation expense, net of
estimated forfeitures, related to stock option plans and the employee stock purchase plan that will be recognized
over the weighted average period of approximately one year. Cash received from stock option exercises and the
employee stock purchase plan was $116 million, $145 million and $440 million for the years ended
December 31, 2009, 2008 and 2007, respectively. The total intrinsic value of options exercised during the years
ended December 31, 2009, 2008 and 2007 was $1 million, $2 million and $177 million, respectively. The
aggregate intrinsic value for options outstanding and exercisable as of December 31, 2009 was $128 million and
$27 million, respectively, based on a December 31, 2009 stock price of $7.76 per share.
At December 31, 2009 and 2008, 60.5 million shares and 72.2 million shares, respectively, were available for
future share-based award grants under the 2006 Motorola Omnibus Plan, covering all equity awards to
employees and non-employee directors.