Spirit Airlines 2011 Annual Report Download - page 91

Notes to Financial Statements—(Continued)
The following table illustrates the liquidation adjustment as triggered by the excess of MD-80 charges over the target:
As of December 31, 2010, accrued and unpaid dividends for the Class A and Class B preferred stock totaled $14.5 million and
$4.2 million, respectively. The maximum amount the Company could be required to pay to redeem the Class A and Class B preferred stock as of
the mandatory redemption date of July 1, 2012, is estimated to be $78.6 million and $9.2 million, respectively.
During the years ended 2010 and 2009, Class A preferred stock accrued dividends of $3.5 million or $35.21 per share and $4.3 million or
$43.10 per share, respectively, while the Class B preferred stock accrued dividends of $1.1 million or $381.04 per share and $0.9 million or
$322.60 per share, respectively.
In connection with the closing of the IPO, the Company consummated the transaction contemplated by the Recapitalization Agreement on
June 1, 2011, which resulted in the repayment or exchange for common stock of all of the Company’s notes and preferred stock (see Note 20).
The Company’s board of directors adopted, and the Company’s stockholders approved, the Amended and Restated 2005 Incentive Stock
Plan, or the 2005 Stock Plan, effective January 1, 2008. The total number of shares of common stock authorized for issue pursuant to awards
granted under the 2005 Stock Plan was 2,500,000 shares. The 2005 Stock Plan provided for the grant of non-qualified stock options, stock
appreciation rights, restricted stock, performance shares, phantom stock, restricted stock units and other awards that are valued in whole or in
part by reference to the Company’s stock.
On May 9, 2011, the Company’s board of directors adopted, and the Company’s stockholders approved, the 2011 Equity Incentive Award
Plan, or 2011 Plan. The principal purpose of the 2011 Plan is to attract, retain and engage selected employees, consultants and directors through
the granting of stock-based compensation awards and cash-based performance bonus awards. Under the 2011 Plan, 3,000,000 shares of common
stock are reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, or
SARs, restricted stock awards, restricted stock unit awards, deferred stock awards, dividend equivalent awards, stock payment awards and
performance awards and other stock-based awards, plus the number of shares remaining available for future awards under the Company’s 2005
Stock Plan. The number of shares reserved for issuance or transfer pursuant to awards under the 2011 Plan will be increased by the number of
shares represented by awards outstanding under the Company’s 2005 Stock Plan that are forfeited or lapse unexercised and which, following the
effective date of the 2011 Plan, are not issued under the 2005 Stock Plan. No further awards will be granted under the 2005 Stock Plan, and all
outstanding awards will continue to be governed by their existing terms. As of December 31, 2011 , 3,336,614 shares of the Company’
s common
stock remained available for future issuance under the 2011 Plan.
Restricted stock awards are valued at the fair value of the shares on the date of grant if vesting is based on a service or a performance
condition. Granted shares vest 25% per year on each anniversary of issuance. Compensation expense is recognized on a straight-line basis over
the requisite service period.
Stock option awards are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant
and graded vest based on four years of continuous service and have 10-year contractual terms. The fair value of each stock option award is
estimated on the date of grant using the Black-Scholes model. For option grants during 2011 , the Company’s weighted average assumptions for
expected volatility, dividends, term, and risk-free interest rate were 46.25 %, 0 %, 6.25 years and 2.03
%, respectively. For option granted during
2010, the Company’s weighted average assumptions for expected volatility, dividends, term, and risk-free interest rate were 51.6%, 0%, 6.25
years and 2.12%, respectively. Expected volatilities are based on the historical volatility of a group of peer entities within the same industry. The
expected term of options is based
80
$16.7 Million Liquidation Value Adjustment
Outstanding
Shares
Liquidation Value Prior to
Adjustment
Liquidation Value
Adjustment
Liquidation Value per Share After
Adjustment
Liquidation Value as of
December 31, 2009 *
(in thousands except share and per share amounts)
Oaktree
100,000
$
74,821
$
(16,664
)
$
582
$
58,157
Indigo
—
—
—
—
—
Total Class A
preferred stock
100,000
$
74,821
$
(16,664
)
$
58,157
* Liquidation value does not include accrued and unpaid dividends.
9. Stock-
Based Compensation