Virgin Media 2007 Annual Report Download - page 120

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. Stock-Based Compensation Plans (Continued)
2006, we recorded a cumulative effect of a change in accounting principle of £1.2 million to reduce
compensation expense recognized in previous periods.
The Virgin Media Inc. Stock Incentive Plan is intended to encourage Virgin Media stock
ownership by employees, directors and independent contractors so that they may acquire or increase
their proprietary interest in our company, and to encourage such employees, directors and independent
contractors to remain in our employ or service and to put forth maximum efforts for the success of the
business. To accomplish such purposes, the plan provides that we may grant incentive stock options,
nonqualified stock options, restricted stock, restricted stock units and share awards.
Under the Virgin Media Inc. Stock Incentive Plan, options to purchase up to 29.0 million shares of
our common stock may be granted from time to time to certain of our employees and our subsidiaries.
Accordingly, we have reserved 29.0 million shares of common stock for issuance under the Virgin
Media Inc. Stock Incentive Plan.
Stock Option Grants
As a result of the reverse acquisition of Telewest as described in note 5, the outstanding options on
March 3, 2006 were converted into 2.5 options to purchase shares in the new parent company, with a
corresponding reduction in exercise price. Along with this, each outstanding option issued by Telewest
prior to the acquisition was converted into 0.89475 options to purchase shares in the new parent
company, with a corresponding adjustment in the exercise price in accordance with the terms of the
merger agreement.
All options have a 10 year term and vest and become fully exercisable within five years of
continued employment. We issue new shares upon exercise of the options. The fair value for these
options was estimated at the date of grant using a Black-Scholes option-pricing model with the
following weighted-average assumptions for the years ended December 31, 2007, 2006 and 2005:
Year ended December 31,
2007 2006 2005
Risk-free Interest Rate ............................... 4.52% 4.79% 4.25%
Expected Dividend Yield .............................. 0.94% 0.00% 0.00%
Expected Volatility .................................. 29.04% 25.06% 37.50%
Expected Lives ..................................... 4.6 Years 2.4 Years 4.6 Years
The above weighted average assumptions for the year ended December 31, 2006 include options
converted on the merger with Telewest. Had these been excluded, the assumptions would have been as
follows; risk free interest rate 4.83%, expected dividend yield 0.00%, expected volatility 26.24% and
expected lives 4.3 years.
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