Virgin Media 2010 Annual Report Download - page 131

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 11—Stock-Based Compensation Plans (continued)
Virgin Media Sharesave Plan
The Virgin Media Sharesave Plan is a broad based stock option arrangement which enables eligible
employees to receive options to purchase shares of our common stock at a discount. Employees are invited to
take out savings contracts that last for three, five, or seven years. At the end of the contract, employees use the
proceeds of these savings to exercise options granted under the plan. Under the Virgin Media Sharesave Plan,
options to purchase up to 10.0 million shares of our common stock may be granted to certain of our employees.
Accordingly, we have 10.0 million shares of common stock reserved for issuance under the Virgin Media
Sharesave Plan.
Details of the stock option grants, restricted stock grants and restricted stock unit grants under the stock
incentive plans and Virgin Media Sharesave plan are as follows:
Stock Option Grants
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 of 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, 2010, 2009 and 2008:
Year ended December 31,
2010 2009 2008
Risk-free Interest Rate ......................... 1.89% 2.34% 2.43%
Expected Dividend Yield ...................... 0.90% 3.05% 1.00%
Expected Volatility ........................... 61.81% 61.48% 33.65%
Expected Lives .............................. 4.7Years 4.6 Years 4.7 Years
Risk-free interest rate. This is the US Treasury Strip rate posted at the date of grant having a term equal to
the expected life of the option. An increase in the risk-free rate will increase the compensation cost.
Expected dividend yield. This is the annual rate of dividends per share over the exercise price of the option.
An increase in the dividend yield will increase compensation cost.
Expected volatility. Actual historical changes in the market value of our stock are used to calculate the
volatility assumption. We calculate daily market value changes over the most recent historical period as of the
date of grant equal to the expected life of the option. An increase in the expected volatility will increase
compensation cost.
Expected lives. This is the period of time over which the granted options are expected to remain outstanding.
This assumption is based on actual stock option exercises. An increase in the expected lives will increase
compensation cost.
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