Vonage 2010 Annual Report Download - page 79

V
O
NA
G
EH
O
LDIN
GS CO
RP
.
N
OTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(
In thousands, except per share amounts
)
Fair Value of
O
ther Financial Instrument
s
T
he carrying amounts of our financial instruments
,
i
nc
l
u
di
ng cas
h
an
d
cas
h
equ
i
va
l
ents, accounts rece
i
va
bl
e
,
and accounts pa
y
able, approximate fair value because of
t
heir short maturities. The carrying amounts of our capita
l
l
eases approximate fair value of these obligations base
d
upon management’s best estimates of interest rates that
would be available for similar debt obligations at
December 31
,
2010 and 2009. We believe the fair value o
f
our debt at December 31, 2010 was approximately th
e
same as its carryin
g
amount as market conditions, includ
-
i
n
g
available interest rates, credit spread relative to our
credit ratin
g
, and illiquidity, remain relatively unchan
g
e
d
f
rom the issuance date o
f
our debt on December 14
,
2
0
1
0.
N
ote 8.
Co
mm
o
n
S
t
oc
k
C
ommon
S
tock Warrant
O
n April 17, 2002, Vonage’s principal stockholder
and
C
hairman received a warrant to purchase 514 share
s
of Common Stock at an exercise price of
$
0.70 per shar
e
t
hat expires on June 20, 2012. As a result of the issuanc
e
of our
C
onvertible Notes, the exercise price was reduce
d
t
o
$
0.58.
No
t
e9
.
E
mployee Benefit
P
lans
S
hare-Based
C
ompensatio
n
O
ur stock option program is a long-term retentio
n
p
ro
g
ram that is intended to attract, retain and provide
i
ncentives for talented emplo
y
ees, officers and directors
,
and to ali
g
n stockholder and employee interests.
C
ur-
r
ently, we
g
rant options from our 2006 Incentive Plan.
O
u
r
2001
S
tock Incentive Plan was terminated b
y
our board o
f
di
rectors
i
n 2008.
A
s suc
h,
s
h
are-
b
ase
d
awar
d
s are no
l
onger granted under the 2001
S
tock Incentive Plan.
U
n
d
er t
h
e 2006
I
ncent
i
ve
Pl
an
,
s
h
are-
b
ase
d
awar
d
s can
be granted to all employees, including executive officers
,
outs
id
e consu
l
tants, an
d
non-emp
l
oyee
di
rectors.
V
est
i
n
g
periods for share-based awards are generally four years
for both plans. Awards granted under each plan expire i
n
five or 10 years from the effective date of grant. As of April
2010, the
C
ompany began routinely granting awards wit
h
a10
y
ear exp
i
rat
i
on per
i
o
d.
T
he fair value for these options was estimated at the date of
g
rant usin
g
a Black-
S
choles option-pricin
g
model. The
assum
p
tions used to value o
p
tions are as follows
:
20
1
0 2009 2008
Risk-
f
ree interest rate 0.99-2.89
%
1.50-3.12
%
1.24-3.23
%
Expected stock price volatilit
y
100.05-106.55
%
87.70-109.31
%
66.29-86.83
%
Di
v
id
en
dyi
e
ld
0
.00
%
0.00
%
0.00
%
Expected life (in
y
ears) 3.75-6.25 3.75-6.25 3.75-6.2
5
Beginning January 1, 2006, we estimated the vola-
t
ility of our stock usin
g
historical volatility of comparable
p
ublic companies in accordance with
g
uidance in FA
SB
A
SC
718, “
C
om
p
ensation-
S
tock
C
om
p
ensation”. Be
g
in-
nin
g
in the first quarter of 2008, we used the historica
l
v
olatility of our common stock to measure expected vola-
t
ility for future option
g
rants
.
T
he risk-free interest rate assum
p
tion is based u
p
on
observed interest rates a
pp
ro
p
riate for the term of ou
r
emplo
y
ee stock options. The expected term of emplo
y
e
e
stock options represents the wei
g
hted-avera
g
e period
t
hat the stock o
p
tions are ex
p
ected to remain out-
standin
g
, which we derive based on our historical settle
-
m
ent ex
p
erience.
O
ur
S
tock Incentive Plans as of December 31, 2010 are summarized as follows
(
in thousands
)
:
S
hares
A
uthorize
d
S
hare
s
Available
f
or
G
rant
S
tock
O
ption
s
O
utstandin
g
R
estr
i
cte
d
S
tock and
R
estricte
d
S
toc
k
U
nit
s
2001 Incentive Plan
–
5
,
315
–
2006 Incentive Plan 66
,
400 23
,
947 30
,
414 2
,
33
2
Total as of December 31
,
2010 66
,
400 23
,
947 35
,
729 2
,
332
F
-
24
VO
NA
G
E ANN
U
AL REP
O
RT 2010