Avis 2012 Annual Report Download - page 92

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F-36
calculated using a Monte-Carlo simulation model, which takes into consideration several factors including volatility, risk
free interest rates, and the correlation of the Company’s stock price with the Russell 2000 Index. The fair value of these
market-based restricted cash units, which contain a 2.5-year vesting period, was estimated to be approximately $11.93.
Compensation expense during 2012 related to the award was immaterial. At December 31, 2012, the Company had
156,000 restricted cash units outstanding with a weighted average contractual life of 2.1 years.
Stock Appreciation Rights
In 2006, the Company issued stock-settled SARs to certain employees. Such SARs are settled in Company stock, have a
seven-year term, and vest ratably over a four-year period or after three years with no graded vesting prior thereto. The
Company’s policy is to grant SARs with exercise prices at then-current fair market value. At December 31, 2012, the
Company had approximately 0.5 million SARs outstanding with a weighted average exercise price of $24.40 and a
weighted average contractual life of 0.6 years.
Non-employee Directors Deferred Compensation Plan
The Company grants RSUs annually to members of its Board of Directors representing annual retainer, committee chair
and membership stipends, which are payable in the form of Avis Budget common stock upon termination of service.
During 2012, 2011 and 2010, the Company granted 53,000, 54,000 and 51,000 RSUs, respectively under the 2007
Equity and Incentive Plan to members of its Board of Directors. The RSU grants are included in the calculation of basic
and diluted earnings per share as common stock equivalents.
Employee Stock Purchase Plan
The Company is authorized to sell shares of its Avis Budget common stock to eligible employees under its non-
compensatory employee stock purchase plan (“ESPP”). In June 2009, stockholders approved the adoption of the Avis
Budget Group Inc. Employee Stock Purchase Plan. Under the terms of the ESPP, the fair market value of the shares of
common stock which may be purchased by any employee cannot exceed $25,000 during any calendar year or 10% of the
employee’s annual base salary. The purchase price is calculated at 95% of the fair market value of Avis Budget common
stock. The Company reserved 2.5 million shares of its common stock for potential purchases under the ESPP. In any
given period, up to 125,000 shares purchased may be either newly issued shares or existing treasury shares, and in the
aggregate, up to 1 million shares of common stock purchased under the ESPP may be either newly issued shares or
existing treasury shares. Subject to the preceding limitation, shares purchased under the ESPP may be either newly
issued shares, existing treasury shares, or new purchases in the open market. During 2012, the Company sold
approximately 12,000 shares under this plan.
Compensation Expense
Compensation expense for all outstanding employee stock awards is based on the estimated fair value of the award at the
grant date and is recognized as an expense in the Consolidated Statements of Operations over the requisite service
period. The Company’s policy is to record compensation expense related to the issuance of stock options, time- and
market-based RSUs and SARs to its employees on a straight-line basis over the vesting period of the award and based on
the estimated number of stock awards the Company believes it will ultimately provide. The Company records
amortization expense related to performance-based RSUs on a straight-line basis over the remaining vesting periods of
the respective award and based on the estimated vesting the Company believes will ultimately occur.
The Company recorded stock-based compensation expense of $16 million ($10 million, net of tax) during 2012, $17
million ($11 million, net of tax) during 2011 and $15 million ($9 million, net of tax) in 2010, related to employee stock
awards that were granted by the Company.
19. Employee Benefit Plans
Defined Contribution Savings Plans
The Company sponsors several defined contribution savings plans in the United States and certain foreign subsidiaries
that provide certain eligible employees of the Company an opportunity to accumulate funds for retirement. The
Company matches portions of the contributions of participating employees on the basis specified by the plans. The
Company’s contributions to these plans were $34 million, $15 million and $9 million during 2012, 2011 and 2010,
respectively.