Orbitz 2008 Annual Report Download - page 106

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ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Income Taxes (Continued)
liabilities. However, we and Travelport have been indemnified by Cendant for all income taxes relating to periods prior to the Blackstone Acquisition, and
therefore, we do not expect such final determination to have a significant impact on our consolidated financial statements.
12. Equity-Based Compensation
Our employees participated in three equity based compensation plans during the years ended December 31, 2007, 2006, and 2005: the Orbitz
Worldwide, Inc. 2007 Equity and Incentive Plan (the "Plan"), the Travelport Equity-Based Long-Term Incentive Plan (the "Travelport Plan"), and the Cendant
Stock-Based Compensation Plan (the "Cendant Plan"). The awards granted under each plan are described below.
Orbitz Worldwide, Inc. 2007 Equity and Incentive Plan
On July 18, 2007, our board of directors and TDS Investor (Luxembourg) S.à r.l, as our sole stockholder prior to the IPO, approved the Orbitz
Worldwide, Inc. 2007 Equity and Incentive Plan. The Plan provides for the grant of equity-based awards, including restricted stock, restricted stock units, stock
options, stock appreciation rights and other equity-based awards to our directors, officers and other employees, advisors and consultants who are selected by the
Compensation Committee of the Board of Directors for participation in the Plan. In addition, we may grant annual cash bonuses and long-term cash awards.
Under the Plan, 6,100,000 shares of our common stock are reserved for issuance. As of December 31, 2007, 985,274 shares were available for future issuance
under the Plan.
Stock Options
The exercise price of stock options is equal to the fair market value of the underlying stock on the date of grant. All stock options expire ten years from the
grant date. The stock options granted as additional compensation to the employees who previously held equity awards under the Travelport Plan, as described
below, vested 5.555% in August 2007 and vest an additional 8.586% on each subsequent November, February, May and August through February 2010, and
become fully vested in May 2010. All other stock options granted vest annually over a four-year period. The fair value of stock options on the date of grant is
amortized on a straight-line basis over the requisite service period.
The fair value of stock options granted from the Plan's inception on July 18, 2007 to December 31, 2007 was estimated on the date of grant using the
Black-Scholes option-pricing model with the weighted average assumptions outlined in the table below. Expected volatility is based on implied volatilities for
publicly traded options and historical volatility for comparable companies over the estimated expected life of the stock options. The expected life represents the
period of time the stock options are expected to be outstanding and is based on the "simplified method," as defined in SEC Staff Accounting Bulletin No. 107,
"Share-Based Payments." The risk-free interest rate is based on
99
Source: Orbitz Worldwide, In, 10-K/A, August 28, 2008