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DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Omnibus Stock Incentive Plan of 2008
In connection with the separation from Cadbury, on May 5, 2008, Cadbury Schweppes Limited, the Company's sole
stockholder, approved the Company's Omnibus Stock Incentive Plan of 2008 (the “2008 Stock Plan”) and authorized up to
9,000,000 shares of the Company's common stock to be issued under the Stock Plan. Subsequent to May 7, 2008, the Compensation
Committee granted under the 2008 Stock Plan (a) options to purchase shares of the Company's common stock, which vest ratably
over three years commencing with the first anniversary date of the option grant, and (b) RSUs, with a substantial portion of RSUs
vesting over a three year period. Each RSU is to be settled for one share of the Company's common stock on the respective vesting
date of the RSU. The stock options issued under the 2008 Stock Plan have a maximum option term of 10 years.
Employee Stock Purchase Plan
In connection with the separation from Cadbury, on May 5, 2008, Cadbury Schweppes Limited, the Company's sole
stockholder, approved the Company's Employee Stock Purchase Plan (“ESPP”) and authorized up to 2,250,000 shares of the
Company's common stock to be issued under the ESPP. No ESPP has been implemented and no shares have been issued under
that plan.
Stock Options
The tables below summarize information about the Company's stock options granted during the years ended December 31,
2010, 2009 and 2008.
The fair value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model. Because
the Company lacks a meaningful set of historical data upon which to develop certain valuation assumptions, including expected
term and volatility of options granted, DPS has elected to develop these valuation assumptions based on information disclosed by
similarly-situated companies, including multi-national consumer goods companies of similar market capitalization. The risk-free
interest rate used in the option valuation model is based on zero-coupon yields implied by U.S. Treasury issues with remaining
terms similar to the expected term on the options. The Company's expected dividend yield is based on historical dividends declared.
DPS is required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures
differ from those estimates. The Company uses historical data to estimate pre-vesting option forfeitures and record stock-based
compensation expense only for those awards that are expected to vest.
The weighted average assumptions used to value grant options are detailed below:
Fair value of options at grant date
Risk free interest rate
Expected term of options (in years)
Dividend yield(1)
Expected volatility
For the Year Ended
December 31,
2010
$ 6.99
2.65%
6.0
1.90%
24.00%
2009
$ 3.57
2.23%
6.1
—%
21.46%
2008
$ 7.37
3.27%
5.8
—%
22.26%
(1) During the fourth quarter of 2009, the Company declared its first dividend; therefore, dividend yield is included as a valuation
assumption for stock based compensation awards for the year ended December 31, 2010.
98