Vistaprint 2006 Annual Report Download - page 72

Table of Contents VISTAPRINT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Years Ended June 30, 2006, 2005 and 2004
(in thousands, except share and per share data)
terminations and resulting forfeiture rates within the option pricing model. The risk−free interest rate for periods within the contractual life of the
option is based on the U.S. Treasury yield curve in effect at the time of the grant. The fair value of restricted share grants is recognized using the
straight−line recognition method. Weighted−average assumptions used for grants in 2006, 2005 and 2004 are as follows:
Year Ended June 30,
2006 2005 2004
Risk−free interest rate 4.36% 3.78% 3.00%
Expected dividend yield 0% 0% 0%
Expected life (years) 4.25 years 4.5 years 4.5 years
Expected volatility 60% 0% 0%
Weighted average fair value of options and warrants granted $ 8.81 $ 1.69 $ 0.50
On January 23, 2006, the Company entered into a Transition Agreement (the “Transition Agreement”) with Paul Flanagan, the Company’s
then current Chief Financial Officer. Pursuant to the terms of the Transition Agreement, Mr. Flanagan agreed to remain employed through at least
June 30, 2006. Under the terms of the Transition Agreement, after June 30, 2006, either Mr. Flanagan or the Company could terminate
employment with or without cause and without prior notice. In accordance with the terms of the Transition Agreement, on July 3, 2006,
Mr. Flanagan resigned. He will continue to provide consulting services to the Company through January 1, 2007. The share options granted to
Mr. Flanagan in February 2004 for an aggregate of 300,000 common shares of the Company will continue to vest through January 1, 2007 in
accordance with the vesting schedules set forth in such options. On January 1, 2007, any unvested portion of such share options will become
immediately exercisable in full. For the year ended June 30, 2006, the Company has recorded a share−based compensation charge of $3,237
related to the modification of the vesting of the options which was recognized over the service period. Upon Mr. Flanagan’s resignation, all
remaining vesting of the share option granted to Mr. Flanagan in May 2005 for 350,000 common shares ceased.
Patents
The Company pursues patent protection for its intellectual property. As of June 30, 2006, the Company held eight issued United States
patents; two issued European patents registered as national patents in various European Union countries; one issued French patent and had
received notice of intention to grant a patent from the U.S. Patent Office for one additional United States patent. The Company has multiple
additional patent applications pending with United States, European, and other patent offices related to various systems, processes, techniques,
and tools developed by the Company for its business. All costs related to patent applications are expensed as incurred. The costs of purchasing
patents from unrelated third parties are capitalized and amortized over the remaining life of the patent. The costs of pursuing others who are
believed to infringe on the Company’s patents, as well as costs of defending the Company against patent−infringement claims, are expensed as
incurred.
Reclassifications
Certain reclassifications of prior year information have been made to conform to the current year presentation.
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