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F-25 VONAGE ANNUAL REPORT 2013
Our stock option program is a long-term retention program
that is intended to attract, retain and provide incentives for talented
employees, officers and directors, and to align stockholder and
employee interests. Currently, we grant options from our 2006 Incentive
Plan. Our 2001 Stock Incentive Plan was terminated by our board of
directors in 2008. As such, share-based awards are no longer granted
under the 2001 Stock Incentive Plan. Under the 2006 Incentive Plan,
share-based awards can be granted to all employees, including
executive officers, outside consultants, and non-employee directors.
Vesting periods for share-based awards are generally four years for
both plans. Awards granted under each plan expire in five or ten years
from the effective date of grant. As of April 2010, the Company began
routinely granting awards with a ten year expiration period.
The fair value for these options was estimated at the date of grant using a Black-Scholes option-pricing model. The assumptions used
to value options are as follows:
2013 2012 2011
Risk-free interest rate 1.13-2.02% 0.94-1.36% 0.56-1.52%
Expected stock price volatility 86.94-90.39% 90.37-93.57% 94.94-98.74%
Dividend yield 0.00%0.00%0.00%
Expected life (in years) 6.25 6.25 3.75-6.25
Beginning January 1, 2006, we estimated the volatility of our
stock using historical volatility of comparable public companies in
accordance with guidance in FASB ASC 718, “Compensation-Stock
Compensation”. Beginning in the first quarter of 2008, we used the
historical volatility of our common stock to measure expected volatility
for future option grants.
The risk-free interest rate assumption is based upon observed
interest rates appropriate for the term of our employee stock options.
The expected term of employee stock options represents the weighted-
average period that the stock options are expected to remain
outstanding, which we derive based on our historical settlement
experience.
Our stock incentive plans as of December 31, 2013 are summarized as follows (in thousands):
Shares
Authorized
Shares
Available
for Grant
Stock
Options
Outstanding
Restricted
Stock and
Restricted
Stock
Units
2001 Incentive Plan — —3,230 —
2006 Incentive Plan 77,400 19,452 29,607 5,182
Total as of December 31, 2013 77,400 19,452 32,837 5,182
Table of Contents
VONAGE HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)