iHeartMedia 2009 Annual Report Download - page 130

CCMH has granted options to purchase its Class A common stock to certain key executives under its equity incentive plan at no less
than the fair value of the underlying stock on the date of grant. These options are granted for a term not to exceed ten years and are
forfeited, except in certain circumstances, in the event the executive terminates his or her employment or relationship with the
Company or one of its affiliates. Approximately one-third of the options granted vest based solely on continued service over a period
of up to five years with the remainder becoming eligible to vest over five years if certain predetermined performance targets are met.
The equity incentive plan contains antidilutive provisions that permit an adjustment of the number of shares of CCMH’s common
stock represented by each option for any change in capitalization.
The Company accounts for share-based payments using the fair value recognition provisions of ASC 718-10. The fair value of the
portion of options that vest based on continued service is estimated on the grant date using a Black-Scholes option-pricing model and
the fair value of the remaining options which contain vesting provisions subject to service, market and performance conditions is
estimated on the grant date using a Monte Carlo model. Expected volatilities were based on implied volatilities from traded options
on peer companies, historical volatility on peer companies’ stock, and other factors. The expected life of the options granted
represents the period of time that the options granted are expected to be outstanding. CCMH used historical data to estimate option
exercises and employee terminations within the valuation model. The risk free interest rate is based on the U.S. Treasury yield curve
in effect at the time of grant for periods equal to the expected life of the option. The following assumptions were used to calculate the
fair value of these options:
The following table presents a summary of CCMH’s stock options outstanding at and stock option activity during the year ended
December 31, 2009 (“Price” reflects the weighted average exercise price per share):
125
2009 2008
Expected volatility 58% 58%
Expected life in years
5.5 – 7.5 5.5
–
7.5
Risk-free interest rate 2.30% – 3.26% 3.46% – 3.83%
Dividend yield
0% 0%
(In thousands, except per share data)
Options Price
Weighted Average
Remaining
Contractual Term
Aggregate
Intrinsic Value
Outstanding, January 1, 2009 7,751 $35.70
Granted 491 36.00
Exercised
—
n/a
Forfeited (1,797) 36.00
Expire
d
(285) 46.01
Outstanding, December 31, 2009 6,160 35.15 8.5 years $ 0
Exercisable 808 29.55 7.3 years 0
Expect to Vest
2,191 36.00 8.7 years 0
(1) The weighted average grant date fair value of options granted during the year ended December 31, 2009 was $0.12 per share.
(2) Non-cash compensation expense has not been recorded with respect to 3.4 million shares as the vesting of these options is
subject to performance conditions that have not yet been determined probable to meet.
(1)
(2)