iHeartMedia 2014 Annual Report Download - page 100

IHEARTCOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
98
Dividends
The Company has not paid cash dividends on the shares of its common stock since the merger in 2008 and its ability to pay dividends
is subject to restrictions should it seek to do so in the future. The Company’s debt financing arrangements include restrictions on its
ability to pay dividends.
Share-Based Compensation
Stock Options
The Company does not have any compensation plans under which it grants stock awards to employees. Prior to the merger, the
Company granted options to purchase its common stock to its employees and directors and its affiliates under its various equity
incentive plans typically at no less than the fair value of the underlying stock on the date of grant. These options were granted for a
term not exceeding ten years and were forfeited, except in certain circumstances, in the event the employee or director terminated his
or her employment or relationship with the Company or one of its affiliates. Prior to acceleration, if any, in connection with the
merger, these options vested over a period of up to five years. All equity incentive plans contained anti-dilutive provisions that
permitted an adjustment of the number of shares of the Company’s common stock represented by each option for any change in
capitalization.
Parent has granted options to purchase its shares of 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
Parent or one of its affiliates. Approximately three-fourths of the options outstanding at December 31, 2014 vest based solely on
continued service over a period of up to five years with the remainder becoming eligible to vest over a period of up to 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 Parent’s common stock represented by each option for any change in capitalization.
The Company accounts for its 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 historical volatility of peer companies’
stock, including Parent, over the expected life of the options. The expected life of the options granted represents the period of time
that the options granted are expected to be outstanding. The Company used historical data to estimate option exercises and employee
terminations within the valuation model. The Company includes estimated forfeitures in its compensation cost and updates the
estimated forfeiture rate through the final vesting date of awards. 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. No options were granted during the years ended
December 31, 2014 and 2013. The following assumptions were used to calculate the fair value of the options granted during the year
ended December 31, 2012: