42. OpenTV Corp - share based payments

OpenTV Corp, a subsidiary of the Group, recognizes compensation expenses for shares and share options granted to employees and board members as detailed below.

Stock option plan

In 2009, employees and board members of OpenTV Corp were granted 453 400 (2008: 688 800) options with an average strike price of USD 1.40 (2008: 1.34). Employees and board members of OpenTV Corp exercised 191 853 (2008: 39 464) options with an average strike price of USD 1.14 (2008: 0.44). The table below summarizes movements in options:

	Options outstanding	Exercice price	Weighted average exercice price
		in USD	in USD
Balance, December 31, 2007	5 858 675		4.89

Options granted	688 800	1.04 – 1.97	1.34
Options exercised	-39 464	0.33 – 1.05	0.44
Options forfeited	-341 164	1.03 – 4.00	2.61
Options expired	-981 772	0.33 – 54.25	3.67
Balance, December 31, 2008	5 185 075	–	4.84

Options granted	453 400	1.09 – 1.55	1.40
Options exercised	-191 853	1.03 – 1.35	1.14
Options forfeited	-234 833	1.03 – 3.67	1.19
Options expired	-514 061	0.33 – 88.00	6.16
Balance, December 31, 2009	4 697 728		4.65

The following table summarizes information with respect to the options outstanding as of December 31, 2009:

	Options outstanding			Options currently exercisable
Exercice price in USD	Number outsdanding	Weighted average remaining contractual life	Weighted average exercise price	Number exercisable	Weighted average exercise price
		in years	in USD		in USD
1.03 – 1.51	759 625	8.64	1.34	725 225	1.34
1.53 – 2.35	480 836	6.46	1.85	480 836	1.85
2.41 – 2.69	177 950	6.53	2.53	177 950	2.53
2.70 – 2.70	844 200	5.10	2.70	844 200	2.70
2.73 – 2.82	251 400	4.21	2.78	251 400	2.78
2.84 – 2.84	991 937	5.98	2.84	991 937	2.84
2.85 – 3.23	514 018	4.52	3.01	514 018	3.01
3.35 – 10.00	478 438	2.87	6.96	478 438	6.96
10.19 – 81.00	196 324	0.63	43.54	196 324	43.54
82.06 – 82.06	3 000	0.25	82.06	3 000	82.06

	4 697 728	5.53	4.65	4 663 328	4.67

And as of December 31, 2008:

	Options outstanding			Options currently exercisable
Exercice price in USD	Number outsdanding	Weighted average remaining contractual life	Weighted average exercise price	Number exercisable	Weighted average exercise price
		in years	in USD		in USD
0.33 – 1.33	550 650	7.66	1.13	125 528	1.05
1.46 – 2.12	571 112	6.77	1.70	150 357	1.85
2.13 – 2.69	401 257	6.99	2.41	259 166	2.39
2.70 – 2.70	899 600	5.95	2.70	868 115	2.70
2.73 – 2.82	254 587	6.52	2.78	215 987	2.79
2.84 – 2.84	1 030 025	6.88	2.84	760 896	2.84
2.85 – 3.23	573 000	6.25	3.02	403 741	3.02
2.35 – 3.23	567 647	3.39	6.59	522 474	6.85
9.90 – 82.06	336 197	1.44	32.38	336 197	32.38
88.00 – 88.00	1 000	5.97	88.00	1 000	88.00

	5 185 075	6.38	4.84	3 643 461	6.28

Employee and board members share allocations

In March 2008, OpenTV Corp issued 100 000 restricted Class A ordinary shares to OpenTV's executive chairman. Such shares are restricted as to sale or transfer for a period of four years from the date of grant.

In November 2008, OpenTV Corp issued 100 000 restricted Class A ordinary shares to OpenTV's chief executive officer. The restriction as to sale or transfer of such shares lapse with respect to one-third of the restricted shares on each of March 5, 2009, 2010 and 2011. As of December 31, 2009, restrictions as to 33 333 of such shares lapsed and OpenTV Corp withheld 12'864 of such shares to satisfy applicable withholding tax liabilities.

In March 2009, OpenTV Corp issued 100 000 restricted Class A ordinary shares to OpenTV's chief executive officer. The restrictions as to sale or transfer for such shares lapse with respect to one-third of the restricted shares on each January 1, 2010, 2011 and 2012.

2007 RESTRICTED SHARES

In December 2007, OpenTV Corp issued 1 211 250 restricted Class A ordinary shares to employees, in lieu of option grants consideration. These shares are restricted from sale or transfer and subject to forfeiture for a period of time that is equivalent to the normal vesting schedule applied to stock option granted under the current option plan. The fair value of the grant has been determined as being the stock market value at the date of grant of USD 1.04 per ordinary share. The expense is recognized over the remaining requisite service period. As of December 31, 2009, an aggregate of 215 340 of such restricted share grant had been forfeited and cancelled as a result of employee terminations.

In December 2008, restrictions on the sale or transfer of the 2007 restricted shares lapses as to 25% of such shares. Restriction on the remaining 2007 Restricted shares lapse in equal monthly installments over the remaining 36 months. As of December 31, 2009, restrictions as to an aggregate of 1 262 621 of the 2007 Restricted shares had lapsed. OpenTV Corp withheld an aggregate of 393 300 of such shares to satisfy applicable withholding tax liabilities. As of December 31, 2009, zero of the 2007 Restricted Shares were outstanding and subject to restriction.

2007 MANAGEMENT BONUS AND EQUITY ISSUANCE PLAN

As of December 31, 2007 OpenTV Corp's board of directors approved a grant of 1 020 232 restricted class A ordinary shares including performance and service element for certain OpenTV's senior management and other key employees. This grant allows for both performance and service elements. Accordingly, once vesting is considered probable, expense is recognized on a straight line basis over the remaining requisite service period. Final compensation cost is recognized only for awards that ultimately vest. As part of this plan, 1 020 232 Class A ordinary shares were issued in August 2007 as 2007 Management Restricted Shares. Profitability targets were achieved in May 2008. At such time, restrictions as to an aggregate of 929 767 Restricted shares lapsed and the company withheld an aggregate of 332 528 shares to satisfy applicable withholding tax liability.

Pursuant to the company's share based compensation plan, upon a change in control in the company, outstanding stock options and stock award held by an employee become fully vested. The closing of the tender offer by the Kudelski Group qualified as a change of control as defined in the share based compensation plan. As a result, on November 25, 2009, OpenTV Corp accelerated all of the unvested shares causing the remaining share-based compensation expense to be recognized in the second half of 2009. Therefore the activity relating to OpenTV's unvested restricted shares during the years ended December 31, 2009 and 2008 is as follows:

	Number of Shares	Weighted average Grant date fair value
Unvested 2007 Management Restricted Shares granted	1 020 232	1.43
Unvested 2007 Restricted Shares granted	1 211 250	1.04
Unvested share balance, December 31, 2007	2 231 482	1.22

Unvested restricted shares granted	200 000	1.17
Unvested restricted shares forfeited and cancelled	-679 923	1.28
Restricted shares vested	-771 212	1.34
Unvested shares balance, December 31, 2008	980 347	1.07

Unvested restricted shares granted	100 000	1.34
Unvested restricted shares forfeited and cancelled	-44 972	1.09
Restricted shares vested	-1 035 375	1.04
Unvested shares balance, December 31, 2009	–	–

As a result, 1 035 375 shares vested and were issued (2008: 771 212), 364 284 (2008: 419 091) shares vested, were issued and immediately cancelled in order to satisfy withholding tax payment on the shares issued in favour of the employees and 44 972 shares forfeited.

Other share based transactions

Minority interest of OpenTV Corp subsidiaries converted their subsidiary shares into OpenTV Corp shares for kCHF 309 (2008: kCHF 2).

Opentv share based transactions impacts

The impact of the above transactions on the Group financial statements is as follows:

In CHF'000	Retained earnings	Translation difference	Income statement	Retained earnings	Translation difference	Income statement
	2009	2009	2009	2008	2008	2008
Stock option and share based compensation expense recognized	3 072	262	-3 334	2 705	25	-2 730
Repurchase of options	–	–	–	–	–	–
Exercise of options	224	–	–	19	–	–
Conversion by minority into OpenTV Corp shares	309	–	–	2	–	–
Impact of shares cancelled for withholding tax purposes	-475	–	–	-590	–	–
Total in OpenTV Corp books	3 130	262	-3 334	2 136	25	-2 730

Acceleration of vesting period considered as acquisition cost	–	-91	1 784	–	–	–
Cancellation of conversion by minority treated as Goodwill in OpenTV Corp	-309	–	–	-2	–	–
Total in Kudelski Group books	2 821	171	-1 550	2 134	25	-2 730

to adjust for minority interests	-324	-20	178	-1 444	-17	1 847
Total	2 497	151	-1 372	690	8	-883