Stock-Based Compensation

Prior to the acquisition of Westwood, the Company did not have a stock-based compensation plan. As part of the Merger, the Company assumed all of the outstanding stock options and restricted stock units ("RSU") previously granted by Westwood to its employees under the 1999 Stock Incentive Plan (the "1999 Plan”), the 2005 Equity Compensation Plan (the "2005 Plan”) and/or the 2010 Equity Compensation Plan (which is an amended and restated version of the 2005 Plan, the "2010 Plan").

The detail of the assumed stock options granted under Westwood's stock-based compensation plans as of October 21, 2011 were as follows.



Plan	Assumed Options	Unvested Options	Weighted Average Exercise Price		Last Expiration Date
1999 Plan	9,972	—	$	1,382.51	7/7/2018
2005 Plan	2,421	—	$	1,261.94	1/8/2018
2010 Plan	1,053,000	700,341	$	6.19	2/12/2020
Total	1,065,393	700,341	$	21.93

Unvested stock options of Westwood assumed on the date of the Merger have vesting periods that extend over a period ending February 12, 2013. Certain of these options have accelerated vesting provisions under certain circumstances, including a change in control.

Outstanding RSUs of Westwood assumed on the date of the Merger consisted of two grants for 66,732 shares, which were to vest over a two year period ending October 10, 2013. The RSUs had accelerated vesting provisions under certain circumstances, including a change in control. As a result this RSU vested on November 18, 2011. See Restricted Stock Units below for additional details.

On December 19, 2011, our Board of Directors approved the adoption of the 2011 Stock Option Plan (the "2011 Plan"). The purpose of the 2011 Plan is to furnish a material incentive to employees, officers, consultants and directors by making available to them the benefits of common stock ownership through stock options. Under the 2011 Plan, we may grant stock options that constitute “incentive stock options” (“ISOs") within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended, or stock options that do not constitute ISOs ("NSOs and with ISOs, the “Options"). Under the 2011 Option Plan, 8,513,052 shares of the Company’s Class A common stock are authorized for issuance of which 2,946,827 remain available for issuance as of December 31, 2011. Under the 2010 Plan, a maximum of 2,650,000 shares of Class A common stock are authorized for issuance of equity compensation awards of which 760,634 remain available for issuance as of December 31, 2011.

The 2011 Plan will be administered by the Compensation Committee, and a sub-committee of which will be authorized to grant ISOs to officers and employees and NSOs to employees, officers, directors and consultants. The Compensation Committee will also be authorized to interpret the 2011 Option Plan, prescribe option agreements and make all other determinations that it deems necessary or desirable for the administration of the 2011 Plan.

All stock-based compensation expense is included in compensation expense for financial reporting purposes. Stock-based compensation expense is recognized using a straight-line basis over the requisite service period for the entire award. For the year ended December 31, 2011 stock-based compensation expense is $1,280 and is included in compensation costs. Also included in the 2011 stock-based compensation expense is $145 for the modification of awards upon the termination of an employee.

The fair value of the assumed options and RSUs was $954 and $224, respectively, and are included in the purchase price of the Merger, see Note 3 — Acquisitions.

Stock Options

Stock option activity for the period from October 21, 2011 to December 31, 2011 is as follows:



	Shares			Weighted Average Exercise Price
Grants assumed as part of the Merger	1,065,393			$	21.93
Granted	5,566,225			$	3.27
Exercised	—			$	—
Canceled, forfeited or expired	(116,424		)	$	11.50
Outstanding December 31, 2011	6,515,194			$	6.17
Options exercisable at end of period	973,940			$	21.99
Aggregate estimated fair value of options vesting during the period	$	1,521

At December 31, 2011, vested and exercisable options had an aggregate intrinsic value of $0 and a weighted average remaining contractual term of 4.41 years. Additionally, at December 31, 2011, 5,541,254 unvested options were expected to vest with a weighted average exercise price of $3.39, a weighted average remaining term of 9.89 years and an aggregate intrinsic value of $0. No options were exercised during the period from October 22, 2011 to December 31, 2011. The aggregate intrinsic value of options represents the total pre-tax intrinsic value (the difference between our closing stock price at the end of the period and the option's exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options at that time. For the year ended December 31, 2011, compensation expense related to stock options was $1,226 and is included in compensation costs. Also included in the 2011 stock-based compensation expense is $145 for the modification of awards upon the termination of an employee.

As of December 31, 2011, there was $16,202 of unearned compensation cost related to stock options granted under all of our stock-based compensation plans. That cost is expected to be recognized over a weighted-average period of 3.8 years.

Options granted in the period from October 21, 2011 to December 31, 2011, vested as follows: one-fortieth (1/40) immediately and the remainder in equal one-fortieth (1/40) monthly installments beginning on December 21, 2011 and on each monthly anniversary thereafter through October 21, 2014 and then one-one hundred twentieth (1/120) monthly installments beginning November 21, 2014 through October 21, 2015. Options are expensed on a straight-line basis over the requisite service period for the entire award with the amount of compensation cost recognized at any date being at least equal to the portion of the grant-date value of the award that is vested at that date.

The estimated fair value of options assumed from Westwood on the date the Merger closed and of options granted in the period from such date to December 31, 2011 were measured using the Black-Scholes-Merton option pricing model using the weighted average assumptions as follows:



				Assumed Options Fair Value
	December 31, 2011			Greater Than $0			Equal To $0
Risk-free interest rate	1.84		%	0.02% to 1.860%			0.02% to 1.50%
Expected term (years)	10.00			0.08 to 8.31			0.26 to 6.72
Expected volatility	109.5		%	117.5% to 180.0%			94.1% to 176.0%
Expected dividend yield	—		%	—		%	—		%
Exercise prices	$	3.27		$6.00 to $8.02			$36.00 to $7,038.00
Weighted average fair value of options granted	$	3.00		$	1.48		$	—
Number of shares	5,566,225			1,053,000			12,393

The risk-free interest rate for periods within the life of the option is based on a blend of U.S. Treasury rates. The expected term is based on length of time until the option expires at the valuation date, which cannot exceed ten years. The expected volatility assumption used by us is based on the historical volatility of the Westwood and Dial Global stock using a period equal to the expected term. The dividend yield represents the expected dividends on our common stock for the expected term of the option and we do not expect to declare any dividends during that time.

Additional information related to options outstanding at December 31, 2011, segregated by grant price range is summarized below:



Options outstanding at exercise price of:	Number of Options	Weighted Average Exercise Price		Remaining Weighted Average Contractual Life (in years)
$3.27	5,566,225	$	3.27	9.98
$6.00	836,832	$	6.00	4.12
$8.02	100,000	$	8.02	0.88
$36 - $438	8,982	$	238.45	3.46
$1,234 - $7,038	3,155	$	4,455.70	2.84
	6,515,194	$	6.17	9.07

Restricted Stock Units

Outstanding RSUs of Westwood assumed on the date of the Merger consisted of one grant for 66,667 shares and one grant for 65 shares, with a fair value of $3.61 per share. All of these RSUs vested on November 18, 2011. For the year ended December 31, 2011, the compensation expense related to these RSUs was $16 and is included in compensation costs.

On December 20, 2011, our Compensation Committee determined that our independent non-employee directors should receive an award of RSUs valued in an amount of $65 for their initial year of service as directors. These awards vested as follows: one-twelfth (1/12) immediately and the remainder in equal one-twelfth (1/12) monthly installments beginning on December 21, 2011 and on each monthly anniversary thereafter through October 21, 2012. For the year ended December 31, 2011, compensation expense related to these RSUs is $38 and is included in compensation costs. As of December 31, 2011, unearned compensation cost related to RSUs is $157. Under the 2010 Plan, options, RSUs and restricted stock (once granted) are deducted from the authorized plan total, with grants of RSUs, restricted stock and related dividend equivalents being deducted at the rate of three shares for every one share granted.

RSUs activity for the period ended December 31, 2011 is as follows:



	Shares		Weighted Average Grant Date Fair Value
Grants assumed as part of the Merger	66,732		$	3.61
Granted	60,000		$	3.25
Converted to common shares	(76,731	)	$	3.56
Canceled, forfeited or expired	—		$	—
Outstanding end of period	50,001		$	3.25