v2.4.1.9

Share-based Compensation | 12 Months Ended
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Dec. 31, 2014
Share-based Compensation | (12) Share-based Compensation In September 2013, the Board of Directors approved the Company’s 2013 Stock Incentive Plan (the “2013 Plan”), under which the Company’s employees, officers, directors, and other eligible participants may be awarded various types of share-based compensation, and authorized 600,000 shares of the Company’s class A common stock for issuance under the 2013 Plan. In April 2014, the Company’s stockholders approved the 2013 Plan at the Company’s annual meeting. In April 2014, following the Company’s annual meeting, the Board of Directors authorized, subject to stockholder approval, an amendment to the 2013 Plan to increase the total number of shares of the Company’s class A common stock authorized for issuance under the 2013 Plan from 600,000 to 1,500,000 shares (“Amendment No. 1”). Also in April 2014, the Compensation Committee of the Board of Directors (the “Compensation Committee”) authorized, subject to stockholder approval, an additional amendment to the 2013 Plan to provide for automatic annual stock option grants to each of the Company’s non-employee directors with respect to 5,000 shares of the Company’s class A common stock, beginning in 2015 (“Amendment No. 2”). The Company considers stockholder approval of both amendments to the 2013 Plan to be perfunctory since the Company’s Chairman and Chief Executive Officer holds a majority of the total voting power of all the Company’s outstanding voting stock. During 2014, the Compensation Committee approved, in each case subject to stockholder approval of Amendment No. 1, the grant of stock options to purchase an aggregate of 745,000 shares of class A common stock to certain Company employees, officers, and directors pursuant to the 2013 Plan. These awards, and any additional awards granted prior to stockholder approval of Amendment No. 1, will be terminated or forfeited if stockholder approval is not obtained within 12 months of the date of grant of the awards, and no awards may be exercised or settled prior to such stockholder approval. However, the Company expects to obtain stockholder approval of both amendments to the 2013 Plan at the Company’s annual meeting of stockholders in 2015. In the event stockholder approval for Amendment No. 1 is not obtained within 12 months of the grant date of any option awards, the cumulative share-based compensation expense associated with those stock option awards would be reversed. As of December 31, 2014, there were options to purchase 1,200,800 shares of class A common stock outstanding under the 2013 Plan (including options to purchase 685,000 shares of class A common stock that are subject to stockholder approval of Amendment No. 1). As of December 31, 2014, there were 290,000 remaining shares of class A common stock authorized for future issuance under the 2013 Plan, subject to stockholder approval of Amendment No. 1. Shares issued under the 2013 Plan may consist in whole or in part of authorized but unissued shares or treasury shares. No awards may be issued more than ten years after the 2013 Plan’s effective date. Stock options that are granted under the 2013 Plan must have an exercise price equal to at least the fair market value of the Company’s class A common stock on the date of grant, become exercisable as established by the Board of Directors or the Compensation Committee, and expire no later than ten years following the date of grant. The Company recognizes share-based compensation expense associated with such stock option awards on a straight-line basis over the award’s requisite service period (generally, the vesting period). The stock option awards granted to date vest in equal annual installments over an approximately four-year vesting period (unless accelerated upon a change in control event (as defined in the stock option agreement for the applicable award) or otherwise in accordance with provisions of the 2013 Plan or applicable option agreement). Share-based compensation expense is based on the fair value of the stock option awards on the date of grant, as estimated using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the input of certain management assumptions, including the expected term, expected stock price volatility, risk-free interest rate, and expected dividend yield. The Company estimates the term over which optionholders are expected to hold their stock options by using the simplified method for “plain-vanilla” stock option awards because the Company’s stock option exercise history does not provide a reasonable basis to compute the expected term for stock options granted under the 2013 Plan. The Company relies exclusively on its historical stock price volatility to estimate the expected stock price volatility over the expected term because the Company believes future volatility is unlikely to differ from the past. In estimating the expected stock price volatility, the Company uses a simple average calculation method. The risk-free interest rate is based on U.S. Treasury securities with terms that approximate the expected term of the stock options. The expected dividend yield is based on the Company’s past cash dividend history and anticipated future cash dividend payments. The expected dividend yield is zero, as the Company has not previously declared cash dividends and does not currently intend to declare cash dividends in the foreseeable future. These assumptions are based on management’s best judgment, and changes to these assumptions could materially affect the fair value estimates and amount of share-based compensation expense recognized. Prior to the adoption of the 2013 Plan, the Company had maintained other share-based compensation plans with respect to the Company’s class A common stock (the “Other Stock Incentive Plans”), but had not granted any share-based awards under the Other Stock Incentive Plans since the first quarter of 2004 and is no longer authorized to grant any awards under such plans. As of December 31, 2014, there were no outstanding share-based awards granted under the Other Stock Incentive Plans. The following table summarizes the Company’s stock option activity (in thousands, except per share data and years) for the periods indicated:
|  | Stock Options Outstanding |
|  | Shares |  |  | Weighted Average Exercise Price Per Share |  |  | Aggregate Intrinsic Value |  |  | Weighted Average Remaining Contractual Term (Years) |
Balance as of January 1, 2012 |  |  | 517 |  |  | $ | 20.31 |  |  |  |  |  |  |  |  |
Granted |  |  | 0 |  |  |  | 0 |  |  |  |  |  |  |  |  |
Exercised |  |  | (501 | ) |  |  | 20.30 |  |  | $ | 51,564 |  |  |  |  |
Forfeited/Expired |  |  | 0 |  |  |  | 0 |  |  |  |  |  |  |  |  |
Balance as of December 31, 2012 |  |  | 16 |  |  | $ | 20.81 |  |  |  |  |  |  |  |  |
Granted |  |  | 600 |  |  |  | 92.84 |  |  |  |  |  |  |  |  |
Exercised |  |  | (16 | ) |  |  | 20.81 |  |  | $ | 1,262 |  |  |  |  |
Forfeited/Expired |  |  | 0 |  |  |  | 0 |  |  |  |  |  |  |  |  |
Balance as of December 31, 2013 |  |  | 600 |  |  | $ | 92.84 |  |  |  |  |  |  |  |  |
Granted |  |  | 745 |  |  |  | 125.46 |  |  |  |  |  |  |  |  |
Exercised |  |  | (9 | ) |  |  | 92.84 |  |  | $ | 653 |  |  |  |  |
Forfeited/Expired |  |  | (135 | ) |  |  | 104.48 |  |  |  |  |  |  |  |  |
Balance as of December 31, 2014 |  |  | 1,201 |  |  | $ | 111.77 |  |  |  |  |  |  |  |  |
Exercisable as of December 31, 2014 |  |  | 141 |  |  | $ | 92.84 |  |  | $ | 9,794 |  |  |  | 7.7 |
Expected to vest as of December 31, 2014 |  |  | 1,060 |  |  | $ | 114.29 |  |  |  | 51,001 |  |  |  | 9.1 |
Total |  |  | 1,201 |  |  | $ | 111.77 |  |  | $ | 60,795 |  |  |  | 9.0 |
Stock options outstanding as of December 31, 2014 are comprised of the following range of exercise prices per share (in thousands, except per share data and years):
|  | Stock Options Outstanding at December 31, 2014 |
Range of Exercise Prices per Share |  | Shares |  |  | Weighted Average Exercise Price Per Share |  |  | Weighted Average Remaining Contractual Term (Years) |
$92.84 - $120.00 |  |  | 596 |  |  | $ | 96.34 |  |  |  | 8.5 |
$120.01 - $150.00 |  |  | 520 |  |  | $ | 121.43 |  |  |  | 9.3 |
$150.01 - $160.88 |  |  | 85 |  |  | $ | 160.88 |  |  |  | 9.8 |
Total |  |  | 1,201 |  |  | $ | 111.77 |  |  |  | 9.0 |
An aggregate of 150,000 stock options with an aggregate fair value of $6.3 million vested during the year ended December 31, 2014. No stock options vested during the years ended December 31, 2013 and, 2012. The Company expects all unvested and outstanding options at December 31, 2014 to fully vest in future years in accordance with their vesting schedules and therefore share-based compensation expense has not been adjusted for any expected forfeitures. The weighted average grant date fair value of stock option awards using the Black-Scholes option pricing model was $55.84 and $42.03 for each share subject to a stock option granted during the years ended December 31, 2014 and December 31, 2013, respectively, based on the following assumptions:
|  | Years Ended December 31, |
|  | 2014 |  |  | 2013 |
Expected term of options in years |  |  | 6.3 |  |  |  | 6.3 |
Expected volatility |  |  | 41.5 - 42.5 | % |  |  | 42.8 | %
Risk-free interest rate |  |  | 2.1 - 2.3 | % |  |  | 2.5 | %
Expected dividend yield |  |  | 0.0 | % |  |  | 0.0 | %
No stock options were granted during the year ended December 31, 2012. The Company recognized approximately $11.8 million and $2.1 million in share-based compensation expense for the years ended December 31, 2014 and December 31, 2013, respectively, from stock options granted under the 2013 Plan. The Company recognized no share-based compensation expense for the years ended December 31, 2014, 2013, and 2012 from stock options granted under the Other Stock Incentive Plans as all such options fully vested in prior years. As of December 31, 2014, there was approximately $46.6 million of total unrecognized share-based compensation expense related to unvested stock options. The Company expects to recognize this remaining share-based compensation expense over a weighted-average vesting period of approximately 3.2 years. Such amounts do not include the impact from the grants of stock options in February 2015 to purchase an aggregate of 200,000 shares of class A common stock. See Note 19, Subsequent Events, for further detail. During the year ended December 31, 2013, the Company was able to recognize and utilize net operating loss carryforwards arising directly from tax deductions related to equity compensation in excess of compensation recognized for financial reporting that was generated primarily in prior years under the Other Stock Incentive Plans. Accordingly, stockholders’ equity increased by $23.6 million during the year ended December 31, 2013. No windfall tax benefit was realized from the exercise of stock options during the years ended December 31, 2014 and 2012. MicroStrategy’s former subsidiary, Angel.com, previously maintained a stock incentive plan under which certain employees, officers, and directors of MicroStrategy and Angel.com were granted options to purchase shares of the class A common stock of Angel.com, subject to the satisfaction of both performance and continued service conditions. Share-based compensation expense would have been recognized over the requisite service period of the award based on the probability of the satisfaction of the performance condition, reduced by the number of awards that were not expected to vest due to the failure to satisfy the continued service condition. In connection with the sale of Angel.com in the first quarter of 2013, the Angel.com stock incentive plan was terminated and all outstanding options thereunder were terminated in exchange for cash payments totaling $8.0 million. Prior to their termination, no share-based compensation expense was recognized for these awards for the years ended December 31, 2013 and 2012 because the performance condition had not been satisfied.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 + Details
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