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Equity Incentive Plans and Stock-Based Compensation | 9 Months Ended
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Sep. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
Equity Incentive Plans and Stock-Based Compensation | Equity Incentive Plans and Stock-Based Compensation As of September 30, 2014, 10,839,423 shares of the 31,400,000 shares approved under the 2006 Equity Incentive Plan (the “2006 Plan”) remain available for grant which included an increase of 10,000,000 shares approved by stockholders on April 24, 2014. The 2006 Plan is now the Company’s only plan for providing stock-based incentive awards to eligible employees, executive officers, non-employee directors and consultants; however, the 1997 Stock Option Plan (the “1997 Plan”) will continue to govern awards previously granted under that plan. A summary of shares available for grant under the Company’s plans is as follows:
| Shares Available for Grant
Shares available as of December 31, 2013 | 2,527,428 |
Increase in shares approved for issuance | 10,000,000 |
Stock options granted | (2,168,309 | )
Stock options forfeited | 994,532 |
Stock options expired under former plans | (157,000 | )
Nonvested equity stock and stock units granted (1) | (421,908 | )
Nonvested equity stock and stock units forfeited (1) | 64,680 |
Total available for grant as of September 30, 2014 | 10,839,423 |
_________________________________________
(1) | For purposes of determining the number of shares available for grant under the 2006 Plan against the maximum number of shares authorized, each share of restricted stock granted reduces the number of shares available for grant by 1.5 shares and each share of restricted stock forfeited increases shares available for grant by 1.5 shares.
General Stock Option Information The following table summarizes stock option activity under the 1997 Plan and 2006 Plan for the nine months ended September 30, 2014 and information regarding stock options outstanding, exercisable, and vested and expected to vest as of September 30, 2014.
| Options Outstanding |  |  |  |
| Number of Shares |  | Weighted Average Exercise Price Per Share |  | Weighted Average Remaining Contractual Term (years) |  | Aggregate Intrinsic Value
| (In thousands, except per share amounts)
Outstanding as of December 31, 2013 | 11,377,146 |  |  | $ | 11.32 |  |  |  |  |  |
Options granted | 2,168,309 |  |  | $ | 9.43 |  |  |  |  |  |
Options exercised | (808,643 | ) |  | $ | 7.02 |  |  |  |  |  |
Options forfeited | (994,532 | ) |  | $ | 15.92 |  |  |  |  |  |
Outstanding as of September 30, 2014 | 11,742,280 |  |  | $ | 10.88 |  |  | 6.09 |  | $ | 47,629 |
Vested or expected to vest at September 30, 2014 | 11,076,127 |  |  | $ | 11.06 |  |  | 5.94 |  | $ | 44,436 |
Options exercisable at September 30, 2014 | 6,135,339 |  |  | $ | 14.14 |  |  | 4.17 |  | $ | 17,678 |
No stock options that contain a market condition were granted during the three and nine months ended September 30, 2014. As of both September 30, 2014 and December 31, 2013, there were 1,315,000 stock options outstanding that require the Company to achieve minimum market conditions in order for the options to become exercisable. The fair values of the options granted with a market condition were calculated, on their respective grant dates, using a binomial valuation model, which estimates the potential outcome of reaching the market condition based on simulated future stock prices. The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value for in-the-money options at September 30, 2014, based on the $12.48 closing stock price of Rambus’ common stock on September 30, 2014 on the NASDAQ Global Select Market, which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options outstanding and exercisable as of September 30, 2014 was 8,436,927 and 3,064,424, respectively. Employee Stock Purchase Plan Under the 2006 Employee Stock Purchase Plan (“ESPP”), the Company issued 374,588 shares at a price of $7.42 per share during the nine months ended September 30, 2014. The Company issued 652,272 shares at a price of $4.28 per share during the nine months ended September 30, 2013. As of September 30, 2014, 1,144,644 shares under the ESPP remain available for issuance. On September 27, 2013, the Company filed a Registration Statement on Form S-8, registering 1,500,000 additional shares under the ESPP in connection with the commencement of the next subscription period under the ESPP. On April 24, 2014, the Company held its 2014 Annual Meeting of Stockholders where an amendment to the ESPP to increase the number of shares of common stock reserved for issuance under the ESPP by 1,500,000 shares was approved. Stock-Based Compensation For the nine months ended September 30, 2014 and 2013, the Company maintained stock plans covering a broad range of potential equity grants including stock options, nonvested equity stock and equity stock units and performance based instruments. In addition, the Company sponsors an ESPP, whereby eligible employees are entitled to purchase common stock semi-annually, by means of limited payroll deductions, at a 15% discount from the fair market value of the common stock as of specific dates. Stock Options During the three and nine months ended September 30, 2014, the Company granted 252,232 and 2,168,309 stock options, respectively, with an estimated total grant-date fair value of $1.5 million and $9.1 million, respectively. During the three and nine months ended September 30, 2014, the Company recorded stock-based compensation expense related to stock options of $2.4 million and $6.9 million, respectively. During the three and nine months ended September 30, 2013, the Company granted 141,575 and 1,897,887 stock options, respectively, with an estimated total grant-date fair value of $0.6 million and $4.7 million, respectively. During the three and nine months ended September 30, 2013, the Company recorded stock-based compensation expense related to stock options of $2.5 million and $8.1 million, respectively. As of September 30, 2014, there was $15.8 million of total unrecognized compensation cost, net of expected forfeitures, related to non-vested stock-based compensation arrangements granted under the stock option plans. That cost is expected to be recognized over a weighted-average period of 2.1 years. The total fair value of shares vested as of September 30, 2014 was $57.7 million. The total intrinsic value of options exercised was $1.7 million and $3.9 million for the three and nine months ended September 30, 2014, respectively. The total intrinsic value of options exercised was $0.6 million and $0.7 million for the three and nine months ended September 30, 2013, respectively. Intrinsic value is the total value of exercised shares based on the price of the Company’s common stock at the time of exercise less the cash received from the employees to exercise the options. During the nine months ended September 30, 2014, net proceeds from employee stock option exercises totaled approximately $5.7 million. Employee Stock Purchase Plan For the three and nine months ended September 30, 2014, the Company recorded compensation expense related to the ESPP of $0.4 million and $2.2 million, respectively. The compensation expense related to the ESPP for the nine months ended September 30, 2014 included a one-time catch-up compensation expense related to the increase in shares available for the ESPP which was approved by shareholders during the 2014 Annual Meeting of Stockholders. For the three and nine months ended September 30, 2013, the Company recorded compensation expense related to the ESPP of $0.4 million and $1.4 million, respectively. As of September 30, 2014, there was $0.1 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under the ESPP. That cost is expected to be recognized over one month. There were no tax benefits realized as a result of employee stock option exercises, stock purchase plan purchases, and vesting of equity stock and stock units for the three and nine months ended September 30, 2014 and 2013 calculated in accordance with accounting for share-based payments. Valuation Assumptions The fair value of stock awards is estimated as of the grant date using the Black-Scholes-Merton (“BSM”) option-pricing model assuming a dividend yield of 0% and the additional weighted-average assumptions as listed in the table below. The following table presents the weighted-average assumptions used to estimate the fair value of stock options granted that contain only service conditions in the periods presented.
| Stock Option Plans
| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
| 2014 |  | 2013 |  | 2014 |  | 2013
Stock Option Plans |  |  |  |  |  |  |  |  |  |  |
Expected stock price volatility | 44 | % |  | 45 | % |  | 40-44% |  |  | 45-47% |
Risk free interest rate | 2.1 | % |  | 1.5 | % |  | 2.1-2.2% |  |  | 0.8-1.5% |
Expected term (in years) | 6.0 |  |  | 5.5 |  |  | 6.0-6.1 |  |  | 5.4-5.5 |
Weighted-average fair value of stock options granted to employees | $ | 5.81 |  |  | $ | 4.00 |  |  | $ | 4.20 |  |  | $ | 2.48 |
| Employee Stock Purchase Plan
| Nine Months Ended
| September 30,
| 2014 |  | 2013
Employee Stock Purchase Plan |  |  |  |  |
Expected stock price volatility | 39-44% |  |  | 48 | %
Risk free interest rate | 0.0-0.1% |  |  | 0.1 | %
Expected term (in years) | 0.02-0.5 |  |  | 0.5 |
Weighted-average fair value of purchase rights granted under the purchase plan | $ | 3.91 |  |  | $ | 1.94 |
_______________________ No shares were issued under the Employee Stock Purchase Plan during the three months ended September 30, 2014 and 2013. Nonvested Equity Stock and Stock Units The Company grants nonvested equity stock units to officers, employees and directors. During the three and nine months ended September 30, 2014, the Company granted nonvested equity stock units totaling 52,596 and 281,272 shares under the 2006 Plan, respectively. During the three and nine months ended September 30, 2013, the Company granted nonvested equity stock units totaling 44,944 and 349,896 shares under the 2006 Plan, respectively. These awards have a service condition, generally a service period of four years, except in the case of grants to directors, for which the service period is one year. For the three and nine months ended September 30, 2014, the nonvested equity stock units were valued at the date of grant giving them a fair value of approximately $0.7 million and $2.8 million, respectively. For the three and nine months ended September 30, 2013, the nonvested equity stock units were valued at the date of grant giving them a fair value of approximately $0.4 million and $2.1 million, respectively. In prior years, the Company granted nonvested equity stock units to its employees with vesting subject to the achievement of certain performance conditions. During the three and nine months ended September 30, 2014, the Company did not record any stock-based compensation expense related to these performance stock units as they have been forfeited. During the three and nine months ended September 30, 2013, the achievement of certain performance conditions for certain performance equity stock units was considered probable, and as a result, the Company recognized an immaterial amount of stock-based compensation expense related to these performance stock units for these periods. For the three and nine months ended September 30, 2014, the Company recorded stock-based compensation expense of approximately $0.7 million and $2.1 million, respectively, related to all outstanding nonvested equity stock grants. For the three and nine months ended September 30, 2013, the Company recorded stock-based compensation expense of approximately $0.5 million and $2.4 million, respectively, related to all outstanding nonvested equity stock grants. Unrecognized stock-based compensation related to all nonvested equity stock grants, net of estimated forfeitures, was approximately $3.7 million at September 30, 2014. This amount is expected to be recognized over a weighted average period of 2.6 years. The following table reflects the activity related to nonvested equity stock and stock units for the nine months ended September 30, 2014:
Nonvested Equity Stock and Stock Units |  | Shares |  | Weighted- Average Grant-Date Fair Value
Nonvested at December 31, 2013 |  | 629,649 |  |  | $ | 8.56 |
Granted |  | 281,272 |  |  | $ | 9.83 |
Vested |  | (168,915 | ) |  | $ | 10.01 |
Forfeited |  | (43,113 | ) |  | $ | 7.37 |
Nonvested at September 30, 2014 |  | 698,893 |  |  | $ | 8.79 |

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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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