Equity Incentive Plans and Stock-Based Compensation

As of March 31, 2015, 8,161,965 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 was the Company’s only plan for providing stock-based incentive awards to eligible employees, executive officers, non-employee directors and consultants as of March 31, 2015. However, the 1997 Stock Option Plan (the “1997 Plan”) continues to govern awards previously granted under that plan. Additionally, on April 23, 2015, the Company's stockholders approved the 2015 Equity Incentive Plan (the “2015 Plan”), which authorizes 4,000,000 shares for future issuance plus the number of shares that remain available for grant under the 2006 Plan as of the effective date of the 2015 Plan. The 2015 Plan became effective and replaced the 2006 Plan on April 23, 2015. No further awards will be made under the 2006 Plan, but the 2006 Plan will continue to govern awards previously granted under it. In addition, any shares subject to stock options or other awards granted under the 2006 Plan that on or after the effective date of the 2015 Plan are forfeited, cancelled, exchanged or surrendered or terminate under the 2006 Plan will become available for grant under the 2015 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, 2014	10,724,228
Stock options granted	(362,335	)
Stock options forfeited	518,778
Stock options expired under former plans	(285,000	)
Nonvested equity stock and stock units granted (1) (2)	(2,520,747	)
Nonvested equity stock and stock units forfeited (1)	87,041
Total available for grant as of March 31, 2015	8,161,965

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(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.


(2)	Amount includes 238,980 shares that have been reserved for potential future issuance related to certain performance unit awards discussed under the section titled "Nonvested Equity Stock and Stock Units" below.

General Stock Option Information

The following table summarizes stock option activity under the 1997 Plan and 2006 Plan for the three months ended March 31, 2015 and information regarding stock options outstanding, exercisable, and vested and expected to vest as of March 31, 2015.



	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, 2014	11,441,646		$	10.73
Options granted	362,335		$	11.27
Options exercised	(217,241	)	$	6.90
Options forfeited	(518,778	)	$	16.37
Outstanding as of March 31, 2015	11,067,962		$	10.55	5.95	$	45,831
Vested or expected to vest at March 31, 2015	10,524,492		$	10.64	5.81	$	43,741
Options exercisable at March 31, 2015	6,207,537		$	12.84	4.30	$	21,336

No stock options that contain a market condition were granted during the three months ended March 31, 2015. As of both March 31, 2015 and December 31, 2014, 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 March 31, 2015, based on the $12.58 closing stock price of Rambus’ common stock on March 31, 2015 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 March 31, 2015 was 8,384,579 and 3,673,017, respectively.

Employee Stock Purchase Plan

No purchases were made under the 2006 Employee Stock Purchase Plan (“2006 ESPP”) during the three months ended March 31, 2015 and 2014, respectively. As of March 31, 2015, 923,044 shares under the 2006 ESPP remain available for issuance. On April 23, 2015, the Company's stockholders approved the 2015 Employee Stock Purchase Plan (“2015 ESPP”) which reserves an additional 2,000,000 shares of the Company's common stock for purchase. The 2006 ESPP will remain in effect until the Company’s next offering period scheduled to begin on November 2, 2015 at which time the 2015 ESPP will become effective.

Stock-Based Compensation

For the three months ended March 31, 2015 and 2014, 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 the 2006 ESPP and 2015 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 months ended March 31, 2015, the Company granted 362,335 stock options with an estimated total grant-date fair value of $1.7 million. During the three months ended March 31, 2015, the Company recorded stock-based compensation expense related to stock options of $2.2 million.

During the three months ended March 31, 2014, the Company granted 1,797,462 stock options with an estimated total grant-date fair value of $7.0 million. During the three months ended March 31, 2014, the Company recorded stock-based compensation expense related to stock options of $2.2 million.

As of March 31, 2015, there was $12.1 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 1.9 years. The total fair value of shares vested as of March 31, 2015 was $51.8 million.

The total intrinsic value of options exercised was $1.0 million for the three months ended March 31, 2015. The total intrinsic value of options exercised was $0.6 million for the three months ended March 31, 2014. 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 three months ended March 31, 2015, net proceeds from employee stock option exercises totaled approximately $1.5 million.

Employee Stock Purchase Plan

For the three months ended March 31, 2015, the Company recorded compensation expense related to the 2006 ESPP of $0.4 million. For the three months ended March 31, 2014, the Company recorded an immaterial amount of compensation expense related to the 2006 ESPP. As of March 31, 2015, there was $0.3 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under the 2006 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 months ended March 31, 2015 and 2014 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
	March 31,
	2015			2014
Stock Option Plans
Expected stock price volatility	41		%	44		%
Risk free interest rate	1.2		%	2.1		%
Expected term (in years)	6.0			6.1
Weighted-average fair value of stock options granted to employees	$	4.59		$	3.92

No shares were issued under the 2006 ESPP during the three months ended March 31, 2015 and 2014.

Nonvested Equity Stock and Stock Units

The Company grants nonvested equity stock units to officers, employees and directors. During the three months ended March 31, 2015, the Company granted nonvested equity stock units totaling 1,521,178 shares under the 2006 Plan. During the three months ended March 31, 2014, the Company granted nonvested equity stock units totaling 205,808 shares under the 2006 Plan. 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 months ended March 31, 2015, the nonvested equity stock units were valued at the date of grant giving them a fair value of approximately $17.1 million. For the three months ended March 31, 2014, the nonvested equity stock units were valued at the date of grant giving them a fair value of approximately $1.8 million. During the first quarter of 2015, the Company granted performance unit awards to certain Company executive officers with vesting subject to the achievement of certain performance conditions. The ultimate number of performance units that can be earned can range from 0% to 150% of target depending on performance relative to target over the applicable period. The shares earned will vest on the third anniversary of the date of grant. The Company's shares available for grant has been reduced to reflect the shares that could be earned at 150% of target. During the three months ended March 31, 2015, the Company recorded $0.2 million of stock-based compensation expense related to these performance unit awards.

For the three months ended March 31, 2015, the Company recorded stock-based compensation expense of approximately $1.2 million related to all outstanding nonvested equity stock grants. For the three months ended March 31, 2014, the Company recorded stock-based compensation expense of approximately $0.7 million 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 $14.6 million at March 31, 2015. This amount is expected to be recognized over a weighted average period of 3.3 years.

The following table reflects the activity related to nonvested equity stock and stock units for the three months ended March 31, 2015:



Nonvested Equity Stock and Stock Units	Shares		Weighted- Average Grant-Date Fair Value
Nonvested at December 31, 2014	673,864		$	9.23
Granted	1,521,178		$	11.27
Vested	(138,810	)	$	8.55
Forfeited	(58,027	)	$	10.35
Nonvested at March 31, 2015	1,998,205		$	10.80