Equity Incentive Plans and Stock-Based Compensation

As of March 31, 2013, 1,385,873 shares of the 21,400,000 shares approved under the 2006 Equity Incentive Plan (the “2006 Plan”) remain available for grant which included an increase of 6,500,000 shares approved by stockholders on April 26, 2012. 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”) and the 1999 Non-statutory Stock Option Plan (the “1999 Plan”) will continue to govern awards previously granted under those plans.

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, 2012	2,729,159
Stock options granted	(1,619,437	)
Stock options forfeited	893,744
Stock options expired under former plans	(291,219	)
Nonvested equity stock and stock units granted (1)	(414,744	)
Nonvested equity stock and stock units forfeited (1)	88,370
Total available for grant as of March 31, 2013	1,385,873

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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 restricted stock granted reduces the number of shares available for grant by 1.5 shares and each 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, 1999 Plan and 2006 Plan for the three months ended March 31, 2013 and information regarding stock options outstanding, exercisable, and vested and expected to vest as of March 31, 2013.



	Options Outstanding
	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
	(Dollars in thousands, except per share amounts)
Outstanding as of December 31, 2012	13,094,815		$	12.79
Options granted	1,619,437		5.46
Options exercised	—		—
Options forfeited	(893,744	)	11.20
Outstanding as of March 31, 2013	13,820,508		12.03		6.44	$	1,898
Vested or expected to vest at March 31, 2013	12,533,217		12.48		6.21	1,549
Options exercisable at March 31, 2013	5,945,597		19.05		3.82	36

No stock options that contain a market condition were granted during the three months ended March 31, 2013. The fair values of the options granted with a market condition were calculated using a binomial valuation model, which estimates the potential outcome of reaching the market condition based on simulated future stock prices. As of March 31, 2013 and December 31, 2012 , there were 1,535,000 stock options outstanding that require the Company to achieve minimum market conditions in order for the options to become exercisable.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value for in-the-money options at March 31, 2013, based on the $5.61 closing stock price of Rambus’ Common Stock on March 28, 2013 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, 2013 was 2,900,931 and 32,761, respectively.

Employee Stock Purchase Plan

No purchases were made under the 2006 Employee Stock Purchase Plan (“ESPP”) during the three months ended March 31, 2013 and 2012, respectively. As of March 31, 2013, 1,082,515 shares under the ESPP remain available for issuance.

Stock-Based Compensation

For the three months ended March 31, 2013 and 2012, 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 months ended March 31, 2013 and 2012, the Company granted 1,619,437 and 1,937,002 stock options, respectively, with an estimated total grant-date fair value of $3.8 million and $7.5 million, respectively. During the three months ended March 31, 2013 and 2012, Rambus recorded stock-based compensation expense related to stock options of $3.1 million and $4.3 million, respectively.

As of March 31, 2013, there was $26.6 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 2.8 years. The total fair value of shares vested as of March 31, 2013 was $76.3 million.

There were no options exercised during the three months ended March 31, 2013. The total intrinsic value of options exercised was $39 thousand for the three months ended March 31, 2012. 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.

Employee Stock Purchase Plan

For the three months ended March 31, 2013 and 2012, the Company recorded compensation expense related to the ESPP of $0.5 million and $0.7 million, respectively. As of March 31, 2013, there was $0.2 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 months ended March 31, 2013 and 2012 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,
	2013			2012
Stock Option Plans
Expected stock price volatility	47		%	60		%
Risk free interest rate	0.9		%	0.7		%
Expected term (in years)	5.4			5.6
Weighted-average fair value of stock options granted to employees	$	2.33		$	3.88

No shares were issued under the ESPP during the three months ended March 31, 2013 and 2012.

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, 2013 and 2012, the Company granted nonvested equity stock units totaling 276,496 and 423,371 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 months ended March 31, 2013 and 2012, the nonvested equity stock units were valued at the date of grant giving them a fair value of approximately $1.5 million and $3.1 million, respectively. The Company occasionally grants nonvested equity stock units to its employees with vesting subject to the achievement of certain performance conditions. During the three months ended March 31, 2013 and 2012, 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 all periods.

For the three months ended March 31, 2013 and 2012, the Company recorded stock-based compensation expense of approximately $1.3 million and $1.8 million, respectively, related to all outstanding unvested equity stock grants. Unrecognized stock-based compensation related to all nonvested equity stock grants, net of estimated forfeitures, was approximately $5.1 million at March 31, 2013. This is expected to be recognized over a weighted average period of 2.2 years.

The following table reflects the activity related to nonvested equity stock and stock units for the three months ended March 31, 2013:



Nonvested Equity Stock and Stock Units	Shares		Weighted- Average Grant-Date Fair Value
Nonvested at December 31, 2012	922,491		$	10.24
Granted	276,496		5.46
Vested	(178,666	)	14.02
Forfeited	(58,911	)	13.97
Nonvested at March 31, 2013	961,410		7.93