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Equity Incentive Plans and Stock-Based Compensation
 9 Months Ended
Sep. 30, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Equity Incentive Plans and Stock-Based Compensation Equity Incentive Plans and Stock-Based Compensation
In the third quarter of 2019, the Company adopted the Rambus Inc. 2019 Inducement Equity Incentive Plan (the “2019 Inducement Plan”) and, subject to the adjustment provisions of the 2019 Inducement Plan, reserved 400,000 shares of the Company’s common stock for issuance pursuant to equity awards granted under the 2019 Inducement Plan.
The 2019 Inducement Plan provides for the grant of equity-based awards, including nonstatutory stock options, restricted stock units, restricted stock, stock appreciation rights, performance shares and performance units, and its terms are substantially similar to the Company’s 2015 Equity Incentive Plan (the “2015 Plan”). However, awards under the 2019 Inducement Plan may only be granted to individuals who previously have not been employees or non-employee directors of the Company (or who will become employed following a bona fide period of non-employment or service with the Company), as an inducement material to the individuals’ entry into employment with the Company, or, to the extent permitted by Rule 5635(c)(3) of the Nasdaq Listing Rules, in connection with a merger or acquisition.
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, 2018
10,074,046

Increase in shares approved for issuance (3)
400,000

Stock options granted
(40,000
)
Stock options forfeited
391,542

Nonvested equity stock and stock units granted (1) (2)
(6,986,217
)
Nonvested equity stock and stock units forfeited (1)
1,724,535

Total available for grant as of September 30, 2019
5,563,906

_________________________________________
(1)
For purposes of determining the number of shares available for grant under the 2015 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 approximately 1.0 million shares that have been reserved for potential future issuance related to certain performance unit awards granted in the first and third quarters of 2019 and discussed under the section titled “Nonvested Equity Stock and Stock Units” below.
(3)
Shares were reserved under the 2019 Inducement Plan adopted in the third quarter of 2019.
General Stock Option Information
The following table summarizes stock option activity under the 2015 Plan for the nine months ended September 30, 2019 and information regarding stock options outstanding, exercisable, and vested and expected to vest as of September 30, 2019.
 
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, 2018
3,235,891

 
$
10.25

 
 
 
 

Options granted
40,000

 
$
12.57

 
 
 
 

Options exercised
(1,087,931
)
 
$
7.68

 
 
 
 

Options forfeited
(391,542
)
 
$
13.86

 
 
 
 

Outstanding as of September 30, 2019
1,796,418

 
$
11.07

 
4.49
 
$
4,499

Vested or expected to vest at September 30, 2019
1,782,725

 
$
11.06

 
4.46
 
$
4,492

Options exercisable at September 30, 2019
1,437,761

 
$
10.68

 
3.74
 
$
4,312


Employee Stock Purchase Plan
Under the 2015 Employee Stock Purchase Plan (“2015 ESPP”), the Company issued 429,396 shares at a price of $7.95 per share during the nine months ended September 30, 2019. Under the 2015 ESPP, the Company issued 297,497 shares at a price of $11.66 per share during the nine months ended September 30, 2018. As of September 30, 2019, approximately 1.9 million shares under the 2015 ESPP remained available for issuance.
Stock-Based Compensation
For the nine months ended September 30, 2019 and 2018, 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 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 and nine months ended September 30, 2019, the Company granted 40,000 stock options with an estimated grant-date fair value of $0.2 million. During the three and nine months ended September 30, 2019, the Company recorded stock-based compensation expense related to stock options of $0.3 million and $0.8 million, respectively.
During the three months ended September 30, 2018, the Company granted approximately 0.1 million stock options with an estimated grant-date fair value of $0.4 million. During the nine months ended September 30, 2018, the Company granted approximately 0.7 million stock options with an estimated grant-date fair value of $3.0 million. During the three and nine months ended September 30, 2018, the Company recorded stock-based compensation expense related to stock options of $0.4 million and $1.4 million, respectively.
As of September 30, 2019, there was $2.3 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 2.3 years.
Employee Stock Purchase Plan
For the three and nine months ended September 30, 2019, the Company recorded compensation expense related to the 2015 ESPP of $0.3 million and $1.2 million, respectively. For the three and nine months ended September 30, 2018, the Company recorded compensation expense related to the 2015 ESPP of $0.3 million and $1.1 million, respectively. As of September 30,
2019, there was $0.1 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under the 2015 ESPP. That cost is expected to be recognized over one month.
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.
 
 
 
Equity Incentive Plan
 
Three Months Ended September 30, 2019
 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2019
 
Nine Months Ended September 30, 2018
Stock Options
 
 
 

 
 
 
 

Expected stock price volatility
36
%
 
32
%
 
36
%
 
24% - 32%

Risk free interest rate
1.4
%
 
2.8
%
 
1.4
%
 
2.6% - 2.8%

Expected term (in years)
5.1

 
5.8

 
5.1

 
5.8

Weighted-average fair value of stock options granted to employees
$
4.24

 
$
4.34

 
$
4.24

 
$
4.23


 
Employee Stock Purchase Plan
 
Nine Months Ended
 
September 30,
 
2019
 
2018
Employee Stock Purchase Plan
 

 
 

Expected stock price volatility
32
%
 
27
%
Risk free interest rate
2.44
%
 
2.05
%
Expected term (in years)
0.5

 
0.5

Weighted-average fair value of purchase rights granted under the purchase plan
$
2.80

 
$
3.14


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, 2019, the Company granted nonvested equity stock units totaling approximately 0.4 million and 4.1 million shares under both the 2015 Plan and 2019 Inducement Plan, respectively. During the three and nine months ended September 30, 2018, the Company granted nonvested equity stock units totaling approximately 0.3 million and 2.7 million shares under the 2015 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, 2019, the nonvested equity stock units were valued at the date of grant giving them a fair value of approximately $5.6 million and $41.2 million, respectively. For the three and nine months ended September 30, 2018, the nonvested equity stock units were valued at the date of grant giving them a fair value of approximately $4.1 million and $35.6 million, respectively. During the first and third quarters of 2019 and first quarter of 2018, 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 200% 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 have been reduced to reflect the shares that could be earned at the maximum target.
For the three and nine months ended September 30, 2019, the Company recorded stock-based compensation expense of approximately $6.8 million and $19.7 million, respectively, related to all outstanding nonvested equity stock grants. For the three and nine months ended September 30, 2018, the Company recorded stock-based compensation expense of approximately $5.5 million and $13.0 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 $41.9 million at September 30, 2019. This amount is expected to be recognized over a weighted average period of 2.5 years.
The following table reflects the activity related to nonvested equity stock and stock units for the nine months ended September 30, 2019:
Nonvested Equity Stock and Stock Units
 
Shares
 
Weighted-
 Average
 Grant-Date
 Fair Value
Nonvested at December 31, 2018
 
4,859,135

 
$
12.71

Granted
 
4,120,729

 
$
10.05

Vested
 
(1,517,554
)
 
$
12.66

Forfeited
 
(986,572
)
 
$
11.53

Nonvested at September 30, 2019
 
6,475,738

 
$
11.21