Stock-Based Compensation and Employee Benefit Plans
|6 Months Ended|
Jun. 30, 2012
|Stock-Based Compensation and Employee Benefit Plans [Abstract]|
|Stock-Based Compensation and Employee Benefit Plans||
5. Stock-Based Compensation and Employee Benefit Plans
The Company uses the Black-Scholes valuation model to calculate the fair value of stock options and employee stock purchase rights granted to employees. The Company calculates the fair value of restricted stock units, or RSUs, and restricted stock awards, or RSAs, based on the fair market value of our Class A common stock on the grant date. The weighted-average grant date fair value per share of the RSUs and RSAs granted in the six months ended June 30, 2012 was $5.90. The weighted-average grant date fair value per share of the RSUs granted in the six months ended June 30, 2011 was $9.02. No RSAs were granted during the six months ended June 30, 2011.
The fair values of stock options and employee stock purchase rights were estimated at their respective grant date using the following assumptions:
Employee Stock Purchase Rights
The risk-free interest rate assumption was based on the United States Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. The weighted-average expected life of options was calculated using the simplified method as prescribed by guidance provided by the SEC. This decision was based on the lack of relevant historical data due to the Company’s limited historical experience. In addition, due to the Company’s limited historical data, the estimated volatility incorporates the historical volatility of comparable companies whose share prices are publicly available.
The Company recognized stock-based compensation in the statements of operations as follows:
In May 2012, the Company completed an offer to exchange (the “Exchange Offer”) for restricted stock units (RSUs), certain outstanding options to purchase shares of the Company’s Class A common stock and shares of the Company’s Class B common stock, whether vested or unvested, that (i) had an exercise price per share greater than $5.00, (ii) were granted under either the MaxLinear 2010 Equity Incentive Plan (the “2010 Plan”) or the MaxLinear 2004 Stock Plan (the “2004 Plan,” and together with the 2010 Plan, the “Plans”), and (iii) were held by employees eligible to participate in the Exchange Offer. Pursuant to the terms and conditions of the Exchange Offer, the Company accepted for exchange options to purchase 1,327,171 shares of the Company’s Class A common stock and 591,242 shares of the Company’s Class B common stock from a total of 148 eligible employees. All surrendered options were cancelled, and immediately thereafter, the Company issued a total of 959,222 restricted stock units in exchange therefor, pursuant to the terms of the Exchange Offer and the Plans. One share of the Company’s Class A common stock is issuable upon the vesting of each restricted stock unit. The restricted stock units have new vesting schedules based on continued service through each applicable vesting date over a period of approximately 3 years following the grant date of the RSUs. The Company accounted for the Exchange Offer as a modification of the original options as required by the accounting standard for stock-based compensation. The total Exchange Offer stock-based compensation is $7.3 million, including the incremental value attributed to the modified options of $1.8 million, which will be recognized over the vesting period of the new RSUs.
Employee Benefit Plans
2010 Equity Incentive Plan
The 2010 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance-based stock awards, and other forms of equity compensation, or collectively, stock awards. The exercise price for an incentive or a non-statutory stock option cannot be less than 100% of the fair market value of the Company’s Class A common stock on the date of grant. Options granted will generally vest over a four-year period and the term can be from seven to ten years.
On January 1, 2012, 1,329 shares of Class A common stock were automatically added to the shares authorized for issuance under the 2010 Plan pursuant to an “evergreen” provision contained in the 2010 Plan.
2010 Employee Stock Purchase Plan
The ESPP is implemented through a series of offerings of purchase rights to eligible employees. Generally, all regular employees, including executive officers, employed by the Company may participate in the ESPP and may contribute up to 15% of their earnings for the purchase of the Company’s common stock under the ESPP. Unless otherwise determined by the Company’s board of directors, Class A common stock will be purchased for accounts of employees participating in the ESPP at a price per share equal to the lower of (a) 85% of the fair market value of a share of the Company’s Class A common stock on the first date of an offering or (b) 85% of the fair market value of a share of the Company’s Class A common stock on the date of purchase.
On January 1, 2012, 415 shares of Class A common stock were automatically added to the shares authorized for issuance under the ESPP pursuant to an “evergreen” provision contained in the ESPP.
At June 30, 2012, the Company had 500 million authorized shares of Class A common stock and 500 million authorized shares of Class B common stock. Holders of the Company’s Class A and Class B common stock have identical voting rights, except that holders of Class A common stock are entitled to one vote per share and holders of Class B common stock are entitled to ten votes per share with respect to transactions that would result in a change of control of the Company or that relate to the Company’s equity incentive plans. In addition, holders of Class B common stock have the exclusive right to elect two members of the Company’s Board of Directors, each referred to as a Class B Director. The shares of Class B common stock are not publicly traded. Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock and in most instances automatically converts upon sale or other transfer.
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.
Reference 1: http://www.xbrl.org/2003/role/presentationRef