from company 10k your answer about internal stock options.
BL
9. STOCKHOLDERS' EQUITY
Common Stock
In May 1995, the Company sold 7,850,000 shares of common stock in an
underwritten public offering at a price of $12.13 per share.
Preferred Stock
The number of shares of preferred stock authorized to be issued is
5,000,000 with a par value of $0.0001 per share. The preferred stock may be
issued from time to time in one or more series. The Board of Directors is
authorized to provide for the rights, preferences, privileges and restrictions
of the shares of such series. As of December 31, 1996, no shares of preferred
stock had been issued.
Employee Stock Purchase Plan
Under the Company's 1993 Employee Stock Purchase Plan (the "Plan")
1,400,000 shares of common stock are reserved for issuance pursuant thereto. The
Plan permits eligible employees to purchase shares at a price equal to 85% of
the lower of the fair market value at the beginning or end of the offering
period. At December 31, 1996, 597,077 shares have been issued under the Plan and
802,923 shares have been reserved for further issuance. The weighted average
fair value of those purchase rights granted in 1996 and 1995 was $6.97 and
$4.97, respectively. The Company's calculations were made using the
Black-Scholes option pricing model with the following weighted average
assumptions: expected life of 2 years for both years; expected interest rate of
6.1% and 5.6% for 1996 and 1995, respectively; expected volatility of 60% for
both years; and no dividends during the expected term.
Stock Plan
Under the Company's stock option plans at December 31, 1996, 17,040,057
shares of common stock have been authorized for the grant of incentive or
nonstatutory stock options and the direct award or sale of shares to employees,
directors and consultants. Incentive stock options must be granted at not less
than fair market value at the date of grant. The exercise price of nonstatutory
options and the share price for shares sold generally may be no less than 85% of
fair market value at the date of the grant or sale. At December 31, 1996,
9,614,249 shares of common stock are reserved for issuance under the plans and
694,150 shares were available for future grant.
40
S3 INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
A summary of stock option activity is as follows:
NUMBER OF WEIGHTED AVERAGE
SHARES PRICE PER SHARE
---------- -----------------
Balance, January 1, 1994....................... 5,256,132 $ 1.84
Options granted................................ 3,951,600 4.88
Options exercised.............................. (858,382) 0.45
Options canceled............................... (1,540,596) 6.38
----------
Balance, December 31, 1994..................... 6,808,754 2.75
Options granted................................ 2,970,550 15.47
Options exercised.............................. (2,330,911) 1.27
Options canceled............................... (463,454) 6.61
----------
Balance, December 31, 1995..................... 6,984,939 8.37
Options granted................................ 6,538,362 12.09
Options exercised.............................. (1,204,235) 3.83
Options canceled............................... (3,398,967) 15.28
----------
Balance, December 31, 1996..................... 8,920,099 $ 9.06
=========
Options on 2,267,969, 2,030,259 and 1,717,140 shares were exercisable at
December 31, 1996, 1995 and 1994 with a weighted average exercise price of
$4.29, $3.51 and $0.69, respectively.
These options generally vest over a period of four years and generally
become exercisable beginning 6 months from the date of employment or grant.
Options expire ten years from the date of grant. Common stock sold to employees,
directors and consultants under stock purchase agreements is subject to
repurchase at the Company's option upon termination of their employment or
services at the original purchase price. This right expires ratably over four
years. The Company repriced 2,713,657 options to $10.06, the market price on
July 15, 1996. The repriced options are treated as canceled and regranted,
however, they retain their original vesting terms.
Stock Compensation Arrangement
Pursuant to an incentive compensation plan for certain employees, the
Company issued 99,071 shares of its common stock in 1996 and is committed to
issue 99,071 shares of its common stock on June 30, 1997. The Company is
accruing the related compensation cost ratably over the periods.
Additional Stock Plan Information
As discussed in Note 1, the Company continues to account for its
stock-based awards using the intrinsic value method in accordance with
Accounting Principles Board No. 25, Accounting for Stock Issued to Employees and
its related interpretations. Accordingly, no compensation expense has been
recognized for employee stock option and purchase plan arrangements.
Under SFAS 123, the fair value of stock-based awards to employees is
calculated through the use of option pricing models, even though such models
were developed to estimate the fair value of freely tradable, fully transferable
options without vesting restrictions, which significantly differ from the
Company's stock option awards. These models also require subjective assumptions,
including future stock price volatility and expected time to exercise, which
greatly affect the calculated values. Adoption of SFAS 123 is optional; however,
pro forma disclosures as if the Company adopted the cost recognition
requirements under SFAS 123 in 1995 are presented below.
41
S3 INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The following table summarizes significant ranges of outstanding and
exercisable options at December 31, 1996:
OPTIONS OUTSTANDING
--------------------------- OPTIONS EXERCISABLE
WEIGHTED ------------------------
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE (YRS) PRICE EXERCISABLE PRICE
-------------- ----------- ----------- -------- ----------- --------
$0.12 - $ 3.44 1,326,821 6.04 $ 1.83 1,140,236 $ 1.60
3.56 - 8.72 1,843,521 7.67 5.64 870,111 5.56
8.97 - 10.06 3,576,941 9.00 10.05 54,095 9.77
10.13 - 23.38 2,172,816 9.33 14.74 203,527 12.49
---------- ---------
$0.12 - $23.38 8,920,099 8.37 $ 9.06 2,267,969 $ 4.29
The weighted average fair value at date of grant for options granted during
1996, 1995 and 1994 was $12.09, $15.65 and $4.49 per option, respectively. The
Company's calculations were made using the Black-Scholes option pricing model
with the following weighted average assumptions:
1996 1995
--------------------------- ---------------------------
Expected Life............. 6 months following vesting 6 months following vesting
Interest Rate............. 6.1% 5.6%
Volatility................ 60% 60%
Dividend Yield............ 0% 0%
The Company's calculations are based on a multiple option valuation
approach and forfeitures are recognized as they occur.
If the computed fair values of the 1996 and 1995 awards had been amortized
to expense over the vesting period of the awards, pro forma net income would
have been $35.3 million ($0.69 fully diluted earnings per share and $0.72
primary earnings per share) in 1996 and $30.3 million ($0.66 fully diluted and
primary earnings per share) in 1995. However, because options vest over several
years and grants prior to 1995 are excluded from these calculations, these
amounts may not be representative of the impact on future years' earnings,
assuming grants are made in those years.
|
