Classmates.com 2005 Annual Report Download - page 105

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Options granted during the years ended December 31, 2005 and 2004, the six months ended December 31, 2003 and the year ended
June 30, 2003 did not result in any deferred stock-based compensation. RSUs issued during the year ended December 31, 2005 resulted in total
deferred stock-based compensation of $18.0 million, which was included in deferred stock-based compensation in stockholders’ equity.
Restricted stock awards issued during the year ended December 31, 2004 resulted in total deferred stock-based compensation of $11.4 million,
which was included in deferred stock-based compensation in stockholders’ equity. In December 2004, the Company repurchased 100,000
restricted shares of common stock in connection with the resignation of an executive officer and reversed $2.0 million of the $11.4 million in
deferred stock-based compensation. Deferred stock-based compensation is recognized over the service period. During the years ended
December 31, 2005 and 2004, the six months ended December 31, 2003 and the year ended June 30, 2003, compensation expense included in
the statement of operations amounted to $10.0 million, $2.4 million, $0 and $0.1 million, respectively.
The following table summarizes the stock-based compensation that has been included in the following captions for each of the periods
presented (in thousands):
Acceleration of Stock Options
In December 2005, the Company’s Compensation Committee of the Board of Directors approved the acceleration of vesting of all options
to purchase the Company’s common stock with exercise prices in excess of $16.00. These options were granted to executive officers and other
employees of the Company under the Company’s 2001 Stock Incentive Plan and 2001 Supplemental Stock Incentive Plan. Options to purchase
1.3 million shares of the Company’
s common stock were subject to this acceleration and such options had exercise prices ranging from $16.01 to
$64.17, and had a weighted average exercise price of $18.47.
The acceleration of vesting of these out-of-the-money options was undertaken primarily to eliminate any future compensation expense the
Company would otherwise recognize in its income statement with respect to these options with the implementation of SFAS No. 123R effective
January 1, 2006. The Company estimated this compensation expense, before tax, would have totaled approximately $3.8 million over the course
of the original vesting periods. Ninety five percent of the options would have vested within approximately 1.5 years from the effective date of
the acceleration with the remaining 5% vesting within approximately 2.5 years from the date of acceleration. The Company also believed that
because the options to be accelerated had exercise prices in excess of the current market value of the Company’s common stock, the options had
limited economic value and were not fully achieving their original objective of incentive compensation and employee retention.
Employee Stock Purchase Plan
The Company has a 2001 Employee Stock Purchase Plan (“ESPP”), which expires in the year 2011, and under which an aggregate of
4.8 million shares of the Company’s common stock have been authorized
F- 36
Year Ended December 31,
Six Months Ended
December 31,
Year Ended
June 30,
2005
2004
2003
2003
Operating expenses:
Cost of billable services
$
183
$
16
$
—
$
8
Sales and marketing
954
76
—
20
Product development
1,069
32
—
6
General and administrative
7,746
2,325
—
73
Total stock
-
based compensation
$
9,952
$
2,449
$
—
$
107