Metro PCS 2007 Annual Report Download - page 127

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MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
F-28
Initial Public Offering
On April 24, 2007, upon consummation of the Offering, the Company’ s Third Amended and Restated Certificate
of Incorporation (the “Restated Certificate”), as filed with the Delaware Secretary of State, became effective. The
Restated Certificate provides for two classes of capital stock to be designated, respectively, Common Stock and
Preferred Stock. The total number of shares which the Company is authorized to issue is 1,100,000,000 shares.
1,000,000,000 shares are Common Stock, par value $0.0001 per share, and 100,000,000 shares are Preferred Stock,
par value $0.0001 per share. The Restated Certificate does not distinguish classes of common stock or preferred
stock.
14. Share-Based Payments:
Prior to the first quarter of 2006, the Company measured stock-based compensation expense for its stock-based
employee compensation plans using the intrinsic value method prescribed by APB No. 25, as allowed by
SFAS No. 123.
Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R) using
the modified prospective transition method. Under that transition method, compensation expense recognized
beginning on that date includes: (a) compensation expense for all share-based payments granted prior to, but not yet
vested as of, January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions
of SFAS No. 123, and (b) compensation expense for all share-based payments granted on or after January 1, 2006,
based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). Although there
was no material impact on the Company’ s financial position, results of operations or cash flows from the adoption of
SFAS No. 123(R), the Company reclassified all deferred equity compensation on the consolidated balance sheet to
additional paid-in capital upon its adoption. The period prior to the adoption of SFAS No. 123(R) does not reflect
any restated amounts.
MetroPCS has two stock option plans (the “Option Plans”) under which it grants options to purchase common
stock of MetroPCS: the Second Amended and Restated 1995 Stock Option Plan, as amended (“1995 Plan”), and the
Amended and Restated 2004 Equity Incentive Compensation Plan, as amended (“2004 Plan”). The 1995 Plan was
terminated in November 2005 and no further awards can be made under the 1995 Plan, but all options previously
granted will remain valid in accordance with their original terms. As of December 31, 2007, the maximum number
of shares reserved for the 2004 Plan was 40,500,000 shares. In February 2007, the 2004 Plan was amended to
increase the number of shares of common stock reserved for issuance under the plan from 18,600,000 to a total of
40,500,000 shares. Vesting periods and terms for stock option grants are determined by the plan administrator,
which is MetroPCS’ Board of Directors for the 1995 Plan and the Compensation Committee of the Board of
Directors of MetroPCS for the 2004 Plan. No option granted under the 1995 Plan have a term in excess of fifteen
years and no option granted under the 2004 Plan shall have a term in excess of ten years. Options granted during the
years ended December 31, 2007, 2006 and 2005 have a vesting period of one to four years.
Options granted under the 1995 Plan are exercisable upon grant. Shares received upon exercising options prior to
vesting are restricted from sale based on a vesting schedule. In the event an option holder’ s service with the
Company is terminated, MetroPCS may repurchase unvested shares issued under the 1995 Plan at the option
exercise price. Options granted under the 2004 Plan are only exercisable upon vesting. Upon exercise of options
under the Option Plans, new shares of common stock are issued to the option holder.
The value of the options is determined by using a Black-Scholes pricing model that includes the following
variables: 1) exercise price of the instrument, 2) fair market value of the underlying stock on date of grant,
3) expected life, 4) estimated volatility and 5) the risk-free interest rate. The Company utilized the following
weighted-average assumptions in estimating the fair value of the option grants in the years ended December 31,
2007, 2006 and 2005: