NetSpend 2010 Annual Report Download - page 95

Table of Contents
NetSpend Holdings, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2009 and 2010
NOTE 12: SHARE BASED PAYMENT (Continued)
0.1 million performance-based options, respectively. The Company did not issue any performance-based options in 2010.
During the year ended December 31, 2010, the Board modified the performance condition of certain performance-based options. Prior to
the modification, the performance condition for employee option holders was the Company's achievement of a pre-determined equity value
hurdle in an initial public offering or change of control. The performance condition for all performance-based employee options, with the
exception of those held by the Company's Chief Executive Officer, was modified to be the earlier of (1) the Company's achievement of a
determined equity value hurdle in or subsequent to an initial public offering, (2) a change in control prior to December 31, 2011, or (3) the
Company's achievement of a pre-determined earnings target. During the year ended December 31, 2010, the Company recorded additional
compensation expense of approximately $0.2 million related to this modification.
Also in 2010, the Board modified the terms of certain options held by a former member of the Company's board of directors to allow the
former board member's options to continue vesting subsequent to the termination of the option holder's board membership. The modification
was approved by the board of directors in exchange for consulting services. The services were deemed non-substantive and additional
compensation expense of approximately $0.2 million was recognized during the year ended December 31, 2010. In addition, restricted stock
awards held by former executives and employees of the Company were accelerated in accordance with their employment agreements. The
Company recorded additional compensation expense of $0.5 million related to this acceleration.
The fair value of the stock options issued under the employee stock incentive plan during the years ended December 31, 2008, 2009 and
2010 was $15.6 million, $4.6 million and $10.7 million, respectively.
Accelerated Vesting Upon Initial Public Offering
Upon completion of the Company's initial public offering, the vesting of certain outstanding options and shares of restricted stock
accelerated according to the terms of the underlying agreements.
Certain restricted shares accelerated to vest on the date six months following the completion of the initial public offering, as opposed to on
the date three years from the initial grant date. In connection with the acceleration, the Company will recognize the unamortized restricted
stock expense on a straight-line basis over the 0.5 year future service period.
All event-based options were triggered to vest on the date two years after the completion of the initial public offering. Prior to the
completion of the initial public offering, the Company had not recognized any expense related to event-based options because the vesting was
contingent upon future events that were not deemed probable prior to the initial public offering. The Company will recognize the unamortized
event-based option expense on a straight-line basis over the 2.0 year service period.
In connection with the initial public offering, the remaining service period associated with the CEO's standard options was shortened by
one year as stipulated under the original option agreement. The Company will recognize the unamortized stock option expense on a straight-
line basis over the remaining 0.3 year service period.
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