Rosetta Stone 2012 Annual Report Download - page 105
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Table of Contents
motivate senior management to achieve key financial and strategic business objectives of the Company; offer eligible executives a competitive total
compensation package; reward executives in the success of the Company; provide ownership in the Company; and retain key talent. Executives
designated by the Board of Directors were eligible to receive a minimum number of shares of restricted common stock for each milestone level of total
market capitalization achieved, as specified in individual award agreements. The shares received would be restricted in that after issuance of the shares,
they would be subject to vesting over a two-year period. For each milestone level of market capitalization reached above the base market capitalization as
of October 1, 2010, the compensation committee of the Board of Directors would allocate the pre-defined share incentive pool for that milestone reached
amongst the participating executives with the minimum number of shares specified in individual award agreements. Although minimum participation
percentages were communicated to certain plan participants, all share grants under the LTIP were contingent upon achievement of the market
capitalization thresholds.
In accordance with the agreements communicated to the executives after the approval of the plan by the Board of Directors, the LTIP participants
were granted minimum participation percentages of each tranche of shares issued at each milestone level reached. Throughout the year ended
December 31, 2011, the target market capitalization required to trigger the first issuance of shares was below the minimum threshold, and no shares
were issued. The minimum participation percentages given to plan participants were considered grants in accordance with the provisions of ASC 718.
The grant date fair value of the minimum awards was $6.1 million, which was derived using a Monte Carlo valuation model. This value would have
been amortized as stock-based compensation expense over the derived service period of five years.
On November 30, 2011, as a result of the substantial reduction in incentive and retentive value of the plan, the board of directors cancelled the
LTIP. As a result of the cancellation, the company recognized $4.9 million in stock-based compensation expense equal to the total unamortized value of
the awards. There were no shares issued from the LTIP to any executive prior to its cancellation.
Stock-based compensation expense related to the LTIP was $6.0 million for the year ended December 31, 2011. As of December 31, 2011, there
was no unrecognized stock-based compensation expense related to awards under the LTIP.
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