Annual report pursuant to Section 13 and 15(d)

Employee Stock Plans

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Employee Stock Plans
12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Employee Stock Plans Employee Stock Plans
Stock Incentive Plans
Our 1999 Stock Incentive Plan (the “1999 Plan”), which became effective in June 1999, was the successor to the 1998 Stock Plan (the “1998 Plan”). Upon approval of the 1999 Plan, all outstanding options under the 1998 Plan were transferred to the 1999 Plan, and no further option grants were made under the 1998 Plan. All outstanding options under the 1998 Plan continue to be governed by the terms and conditions of the existing option agreements for those grants, unless our compensation committee decides to extend one or more features of the 1999 Plan to those options. In June 2009, our 1999 Plan expired and no further options grants were made under the 1999 Plan. Our 2010 Equity Incentive Plan (the “2010 Plan”) was approved by our stockholders in June 2010. Under the 2010 Plan, we were initially authorized to issue 3,500,000 shares of common stock and stock units, although “full value” awards (such as restricted stock and restricted stock units) will be counted against the 2010 Plan’s overall limits as two shares (rather than one), while options and stock appreciation rights will be counted as one share. On September 9, 2014, our board of directors approved an amendment (the “2014 Amendment”) to our 2010 Plan, which was approved by our shareholders on June 17, 2015. Pursuant to the 2014 Amendment, the maximum aggregate number of shares of common stock and stock units available for the grant of awards under the 2010 Plan was increased by an additional 2,100,000 shares. On April 28, 2016, our board of directors adopted an amendment (the “2016 Amendment”) to increase the maximum aggregate number of shares of common stock and stock units available for grants by an additional 1,200,000 shares, which was approved by our shareholders on June 13, 2016. On April 25, 2018, our board of directors adopted an amendment (the “2018 Amendment”) to our 2010 Plan, which was approved by our shareholders on June 11, 2018. The 2018 Amendment: (i) increased the maximum aggregate number of shares of common stock and stock units available for the grant of awards under the 2010 Plan by 2,200,000 shares; (ii) extended the term of the 2010 Plan through April 25, 2028; (iii) added a requirement that, except in the case of substitute awards which may be granted in connection with certain business combinations, any awards granted after the effective date of the 2018 Amendment (except for 5% of the shares reserved under the 2010 Plan) shall be granted with a minimum vesting period of at least 12 months, subject to the Compensation Committee's discretionary authority to accelerate such awards in the event of the participant's retirement, death or disability, or upon a change in control of the company; and (iv) prohibits the payment of dividends on awards that are unvested or subject to restrictions. At December 31, 2019, the number of shares of common stock remaining available for future issuance under the equity compensation plans was 449,000 excluding the number of shares of common stock to be issued upon exercise of outstanding options, warrants and rights. Except for the 2014, 2016, and 2018 Amendments to the 2010 Plan described above, the 2010 Plan otherwise remains materially unchanged.
On April 9, 2015, pursuant to the 2014 Amendment, our compensation committee approved additional performance-based stock option grants for certain employees. These additional option awards granted under the 2014 Amendment vest monthly in equal parts over a 36-month period that commenced on the closing of our acquisition of Endicia, except for the awards for a former employee which were fully expensed on an accelerated basis in the third quarter of 2017 based on specific events and circumstances of the employee’s status change to a consultant in the third quarter of 2017. The number of options issued was approximately 175,000. For these awards subject to performance conditions, the fair value per award was fixed at the grant date on June 17, 2015, the date the 2014 Amendment was approved by the shareholders. In the year ended December 31, 2019 there was no stock-based compensation expense for these performance-based awards. For the years ended December 31, 2018 and 2017, the total stock-based compensation expense for these performance-based awards was approximately $878,000 and $2.4 million, respectively.
A summary of stock option activity is as follows:
 
Options (in thousands)
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term
 
Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2016
3,292

 
$
49.95

 
7.9 years
 
$
213,066

Granted
1,167

 
$
133.19

 
 
 
 
Forfeited or expired
(102
)
 
$
94.68

 
 
 
 
Exercised
(1,612
)
 
$
39.15

 
 
 
 
Outstanding at December 31, 2017
2,745

 
$
89.99

 
8.2 years
 
$
269,018

Granted
851

 
$
221.58

 
 
 
 
Forfeited or expired
(171
)
 
$
139.99

 
 
 
 
Exercised
(784
)
 
$
60.45

 
 
 
 
Outstanding at December 31, 2018
2,641

 
$
137.88

 
8.1 years
 
$
104,348

Granted
2,043

 
$
42.77

 
 
 
 
Forfeited or expired
(350
)
 
$
152.17

 
 
 
 
Exercised
(53
)
 
$
57.41

 
 
 
 
Outstanding at December 31, 2019
4,281

 
$
92.31

 
8.1 years
 
$
100,494

Exercisable at December 31, 2019
1,667

 
$
114.54

 
6.7 years
 
$
18,506



The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on our closing stock price of $83.52 at December 31, 2019, the last trading day of 2019, which would have been received by award holders had all award holders exercised their awards that were in-the-money as of that date.
    
The weighted average fair value of stock options granted for 2019, 2018 and 2017 using the Black-Scholes valuation method are as follows:
 
2019
 
2018
 
2017
Weighted average fair value of stock options with an exercise price equal to the market price on the grant date
$
23.64

 
$
84.55

 
$
47.17

Weighted average fair value of stock options with an exercise price greater than the market price on the grant date

 

 

   Total
$
23.64

 
$
84.55

 
$
47.17



Weighted average exercise prices for stock options exercised in 2019 are as follows:
 
2019
Weighted average exercise price of stock options with an exercise price equal to the market price on the grant date
$
57.41

Weighted average exercise price of stock options with an exercise price greater than the market price on the grant date

   Total weighted average exercise price
$
57.41



The weighted average grant date fair value of options vested during 2019, 2018 and 2017 was $54.87, $43.30 and $32.52, respectively. The total intrinsic value of options exercised during 2019, 2018 and 2017 was approximately $3.5 million, $125.3 million and $240.0 million, respectively.

The following table summarizes the status of our non-vested stock options as of December 31, 2019:
 
Non-vested
Number of Stock Options (in thousands)
 
Weighted Average Grant Date Fair Value per Option
Non-vested at December 31, 2018
1,578

 
$
63.13

Granted
2,043

 
$
23.64

Vested
(657
)
 
$
54.87

Forfeited / Cancelled
(350
)
 
$
62.40

Non-vested at December 31, 2019
2,614

 
$
34.40



As of December 31, 2019, there was $78.8 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements, which is expected to be recognized over a weighted average period of approximately 2 years.
Equity Inducement Plans
In connection with the ShippingEasy acquisition, we issued performance-based inducement equity awards to two executives of ShippingEasy covering an aggregate of up to approximately 87,000 shares of common stock if earnings targets for ShippingEasy are achieved over a two and one-half year period which began July 1, 2016. The awards were subject to proration if at least 75% of the applicable target was achieved and were subject to forfeiture or acceleration based on changes in employment circumstances over the performance period.
In addition, in connection with the ShippingEasy acquisition we made inducement stock option grants for an aggregate of 62,000 shares of Stamps.com common stock to 48 employees. Each option vested 25% on the one year anniversary of the grant date and the remaining 75% vest in approximately equal monthly increments over the succeeding thirty-six months provided that the option holder is still employed by the Company on the vesting dates. The stock options have a ten year term and an exercise price equal to the closing price of Stamps.com common stock on the grant date of July 1, 2016.
In 2018, we granted inducement stock options to purchase 60,000 shares of Stamps.com common stock to a newly hired executive officer. Such option vests 25% on the one year anniversary of the grant date with the remaining 75% vesting in approximately equal monthly increments over the succeeding thirty-six months provided that the option holder is still employed by the Company on the vesting dates. The stock options have a ten year term and an exercise price equal to the closing price of Stamps.com common stock on the grant date of February 26, 2018.
Further, in connection with the MetaPack acquisition we made inducement stock option grants for an aggregate of 320,250 shares of Stamps.com common stock to 72 employees. Each option vests 25% on the one year anniversary of the grant date with the remaining 75% vesting in approximately equal monthly increments over the succeeding thirty-six months provided that the option holder is still employed by the Company on the vesting dates. The stock options have a ten year term and an exercise price equal to the closing price of Stamps.com common stock on the grant date of August 15, 2018.
The inducement plans were exempt from stockholder approval requirements as an employment inducement grant plan under applicable Nasdaq Listing Rule 5635(c)(4) as inducements material to the new employees entering into employment with Stamps.com.
Employee Stock Purchase Plan
In June 1999, our board of directors adopted an Employee Stock Purchase Plan (ESPP), which allows our eligible employees to purchase shares of common stock, at semi-annual intervals, with their accumulated payroll deductions.
Eligible participants may contribute up to 15% of cash earnings through payroll deductions, and the accumulated deductions will be applied to the purchase of shares on each semi-annual purchase date. The purchase price per share is equal to 85% of the fair market value per share on the participant’s entry date into the offering period or, if lower, 85% of the fair market value per share on the semi-annual purchase date.
Upon adoption of the ESPP, 150,000 shares of common stock were reserved for issuance. This reserve automatically increases on the first trading day in January each year, by an amount equal to 1% of the total number of outstanding shares of our common stock on the last trading day in December in the prior year. In no event will any annual increase exceed 260,786 shares.
In July 2009, our board of directors amended our ESPP to extend it for a period of ten years beyond its original expiration date of July 31, 2009. Under this amendment, the total shares available for issuance may not increase. In October 2018, the board of directors further amended our ESPP to extend its expiration date for an additional period of ten years to July 31, 2029. As of December 31, 2019 and 2018, we had approximately 1.5 million and 1.5 million shares available for issuance under our ESPP, respectively. Total shares of common stock issued pursuant to the ESPP during 2019, 2018 and 2017 were approximately 31,000, 25,000, and 36,000, respectively.
Savings Plan
We have a savings plan for all eligible employees which qualifies under Section 401(k) of the Internal Revenue Code. Participating employees may contribute any percentage of their pretax salary, but not more than statutory dollar limits. We match participant contributions up to certain limitations. We expensed approximately $2.0 million, $1.7 million and $1.4 million in 2019, 2018 and 2017, respectively, related to this plan.
In Europe where applicable, we have savings plans for all eligible employees which conform to country-specific regulations. Participating employees may contribute any percentage of their salary, but not more than statutory dollar limits. We match participant contributions up to certain limitations. Matching contributions to these plans were not material in 2019 or 2018.