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Compensation Related Costs, Share Based Payments (Tables)
 6 Months Ended
Dec. 26, 2020
Share-based Payment Arrangement [Abstract]  
Disclosure of Share-based Compensation Arrangements by Share-based Payment Award STOCK-BASED COMPENSATION
At December 26, 2020, the Company had one stock incentive plan, the Company's 1996 Stock Incentive Plan (the “1996 Plan”) and one employee stock purchase plan, the 2008 Employee Stock Purchase Plan (the “2008 ESPP”). The 1996 Plan was adopted by the Board of Directors to provide the grant of incentive stock options, non-statutory stock options, restricted stock units (“RSUs”), restricted stock awards ("RSAs") and market stock units (“MSUs”) to employees, directors, and consultants.

Pursuant to the 1996 Plan, the exercise price for incentive stock options and non-statutory stock options is determined to be the fair market value of the underlying shares on the date of grant. Options typically vest ratably over a four-year period measured from the date of grant. Options generally expire no later than seven years after the date of grant, subject to earlier termination upon an optionee's cessation of employment or service.

RSUs granted to employees typically vest ratably over a four-year period and are released or converted into shares of the Company's common stock upon vesting, subject to the employee's continued service to the Company over that period. RSUs granted from September 2017 to July 2020 will continue to vest post-employment at the Company for certain individuals satisfying specific eligibility requirements.

RSAs granted to employees typically vest over a four-year cliff period and are converted into shares of the Company's common stock upon vesting, subject to the employee's continued service to the Company over that period. RSAs have certain shareholder rights, such as voting rights, but are not eligible for dividends or dividend equivalents.

MSUs granted to employees typically vest over a four-year cliff period and are converted into shares of the Company's common stock upon vesting, subject to the employee's continued service to the Company over that period. The number of shares that are released at the end of the performance period can range from zero to a maximum cap depending on the Company's performance. MSUs granted in September 2017, September 2018, and September 2019 will continue to vest post-employment at the Company for certain individuals satisfying specific eligibility requirements.
The following tables show total stock-based compensation expense by type of award, and the resulting tax effect, included in the Condensed Consolidated Statements of Income for the three and six months ended December 26, 2020 and December 28, 2019, respectively:

Three Months EndedThree Months Ended
December 26, 2020December 28, 2019
Stock OptionsRestricted Stock Units and Other AwardsEmployee Stock Purchase PlanTotalStock OptionsRestricted Stock Units and Other AwardsEmployee Stock Purchase PlanTotal
(in thousands)
Cost of goods sold$13 $3,502 $585 $4,100 $5 $2,269 $699 $2,973 
Research and development3 10,880 1,048 11,931 4 9,918 1,514 11,436 
Selling, general and administrative73 14,559 546 15,178 55 8,753 849 9,657 
Pre-tax stock-based compensation expense$89 $28,941 $2,179 $31,209 $64 $20,940 $3,062 $24,066 
Less: income tax effect3,030 2,193 
Net stock-based compensation expense$28,179 $21,873 

Six Months EndedSix Months Ended
December 26, 2020December 28, 2019
Stock OptionsRestricted Stock Units and Other AwardsEmployee Stock Purchase PlanTotalStock OptionsRestricted Stock Units and Other AwardsEmployee Stock Purchase PlanTotal
(in thousands)
Cost of goods sold$24 $7,295 $1,449 $8,768 $14 $4,549 $1,368 $5,931 
Research and development6 23,147 3,155 26,308 8 19,403 2,909 22,320 
Selling, general and administrative148 30,042 1,673 31,863 122 18,706 1,659 20,487 
Pre-tax stock-based compensation expense$178 $60,484 $6,277 $66,939 $144 $42,658 $5,936 $48,738 
Less: income tax effect5,561 5,081 
Net stock-based compensation expense$61,378 $43,657 

The expense included in the Condensed Consolidated Statements of Income for RSUs and other awards include expenses related to MSUs of $2.5 million and $2.4 million for the three months ended December 26, 2020 and December 28, 2019, respectively, and $6.1 million and $6.8 million for the six months ended December 26, 2020 and December 28, 2019, respectively.

In connection with the proposed ADI Merger, on September 1, 2020, the Company’s Board of Directors granted RSAs to certain employees. For employees who made IRS Section 83(b) elections, Maxim accelerated a portion of the RSAs to satisfy tax withholding requirements. The Company recorded $0.7 million and $8.7 million of stock-based compensation expense related to the accelerated RSAs during the three and six months ended December 26, 2020, respectively. Additionally, in connection with the proposed ADI Merger, the Company modified equity awards held by certain executives by accelerating the vesting of 0.2 million outstanding RSU awards that otherwise would have vested at various dates through calendar year 2023. The Company recognized an additional $5.1 million of stock-based compensation expense related to these RSU modifications during the three and six months ended December 26, 2020.
Stock Options

The fair value of options granted to employees under the 1996 Plan is estimated on the date of grant using the Black-Scholes option valuation model.

There were no stock options granted in the six months ended December 26, 2020 and December 28, 2019.

The following table summarizes outstanding, exercisable and vested and expected to vest stock options as of December 26, 2020 and related activity for the six months ended December 26, 2020:
Number of
Shares
Weighted Average Exercise PriceWeighted Average Remaining Contractual Term (in Years)
Aggregate Intrinsic Value(1)
Balance at June 27, 2020104,447 $28.76 
Options Granted— — 
Options Exercised(99,819)28.50 
Options Cancelled— — 
Balance at December 26, 20204,628 $34.20 0.4$242,414 
Exercisable, December 26, 20204,628 $34.20 0.4$242,414 
Vested and expected to vest, December 26, 20204,628 $34.20 0.4$242,414 

(1)Aggregate intrinsic value represents the difference between the exercise price and the closing price per share of the Company’s common stock on December 24, 2020, the last business day preceding the fiscal quarter-end, multiplied by the number of options outstanding, exercisable or vested and expected to vest as of December 26, 2020.

As of December 26, 2020, there was no unrecognized stock compensation from unvested stock options.

Restricted Stock Units and Restricted Stock Awards

The fair value of RSUs and RSAs under the Company’s 1996 Plan is estimated using the value of the Company’s common stock on the date of grant, reduced by the present value of dividends expected to be paid on the Company’s common stock prior to vesting. The Company also estimates forfeitures at the time of grant and makes revisions to forfeitures on a quarterly basis.

The weighted-average fair value of RSUs and RSAs granted was $69.32 and $56.21 per share for the six months ended December 26, 2020 and December 28, 2019, respectively.

The following table summarizes the outstanding and expected to vest RSUs and RSAs as of December 26, 2020 and related activity during the six months ended December 26, 2020:
Number of
Shares
Weighted Average
Remaining
Contractual Term
(in Years)
Aggregate Intrinsic
Value(1)
Balance at June 27, 20204,606,592 
Restricted stock units and restricted stock awards granted1,377,171 
Restricted stock units and restricted stock awards released(949,534)
Restricted stock units and restricted stock awards cancelled(246,848)
Balance at December 26, 20204,787,381 1.9$414,491,447 
Outstanding and expected to vest, December 26, 2020
3,928,669 1.6$340,144,241 

(1)Aggregate intrinsic value for RSUs and RSAs represents the closing price per share of the Company’s common stock on December 24, 2020, the last business day preceding the fiscal quarter-end, multiplied by the number of RSUs and RSAs outstanding or expected to vest as of December 26, 2020.
The Company withheld shares totaling $36.0 million in value as a result of employee withholding taxes based on the value of RSUs and RSAs on their vesting date for the six months ended December 26, 2020. Total payments for employees’ tax obligations to taxing authorities are reflected as financing activities within the Condensed Consolidated Statements of Cash Flows.

As of December 26, 2020, there was $183.3 million of unrecognized compensation expense related to 4.8 million unvested RSUs and RSAs, which is expected to be recognized over a weighted average period of approximately 1.9 years.

Market Stock Units (MSUs)

The Company grants MSUs to senior members of management in lieu of granting stock options. For MSUs granted prior to September 2017, the performance metrics of this program are based on relative performance of the Company’s stock price as compared to the Semiconductor Exchange Traded Fund index SPDR S&P (the “XSD”). For MSUs granted in September 2017, September 2018, and September 2019, the performance metrics for this program are based on the total shareholder return ("TSR") of the Company relative to the TSR of the other companies included in the XSD. The fair value of MSUs is estimated using a Monte Carlo simulation model on the date of grant. The Company also estimates forfeitures at the time of grant and makes revisions to forfeitures on a quarterly basis. Compensation expense is recognized based on the initial valuation and is not subsequently adjusted as a result of the Company’s performance relative to that of the XSD or the TSR of the companies included in the XSD, as applicable. Vesting for MSUs is contingent upon both service and market conditions and has a four-year vesting cliff period. MSUs granted in September 2017, September 2018, and September 2019 vest based upon annual performance and are subject to continued service through the end of the four-year period but will continue to vest post-employment at the Company for certain individuals satisfying specific eligibility requirements. Pursuant to the terms of the ADI Merger Agreement, the Company grants RSUs in lieu of MSUs (or RSAs in lieu of MSUs for any potential “disqualified individuals” within the meaning of Section 280G of the Internal Revenue Code, which RSAs will not be eligible for dividends or dividend equivalent rights) from the date of the ADI Merger Agreement through the date that the transaction closes.

No MSUs were granted during the six months ended December 26, 2020. The weighted-average fair value of MSUs granted was $54.70 per share for the six months ended December 28, 2019.

The following table summarizes the number of MSUs outstanding and expected to vest as of December 26, 2020 and their activity during the six months ended December 26, 2020:
Number of
Shares
Weighted Average
Remaining
Contractual Term
(in Years)
Aggregate Intrinsic
Value(1)
Balance at June 27, 2020971,220 
Market stock units granted— 
Market stock units released— 
Market stock units cancelled(237,576)
Balance at December 26, 2020733,644 1.5$63,518,898 
Outstanding and expected to vest, December 26, 2020
1,062,016 1.1$91,949.385 

(1)Aggregate intrinsic value for MSUs represents the closing price per share of the Company’s common stock on December 24, 2020, the last business day preceding the fiscal quarter-end, multiplied by the number of MSUs outstanding or expected to vest as of December 26, 2020.

As of December 26, 2020, there was $19.3 million of unrecognized compensation expense related to 0.7 million unvested MSUs, which is expected to be recognized over a weighted average period of approximately 1.5 years.

Employee Stock Purchase Plan

Employees are granted rights to acquire common stock under the 2008 ESPP.

The fair value of 2008 ESPP rights granted to employees has been estimated at the date of grant using the Black-Scholes option valuation model using the following assumptions for the offering periods:
Three Months EndedSix Months Ended
December 26, 2020December 28, 2019December 26, 2020December 28, 2019
Expected holding period (in years)0.5 years0.5 years0.5 years0.5 years
Risk-free interest rate0.2% - 1.6%1.6% - 2.7%0.2% - 1.6%1.6% - 2.7%
Expected stock price volatility29.2% - 55.2%28.4% - 31.3%29.2% - 55.2%28.4% - 31.3%
Dividend yield3.3% - 3.3%3.1% - 3.4%3.3% - 3.3%3.1% - 3.4%

As of December 26, 2020 and December 28, 2019, there was $0 and $10.1 million, respectively, of unrecognized compensation expense related to the 2008 ESPP. At the end of the current offering period in November 2020, the Company suspended the 2008 ESPP program pursuant to the terms of the ADI Merger Agreement.