Stock Incentive and Employee Stock Purchase Plans

During the year ended December 31, 2014, the Company granted awards under the 2009 Omnibus Incentive Compensation Plan (the “2009 Plan”). The Compensation Committee of the Board of Directors administers the plan.

Under the 2009 Plan, a maximum of 10.0 million shares of common stock may be issued upon the exercise of stock options, in the form of restricted stock, or in settlement of restricted stock units or other awards, including awards with alternative vesting schedules such as performance-based criteria.

For the years ended December 31, 2014, 2013 and 2012, the following table presents total share-based compensation expense in each functional line item on our consolidated statements of operations (in thousands):



	Year Ended December 31,
	2014		2013		2012
Cost of revenues	$	5	$	84	$	747
Research and development	654		1,114		3,042
Sales and marketing	247		669		1,403
General and administrative	2,682		1,576		2,308
Totals	$	3,588	$	3,443	$	7,500

Included in share-based compensation for the year ended December 31, 2014 is approximately $1.3 million of share-based compensation related to the departure of the Company’s former Chief Executive Officer and the vesting of all of his restricted stock units and options immediately upon his departure in accordance with the terms of his employment agreement.

The per share fair values of stock options granted under the 2009 Plan and rights granted under the ESPP have been estimated with the following assumptions.



	Employee Stock Options						Employee Stock Purchase Rights
	2014		2013		2012		2014		2013		2012
Expected dividend yield:	—	%	—	%	—	%	—	%	—	%	—	%
Risk-free interest rate:	1.4	%	0.8	%	0.9	%	5.4	%	—	%	0.2	%
Volatility:	80	%	63	%	63	%	53	%	—	%	68	%
Expected term (in years):	4.6		6		6		0.4		0.0		1.3

Stock Options

The Compensation Committee of the Board of Directors determines eligibility, vesting schedules and exercise prices for options granted. Options granted under the 2009 Plan and previous plans generally have a term of ten years, and in the case of new hires, generally vest and become exercisable at the rate of 33.3% after one year and ratably on a monthly basis over a period of 24 months thereafter. Subsequent option grants to existing employees generally have the same terms.

A summary of stock option activity for the years ended December 31, 2014 and 2013 is presented below (dollars and shares in thousands, except per share data):



	Stock Options Outstanding		Weighted Average Exercise Price Per Option		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Options outstanding December 31, 2012	4,282		$	10.25
Granted	425		2.10
Exercised	(38	)	2.68
Cancelled	(736	)	10.21
Options outstanding December 31, 2013	3,933		$	9.45
Granted	1,658		2.92
Exercised	(89	)	2.17
Cancelled	(2,437	)	10.52
Balance December 31, 2014	3,065		$	5.27	4.92 years	$	1,022
Options Exercisable, December 31, 2014	1,769		$	6.80	4.99 years	$	449

The total intrinsic value of options exercised to purchase common stock during the years ended December 31, 2014, 2013 and 2012 was approximately $96,000, $44,000 and $0, respectively. As of December 31, 2014, total unrecognized share-based compensation cost related to unvested stock options was $1,777,000, which is expected to be recognized over a weighted average period of approximately 2.7 years. The total fair value of option awards recognized as expense during the years ended December 31, 2014, 2013 and 2012 was approximately $776,000, $0.8 million and $1.7 million, respectively. The weighted average fair value of option awards granted during years ended December 31, 2014, 2013 and 2012 was $1.48, $1.20 and $1.97, respectively.

Restricted Stock Units

The Company may issue restricted stock units (“RSUs”) that, upon satisfaction of vesting conditions, allow for employees and non-employee directors to receive common stock. Issuances of such awards reduce common stock available under the 2009 Plan for stock incentive awards. The Company measures compensation cost associated with grants of RSUs at fair value, which is generally the closing price of the Company’s stock on the date of grant.

During 2014, the Compensation Committee of the Board of Directors, pursuant to the 2009 Plan, awarded employees a total of 2,658,956 RSUs at fair values ranging from $1.60 per share to $3.55 per share. Generally, one-third of the shares underlying each grant become issuable on the anniversary of each grant date, assuming continued employment with the Company through such date. Based on the fair value of the Company’s common stock price at the grant dates, the Company estimated the aggregate fair value of these awards at approximately $5.7 million. The estimated fair value of these awards is being amortized to compensation expense for each grant on a straight-line basis over the estimated service period.

During 2013, the Compensation Committee of the Board of Directors, pursuant to the 2009 Plan, awarded employees a total of 447,703 RSUs at fair values ranging from $1.74 per share to $4.17 per share. Generally, one-third of the shares underlying each grant become issuable on the anniversary of each grant date, assuming continued employment with the Company through such date. Based on the fair value of the Company’s common stock price at the grant dates, the Company estimated the aggregate fair value of these awards at approximately $0.9 million. The estimated fair value of these awards is being amortized to compensation expense for each grant on a straight-line basis over the estimated service period.

During 2012, the Compensation Committee of the Board of Directors, pursuant to the 2009 Plan, awarded employees a total of 1,015,638 RSUs at fair values ranging from $1.28 per share to $3.58 per share. Generally, one-third of the shares underlying each grant become issuable on the anniversary of each grant date, assuming continued employment with the Company through such date. Based on the fair value of the Company’s common stock price at the grant dates, the Company estimated the aggregate fair value of these awards at approximately $3.4 million. The estimated fair value of these awards is being amortized to compensation expense for each grant on a straight-line basis over the estimated service period.

A summary of restricted stock unit activity for the year ended December 31, 2014 is presented below (shares in thousands):



	Shares
Non-vested at December 31, 2013	1,108
Granted	2,659
Vested	(1,207	)
Forfeited	(931	)
Non-vested at December 31, 2014	1,629

As of December 31, 2014, there was $3.0 million of unrecognized compensation expense related to non-vested RSUs. That expense is expected to be recognized over a weighted average period of 2.7 years. The total fair value of RSUs recognized as expense during the years ended December 31, 2014, 2013 and 2012 was $2.9 million, $2.6 million and $3.4 million, respectively.

2000 Employee Stock Purchase Plan

The Company’s 2000 Employee Stock Purchase Plan (the “ESPP”) permits eligible employees of the Company to purchase newly issued shares of common stock, at a price equal to 85% of the lower of the fair market value on (i) the first day of the offering period or (ii) the last day of each six-month purchase period, through payroll deductions of up to 10% of their annual cash compensation.

On October 22, 2012, the Company announced the termination of the ESPP as of November 15, 2012 due to a lack of available shares. The cancellation of the awards was accounted for as a repurchase for no consideration. The previously unrecognized compensation cost as of November 15, 2012 of $1.0 million was fully expensed in the fourth quarter of 2012.

The Company reinstated the ESPP program effective as of August 16, 2014. The reinstated ESPP authorizes the Company to issue 1,500,132 shares of common for purchase by eligible employees.

During the years ended December 31, 2014, 2013 and 2012, the Company issued 114,791 shares, 0 shares and 1,086,837 shares, respectively, under the ESPP. During the years ended December 31, 2014, 2013 and 2012, the Company received $192,000, $0 and $1.6 million, respectively, in cash through employee withholdings.

The total fair value of ESPP awards recognized as expense during the years ended December 31, 2014, 2013 and 2012 was $101,000, $0 and $1.4 million, respectively.