EQUITY INCENTIVE PLAN

The Company’s 2006 Equity Incentive Plan (the “Plan”) allows the Company to make awards of various types of equity-based compensation, including stock options, dividend equivalent rights (“DERs”), stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance units, performance shares and other awards, to employees and directors of the Company. The Company may issue 10,000,000 shares under the Plan; provided, that no more than 5,000,000 of such shares may be used for grants of restricted stock, restricted stock units, performance units, performance shares and other awards.

The Plan is administered by the Compensation Committee of the Board of Directors (the “Committee”) which has the authority to set the number, exercise price, term and vesting provisions of the awards granted under the Plan, subject to the terms thereof. Either incentive or non-qualified stock options may be granted to employees of the Company, but only non-qualified stock options may be granted to non-employee directors and advisors. However, in either case, the Plan requires that stock options must be granted at exercise prices not less than the fair market value of the common stock on the date of the grant. Options issued under the plan vest over periods as determined by the Compensation Committee and expire 10 years after the date the option was granted. To date, the only awards made under the Plan have been non-incentive stock options.

For the year ended December 31, 2012, we recorded compensation expense of $0.7 million within selling, general and administrative expense as a result of the vesting of options exercisable for the purchase of 3.9 million options. For the year ended December 31, 2011, we recorded compensation expense of $1.0 million within selling, general and administrative expense as a result of the vesting of options exercisable for the purchase of 3.0 million options. For the year ended December 31, 2010, we recorded compensation expense recovery of less than $0.1 million within selling, general and administrative expense. Two executive officers departed during the second quarter of 2010. All stock options that were unvested were forfeited at the time of their departure as their requisite services periods were not completed. The vesting of options exercisable for the purchase of 1.3 million shares was offset by the expense recovery for stock options that were forfeited due to the requisite service not being rendered. As of December 31, 2012, there was $0.6 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of nearly three years.

The fair value of the options granted during 2012 was estimated on their respective grant dates using the Black-Scholes option pricing model. The Black-Scholes model was used with the following assumptions: risk-free interest rates of 0.62% to 1.03%, based on the U.S. Treasury yield in effect at the time of grant; dividend yields of zero percent; expected lives of five to eight years, based on historical exercise activity; and volatility of 101% to 114% for grants made during the year ended December 31, 2012 based on the historical volatility of our stock over a time that is consistent with the expected life of the option. A small group of senior executives hold the majority of the stock options and are expected to hold the options until they are vested. Forfeitures of 2% to 4% have been assumed in the calculation.

The fair value of the options granted during 2011 was estimated on their respective grant dates using the Black-Scholes option-pricing model. The Black-Scholes model was used with the following assumptions: risk-free interest rates of 0.92% to 2.16%, based on the U.S. Treasury yield in effect at the time of grant; dividend yields of zero percent; expected lives of three to five years, based on historical exercise activity; and volatility of 105% to 107% for grants made during the year ended December 31, 2011 based on the historical volatility of our stock over a time that is consistent with the expected life of the option. A small group of senior executives hold the majority of the stock options and are expected to hold the options until they are vested. Forfeitures of 1% to 4% have been assumed in the calculation.

The fair value of the options granted during 2010 was estimated on their respective grant dates using the Black-Scholes option-pricing model. The Black-Scholes model was used with the following assumptions: risk-free interest rates of 1.17% to 1.98%, based on the U.S. Treasury yield in effect at the time of grant; dividend yields of zero percent; expected lives of five years, based on historical exercise activity; and volatility of 103% to 105% for grants made during the year ended December 31, 2010 based on the historical volatility of our stock over a time that is consistent with the expected life of the option. A small group of senior executives hold the majority of the stock options and are expected to hold the options until they are vested. Forfeitures of 2% to 3% have been assumed in the calculation.

The following table summarizes activity under the Plan during the year ended December 31, 2012:



	Number of Options		Weighted Average Exercise Price
Balance at January 1, 2012:	4,172,000		$1.10
Granted	781,000		$	1.01
Exercised	(20,000	)	(0.50		)
Forfeited	(554,333	)	(1.15		)
Expired	(25,500	)	(5.42		)
Balance at December 31, 2012:	4,353,167		$	1.05
Exercisable at December 31, 2012	2,762,810		$	1.02

The following table summarizes activity under the Plan during the year ended December 31, 2011:



	Number of Options		Weighted Average Exercise Price
Balance at January 1, 2011:	2,565,001		$	2.08
Granted	2,440,500		1.17
Exercised	(30,000	)	(0.76		)
Forfeited	(353,501	)	(1.64		)
Expired	(450,000	)	(6.69		)
Balance at December 31, 2011:	4,172,000		$	1.10
Exercisable at December 31, 2011	2,131,045		$	1.05

The following table summarizes activity under the Plan during the year ended December 31, 2010:



	Number of Options		Weighted Average Exercise Price
Balance at January 1, 2010:	3,331,731		$	2.39
Granted	125,000		0.50
Exercised	(100,000	)	(0.42		)
Forfeited	(593,499	)	(0.73		)
Expired	(198,231	)	(11.07		)
Balance at December 31, 2010:	2,565,001		$	2.08
Exercisable at December 31, 2010	2,358,334		$	2.22

The following table summarizes the stock options that were issued during the year ended December 31, 2012:



	Number of Options	Exercise Price
February 15, 2012	100,000	$1.45
April 2, 2012	49,000	$1.19
July 2, 2012	227,500	$0.86
September 12, 2012	250,000	$0.98
October 1, 2012	154,500	$0.94
	781,000

The weighted average grant date fair value per share of options granted during the years ended December 31, 2012, 2011 and 2010 was $0.81, $0.83 and $0.38 respectively.

The following summarizes all stock options outstanding at December 31, 2012:



Exercise Price Range	Number of Options Outstanding	Remaining Weighted-Average Contractual Life	Weighted–Average Exercise Price	Number of Options Exercisable
$ 0.00—$ 0.50	40,000	5.8 years	$0.48	40,000
$ 0.51—$ 1.00	1,622,000	6.6 years	$0.78	1,043,333
$ 1.01—$ 1.50	2,492,834	7.0 years	$1.18	1,481,144
$ 1.50—$2.00	198,333	0.6 years	$1.90	198,333
	4,353,167			2,762,810

All stock options outstanding were issued to employees, officers or outside directors.

The aggregate intrinsic value of stock options exercisable was less than $0.1 million at December 31, 2012. The aggregate intrinsic value of stock options outstanding was less than $0.1 million at December 31, 2012. The aggregate intrinsic value of options exercised at December 31, 2012, 2011 and 2010 was less than $0.1 million in each year.