Stock-Based Compensation

The following table summarizes all stock-based compensation charges for the year ended December 31, 2012, 2011 and 2010 (in thousands):



	Twelve Months Ended
	December 31,
	2012		2011			2010
Stock-based compensation expense	$	4,317	$	7,805		$	5,962
Stock-based compensation associated with outstanding repriced options	17		(463		)	394
Total stock-based compensation	$	4,334	$	7,342		$	6,356

Stock-based compensation per the table above includes $74 thousand of expense that has been recorded in loss from discontinued operations, net of tax, for the year ended December 31, 2012. Stock-based compensation expense for the year ended December 31, 2011 includes a charge of approximately $1.5 million related to modification of the terms of the stock options held by certain directors who resigned from the Board of Directors.

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options and RSUs. This model requires the input of highly subjective assumptions including the expected term of the stock option, expected stock price volatility and expected forfeitures. The Company used the following assumptions:



	Twelve Months Ended
	December 31,
	2012		2011		2010
Dividend yield	—		—		—
Expected volatility	55%-58%		50%-60%		51%-52%
Risk-free interest rate	.60%-1.09%		.94%-2.14%		1.20%-2.30%
Expected life of options (in years)	4.25-4.50		4.50-5.00		4.50-4.75
Weighted-average grant date fair value	$	4.07	$	6.96	$	5.96

The assumptions above are based on multiple factors, including historical exercise patterns of relatively homogeneous groups with respect to exercise and post-vesting termination behaviors, expected future exercising patterns for these same homogeneous groups and the volatility of similar public companies in terms of type of business, industry, stage of life cycle, size and geographical market. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury Constant Maturity Rate as of the date of grant.

Cash proceeds from the exercise of stock options were $1.7 million, $3.5 million and $2.7 million for the years ended December 31, 2012, 2011 and 2010, respectively.

Compensation expense is recognized ratably over the requisite service period. At December 31, 2012, there was $5.1 million of unrecognized compensation cost related to options and $1.8 million of unrecognized compensation cost related to RSUs, which is expected to be recognized over a weighted average period of 3.6 years and 3.5 years, respectively.

For options that are exercised after they are vested and for RSUs that are released, the Company’s policy is to issue new shares immediately upon exercise or release. The issuance of these new shares is from the Company’s pool of common stock reserved for future issuance as approved by the Company’s stockholders. As of December 31, 2012, the Company had reserved 6.9 million shares of common stock for issuance under the Plans.

Stock‑Based Compensation Associated With Outstanding Repriced Options

In November 2003, the Company’s Board of Directors approved a stock option repricing program. Under this program, eligible employees could elect to exchange certain outstanding stock options with an exercise price greater than or equal to $1.00 for a new option to purchase the same number of shares of common stock. As of the cancellation date, the Company had accepted 0.7 million shares for exchange and 0.7 million stock options were granted six months and one day after they were exchanged for an average exercise price of $0.32.

Because of the subsequent reassessment of the fair market value of the common stock, the options repriced became subject to variable accounting, which requires all such vested options repriced be marked to market until such options are cancelled, expire, or are exercised. For the year ended December 31, 2012, the Company did not record a material adjustment related to these repriced options. The Company recorded a decrease to expense related to these repriced options of $0.5 million during the year ended December 31, 2011. The impact of the change in fair value related to repricing during the year ended December 31, 2010 was a reduction to expense of $0.4 million.