18. Stock-based Compensation Plans

We maintain two stock-based compensation plans: a stock incentive plan and an employee stock purchase plan.

Stock Incentive Plan. We maintain a stock incentive plan that is administered by the Compensation Committee of our Board of Directors. Options granted under the plan vest over periods ranging from one to five years and expire ten years from the date of grant. Under the plans, we may grant certain employees, directors and consultants options to purchase common stock, stock appreciation rights and restricted stock units. Options are rights to purchase our common stock at the fair market value on the date of the grant. Stock appreciation rights are equity settled share-based compensation arrangements whereby the number of shares that will ultimately be issued is based upon the appreciation of our common stock and the number of awards granted to an individual. Restricted stock units are equity settled share-based compensation arrangements of a number of share of our common stock. Restricted stock unit holders do not have voting rights until the restrictions lapse.

We recognize compensation expense net of estimated forfeitures over the requisite service period, which is generally the vesting period of 5 years. We estimate the fair value of each stock option award on the date of grant using the Black-Scholes option-pricing model. Expected volatilities are based on historical volatility of our stock. We estimate forfeitures based on historical experience and the expected term of the options granted are derived from historical data on employee exercises. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant. We have not paid and do not anticipate paying dividends in the near future.

Our assumptions in calculating the fair value of our stock options using Black-Scholes our assumptions for the years ended December 31 were as follows:

	2014		2013		2012
Expected file (in years)	5.5		5.5		5.5
Risk-free interest rate (%)	1.5%-1.9%		1%-1.5%		1%-1.1%
Volatility (%)	55%-62%		63%-64%		61%-64%
Dividend yield (%)		0%		0%		0%

A summary of stock option activity and related information follows (all share amounts in thousands):


	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value ($000)
Outstanding at December 31, 2013		17,177		$	4.47
Granted		2,656			2.62
Exercised		(232	)		2.36
Expired		(2,399	)		6.29
Forfeited		(1,601	)		2.89
Outstanding, December 31, 2014		15,601		$	4.00	5.3		$	4,787
Exercisable, December 31, 2014		10,978		$	4.53		4.0	$	2,136
Vested and expected to vest, December 31, 2014		14,453		$	4.11		5.0	$	4,128



Exercise prices for options outstanding at December 31, 2014 as follows (all share amounts in thousands):
Exercise Prices	Options Outstanding		Weighted-Average Exercise Prices of Options Outstanding		Weighted-Average Remaining Contractual Life of Options Outstanding (years)		Options Vested and Exercisable		Weighted-Average Exercise Prices of Options Vested and Exercisable		Weighted-Average Remaining Contractual Life of Options Vested and Exercisable (years)
$ 1.39 – $ 2.18		281	$	1.46		7.2		137	$	1.49		6.9
$ 2.20 – $ 3.47		8,926	$	2.65		5.8		4,877	$	2.73		3.3
$ 3.69 – $ 5.96		3,484	$	4.08		4.4		3,103	$	4.05		4.2
$ 6.77 – $ 9.86		2,910	$	8.27		4.7		2,861	$	8.27		4.6
Total end of year		15,601						10,978

The weighted average grant date fair value of options granted during the years 2014, 2013, and 2012 was $1.41, $1.33, and $1.30, respectively. The total intrinsic value of options exercised during the years ended December 31, 2014, 2013, and 2012, was $186, $60, and $15, respectively. The total fair value of shares vested during the years ended December 31, 2014, 2013, and 2012, was $3,816, $5,948, and $7,813, respectively. As of December 31, 2014, we estimate that we will recognize $4,000 in expense for outstanding, unvested options over their weighted average remaining vesting period of 3 years.

A summary of restricted stock activity follows (all share amounts in thousands):


	Nonvested Shares			Weighted Average Grant Date Fair Value
Nonvested at December 31, 2013		2,218		$	2.68
Granted		830			2.30
Vested		(1,064	)		2.90
Forfeited		(19	)		2.40
Nonvested at December 31, 2014		1,965		$	2.40

The restrictions expire at the end of one year for directors and expire in annual increments over two and three years for employees and executives, respectively, conditional on continued employment. The fair value of the restricted stock on the date of issuance is recognized as non-cash stock based compensation expense, net of forfeiture adjustments, over the period over which the restrictions expire. The total fair value of restricted stock of shares vested during the years ended December 31, 2014, 2013, and 2012 was $2,510, $1,959, and $1,058. We recognized $2,907, $2,589, and $1,873 of non-cash stock compensation expense related to these grants for the years ended December 31, 2014, 2013, and 2012, respectively. We expect to record future stock compensation expense of $2,600 as a result of these restricted stock grants that will be recognized over the remaining vesting period.

Employee Stock Purchase Plan. We have an employee stock purchase plan (the Plan) that gives all employees an opportunity to purchase shares of our Class A Common Stock. The Plan allows for the purchase of 4,384 shares of our Class A Common Stock at a discount of 15% of the fair market value. The discount of 15% is calculated based on the average daily share price on either the first or the last day of each quarterly enrollment period, whichever date is more favorable to the employee. Option periods are three months in duration. As of December 31, 2014, 2,544 shares of Class A Common Stock have been issued under the Plan. The Plan will continue until the earlier of termination by the board of directors or the date on which all of the share available for issuance under the plan have been issued. Compensation expense related to the Employee Stock Purchase Plan was $107 for the year ended December 31, 2014. We did not recognize any compensation expense related to the Employee Stock Purchase Plan in 2013. Compensation expense relating to the Employee Stock Purchase Plan was $288 for the year ended December 31, 2012.

As of December 31, 2014, the shares of Class A Common Stock reserved for future issuance are:

	(in thousands)
Stock incentive plan		3,118
Outstanding stock options		15,601
Note warrant hedge (see Note 12)		10,001
For Series B to A conversion		4,801
Employee stock purchase plan		1,840
Total shares restricted for future use		35,361

Non-cash stock based compensation expense was included in the following income statement captions for the years ended December 31:

	2014		2013		2012
Direct costs of revenue	$	3,602	$	4,802	$	6,131
Research and development expenses		1,244		1,106		1,599
Sales and marketing expense		278		513		483
General and administrative expense		425		615		808
Total non-cash stock compensation expense	$	5,549	$	7,036	$	9,021