Share-Based Compensation

Stock Plans

The Company has adopted the following stock incentive plans:


•	the 2013 Stock Incentive Plan (the 2013 Plan),


•	the 2009 Equity Inducement Plan (the 2009 Plan),


•	the 2007 Equity Inducement Plan (the 2007 Plan),


•	the 2004 Stock Incentive Plan (the 2004 Plan),


•	the 2001 Non-Officer, Non-Director Stock Incentive Plan (the 2001 Plan),


•	the 2000 Outside Director Stock Option Plan (the 2000 Director Plan), and


•	the 1998 Stock Incentive Plan (the 1998 Plan).

Each of these plans provides for the grant of stock options and other stock- based awards to employees, officers, directors, consultants and advisors of the Company and its subsidiaries. Stock option grants have an exercise price equal to the fair market value of the Company’s common stock on the date of grant and generally have a 10-year term. The fair value of stock option grants is recognized, net of an estimated forfeiture rate, using an accelerated method over the vesting period of the options, which is generally four years.

2013 Plan

In April 2013, the Board of Directors adopted, subject to stockholder approval, the 2013 Plan, which provides for the grant of stock options, restricted stock awards, restricted stock units, stock appreciation rights, other share-based awards and cash-based awards to the Company’s employees, officers, directors, consultants and advisors, including any individuals who have accepted an offer of employment. The Company’s stockholders approved the 2013 Plan on May 30, 2013.

The Company may issue up to 13,166,879 shares of common stock, subject to adjustment in the event of stock splits and other similar events, pursuant to awards granted under the 2013 Plan. The total number of shares of the Company's common stock available for issuance under the 2013 Plan is equal to 3,700,000 shares plus the remaining number of shares of the Company's common stock available for issuance under the 2004 Plan as of May 30, 2013 (the date the plan was approved by the Company's stockholders), plus the number of shares of the Company's common stock subject to awards granted under the 2004 Plan which may expire, terminate or be surrendered, canceled, forfeited or repurchased by the Company. Shares issued under the 2013 Plan may be authorized but unissued shares or treasury shares, or may be issued from shares that are returned to the 2013 Plan (provided that open-market purchases of shares using the proceeds from the exercise of awards do not increase the number of shares available for future grants). The 2013 Plan uses a “fungible share” concept under which the awards of options and stock appreciation rights cause one share per share subject to such award to be removed from the available share pool, while the award of restricted stock, restricted stock units, or other share-based awards where the purchase price for the award is less than 100% of the fair market value of the Company's common stock on the date of grant will be counted against the pool as 1.7 shares, which was changed to 1.98 shares, effective May 2014, for each share subject to such award. Shares subject to awards under the 2013 Plan and the 2004 Plan that are forfeited, canceled or otherwise expire without having been exercised or settled, or that are settled by cash or other non-share consideration, will become available for issuance pursuant to a new award under the 2013 Plan and will be credited back to the pool at the same rates at which they left the plan. Shares are subtracted for exercises of stock appreciation rights using the proportion of the total stock appreciation rights that is exercised, rather than the number of shares actually issued. The Board of Directors has delegated its authority under the 2013 Plan to the Compensation Committee of the Board of Directors (the Compensation Committee), consisting of independent directors, which administers the 2013 Plan, including granting options and other awards under the 2013 Plan. In addition, pursuant to the terms of the 2013 Plan, the Board of Directors has delegated to the Company’s executive officers limited authority to grant stock options to employees without further action by the Board of Directors or the Compensation Committee. Options granted under the 2013 Plan generally have a 10-year term and vest 25% one year after grant and thereafter in equal monthly installments over a three-year period.

The Board of Directors has adopted a program under the 2013 Plan providing for automatic grants of options to the Company’s non-employee directors. Each non-employee director is granted non-statutory stock options under the 2013 Plan to purchase:


•	$320 thousand value of options on the date of his or her initial election to the Board of Directors (the Initial Options); and

•

$215 thousand equity value split equally between stock options and restricted shares on the date of each annual meeting of the Company’s stockholders (the Annual Options), except if such non-employee director was initially elected to the Board of Directors at such annual meeting. The lead director will be granted an additional option to purchase 5,000 shares of the common stock on the date of each annual meeting of the Company’s stockholders.

These options have an exercise price equal to the closing price of the common stock on the NASDAQ Global Select Market on the date of grant and have a 10-year term. The Initial Options vest in 36 equal monthly installments beginning on the date one month after the grant date. The Annual Options vest in one installment 12 months after the date of grant. All vested options are exercisable at any time prior to the first anniversary of the date the director ceases to be a director. The restricted stock awards vest on the first anniversary date after the grant date.

As of December 31, 2014, the Company had granted an aggregate of 3,902,596 shares as restricted stock or subject to issuance upon exercise of stock options under the 2013 Plan, of which 3,560,018 shares remained subject to outstanding options.

2009 Plan

In February 2009, the Board of Directors adopted the 2009 Plan, which provided for the grant of stock options, restricted stock awards, stock appreciation rights and other share-based awards to any person who (a) was not previously an employee or director of the Company or (b) was commencing employment with the Company following a bona fide period of non-employment by the Company, as an inducement material to the individual entering into employment with the Company. The purpose of the 2009 Plan was to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who were expected to make important contributions to the Company and providing such persons with equity ownership opportunities that were intended to better align their interests with those of the Company’s stockholders. The 2009 Plan was administered by the Compensation Committee, which had the authority to grant awards under the 2009 Plan. Under the 2009 Plan, the Company was authorized to issue up to 1,500,000 shares of common stock, subject to adjustment in the event of stock splits and other similar events, pursuant to awards granted under the 2009 Plan. Options granted under the 2009 Plan generally have a 10-year term and vest 25% one year after grant and thereafter in equal monthly installments over a three-year period. The 2009 Plan terminated on May 31, 2010. As of December 31, 2014, an aggregate of 69,671 options had been issued and remained outstanding under the 2009 Plan.

2007 Plan

In December 2007, the Board of Directors adopted the 2007 Plan, which provided for the grant of stock options, restricted stock awards, stock appreciation rights and other share-based awards to any person who (a) was not previously an employee or director of the Company or (b) was commencing employment with the Company following a bona fide period of non-employment by the Company, as an inducement material to the individual entering into employment with the Company. The purpose of the 2007 Plan was to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who were expected to make important contributions to the Company and providing such persons with equity ownership opportunities that were intended to better align their interests with those of the Company’s stockholders. The 2007 Plan was administered by the Compensation Committee, which had the authority to grant awards under the 2007 Plan. Under the 2007 Plan, the Company was authorized to issue up to 1,700,000 shares of common stock, subject to adjustment in the event of stock splits and other similar events, pursuant to awards granted under the 2007 Plan. Options granted under the 2007 Plan generally have a 10-year term and vest 25% one year after grant and thereafter in equal monthly installments over a three-year period. The 2007 Plan terminated on May 29, 2008. As of December 31, 2014, an aggregate of 24,700 options had been issued and remained outstanding under the 2007 Plan.

2004 Plan

In April 2004, the Board of Directors adopted, subject to stockholder approval, the 2004 Plan, which provides for the grant of stock options, restricted stock awards, stock appreciation rights and other share-based awards to the Company’s employees, officers, directors, consultants and advisors, including any individuals who have accepted an offer of employment. The Company’s stockholders approved the 2004 Plan in May 2004. The 2004 Plan has been amended three times to increase the number of shares issuable under the 2004 Plan and to replace the existing sub limit on certain types of awards that may be granted under the 2004 Plan with a fungible share pool.

The Company may issue up to 13,900,000 shares of common stock, subject to adjustment in the event of stock splits and other similar events, pursuant to awards granted under the 2004 Plan. Shares awarded under the 2004 Plan that are subsequently canceled are available to be granted again under the 2004 Plan. The Board of Directors has delegated its authority under the 2004 Plan to the Compensation Committee, consisting of independent directors, which administers the 2004 Plan, including granting options and other awards under the 2004 Plan. In addition, pursuant to the terms of the 2004 Plan, the Board of Directors has delegated to the Company’s executive officers limited authority to grant stock options to employees without further action by the Board of Directors or the Compensation Committee. Options granted under the 2004 Plan generally have a 10-year term and vest 25% one year after grant and thereafter in equal monthly installments over a three-year period. The Company ceased making grants under the 2004 Plan following adoption of an amendment to the 2013 Plan at its annual stockholders’ meeting in May 2013.

As of December 31, 2014, the Company had granted an aggregate of 12,290,910 shares as restricted stock or subject to issuance upon exercise of stock options under the 2004 Plan, of which 5,294,384 shares remained subject to outstanding options.

2001 Plan

In May 2001, the Board of Directors approved the 2001 Plan, which provides for the grant of non-statutory stock options to employees, consultants and advisors of the Company and its subsidiaries, including individuals who have accepted an offer of employment, other than those employees who are officers or directors of the Company. The 2001 Plan provided for the issuance of up to 1,250,000 shares of common stock. Shares awarded under the 2001 Plan that were subsequently canceled were available to be granted again under the 2001 Plan. The Board of Directors delegated its authority under the 2001 Plan to the Compensation Committee, which administers the 2001 Plan, including granting options under the 2001 Plan. In addition, pursuant to the terms of the 2001 Plan, the Board of Directors delegated to the Company’s chief executive officer limited authority to grant stock options to employees without further action by the Board of Directors or the Compensation Committee. The Company ceased making grants under the 2001 Plan following adoption of an amendment to the 2004 Plan at the Company’s annual stockholders’ meeting on May 25, 2006.

As of December 31, 2014, an aggregate of 1,099,241 shares had been issued under the 2001 Plan and options to purchase an aggregate of 11,500 shares remained outstanding.

2000 Director Plan

Prior to the adoption of the 2004 Plan, the Company granted non-statutory stock options to the Company’s non-employee directors pursuant to the 2000 Director Plan. The Company ceased making grants under the 2000 Director Plan following adoption of the 2004 Plan.

As of December 31, 2014, an aggregate of 177,086 shares had been issued under the 2000 Directors Plan and no shares remained outstanding.

1998 Plan

In April 1998, the Company adopted the 1998 Plan, which provided for the grant of stock options, restricted stock and other share-based awards to employees, officers, directors, consultants, and advisors of the Company and its subsidiaries, including any individuals who have accepted an offer of employment. The 1998 Plan terminated in April 2008. Under the 1998 Plan, the Board of Directors had authority to determine the term of each option, the option price, the number of shares for which each option is granted and the rate at which each option becomes exercisable. The 1998 Plan provided that 6,118,259 shares of common stock could be issued pursuant to awards under the 1998 Plan. Shares awarded under the 1998 Plan that were subsequently canceled were available to be granted again under the 1998 Plan. During 1999, the Board of Directors amended all then-outstanding options to allow holders to exercise the options prior to vesting, provided that the shares of common stock issued upon exercise of the option would be subject to transfer restrictions and vesting provisions that allowed the Company to repurchase unvested shares at the exercise price. The Board of Directors delegated its authority under the 1998 Plan to the Compensation Committee, which administered the 1998 Plan, including granting options and other awards under the 1998 Plan. In addition, pursuant to the terms of the 1998 Plan, the Board of Directors delegated to the Company’s chief executive officer limited authority to grant stock options to employees without further action by the Board of Directors or the Compensation Committee. Options granted under the 1998 Plan generally vest in increments over four years and have a ten-year term. The Company ceased making grants under the 1998 Plan following adoption of an amendment to the 2004 Plan at its annual stockholders’ meeting on May 25, 2006.

As of December 31, 2014, an aggregate of 5,046,587 shares had been issued under the 1998 Plan and options to purchase an aggregate of 24,490 shares remained outstanding.

Stock Option Activity

The following table presents a summary of option activity and data under the Company’s stock incentive plans as of December 31, 2014:



	Number of Shares		Weighted-Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding, January 1, 2012	9,136,677		18.51
Granted	1,619,702		17.04
Exercised	(1,342,739	)	11.04
Forfeited and expired	(301,608	)	17.3
Outstanding, December 31, 2012	9,112,032		18.61
Granted	2,263,649		32.2
Exercised	(3,425,586	)	20.79
Forfeited and expired	(333,691	)	23.29
Outstanding, December 31, 2013	7,616,404		$	22.83
Granted	2,825,451		27.8
Exercised	(708,590	)	19.25
Forfeited and expired	(748,502	)	30.12
Outstanding, December 31, 2014	8,984,763		$	24.07	6.48	$	45,251,635
Vested and expected to vest, December 31, 2014	8,670,134		$	23.92	6.39	$	44,766,760
Exercisable, December 31, 2014	5,207,526		$	21.15	4.84	$	38,634,832
Available for future grant at December 31, 2014	2,656,366

Aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company’s common stock exceeded the exercise price of the options at December 31, 2014, for those options for which the quoted market price was in excess of the exercise price. The weighted-average grant date fair value of options granted during the years ended December 31, 2014, 2013 and 2012 was $12.34, $13.76, and $8.95, respectively. The total intrinsic value of options exercised during the years ended December 31, 2014, 2013 and 2012 was $8.2 million, $43.5 million, and $10.4 million, respectively.

In accordance with ASC 718-10, the Company recorded approximately $34.3 million, $23.0 million and $15.0 million of share-based compensation expense related to the options, restricted stock and ESPP for the years ended December 31, 2014, 2013 and 2012, respectively. As of December 31, 2014, there was approximately $33.6 million of total unrecognized compensation costs related to non-vested share-based employee compensation arrangements granted under the Company’s equity compensation plans. This cost is expected to be recognized over a weighted average period of 1.45 years.

The Company recorded approximately $32.8 million, $15.9 million, and $9.6 million in compensation expense related to options in the years ended December 31, 2014, 2013 and 2012.

For purposes of performing the valuation, employees were separated into two groups according to patterns of historical exercise behavior; the weighted average assumptions below include assumptions from the two groups of employees exhibiting different behavior.

The Company estimated the fair value of each option on the date of grant using the Black-Scholes closed-form option-pricing model applying the weighted average assumptions in the following table.



	Years Ended December 31,
	2014		2013		2012
Expected dividend yield	—	%	—	%	—	%
Expected stock price volatility	50.25	%	48.3	%	46.5	%
Risk-free interest rate	1.543	%	1.079	%	0.825	%
Expected option term (years)	4.96		5.07		4.95

The fair value of each option element of the Company’s 2000 Employee Stock Purchase Plan and 2010 Employee Stock Purchase Plan (the 2000 ESPP and the 2010 ESPP) is estimated on the date of grant using the Black-Scholes closed-form option-pricing model applying the weighted average assumptions in the following table. Expected volatilities are based on historical volatility of the Company’s common stock. Expected term represents the six-month offering period for the 2000 ESPP and 2010 ESPP. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant.



	Years Ended December 31,
	2014		2013		2012
Expected dividend yield	—	%	—	%	—	%
Expected stock price volatility	38.97	%	32.46	%	36.25	%
Risk-free interest rate	0.07	%	0.09	%	14	%
Expected option term (years)	0.5		0.5		0.5

The following table presents a summary of the Company’s outstanding shares of restricted stock awards granted as of December 31, 2014:



	Number of Shares		Weighted Average Grant-Date Fair Value
Outstanding, January 1, 2012	449,261		$	14.70
Awarded	369,158		21.89
Vested	(188,541	)	15.03
Forfeited	(16,767	)	14.49
Outstanding, December 31, 2012	613,111		18.93
Awarded	266,388		31.80
Vested	(247,945	)	17.61
Forfeited	(28,975	)	22.88
Outstanding, December 31, 2013	602,579		24.97
Awarded	306,161		29.84
Vested	(238,028	)	23.69
Forfeited	(94,025	)	28.59
Outstanding, December 31, 2014	576,687		$	27.50

The Company grants restricted stock awards under the 2004 Plan. The restricted stock granted to employees generally vests in equal increments of 25% per year on an annual basis commencing twelve months after grant date. The restricted stock granted to non-employee directors generally vests on the first anniversary date after the grant date. Expense of approximately $0.3 million, $6.1 million and $4.7 million was recognized related to restricted stock awards in the years ended December 31, 2014, 2013 and 2012, respectively. The remaining expense of approximately $6.4 million will be recognized over a period of 1.13 years. The total fair value of the restricted stock that vested during the years ended December 31, 2014, 2013 and 2012 was $7.1 million, $7.5 million and $4.0 million, respectively.

2000 ESPP

In May 2000, the Board of Directors and the Company’s stockholders approved the 2000 ESPP. The 2000 ESPP provided for the issuance of up to 805,500 shares of common stock. The 2000 ESPP permitted eligible employees to purchase shares of common stock at the lower of 85% of the fair market value of the common stock at the beginning or at the end of each offering period. Employees who owned 5% or more of the common stock were not eligible to participate in the 2000 ESPP. Participation was voluntary.

As of December 31, 2014, the Company had issued 805,437 shares over the life of the 2000 ESPP. The Company canceled the 2000 ESPP upon approval of the 2010 ESPP.

2010 ESPP

In June 2010, the Board of Directors and the Company’s stockholders approved the 2010 ESPP, which provides for the issuance of up to 1,000,000 shares of common stock. The 2010 ESPP permits eligible employees to purchase shares of common stock at the lower of 85% of the fair market value of the common stock at the beginning or at the end of each offering period. Employees who own 5% or more of the common stock are not eligible to participate in the 2010 ESPP. Participation in the 2010 ESPP is voluntary.

The Company issued 155,867 shares, and 121,845 shares under the 2010 ESPP during the year ended December 31, 2014 and 2013, and currently has 388,340 shares in reserve for future issuance under the 2010 ESPP. The Company recorded approximately $1.2 million, and $1.0 million in compensation expense related to the 2010 ESPP in the year ended December 31, 2014 and 2013.

Common Stock Reserved for Future Issuance

At December 31, 2014, there were 388,340 shares of common stock available for grant under the 2010 ESPP and 2,656,366 shares of common stock available for grant under the 2013 Plan.