Stock-based Compensation

Equity Incentive Plans

In March 2010, the Company's board of directors (the "Board") and stockholders approved the 2010 Equity Incentive Award Plan (the “2010 Plan”), which became effective upon the completion of Codexis' IPO in April 2010. The number of shares of the Company's commons stock available for issuance under the 2010 Plan is equal to 1,100,000 shares plus any shares of common stock reserved for future grant or issuance under the Company's 2002 Stock Plan (the "2002 Plan") that remained unissued at the time of completion of the IPO. The 2010 Plan also provides for automatic annual increases in the number of shares reserved for future issuance. All grants will reduce the 2010 Plan reserve by one share for every share granted. As of December 31, 2014, total shares remaining available for issuance under the 2010 Plan were 6,560,731.

The 2010 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock unit ("RSU"), restricted stock award ("RSA"), performance-based awards, stock appreciation rights, and stock purchase rights to Codexis employees, non-employee directors and consultants.

The option exercise price for incentive stock options is at least 100% of the fair value of the Company's common stock on the date of grant and the option exercise price for nonstatutory stock options is at least 85% of the fair value of the Company's common stock on the date of grant, as determined by the Board. If, at the time of a grant, the optionee directly or by attribution owns stock possessing more than 10% of the total combined voting power of all of the Company's outstanding capital stock, the exercise price for these options must be at least 110% of the fair value of the underlying common stock. Stock options granted to employees generally have a maximum term of 10 years and vest over a four year period from the date of grant; 25% vest at the end of one year, and 75% vest monthly over the remaining three years. We may grant options with different vesting terms from time to time. Unless an employee's termination of service is due to disability or death, upon termination of service, any unexercised vested options will be forfeited at the end of three months or the expiration of the option, whichever is earlier.

We issue employees RSUs, which generally vest over either a three year period with 33% of the awards vesting on each annual anniversary or a four year period with 25% of the awards vesting on each annual anniversary. We may grant RSUs with different vesting terms from time to time.

Performance-Contingent RSUs

The compensation committee of the Board has approved grants of performance-contingent RSUs ("PSUs") to employees. These awards have dual triggers of vesting based upon the successful achievement of certain corporate operating milestones in specified timelines, as well as a requirement for continued employment. When the performance goals are deemed to be probable of achievement for these types of awards, time-based vesting and, as a result, recognition of stock-based compensation expense commences.

In each of 2014 and 2013 Codexis awarded PSUs based upon the achievement of certain cash flow performance goals for each respective year. These PSUs vest such that one-half of the PSUs subject to the award vest one year following the grant, and the remainder of the PSUs vest two years following the grant, subject to Codexis achieving the performance goals and the recipient’s continued service to Codexis on each vesting date. If the performance goal is achieved at the threshold level, the number of shares issuable in respect of the PSUs would be equal to half the number of PSUs granted. If the performance goal is achieved at the target level, the number of shares issuable in respect of the PSUs would be equal to the number of PSUs granted. If the performance goal is achieved at the superior level, the number of shares issuable in respect of the PSUs would be equal to two times the number PSUs granted. The number of shares issuable upon achievement of the performance goal at the levels between the threshold and target levels or target level and superior levels is determined using linear interpolation. Achievement below the threshold level results in no shares being issuable in respect of the PSUs.

In 2014, we concluded that the 2014 PSU performance objective was achieved at a linear point between the threshold level and the target level at 53%. Accordingly, we recognized stock-based compensation expense of $0.4 million to reflect this linear point in 2014.

During 2013, we revised our estimate of forecasted performance criteria and concluded that the performance target would not likely be achieved for the PSUs that were granted in 2013. The PSUs that were granted under the 2013 PSU were canceled in February 2014 when we determined that we had not attained the threshold performance target for the 2013 awards, and as such no expense was recognized for the year ended December 31, 2013.

Director Compensation Program

Each of our independent directors receives periodic automatic grants of equity awards under a program implemented under the 2002 Plan. These grants are non-discretionary. Only our independent directors or affiliates of such directors are eligible to receive automatic grants under the 2010 Plan. Under the program, each individual who first becomes an independent director will, on the date such individual joins the Board, automatically be granted (i) a one-time grant of RSAs covering $0.1 million shares of our common stock. These initial equity grants vest annually over the director's first three years of service.

Annually, upon his or her re-election to the Board at the Annual Meeting of Stockholders, each independent director is automatically granted a RSA covering $85,000 shares of our common stock. These standard annual equity awards vest monthly over the twelve month period of service following the date of grant. In addition, all automatic equity awards vest in full if the Company is subject to a change in control or the Board member dies while in service.

Stock-Based Compensation Expense

Stock-based compensation expense is included in the consolidated statements of operations as follows (in thousands):



	Years Ended December 31,
	2014		2013		2012
Research and development	$	953	$	1,201	$	2,334
Selling, general and administrative	3,667		3,188		2,742
	$	4,620	$	4,389	$	5,076

As of December 31, 2014, the unrecognized stock-based compensation cost, net of expected forfeitures, and the estimated weighted-average amortization period, using the straight-line attribution method, was as follows (in thousands, except amortization period):



	Unrecognized Compensation Cost		Weighted-average remaining amortization period (years)
Stock options	$	1,306	2.75
RSUs	1,027		1.13
RSAs	1,222		1.24
PSUs	259		0.68
Total unrecognized stock-based compensation expense	$	3,814

Compensation Awards

The following table summarizes equity awards activity under the 2010 Plan and related information (in thousands:



	Number of Shares Subject to Outstanding Options		Weighted-average Exercise Price of Outstanding Options		Number of Shares Subject to Outstanding RSUs		Weighted Average Fair Value per Share at Grant		Number of Shares Outstanding RSAs Subject to Vesting		Weighted-average Fair Value per Share at Grant	Number of Shares Outstanding Subject to Performance Conditions		Weighted-average Fair Value per Share at Grant
December 31, 2011	7,904		$	7.35	546		$	—				—		$	—
Granted	1,521		3.42		1,148		3.54					—		—
Exercised	(708	)	1.78
Released					(167	)						—
Forfeited	(2,584	)	8.23		(569	)						—		—
December 31, 2012	6,133		6.65		958				800		3.41	—		—
Granted	922		2.28		2,101		1.80		216		2.32	523		2.32
Exercised	(326	)	0.98
Released					(325	)			(200	)	3.41	—		—
Forfeited	(2,603	)	7.35		(496	)			—		—	(165	)	—
December 31, 2013	4,126		5.68		2,238		—		816		3.12	358		—
Granted	1,075		2.01		155		2.14		599		1.64	835		2.00
Exercised	(145	)	1.33
Released					(923	)			(454	)	2.45	—		—
Forfeited	(1,575	)	6.11		(418	)			(49	)	2.54	(444	)	—
December 31, 2014	3,481		4.53		1,052				912		2.51	749		—
Options/RSUs vested and expected to vest at December 31, 2014	3,341		4.64		1,002
Options exercisable at December 31, 2014	2,072		$	6.04

As of December 31, 2014, the aggregate intrinsic value of the options outstanding was $0.8 million with a weighted-average remaining contractual term of 6.54 years and the aggregate intrinsic value of the options exercisable was $0.2 million with a weighted-average remaining contractual term of 5.08 years. The total intrinsic value of the options exercised were $57 thousand in 2014, $0.4 million in 2013, and $0.9 million in 2012.

Valuation Assumptions

We based the range of weighted-average estimated values of employee stock option grants and rights granted under the employee stock purchase plan, as well as the weighted-average assumptions used in calculating these values, on estimates at the date of grant, as follows:



	Years Ended December 31,
	2014			2013			2012
Expected life (years)	6.0			6.0			6.0
Volatility	65		%	65		%	61		%
Risk-free interest rate	1.9		%	1.2		%	1.0		%
Expected dividend yield	0.0		%	0.0		%	0.0		%
Weighted-average estimated fair value of stock options granted	$	1.20		$	1.34		$	1.91

Range of Stock Option Exercise Prices

The following table summarizes information about stock options outstanding and exercisable at December 31, 2014 (amounts in thousands, except per share and years):



	Options Outstanding				Options Exercisable
Exercise Prices	Number of Options	Weighted Average Remaining Contractual Term (Years)	Weighted Average Exercise Price per Share		Number of Options	Weighted Average Exercise Price per Share
$0.90 - $1.97	889	8.16	$	1.83	113	$	1.05
$1.98 - $2.45	920	6.46	2.35		491	2.38
$3.41 - $7.46	916	6.24	4.67		719	4.98
$7.81 - $11.87	756	5.12	10.21		749	10.22
	3,481	6.54	$	4.53	2,072	$	6.04