Stock-Based Compensation

9 Months Ended

Sep. 30, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation

11. Stock-Based Compensation

Stock Option Plans

In September 1999, the Company approved a stock option plan (the “1999 Plan”) that provides for the issuance of up to 12,384,646 shares of common stock incentives. The 1999 Plan provides for the granting of incentive stock options (“ISOs”), nonqualified stock options (“NSOs”), and stock grants. These incentives may be offered to the Company’s employees, officers, directors, consultants, and advisors, as defined. ISOs may not be granted at less than fair market value on the date of grant, as determined by the Company’s Board of Directors (the “Board”). Each option shall be exercisable at such times and subject to such terms as determined by the Board; grants generally vest over a four year period and expire no later than ten years after the grant date.

In April 2007, the Board approved the 2007 Stock Option and Incentive Plan (the “2007 Plan”), which was approved by the stockholders and became effective upon the consummation of the Company’s IPO in May 2007. Effective upon the consummation of the IPO, no further awards were made pursuant to the 1999 Plan, but any outstanding awards under the 1999 Plan will remain in effect and will continue to be subject to the terms of the 1999 Plan. The 2007 Plan allows the Company to grant ISOs, NSOs, stock appreciation rights, deferred stock awards, restricted stock and other awards. Under the 2007 Plan, stock options may not be granted at less than fair market value on the date of grant, and grants generally vest over a four year period. Stock options granted under the 2007 Plan expire no later than ten years after the grant date. The Company has reserved an aggregate of 2,911,667 shares of common stock for issuance under the 2007 Plan plus an additional annual increase to be added automatically on January 1 of each year, beginning on January 1, 2008, equal to the lesser of (a) 2% of the outstanding number of shares of common stock (on a fully-diluted basis) on the immediately preceding December 31 and (b) such lower number of shares as may be determined by the Company’s compensation committee. The number of shares available for issuance under the 2007 Plan is subject to adjustment in the event of a stock split, stock dividend or other change in capitalization. Generally, shares that are forfeited or cancelled from awards under the 2007 Plan also will be available for future awards. In addition, shares subject to stock options returned to the 1999 Plan, as a result of their expiration, cancellation or termination, are automatically made available for issuance under the 2007 Plan. As of September 30, 2011 a total of 1,342,042 shares were available for grant under the 2007 Plan.

Accounting for Stock-Based Compensation

The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award. The Company calculated the fair values of the options granted using the following estimated weighted-average assumptions:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2011			2010		2011			2010
	(Unaudited)
Expected volatility		79.83	%		*		79.41	%		78	%
Expected term	6.25 years				*	6.25 years			6.25 years
Risk-free interest rate		1.54	%		*		1.92	%		2.85	%
Expected dividend yield		0.00	%		*		0.00	%		0.00	%
Weighted-average grant date fair value per share	$	4.39			*	$	4.77		$	3.89

* There were no grants during the third quarter of 2010.

As there was no public market for the Company’s common stock prior to the Company’s IPO in May 2007, and limited historical information on the volatility of its common stock since the date of the Company’s IPO, the Company determined the volatility for options granted in the three and nine months ended September 30, 2011 and 2010 based on an analysis of the historical volatility of the Company’s stock and reported data for a peer group of companies that issued options with substantially similar terms. The expected volatility of options granted has been determined using a weighted average of the historical volatility of the Company’s stock and the peer group of companies for a period equal to the expected life of the option. The expected life of options has been determined utilizing the “simplified” method. The risk-free interest rate is based on a zero coupon United States treasury instrument whose term is consistent with the expected life of the stock options. The Company has not paid and does not anticipate paying cash dividends on its shares of common stock; therefore, the expected dividend yield is assumed to be zero. The Company applied estimated annual forfeiture rates of 3.6% and 2% for the nine months ended September 30, 2011 and 2010, respectively based on its historical forfeiture experience in determining the expense recorded in those periods.

A summary of the stock option activity under the Company’s stock option plan for the nine months ended September 30, 2011 is presented below:

						Weighted-
				Weighted-		Average
				Average		Remaining
	Options			Exercise Price		Contractual		Aggregate
Year-to-Date Activity	Outstanding			Per Share		Term in Years		Intrinsic Value
	(Unaudited)
Options outstanding at December 31, 2010		7,095,090		$	6.41
Granted		40,000			6.84
Exercised		(200,285	)		5.73
Forfeited		(51,836	)		5.69
Cancelled		(51,000	)		9.85
Options outstanding at September 30, 2011		6,831,969		$	6.41		4.9	$	5,377
Options exercisable at September 30, 2011		5,953,999		$	6.45		4.5	$	5,146
Options vested or expected to vest at September 30, 2011 (1)		6,764,541		$	6.42		4.9	$	5,359

(1) In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future. Options expected to vest is calculated by applying an estimated forfeiture rate to the unvested options.

During the nine months ended September 30, 2011 and 2010, the total intrinsic value of options exercised (i.e. the difference between the market price at exercise and the price paid by the employee to exercise the options) was $482 and $631, respectively, and the total amount of cash received from exercise of these options was $1,148 and $663, respectively. The total grant date fair value of stock options granted after January 1, 2006 that vested during the nine months ended September 30, 2011 and 2010 was $1.7 million and $4.2 million, respectively.

Restricted Stock Awards

Restricted stock awards are valued at the market price of a share of the Company’s common stock on the date of grant. A summary of the restricted stock award activity under the 2007 Stock Plan for the nine months ended September 30, 2011 is presented below:

				Weighted-Ave.
				Grant Date
				Fair Value		Aggregate Intrinsic
Year-to-Date Activity	Shares			Per Share		Value
	(Unaudited)
Nonvested outstanding at December 31, 2010		2,693,453		$	5.92
Granted		85,217			7.27
Vested		(513,839	)		4.68
Forfeited		(119,640	)		6.98
Nonvested outstanding at September 30, 2011		2,145,191		$	5.69	$	12,249

The total grant-date fair value of restricted stock awards that vested during the nine months ended September 30, 2011 and 2010 was $2.4 million and $3.5 million, respectively.