14. STOCK-BASED COMPENSATION

Second Amended and Restated 2004 Equity Incentive Plan—The Company’s Second Amended and Restated Equity Incentive Plan (the “2004 EIP”) was adopted by the Board of Directors in February 2008 (termination date of January 4, 2014). Pursuant to the 2004 EIP, the Company may grant options, restricted stock and stock purchase rights to employees, directors, or consultants of the Company. Options granted may be either incentive stock options or nonstatutory stock options. Incentive stock options may be granted to employees (including offices and directors, who are also employees). Nonstatutory stock options may be granted to employees, directors or consultants. In March 2011, the Company’s Board of Directors approved a 2,000,000 increase in the options reserved for issuance under the Company’s 2004 EIP. On May 25, 2011, in conjunction with the Company’s initial public offering, the 2004 EIP terminated so that no further awards may be granted under the 2004 EIP. Although the 2004 EIP terminated, all outstanding awards will continue to be governed by their existing terms.

2011 Equity Incentive Plan—On May 26, 2011, the Company’s 2011 Equity Incentive Plan (the “2011 EIP”, and together with the 2004 EIP (the “Plans”)) became effective. The Company initially reserved 7,000,000 shares of common stock for issuance under the 2011 EIP. Starting on May 26, 2011, any shares subject to outstanding awards granted under the 2004 EIP that expire or terminate for any reason prior to the issuance of shares shall become available for issuance under the 2011 EIP. The 2011 EIP also provides for automatic annual increases in the number of shares reserved for future issuance, and during the first quarter of 2012, an additional 3,000,362 shares were reserved under the 2011 EIP as a result of this provision. As of December 31, 2012 there were 5,826,327 shares available for issuance under the 2011 EIP.

Options under the Plans may be granted for periods up to ten years. All options issued to date have had up to a ten year life. The exercise price of incentive and nonstatutory stock options shall not be less than 100% of the estimated fair value of the shares on the date of grant, as determined by the Board of Directors. The Board of Directors also determine the vesting period of stock-based awards. The Company’s stock options generally vest over four years. Restricted stock awards are subject to forfeiture if certain vesting requirements are not met. The Company issues new common stock from authorized shares upon the exercise of stock options.

2011 Employee Stock Purchase Plan—On May 26, 2011, the Company’s 2011 Employee Stock Purchase Plan (the “2011 ESPP”) became effective. The Company initially reserved 750,000 shares of common stock for issuance under the 2011 ESPP. The purchase price of the common stock under the Employee Stock Purchase Plan is 85% of the lower of the fair market value of a share of common stock on the first day of the offering period or the last day of the purchase period. The 2011 ESPP also provides for automatic annual increases in the number of shares reserved for future issuance, and during the first quarter of 2012, an additional 600,072 shares were reserved under the 2011 ESPP as a result of this provision. As of December 31, 2012 there were 1,234,092 shares available for issuance under the 2011 ESPP.

The Company recognized stock-based compensation expense related to its 2011 ESPP of $0.3 million, $0.4 million and $0 for the years ended December 31, 2012, 2011 and 2010, respectively.

Common Stock Subject to Repurchase—The Company allows employees and non-employees to exercise options prior to vesting. The Company has the right, but not the obligation, to repurchase any unvested (but issued) common shares upon termination of employment or service at the original purchase price per share. The consideration received for an exercise of an option is considered to be a deposit of the exercise price and the related dollar amount is recorded as a liability. The unvested shares and liability are reclassified to equity on a ratable basis as the award vests. There were 34,832 and 99,110 shares of common stock subject to repurchase as of December 31, 2012 and 2011, respectively. The Company’s liability related to common stock subject to repurchase was $39,000 and $99,000 as of December 31, 2012 and 2011, respectively, and was recorded in other liabilities.

Stock Options

A summary of the Company’s stock option activity under the Plans and related information is as follows:


	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value⁽¹⁾
								(in thousands)
Balance at December 31, 2011		8,410,765		$	6.76
Granted		2,488,574			11.06
Exercised		(805,827	)		2.08
Forfeited, cancelled or expired		(571,542	)		9.17

Balance at December 31, 2012		9,521,970		$	8.13		8.0	$	17,704

Options vested and exercisable at December 31, 2012		4,367,013		$	6.30		7.2	$	14,026

Options vested and expected to vest as of December 31, 2012		9,326,658		$	7.76			$	19,887

(1)

The aggregate intrinsic value represents the value by which the Company’s closing stock price on the last trading day of the year ended December 31, 2012 exceeds the exercise price of the stock multiplied by the number of options outstanding or exercisable, excluding any that have a negative intrinsic value.

The weighted-average grant date fair value of options granted was $6.46, $6.15 and $2.35 for the years ended December 31, 2012, 2011 and 2010, respectively. The total intrinsic value of options exercised was $7.4 million, $6.5 million and $2.0 million for the years ended December 31, 2012, 2011 and 2010, respectively.

The total fair value of options vested was $11.1 million, $3.3 million and $0.4 million for the years ended December 31, 2012, 2011 and 2010, respectively.

The following table presents the composition of options outstanding and vested and exercisable as of December 31, 2012:


	Options Outstanding						Options Vested and Exercisable
Range of Exercise Prices	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Number of Vested and Exercisable Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
$0.001–1.01		1,381,244	$	0.58		4.7		1,272,281	$	0.54		4.6
$2.35		1,181,704		2.35		7.5		753,440		2.35		7.5
$6.79–8.92		2,703,723		7.87		8.2		1,249,747		7.83		8.1
$9.37–11.59		2,628,609		10.89		9.1		551,766		11.10		9.1
$11.61–27.03		1,626,690		14.75		8.9		539,779		16.93		8.6

Totals		9,521,970		8.13		8.0		4,367,013		6.30		7.2

Stock-based compensation expense related to stock-based awards granted to employees and nonemployees were allocated to research and development and sales, general and administrative expense as follows (in thousands):


	Year ended December 31,
	2012		2011		2010
Research and development	$	3,924	$	2,278	$	509
Sales, general and administrative		11,478		8,645		1,443

Total	$	15,402	$	10,923	$	1,952

No income tax benefits have been recognized related to stock-based compensation expense for the years ended December 31, 2012, 2011 and 2010.

Employee Stock-Based Compensation—Stock-based compensation expense was $13.2 million, $6.5 million and $0.7 million for the years ended December 31, 2012, 2011 and 2010, respectively, for stock-based awards granted to employees. There was unrecognized stock-based compensation cost of $22.0 million related to nonvested stock options granted to employees as of December 31, 2012, and the Company expects to recognize this cost over a weighted-average period of 1.9 years as of December 31, 2012. The grant date fair value of employee stock-based awards was estimated using the following weighted-average assumptions:


	Year ended December 31,
	2012	2011	2010
Expected term (in years)	5.3–6.0	5.0–6.1	3.3–6.5
Volatility	62.8%–68.0%	49.6%–68.2%	42.4%–62.7%
Risk-free interest rate	0.6%–1.3%	1.0%–2.5%	1.4%–2.5%
Dividend yield	0%	0%	0%

Nonemployee Stock-Based Compensation—Stock-based compensation expense was $2.2 million, $4.4 million and $1.2 million for the years ended December 31, 2012, 2011 and 2010, respectively, for stock-based awards granted to nonemployees. There was unrecognized stock-based compensation cost of $1.1 million related to nonvested stock options granted to nonemployees as of December 31, 2012, and the Company expects to recognize this cost over a weighted-average period of 2.1 years as of December 31, 2012. The fair value of non-employee stock-based awards was estimated using the following weighted-average assumptions:


	Year ended December 31,
	2012	2011	2010
Expected term (in years)	8.5–8.9	6.2–10.0	6.0–10.0
Volatility	60.3%–64.8%	46.2%–66.7%	44.8%–55.4%
Risk-free interest rate	1.3%–1.9%	1.2%–3.5%	1.6%–3.8%
Dividend yield	0%	0%	0%

Restricted Stock Awards—A summary of the Company’s restricted stock award activity is summarized as follows:


	Number of Shares			Weighted Average Grant Date Fair Value
Unvested at December 31, 2011		36,167			14.89
Granted		—			—
Vested		(23,497	)		14.46
Forfeited or cancelled		—			—

Unvested at December 31, 2012		12,670		$	15.68

There was unrecognized stock-based compensation costs of $0.1 million related to nonvested restricted stock as of December 31, 2012. The Company expects to recognize those costs over a weighted-average period of 0.7 years as of December 31, 2012.

Restricted Stock Units—The Company awarded 82,000 and 140,000 restricted stock units (“RSUs”) to employees in the years ended December 31, 2012 and 2011, respectively. The RSUs have vesting terms between 6 to 48 months. The weighted-average grant date fair value of RSUs granted was $10.66 and $23.56 for the years ended December 31, 2012 and 2011, respectively. As of December 31, 2012, 84,833 shares of RSUs were vested and 137,167 shares of RSUs were unvested. Stock-based compensation expense was $1.5 million and $0.6 million for the years ended December 31, 2012 and 2011, respectively, for RSUs. The Company had not issued RSUs prior to 2011, and therefore, there was no stock-based compensation expense recognized for RSUs in prior periods.

Performance-Based Restricted Stock Units—The Company granted 100,000 and 60,000 performance-based restricted stock units (“PSUs”) to employees in the years ended December 31, 2012 and 2011, respectively. These PSUs vest contingent upon the achievement of pre-determined performance-based milestones. If the performance-based milestones are not met, the restricted stock units will not vest, in which case, any stock-based compensation expense recognized to date will be reversed. The weighted-average grant date fair value of performance-based restricted stock units granted in the years ended December 31, 2012 and 2011 was $9.46 and $23.56, respectively. As of December 31, 2012, 45,000 shares of PSUs had vested and 115,000 shares of PSUs were unvested. Stock-based compensation expense related to PSUs was $0.8 million and $0.4 million for the years ended December 31, 2012 and 2011, respectively. The Company had not issued PSUs prior to 2011, and therefore, there was no stock-based compensation expense recognized for PSUs in prior periods.

Stock Option Modification—In August 2011, the Company modified an employee’s stock options by accelerating the vesting of options and increasing the period to exercise options post-termination date. This modification resulted in the Company recording an additional $0.3 million of additional stock-based compensation expense in the year ended December 31, 2011.

Common Stock Warrants

In June 2010, the Company entered into a transaction with an executive placement group to provide recruiting services. As partial compensation for services rendered, the Company granted a warrant to purchase 5,000 shares of the Company’s common stock at an exercise price of $2.35 per share, the estimated fair value of the Company’s common stock at the time the warrant was granted. Prior to our initial public offering, this warrant was fully exercised in May 2011.

In May 2011, the Company granted Bunge Limited a warrant to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $13.50 per share. During the years ended December 31, 2012 and 2011, 750,000 and 0 of warrant shares, respectively, had vested. Refer to Note 7 and Note 10 for a description of the vesting terms and a discussion of the accounting for the warrant.

In January 2013, the Company granted ADM a warrant to purchase 500,000 shares of the Company’s common stock at an exercise price of $7.17 per share. The warrant will vest in equal monthly installments over five years, commencing from the start of commercial production. The warrant expires in January 2019. See Note 10 and Note 12.