5. Stockholders’ Equity and Employee Stock Option Plans

a) Preferred Stock

As of December 31, 2013, the Company was authorized to issue 5,000,000 shares of new $0.01 par value preferred stock, of which none was outstanding.

(b) Common Stock

As of December 31, 2013, the Company was authorized to issue 100,000,000 shares of $0.01 par value common stock, of which 43,351,850 were outstanding.

In April 2008, the Company's board of directors approved a stock repurchase program, which authorized the Company to repurchase up to 3.0 million shares of the Company's common stock. Since inception, the Company repurchased a total of 750,000 shares under the program at a cost of $8.9 million. The stock repurchase program expired in April 2011.

The Company grants equity compensation awards under the 1997 Stock Plan (the “1997 Plan”). Prior to July 2008, the Company also issued options to certain members of its Board of Directors under the 1998 Director Option Plan (the “Director Option Plan”). A more detailed description of each plan can be found below.

Stock option and other equity compensation grants are designed to reward employees, officers, directors, and certain non-employee consultants for their long-term contribution to the Company, to align their interest with those of the Company's stockholders in creating stockholder value, and to provide incentives for them to remain with the Company. The number and frequency of equity compensation grants is based on competitive practices, operating results of the Company, and accounting regulations. Since the inception of the 1997 Plan, the Company has granted equity compensation awards to all of its employees.

Historically, the Company has issued new shares upon the exercise of stock options. However, treasury shares are also available for issuance, although the Company does not currently intend to use treasury shares for this purpose.

1997 Stock Plan

During 1997, the Company adopted the 1997 Stock Plan for employees, officers, directors, and non-employee consultants, which was amended and restated in May 2004, and further amended and restated in April 2013. During the year, the Board determined that it was in the best interest of the Company and the stockholders to amend and restate the Plan. In setting the share reserve under the amended Plan, the Company considered the number of outstanding awards and forecasted grants under the Plan. As of March 31, 2013 a total of 20,972,838 shares of its Common Stock were reserved for issuance under the Plan, of which 5,505,404 shares were subject to outstanding awards and 15,467,434 shares remained available for new awards under the Plan. Upon approval of the amended Plan by the shareholders, the total number of shares issuable under the Plan after March 31, 2013, was reduced from 20,972,838 to 10,905,404, including the 5,505,404 shares subject to current outstanding awards plus an additional 5,400,000 shares for future new awards. The shares available for future awards are anticipated to be sufficient to meet expected grants by the Company under the Plan for the next two to three years, however future business needs may affect this projection. In determining size of the share reserve, the Company took into account historical grant practices and the rate of granting equity awards (“burn rate”).

Under the amended and restated Plan, the annual “evergreen” share replenishment was eliminated prospectively and a limitation on the number of shares issuable as restricted stock units and restricted shares (referred to as “full value awards”) was added to the Plan. The latter change would be effected by adding a “fungible share” ratio to the Plan whereby grants of full value awards after May 21, 2013, reduce the number of shares issuable under the Plan by 1.7 shares for each share subject to such awards. If shares subject to such awards are subsequently forfeited or otherwise would return to the Plan reserve, the unvested or cancelled shares will be returned to the share reserve as 1.7 shares for each share forfeited or otherwise returned to the Plan share reserve.

As of December 31, 2013, a total of 10,123,801 shares of Common Stock were reserved for issuance under the 1997 Plan. Incentive stock options to purchase shares of common stock may be granted at not less than 100% of the fair market value. Options granted prior to June 15, 2000 and after May 5, 2003, generally have a term of five years from the date of grant. Options granted June 15, 2000 through May 5, 2003, and those granted after March 31, 2013, generally have a term of ten years. The exercise price of stock options granted under the 1997 Plan is determined by the Board of Directors (or a Committee of the Board of Directors), but will be at least equal to 100% of the fair market value per share of common stock on the date of grant (or at least 110% of such fair market value for an incentive stock option granted to a stockholder with greater than 10% voting power of all stock), except that up to 10% of the aggregate number of shares reserved for issuance under the 1997 Plan (including shares that have been issued or are issuable in connection with options exercised or granted under the 1997 Plan) may have exercise prices that are from 0% to 100% of the fair market value of the common stock on the date of grant. Options generally vest ratably over four years.

The 1997 Plan also allows for the issuance of stock purchase rights and options that are immediately exercisable through execution of a restricted stock purchase agreement. Shares purchased pursuant to a stock purchase agreement generally vest ratably over four years. In the event of termination of employment, the Company, at its discretion, may repurchase unvested shares at a price equal to the original issuance price. In addition, the 1997 Plan allows for the issuance of stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), and restricted stock units (“RSUs”). SARs are rights to receive, in cash or shares of the Company's common stock, as designated on the grant date, the appreciation in fair market value of common stock between the exercise date and the date of grant. To date, the Company has only issued SARs that can be settled in shares of the Company's common stock. SARs may be granted alone or in tandem with options. The exercise price of a SAR will be at least equal to 100% of the fair market value per share of common stock on the date of grant. SARs issued by the Company generally vest in equal, annual installments over four years, and expire on the five year anniversary of the grant date. RSUs and RSAs are awards that result in a payment to a participant, generally in the form of an issuance of shares of the Company's common stock, at such time as specified performance goals or other vesting criteria are achieved or the awards otherwise vest. RSUs and RSAs issued by the Company generally vest in equal, annual installments over four years, although certain of these awards vest 100% after one or two years. In addition, certain of these RSU and RSA grants have additional financial-based performance requirements that must be met before vesting can occur. RSUs and RSAs with performance-based vesting conditions expire no later than the five year anniversary of the grant date if the performance criteria have not been met.

(d) Stock Award Activity

The following table summarizes stock award activity under all plans for the years ended December 31, 2013, 2012, and 2011:



			Options Outstanding
	Shares Available for Grant		Number Outstanding		Weighted-Average Exercise Price Per Share
BALANCE AT DECEMBER 31, 2010	11,420,522		4,275,648		$	8.55
Options and stock appreciation rights granted	(313,750	)	313,750		8.26
RSUs granted	(1,381,070	)	—		—
Options and stock appreciation rights cancelled	981,365		(981,365	)	8.64
RSUs cancelled	480,571		—		—
Options exercised	—		(504,561	)	7.15
Unissued shares returned to plan	190,406		—		—
1998 Directors Plan shares expired	(10,000	)	—		—
Additional shares reserved	1,679,692		—		—
BALANCE AT DECEMBER 31, 2011	13,047,736		3,103,472		$	8.71
Options granted	(1,883,388	)	1,883,388		3.21
RSUs granted	(700,987	)	—		—
Options and stock appreciation rights cancelled	1,047,545		(1,047,545	)	8.73
RSUs cancelled	315,817		—		—
Options exercised	—		—		—
Unissued shares returned to plan	—		—		—
1998 Directors Plan shares expired	(60,000	)	—		—
Additional shares reserved	1,700,859		—		—
BALANCE AT DECEMBER 31, 2012	13,467,582		3,939,315		$	6.08
Options granted	(1,785,728	)	1,785,728		2.34
RSUs granted	(702,665	)	—		—
Options and stock appreciation rights cancelled	1,545,194		(1,545,194	)	7.22
RSUs cancelled	471,867		—		—
Options exercised	—		—		—
Unissued shares eliminated from plan	(15,542,434	)	—		—
1998 Directors Plan shares expired	75,000		(75,000	)	—
Additional shares reserved	7,122,039		—		—
BALANCE AT DECEMBER 31, 2013	4,650,855		4,104,849		$	4.13

During the years ended December 31, 2013 and 2012, no options or SARs were exercised. The total intrinsic value of options and SARS exercised in 2011 was approximately $1.2 million. The intrinsic value is calculated as the difference between the market value on the date of exercise and the exercise price of the shares.

The following table provides additional information regarding RSU and RSA activity for the years ended December 31, 2013, 2012, and 2011:



	Number Nonvested and Outstanding		Weighted-Average Grant Date Fair-Value
BALANCE AT DECEMBER 31, 2010	2,201,169		$	8.88
RSUs and RSAs granted	1,381,070		8.74
RSUs vested and released	(580,075	)	10.55
RSUs cancelled	(480,571	)	8.96
BALANCE AT DECEMBER 31, 2011	2,521,593		$	8.40
RSUs granted	700,987		3.25
RSUs vested and released	(977,149	)	8.48
RSUs cancelled	(315,817	)	7.80
BALANCE AT DECEMBER 31, 2012	1,929,614		$	6.56
RSUs granted	419,056		2.34
RSUs vested and released	(522,286	)	6.99
RSUs cancelled	(458,287	)	6.19
BALANCE AT DECEMBER 31, 2013	1,368,097		$	5.22

The fair value of each RSU and RSA granted to employees was estimated on the date of grant by multiplying the number of shares granted times the fair market value of the Company's stock on the grant date.

The total intrinsic value of RSUs and RSAs vested and released during the years ended December 31, 2013, 2012, and 2011 was approximately $1.2 million, $3.7 million, and $5.1 million, respectively. The intrinsic value of vested and released RSUs and RSAs is calculated by multiplying the fair market value of the Company's stock on the vesting date by the number of shares vested. As of December 31, 2013, the number of RSUs and RSAs outstanding and expected to vest was 1,292,436, with a total intrinsic value of $2.8 million. The intrinsic value of the outstanding and expected to vest RSUs and RSAs is calculated based on the market value of the Company's closing stock price of $2.15 as of December 31, 2013, the last market trading day of 2013.

The following table provides additional information for significant ranges of outstanding and exercisable stock options and SARs as of December 31, 2013:



Exercise Price Range	Number Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price per Share		Aggregate Intrinsic Value
2.11-2.29	419,600	9.68	$	2.19	$	4,640
2.37	1,183,829	9.44	2.37		—
2.51-2.57	92,500	9.30	2.55		—
3.17	1,217,567	8.37	3.17		—
3.40-7.46	513,725	4.23	6.02		—
7.47-8.20	431,978	0.47	7.55		—
9.08-10.62	123,900	2.36	9.99		—
12.11	40,000	0.69	12.11		—
12.82	75,000	0.86	12.82		—
13.85	6,750	0.78	13.85		—
Outstanding	4,104,849	7.08	$	4.13	$	4,640
Vested and expected to vest	3,918,854	7.06	$	4.20	$	4,212
Exercisable	1,348,270	3.64	$	6.60	$	—

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company's closing stock price of $2.15 as of December 31, 2013, which would have been received by the option holders had all option holders exercised their options as of that date.