EQUITY AWARDS AND OTHER INCENTIVE COMPENSATION

3 Months Ended

Mar. 31, 2013

EQUITY AWARDS AND OTHER INCENTIVE COMPENSATION

EQUITY AWARDS AND OTHER INCENTIVE COMPENSATION

NOTE 4—EQUITY AWARDS & OTHER INCENTIVE COMPENSATION

        We account for stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation. Total stock-based compensation expense recognized during the three months ended March 31, 2013 and 2012 was $0.4 million and $0.2 million, respectively. These amounts are included in general and administrative expenses in our consolidated statements of operations.

        Nonqualified stock options ("Stock Options"), restricted stock units ("RSUs") and cash-based performance awards ("Performance Awards") are approved by the Compensation Committee of the Board of Directors and are granted to executive officers, certain key employees and nonemployee members of the Board of Directors ("BOD") as permitted under the 2010 Long-Term Incentive Plan ("2010 Plan"). Stock Options primarily vest ratably over three years and RSUs granted to employees primarily vest and become non-forfeitable upon the third anniversary of the date of grant. RSUs granted to non-employee directors vest immediately and are delivered upon the date that is the earlier of termination of service on the Board of Directors or the consummation of a change of control of the Company. The Performance Awards relate to the achievement of differing levels of performance (as defined) and are measured by the level of the Company's Corporate Free Cash Flow (as defined) over a one or two-year Performance Period depending upon the award agreement. If the Performance Award levels are achieved, the awards earned will vest and become payable at the end of the Vesting Period, defined as either a one or two calendar year period following the Performance Period.

        On January 25, 2013, the Compensation Committee of the Board of Directors approved the grant of 216,800 Stock Options and 163,768 RSUs to executive officers, certain key employees and nonemployee members of the BOD, as further discussed below. In addition, Performance Awards totaling $0.7 million were granted to executive officers and certain key employees with a Performance Period of two years and a Vesting Period of one calendar year period following the Performance Period.

        As of March 31, 2013, we have approximately $2.0 million of unrecognized incentive compensation expense related to Performance Awards that is expected to be recognized over a weighted-average period of approximately 1.73 years.

        During the first quarter of 2013, in accordance with the applicable guidance, the Company recognized a one-time reversal of $0.1 million in stock-compensation expense as a result of the update of forfeiture assumptions on outstanding equity awards and $0.3 million in expense associated with unvested Performance Awards of our President and Chief Executive Officer ("CEO"), who announced his resignation on March 27, 2013. Our CEO will continue in his current capacity, for a reasonable period of time, while the Board of Directors conducts its interview process for a new CEO. The CEOs unvested equity awards will forfeit upon his departure upon the terms of the underlying award agreements.

        A summary of the Stock Option activity for the three months ended March 31, 2013 is as follows:

	Options		Range of Exercise Prices		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life		Aggregate Intrinsic Value
							(in years)		(in millions)
Outstanding—December 31, 2012		1,143,900	$	2.04–16.27	$	4.59		7.10	$	1.4
Granted		216,800		3.94		3.94
Exercised		—		—		—
Expired		—		—		—
Forfeited		—		—		—
Outstanding—March 31, 2013		1,360,700	$	2.04–$16.27	$	4.49		7.33	$	0.9
Exercisable at March 31, 2013		752,696	$	2.04–$16.27	$	5.69		5.98	$	0.6

        The weighted-average grant date fair value of stock options granted during the three months ended March 31, 2013 was $2.64 per share.

        As of March 31, 2013, there was $0.8 million of unrecognized compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted-average period of approximately 2.21 years.

        The fair value of each stock option granted under the 2010 Plan is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for options granted during the three months ended March 31, 2013:

Assumptions:
Expected dividend yield(1)	N/A
Expected stock price volatility(2)	77.4	%
Risk-free interest rates(3)	1.36	%
Expected term of options (in years)(4)	6.00

(1)

The expected dividend yield was based on our expectation of not paying dividends for the foreseeable future.

(2)

The expected volatility was based on the historical volatility of our common stock.

(3)

Based on the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our stock options.

(4)

Represents the period of time options are expected to be outstanding. The weighted average expected term was determined using the "simplified method" for plain vanilla options as the Company lacks sufficient historical exercise experience. The "simplified method" calculates the expected term as the average of the vesting term and original contractual term of the options.

        A summary of the RSU activity for the three months ended March 31, 2013 is as follows:

	RSUs			Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Contractual Life		Aggregate Fair Value
						(in years)		(in millions)
Unvested outstanding as of December 31, 2012		300,036		$	2.35		1.65	$	1.3
Granted		163,768			3.94
Vested		(106,369	)		3.64
Forfeited		—			—
Unvested outstanding as of March 31, 2013		357,435		$	2.69		2.09	$	1.2

        As of March 31, 2013, we had approximately $0.4 million of unrecognized compensation expense related to unvested RSUs that is expected to be recognized over a weighted-average period of approximately 2.09 years.