NOTE 4—EQUITY AWARDS AND 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 and six months ended June 30, 2013 was $0.2 million and $0.6 million, and for the three and six months ended June 30, 2012 was $0.5 million and $0.7 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 and executive officers 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 defined levels of performance and are generally 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 June 30, 2013, we have approximately $1.8 million of unrecognized incentive compensation expense related to Performance Awards that is expected to be recognized over a weighted-average period of approximately 1.48 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 former President and Chief Executive Officer ("CEO"), who announced his resignation on March 27, 2013. His resignation was accepted on May 27, 2013. The former CEO's unvested equity awards forfeited upon his departure pursuant to the terms of the underlying award agreements.

A summary of the Stock Option activity for the six months ended June 30, 2013 is as follows:

			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	(259,449	)		2.04–2.44		2.17
Expired	(86,000	)		8.00		8.00
Forfeited	(163,251	)		2.32–3.94		2.92

Outstanding—June 30, 2013	852,000		$	2.32–$16.27	$	5.14		7.31	$	0.5

Exercisable at June 30, 2013	442,943		$	2.32–$16.27	$	7.26		5.81	$	0.2

The weighted-average grant date fair value of stock options granted during the six months ended June 30, 2013 was $2.64 per share.

As of June 30, 2013, there was $0.7 million of unrecognized compensation expense related to unvested stock option awards that is expected to be recognized over a weighted-average period of approximately 2.01 years.

Cash received from the exercise of stock options was $0.5 million for the six months ended June 30, 2013. There were no stock option exercises during the six months ended June 30, 2012. The Company did not recognize a tax benefit from the stock option exercises as the Company is in a net operating loss carryforward position.

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 six months ended June 30, 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 six months ended June 30, 2013 is as follows:

			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	(131,370	)		3.30
Forfeited	(91,000	)		2,70

Unvested outstanding as of June 30, 2013	241,434		$	2.78		1.94	$	0.8

As of June 30, 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 1.94 years.