EQUITY-BASED COMPENSATION

We may issue stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards to employees, officers, directors and consultants under our 2014 incentive plan and our amended and restated 2000 directors stock plan, as amended. We issue both service and performance-based restricted stock awards and units to employees. Performance-based restricted stock awards and units are issued to certain key executives and vest based on financial performance metrics over the requisite service period. The compensation committee of our board of directors administers these stock plans. A total of 4,959,944 and 1,900,000 shares are authorized for issuance under our 2014 plan and 2000 directors stock plan, respectively.

Equity-based compensation expense is measured at the grant date, based on the fair value of the award, and is recognized over the vesting periods. Included in the expense amounts are employer-related costs for taxes incurred upon vesting of awards which do not impact "Additional paid-in capital" in our condensed consolidated balance sheets. The following table presents total equity-based compensation expense for restricted stock awards and non-qualified stock options included in the line items below in our condensed consolidated statements of operations (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Cost of revenues	$	166	$	142	$	338	$	302
Selling and marketing	681		539		1,417		1,141
Research and development	173		224		300		429
General and administrative	1,637		1,057		2,829		1,764
Equity-based compensation expense	$	2,657	$	1,962	$	4,884	$	3,636

Restricted Stock Awards

The fair value of restricted stock awards is the market value of the stock on the date of grant. The effect of vesting conditions that apply only during the requisite service period is reflected by recognizing compensation cost only for the restricted stock awards for which the requisite service is rendered. As a result, we are required to estimate an expected forfeiture rate, as well as the probability that performance conditions that affect the vesting of certain stock-based awards will be achieved, and only recognize expense for those shares expected to vest. We estimate that forfeiture rate based on historical experience of our stock-based awards that are granted, exercised and voluntarily cancelled. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different from what we have recorded in the current period. Our estimated forfeiture rate for restricted stock awards is 3.0%.

The following table summarizes the activity of unvested restricted stock awards under our stock plans from December 31, 2013 to June 30, 2014:



	Shares		Weighted-Average Grant Date Fair Value
Unvested at December 31, 2013	1,943,760		$	9.64
Granted	646,562		12.34
Vested/released	(414,689	)	8.83
Forfeited	(75,147	)	8.98
Unvested at June 30, 2014	2,100,486		$	10.66

Included in the table above are 107,841 and 90,000 restricted stock units outstanding at June 30, 2014 and December 31, 2013, respectively. Restricted stock units represent a right to receive shares of our common stock in the future, subject to attainment of service-based and/or performance-based vesting criteria. Shares underlying restricted stock units are not outstanding and instead convert to shares of our common stock if and when the vesting criteria are met.

The weighted-average grant date fair value of restricted stock granted during six months ended June 30, 2014 and 2013 was $12.34 and $11.10, respectively. The aggregate fair value of restricted stock vested was $2.3 million and $5.2 million for the three and six months ended June 30, 2014, respectively, and $1.7 million and $5.2 million for the three and six months ended June 30, 2013, respectively. During the six months ended June 30, 2014 and the year ended December 31, 2013, we issued 311,320 and 544,559 shares, respectively, of our common stock relating to the vesting of restricted stock. As of June 30, 2014, we had $17.0 million of unvested restricted stock, which we will record in our condensed consolidated statements of operations over a weighted-average recognition period of approximately 2.0 years.

Stock Options

The fair value of stock options is estimated at the date of grant with the Black-Scholes option pricing model using various assumptions such as expected life, volatility, risk-free interest rate, dividend yield and forfeiture rates. The expected life of stock-based awards granted represents the period of time that they are expected to be outstanding and is estimated using historical data. Using the Black-Scholes option valuation model, we estimate the volatility of our common stock at the date of grant based on the historical volatility of our common stock. We base the risk-free interest rate used in the Black-Scholes option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. We have not paid any cash dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero in the Black-Scholes option valuation model. Finally, we use historical data to estimate pre-vesting option forfeitures. Stock-based compensation is recorded for only those awards that are expected to vest. No stock options have been issued since the year ended December 31, 2005.

The following table summarizes the stock options activity under our stock plans from December 31, 2013 to June 30, 2014:



	Options		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Options outstanding at December 31, 2013	107,668		$	11.29
Granted	—		—
Exercised	(85,334	)	11.29
Expired	—		—
Options outstanding and exercisable at June 30, 2014	22,334		$	11.30	0.88	$	45,678

As of June 30, 2014, we had no remaining unvested stock options to be recorded as an expense in our condensed consolidated statements of operations for future periods.