L. Equity-Based Compensation

We currently maintain two equity compensation plans, including our Third Amended and Restated 2007 Equity Incentive Plan, or the 2007 Plan, and our Amended and Restated 2000 Stock Plan, or the 2000 Plan. During 2012 and 2013, we also granted equity to certain newly hired executive officers through inducement grants outside of these plans.

Third Amended and Restated 2007 Equity Incentive Plan

Our 2007 Plan was originally approved by our stockholders in November 2007. In each of May 2009, May 2010, and May 2013 our stockholders approved proposals to amend and restate our 2007 Plan to, among other things, increase the number of shares authorized for issuance thereunder by 600,000, 800,000 and 1,100,000 shares, respectively. In addition, the amendment approved by our stockholders in May 2009 replaced a limitation on the number of shares in the aggregate which could be issued under the 2007 Plan with respect to restricted stock units, restricted stock, stock and similar equity interests in our company with a fungible share reserve whereby the number of shares available for issuance under the 2007 Plan is reduced by one share of our common stock issued pursuant to an option or stock appreciation right and by 1.5 shares for each share of our common stock issued pursuant to a restricted stock unit award or other similar equity-based award.

The 2007 Plan provides for the grant of stock options, restricted stock units, restricted stock, stock, and other equity interests in our company to employees, officers, directors, consultants, and advisors of our company and our subsidiaries. We generally issue common stock from previously authorized but unissued shares to satisfy option exercises and restricted stock awards. The terms and conditions of each such grant, including, but not limited to, the number of shares, the exercise price, term of the option/award and vesting requirements, are determined by our Board of Directors, or Board, or the Compensation Committee of our Board. Our Board may award stock options in the form of nonqualified stock options or incentive stock options, or ISOs. Stock options may be granted at an exercise price no less than fair market value of a share of our common stock on the date of grant, as determined by our Board or the Compensation Committee of our Board, subject to certain limitations.

As of December 31, 2013, we have granted options and restricted stock units covering 6,289,350 shares of common stock under our 2007 Plan, of which 2,558,113 stock options and 626,348 restricted stock units have expired or terminated, and of which 139,146 options have been exercised and 475,614 shares of common stock have been issued pursuant to restricted stock units that became fully vested. The number of options and restricted stock units outstanding under this plan as of December 31, 2013, was 2,199,735 and 290,394, respectively. The remaining number of shares available for future grants as of December 31, 2013 was 2,024,621, not including shares subject to outstanding awards under the 2000 Plan, which will be added to the total number of shares available for issuance under the 2007 Plan to the extent that such awards expire or terminate for any reason prior to exercise. All outstanding stock options granted under our 2007 Plan have an exercise price equal to the closing price of a share of our common stock on the grant date and have either a seven or ten-year term.

Amended and Restated 2000 Stock Plan

Our 2000 Plan provided for the grant of options and other equity-based awards to our directors, officers, employees and consultants. The terms and conditions of each such grant, including, but not limited to, the number of shares, the exercise price, term of the option/award and vesting requirements, were determined by our Board or the Compensation Committee of our Board. As of December 31, 2013, we have granted stock options and restricted stock units covering 2,182,700 shares of common stock under the 2000 Plan, of which 984,339 stock options and 1,500 restricted stock units have expired or terminated, and of which 1,049,420 stock options have been exercised and 42,500 shares of common stock have been issued pursuant to restricted stock units that became fully vested. The remaining number of shares underlying outstanding stock options which were issued pursuant to our 2000 Plan as of December 31, 2013, was 104,941. There were no remaining restricted stock units which were issued pursuant to our 2000 Plan as of December 31, 2013. All outstanding stock options granted under the 2000 Plan have an exercise price equal to the closing price of our common stock on the grant date and have a ten year term. In November 2007, the 2000 Plan was succeeded by our 2007 Plan and, accordingly, no further grants may be made under this plan. Any shares that remained available for issuance under the 2000 Plan as of the date of adoption of the 2007 Plan are included in the number of shares that may be issued under the 2007 Plan. Any shares subject to outstanding awards granted under the 2000 Plan that expire or terminate for any reason prior to exercise will be added to the total number of shares available for issuance under the 2007 Plan.

Other Equity Compensation Grants

In February 2013, we granted restricted stock units to certain members of our senior management covering a maximum of 82,500 shares of common stock, which are subject to a performance condition tied to the price of our common stock. These restricted stock units vest, if at all, at the end of the three-year period ending December 31, 2015 based on the achievement of a minimum, target or maximum stock price range. In the event that the minimum stock price range is not achieved at the measurement date, none of the restricted stock units will vest. The maximum total fair value of these restricted stock units is $0.7 million, which are being recognized to expense over a period of three years from the date of grant, net of any estimated and actual forfeitures.

During 2013 and 2012, our Board granted options to purchase 270,000 and 300,000 shares of our common stock, respectively, to certain members of our senior management to induce them to accept employment with us. These options were granted at an exercise price equal to the fair market value of a share of our common stock on the respective grant dates. The options will be exercisable in four equal annual installments beginning on the first anniversary of the respective grant dates. Of the 270,000 options granted in 2013, 45,000 were forfeited during 2013. In addition, during 2013 and 2012, our Board granted 115,000 and 100,000 restricted stock units, respectively, to certain members of our senior management to induce them to accept employment with us. These grants will vest in four equal annual installments beginning on the first anniversary of the respective grant dates. Of the 115,000 restricted stock units granted in 2013, 15,000 were forfeited during 2013. The foregoing grants were made pursuant to inducement grants outside of our 2007 Plan as permitted under the NASDAQ Global Market rules. We assessed the terms of these awards and determined there was no possibility that we would have to settle these awards in cash and therefore, equity accounting was applied. These shares were registered in August 2013.

Equity-based compensation expense

Equity-based compensation expense for 2013, 2012 and 2011 consisted of the following (in thousands):

	Years Ended December 31,

	2013		2012		2011
Cost of product sales	$	121	$	225	$	616
Research and development		2,149		1,994		1,874
Selling, general and administrative		5,734		4,805		7,548


Total equity-based compensation expense	$	8,004	$	7,024	$	10,038

We reduce the compensation expense being recognized to account for estimated forfeitures, which we estimate based primarily on historical experience, adjusted for unusual events such as the corporate restructurings in 2012 and 2011, which resulted in higher than expected turnover and forfeitures in those years. Under current accounting guidance, forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns associated with operating losses we incurred in the past, we have not recognized any excess tax benefits from the exercise of options. Accordingly, there was no impact recorded in cash flows from financing activities or cash flows from operating activities as reported in the accompanying consolidated statements of cash flows.

The following table summarizes the weighted average assumptions we utilized for purposes of valuing grants of options to our employees and non-employee directors:

	Years Ended December 31,

	2013				2012				2011
	Employees		Non-Employee Directors		Employees		Non-Employee Directors		Employees		Non-Employee Directors
Risk free interest rate (%)		0.95		0.85		0.66		0.68		1.67		1.36
Expected volatility (%)		59		46		57		56		51		51
Expected option term (years)		5.00		4.00		4.66		4.00		5.50		4.00
Dividend yield		none		none		none		none		none		none

Risk free interest rates utilized are based upon published U.S. Treasury yields at the date of the grant for the expected option term. During 2013, we estimated our expected stock price volatility by basing it on the historical volatility of our own common stock price over the prior period equivalent to our expected option term to better reflect expected future volatility. During 2012 and 2011, we estimated our expected stock price volatility by basing it on a blend of our own common stock price and the historical volatility of other similar companies over the prior period equivalent to our expected option term to better reflect expected future volatility. To compute the expected option term, we analyze historical exercise experience as well as expected stock option exercise patterns.

The following table summarizes details regarding stock options granted under our equity incentive plans for the year ended December 31, 2013:

	December 31, 2013

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value ($ in millions)
Outstanding at beginning of year		2,190,073		$	23.07
Granted		1,120,050			18.73
Exercised		(123,658	)		15.02
Expired and/or forfeited		(366,789	)		26.06


Outstanding at end of year		2,819,676		$	21.31		7.1	$	17.5




Outstanding at end of year—vested and unvested expected to vest		2,644,475		$	21.51		7.1	$	16.4




Exercisable at end of year		1,003,804		$	28.75		5.2	$	4.0

The weighted average grant date fair value of stock options granted during 2013, 2012 and 2011 was $8.60, $6.90 and $7.40, respectively. A total of 521,734 stock options vested during 2013. The total grant date fair value of options that vested during 2013, 2012 and 2011 was $4.5 million, $5.5 million and $9.8 million, respectively. The aggregate intrinsic value of options exercised during 2013, 2012 and 2011, excluding purchases made pursuant to our employee stock purchase plans, measured as of the exercise date, was approximately $1.0 million, $0.1 million and $0.1 million, respectively. The intrinsic value of a stock option is the amount by which the fair market value of the underlying stock on a specific date exceeds the exercise price of the common stock option.

In 2013, we issued an aggregate of 270,525 restricted stock units to our employees and directors. In general, these grants vest on an annual basis over a four year period. The estimated fair value of restricted stock units granted was determined at the grant date based upon the quoted market price per share on the date of the grant.

The following table summarizes details regarding restricted stock units granted under our equity incentive plans for the year ended December 31, 2013:

	December 31, 2013

	Unvested Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at beginning of year		373,676		$	17.02
Granted		270,525			16.31
Vested		(152,889	)		18.44
Forfeited		(25,918	)		20.77


Outstanding at end of year		465,394		$	17.28




Outstanding at end of year and expected to vest		382,897		$	17.26

The weighted average grant date fair value of restricted stock units granted during 2013, 2012 and 2011 was $16.31, $15.64 and $15.99, respectively. The total grant date fair of restricted stock units that vested during 2013, 2012 and 2011 was $2.8 million, $3.5 million and $3.1 million, respectively.

At December 31, 2013, the amount of unrecorded equity-based compensation expense for both option and restricted stock unit awards, net of forfeitures, attributable to future periods was approximately $16.0 million. Of this amount, $11.5 million was associated with stock options and is expected to be amortized on a straight-line basis to expense over a weighted average period of approximately 2.7 years, and $4.5 million was associated with restricted stock units and is expected to be amortized to on a straight-line basis to expense over a weighted average period of approximately 2.1 years. Such amounts will be amortized primarily to research and development or selling, general and administrative expense. These future estimates are subject to change based upon a variety of future events, which include, but are not limited to, changes in estimated forfeiture rates, employee turnover, and the issuance of new stock options and other equity-based awards.