Common Stock

The Company’s Certificate of Incorporation, as amended November 9, 2009, authorizes the Company to issue up to 80.0 million shares of common stock, par value $0.0001 per share, and 100,000 shares of one or more series of preferred stock, par value $0.0001 per share.

A reconciliation of the changes in common shares issued is as follows:



	Year ended December 31,
	2012	2011
Shares issued at the beginning of the year	51,957,652	36,753,891
Issued in sale of common stock	—	3,665,000
Issued upon conversion of preferred stock	—	4,871,719
Issued in payment of term loan principal	—	171,154
Issued in exchange of convertible notes	—	559,007
Issued upon exercise of warrants	348,350	3,960,747
Issued as dividend payments on preferred stock	—	624,171
Issued as restricted stock award grants	750,476	1,287,731
Issued upon exercise of stock options	67,500	64,232
Shares issued at the end of the year	53,123,978	51,957,652

Stock-Based Incentive Plans

Stockholders approved long term incentive plans in 2010, 2007, 2005 and 2003 (the “2010” Plan, the “2007 Plan,” the “2005 Plan” and the “2003 Plan,” respectively) under which the Company may grant equity awards to officers, key employees, and non-employee directors in the form of stock options, restricted stock and certain other incentive awards. At December 31, 2012, the maximum number of shares that may be issued under the 2010 Plan, 2007 Plan, 2005 Plan and 2003 Plan are 6.0 million, 2.2 million, 1.9 million and 1.4 million, respectively. The Company had 1.2 million shares remaining to be granted under the 2010 Plan and 0.1 million shares remaining to be granted under both the 2007 and 2005 Plans at December 31, 2012.

Stock Options

All stock options are granted with an exercise price equal to the market value of the Company’s common stock on the date of grant. Options expire no later than ten years from the date of grant and generally vest within four years or less. Proceeds received from stock option exercises are credited to common stock and additional paid-in capital, as appropriate. The Company uses historical data to estimate pre-vesting option forfeitures. Estimates are adjusted when actual forfeitures differ from the estimate. Stock-based compensation expense is recorded for all equity awards expected to vest.

The fair value of stock options at the date of grant is calculated using the Black-Scholes option pricing model. The risk free interest rate is based on the implied yield of U.S. Treasury zero-coupon securities that correspond to the expected life of the option. Volatility is estimated based on historical and implied volatilities of the Company’s stock and of identified companies considered to be representative peers of the Company. The expected life of awards granted represents the period of time the options are expected to remain outstanding. The Company uses the “simplified” method which is permitted for companies that cannot reasonably estimate the expected life of options based on historical share option exercise experience. The Company does not expect to pay dividends on common stock. No options were granted to employees during 2012. Assumptions used in the Black-Scholes option pricing model for stock options granted in 2011 and 2010 are as follows:



	Year ended December 31,
		2011		2010
Risk-free interest rate		.94%-1.825%		.55%-2.275%
Expected volatility of common stock		67.7%-70.3%		61.4%-69.3%
Expected life of options in years		3.50*-4.00		3.34*-6.25
Dividend yield		—	%	—	%
Vesting period in years		3.5-4.0		3.4-6.3

*Grants were made to an optionee for whom the Company was able to reasonably estimate the expected life of the award.

The Black-Scholes option valuation model was developed to estimate the fair value of traded options that have no vesting restrictions and are fully-transferable. Because option valuation models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value calculation. The Company’s options are not characteristic of traded options; therefore, the option valuation models do not necessarily provide a reliable measure of the fair value of options.

A summary of stock option activity for the year ended December 31, 2012 is as follows:



Options	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding as of January 1, 2012	2,529,690		$	5.32
Exercised	(67,500	)	2.50
Expired	(4,604	)	13.81
Outstanding as of
December 31, 2012	2,457,586		$	5.65	7.14	$	16,673,502
Vested or expected to vest at
December 31, 2012	2,437,864		$	5.64	7.14	$	16,571,402
Options exercisable as of
December 31, 2012	1,318,436		$	3.56	6.58	$	11,728,379

The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2011 and 2010 was $8.47 and $2.06 per share, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2012, 2011 and 2010 was $0.6 million, $0.2 million and $0.1 million, respectively. The total fair value of stock options vesting during the years ended December 31, 2012, 2011 and 2010 was $0.5 million, $0.5 million and $0.8 million, respectively.

At December 31, 2012, the Company had $1.0 million of measured but unrecognized compensation expense related to non-vested stock options. This cost is expected to be recognized over a weighted-average period of 0.4 years.

Restricted Stock

The Company grants employees either time-vesting or performance-based restricted shares in accordance with applicable terms underlying the Restricted Stock Agreements (“RSAs”). Time-vesting restricted shares vest after a stipulated period of time has elapsed subsequent the date of grant, generally three to four years. Certain time-vested shares have also been issued with a portion of the shares granted vesting immediately. Performance-based restricted shares are issued with performance criteria defined over a designated performance period and vest only when, and if, the outlined performance criteria is met. Grantees of restricted shares retain voting rights for the granted shares.

During the year ended December 31, 2012, the Company awarded 750,476 restricted stock awards to employees under the 2010 Plan. Approximately 74% of these awards were time-vesting and the remainder were performance-based.

A summary of restricted stock activity for the year ended December 31, 2012 is as follows:



Restricted Stock	Shares		Weighted- Average Fair Value - Date of Grant
Non-vested at January 1, 2012	1,445,858		$	6.64
Granted	750,476		11.03
Vested	(842,730	)	6.51
Forfeited	(29,314	)	10.84
Non-vested at December 31, 2012	1,324,290		$	9.15

The weighted-average grant-date fair value of restricted stock granted during the years ended December 31, 2012, 2011 and 2010 was $11.03, $8.79 and $1.88 per share, respectively. The total fair value of restricted stock that vested during the years ended December 31, 2012, 2011 and 2010 was $5.4 million, $7.2 million, and $4.2 million, respectively.

At December 31, 2012, there was $7.5 million of unrecognized compensation expense related to non-vested restricted stock. The unrecognized compensation expense is expected to be recognized over a weighted-average period of 1.8 years.

Restricted Stock Units

During 2012, the Company granted performance-based restricted stock units that will be converted into 390,124 shares of restricted stock. The restricted stock vests in 2013 and 2014. At December 31, 2012, there was $1.2 million of unrecognized compensation expense related to non-vested restricted stock units. The unrecognized compensation expense is expected to be recognized over a weighted-average period of 1.0 years.

Employee Stock Purchase Plan

The Company's Employee Stock Purchase Plan (ESPP) was approved by stockholders on May 18, 2012. The Company registered 500,000 shares of its common stock, currently held as treasury shares, for issuance under the ESPP. The purpose of the ESPP is to provide employees with an opportunity to purchase shares of the Company's common stock through accumulated payroll deductions. The ESPP allows participants to purchase common stock at a purchase price equal to 85% of the fair market value of the common stock on the last business day of a three-month offering period which coincides with calendar quarters. The first quarterly offering period began on October 1, 2012. Payroll deductions may not exceed 10% of an employee's compensation and participants may not purchase more than 1,000 shares in any one offering period. The fair value of the discount associated with shares purchased under the plan is recognized as share-based compensation expense and was less than $0.1 million in 2012. The total fair value of the shares purchased under the plan during 2012 was $0.2 million. The employee cost associated with participation in the plan was satisfied through payroll deductions.

Share-Based Compensation Expense

Non-cash share-based compensation expense related to stock options, restricted stock and restricted stock unit grants was $13.4 million, $7.4 million and $4.7 million during the years ended December 31, 2012, 2011 and 2010, respectively.

Treasury Stock

The Company accounts for treasury stock using the cost method and includes treasury stock as a component of stockholders’ equity. During the years ended December 31, 2012 and 2011, the Company purchased 166,334 shares and 57,303 shares, respectively, of the Company’s common stock at market value as payment of income tax withholding owed by employees upon the vesting of restricted shares. Shares issued as restricted stock awards to employees that were forfeited have also been accounted for as treasury stock.

During the years ended December 31, 2012 and 2011, JP Morgan Chase & Co. returned 659,340 shares and 701,102 shares, respectively, of the Company’s common stock that had been borrowed under the Share Lending Agreement.

In November 2012, the Company's Board of Directors authorized the repurchase of up to $25 million of the Company's common stock. Repurchases may be made in open market or privately negotiated transactions. Through December 31, 2012, the Company has not repurchased any of its common stock.