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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2011
Stock-Based Compensation |
Stock-Based Compensation |
10. Stock-Based Compensation Equity Incentive Plans The Company authorized 500,000 shares of common stock for issuance under the 2008 Plan upon its adoption in 2008 and authorized an additional 200,000 shares for issuance under the 2008 Plan in July 2009. The 2008 Plan provided for the granting of non-qualified stock options, restricted stock awards and RSUs to newly hired employees. Following the approval by stockholders of the amendment and restatement of the 2004 Plan on April 27, 2010, no additional awards have been made or will be made in the future under the 2008 Plan. The 2004 Plan provides for the granting of stock options, restricted stock awards, stock appreciation rights and RSUs to employees, officers, directors and consultants of the Company. On April 27, 2010, an amendment and restatement of the 2004 Plan was approved by the Company's stockholders to, among other things, reserve additional shares of common stock for issuance thereunder. As of December 31, 2011, total shares remaining available for issuance under the 2004 Plan were 2,090,098. Employee Stock Purchase Plan Under the 2004 Employee Stock Purchase Plan (ESPP), the Company's non-officer employees may purchase common stock through payroll deductions at a price equal to 85 percent of the lower of the fair market value of the stock at the beginning of the offering period or at the end of each applicable purchase period. The ESPP provides for consecutive and overlapping offering periods of 24 months in duration, with each offering period composed of four consecutive six-month purchase periods. The purchase periods end on either May 15th or November 15th. ESPP contributions are limited to a maximum of 15 percent of an employee's eligible compensation. The Company's ESPP plan also includes a feature that provides for a new offering period to begin when the fair market value of the Company's common stock on any purchase date during an offering period falls below the fair market value of the Company's common stock on the first day of such offering period. This feature is called a reset. The Company had resets for new twenty-four month offering periods starting on November 16, 2007, May 16, 2008, November 16, 2008, May 16, 2010, and November 16, 2011. The Company applied modification accounting to determine the incremental fair value associated with the ESPP resets and recognized the related incremental stock-based compensation expense. As of December 31, 2011, a total of 2,025,000 shares of common stock were approved and authorized for issuance under the ESPP. Through December 31, 2011, the Company issued 1,468,454 shares under the ESPP at an average price of $10.15 per share. As of December 31, 2011, total shares remaining available for issuance under the ESPP were 556,546. Restricted Stock Awards The Compensation Committee of the Company's Board of Directors approved the grant of 1,168,000 in 2011 and 71,000 shares in 2007, of restricted stock to certain members of the Company's management. These restricted shares of common stock vest based on continued service, with pre-determined vesting percentages and anniversary dates. The Company valued the awards based on the closing market price of the Company's common stock on the date of the respective awards. Performance-Contingent Restricted Stock Awards In 2011, the Compensation Committee of the Company's Board of Directors approved the grant of 1,290,000 performance-contingent RSAs to senior management. These grants have dual triggers of vesting based upon the achievement of certain performance conditions over a six-year timeframe from 2011-2016 and continued employment, both of which must be satisfied in order for the RSAs to vest. Expense associated with these RSAs would be recognized, if at all, during these years depending on the probability of meeting the performance conditions. The maximum potential expense associated with the RSAs could be up to approximately $31.9 million (allocated as $6.3 million for research and development expense and $25.6 million for general and administrative expense) if all of the performance conditions are achieved on time. As of December 31, 2011, the Company had determined that the achievement of the requisite performance conditions was not probable and, as a result, no compensation expense has been recognized. As the RSAs are dependent upon the achievement of certain performance conditions, the expense associated with the RSAs may vary significantly from period to period. In 2011, the Compensation Committee of the Company's Board of Directors approved the grant of 25,000 performance-contingent RSAs to a non-executive officer that has dual triggers of vesting based upon the achievement of a performance condition over a timeframe from 2012-2013 and continued employment through 2014, both of which must be satisfied in order for the award to vest in full. The maximum potential expense associated with this award is approximately $475,000, which would be recognized in increments based on the achievement of the performance condition. As of December 31, 2011, the Company had determined that the achievement of the requisite performance condition was not probable and, as a result, no compensation expense has been recognized. As the vesting of the RSAs is contingent upon the achievement of the performance condition, the expense associated with the RSAs may vary significantly from period to period. Performance-Contingent Restricted Stock Units In 2010, the Compensation Committee of the Company's Board of Directors approved the grant of 210,000 performance-contingent RSUs to senior management. These awards have dual triggers of vesting based upon the successful achievement of certain corporate operating milestones during 2010 and 2011, as well as a requirement for continued employment through early 2014. As of February 11, 2011, both performance milestones had been deemed achieved, and time-based vesting commenced with respect to all of the performance-contingent RSU shares. Director Compensation Program Non-employee directors of the Company receive compensation for services provided as a director. Each member of the Company's Board who is not an employee receives an annual retainer as well as a fee for each board and committee meeting attended. Commencing on April 27, 2011, chairpersons of the various committees of the Board, the Audit Committee, the Compensation Committee, Nominating/Corporate Governance Committee and the Science and Technology Advisory Committee receives a fixed retainer. The lead independent director also receives a fixed retainer. Each of the Company's independent directors receives periodic automatic grants of equity awards under a program implemented under the 2004 Plan. These grants are non-discretionary. Only independent directors of the Company or affiliates of such directors are eligible to receive automatic grants under the 2004 Plan. Under the program, as amended in July 2010, each individual who first becomes an independent director will, on the date such individual joins the Board, automatically be granted (i) a one-time grant of RSUs covering 6,000 shares of the Company's common stock and (ii) a one-time nonstatutory stock option grant covering 6,000 shares of the Company's common stock. These initial equity grants vest monthly over the director's first two years of service. In addition, on the date of joining the Board, the new director will also receive the standard annual equity awards (if joining on the date of the Company's Annual Meeting of Stockholders) or pro-rated annual equity awards (if joining on any other date). The pro-ration is based upon the number of months of service the new board member will provide during the 12-month period ending on the one-year anniversary of the most recent annual meeting of stockholders. Annually, upon his or her re-election to the Board at the Annual Meeting of Stockholders, each independent director is automatically granted both an RSU covering 6,000 shares of the Company's common stock and a nonstatutory stock option covering 6,000 shares of the Company's common stock. These standard annual equity awards vest monthly over the twelve month period of service following the date of grant. In addition, all automatic equity awards vest in full if the Company is subject to a change in control or the Board member dies while in service. Stock-Based Compensation Expense The allocation of stock-based compensation expense included in the consolidated statements of operations was as follows:
|  | Year Ended December 31, |
--- | --- | --- | ---
(in thousands) |  | 2011 |  | 2010 |  | 2009 |
Research and development |  | $ | 13,422 |  | $ | 10,322 |  | $ | 11,542 |
General and administrative |  |  | 11,494 |  |  | 8,687 |  |  | 8,458 |
Total stock-based compensation expense |  | $ | 24,916 |  | $ | 19,009 |  | $ | 20,000 |
Stock-based compensation expense included in the consolidated statements of operations by award type was as follows:
|  | Year Ended December 31, |
--- | --- | --- | ---
(in thousands) |  | 2011 |  | 2010 |  | 2009 |
Employee stock options |  | $ | 4,528 |  | $ | 7,003 |  | $ | 10,271 |
Employee RSUs |  |  | 13,290 |  |  | 9,783 |  |  | 7,473 |
Employee RSAs |  |  | 5,498 |  |  | 398 |  |  | 470 |
Non-employee options and RSUs |  |  | 307 |  |  | 1,186 |  |  | 501 |
ESPP |  |  | 1,293 |  |  | 639 |  |  | 1,285 |
Total stock-based compensation expense |  | $ | 24,916 |  | $ | 19,009 |  | $ | 20,000 |
In connection with the retirement of the Company's former chairman of the Board of Directors in April 2010, the Company entered into a consulting agreement that provided for, among other things, the acceleration of an RSU that was scheduled to vest through April 2012 and an extension of the period of time in which vested stock options may be exercised until to the stated expiration date of the stock options. As a result of the stock option modification, the Company recorded an expense of $0.9 million in June 2010. As of December 31, 2011, the unrecognized compensation cost, net of expected forfeitures, and the estimated weighted-average amortization period, using the straight-line attribution method, was as follows:
(in thousands, except amortization period) |  | Unrecognized Compensation Cost |  | Weighted-average amortization period (years) |
--- | --- | --- | --- | --- | ---
Stock options |  | $ | 7,293 |  |  | 2.8 |
RSUs |  | $ | 12,449 |  |  | 2.0 |
RSAs |  | $ | 5,389 |  |  | 4.5 |
Compensation Awards The following table summarizes equity award activity under the 2008 Plan and the 2004 Plan, and related information:
(in thousands, except per share data) |  | Number of Shares Subject to Outstanding Options |  | Weighted- average Exercise Price of Outstanding Options |  | Number of Shares Subject to Outstanding RSUs |  | Weighted- average Fair Value per Share at Grant |  | Number of Shares Outstanding Subject to Vesting or Performance Conditions with vesting |  | Weighted- average Fair Value per Share at Grant |
--- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ---
Balance at December 31, 2008 |  |  | 9,953 |  | $ | 16.01 |  |  | 2,260 |  | $ | 21.51 |  |  | 77 |  | $ | 24.42 |
Granted |  |  | 356 |  |  | 14.90 |  |  | 950 |  |  | 14.66 |  |  | — |  |  | — |
Exercised |  |  | (1,333 | ) |  | 7.77 |  |  | — |  |  | — |  |  | — |  |  | — |
Released RSUs/RSAs |  |  | — |  |  | — |  |  | (603 | ) |  | 14.62 |  |  | (20 | ) |  | 20.18 |
Forfeited |  |  | (562 | ) |  | 25.43 |  |  | (565 | ) |  | 29.78 |  |  | — |  |  | — |
Balance at December 31, 2009 |  |  | 8,414 |  |  | 16.63 |  |  | 2,042 |  |  | 14.15 |  |  | 57 |  |  | 25.87 |
Granted |  |  | 321 |  |  | 14.90 |  |  | 1,170 |  |  | 10.55 |  |  | — |  |  | — |
Exercised |  |  | (784 | ) |  | 9.60 |  |  | — |  |  | — |  |  | — |  |  | — |
Released RSUs/RSAs |  |  | — |  |  | — |  |  | (657 | ) |  | 13.20 |  |  | (24 | ) |  | 25.55 |
Forfeited |  |  | (297 | ) |  | 26.17 |  |  | (658 | ) |  | 26.26 |  |  | — |  |  | — |
Balance at December 31, 2010 |  |  | 7,654 |  |  | 16.91 |  |  | 1,897 |  |  | 12.45 |  |  | 33 |  |  | 26.10 |
Granted |  |  | 629 |  |  | 21.98 |  |  | 471 |  |  | 24.96 |  |  | 2,483 |  |  | 24.42 |
Exercised |  |  | (1,265 | ) |  | 8.87 |  |  | — |  |  | — |  |  | — |  |  | — |
Released RSUs/RSAs |  |  | — |  |  | — |  |  | (797 | ) |  | 13.89 |  |  | (74 | ) |  | 24.96 |
Forfeited |  |  | (127 | ) |  | 29.15 |  |  | (29 | ) |  | 15.35 |  |  | — |  |  | — |
Balance at December 31, 2011 |  |  | 6,891 |  |  | 18.62 |  |  | 1,542 |  |  | 15.47 |  |  | 2,442 |  |  | 24.42 |
As of December 31, 2011, the aggregate intrinsic value of the options outstanding was $42.6 million and the aggregate intrinsic value of the options exercisable was $39.0 million. The total intrinsic value of the options exercised was $17.1 million in 2011, $7.2 million in 2010, and $10.0 million in 2009. The total estimated fair value of options vested was $6.4 million in 2011, $8.2 million in 2010, and $15.7 million in 2009. Valuation Assumptions The Company based the range of weighted average estimated values of employee stock option grants and rights granted under the employee stock purchase plan, as well as the weighted-average assumptions used in calculating these values, on estimates at the date of grant, as follows:
|  | Year Ended December 31,
--- | --- | ---
|  | 2011 |  | 2010 |  | 2009
Employee stock options |  |  |  |  |  |
Risk-free interest rate |  | 1.10% - 2.57% |  | 1.11% - 2.82% |  | 1.55% - 2.98%
Expected life (in years) |  | 5 - 6 |  | 5 - 6 |  | 5 - 6
Volatility |  | 0.49 - 0.55 |  | 0.48 - 0.52 |  | 0.48 - 0.57
Dividend yield |  | —% |  | —% |  | —%
Weighted-average estimated fair value of stock options granted |  | $11.11 |  | $7.41 |  | $7.48
Employee stock purchase plan issuances |  |  |  |  |  |
Risk-free interest rate |  | 0.05% - 0.54% |  | 0.19% - 0.79% |  | 0.17% - 0.88%
Expected life (in years) |  | 0.5 - 2 |  | 0.5 - 2 |  | 0.5 - 2
Volatility |  | 0.48 - 0.59 |  | 0.50 - 0.69 |  | 0.50 - 0.84
Dividend yield |  | —% |  | —% |  | —%
Weighted-average estimated fair value of ESPP issuances |  | $9.46 |  | $7.63 |  | $6.42
Range of Stock Option Exercise Prices As of December 31, 2011, all outstanding options to purchase common stock of the Company are summarized in the following table (in thousands, except years and per share data):
|  | Options Outstanding |  | Options Exercisable |
--- | --- | --- | --- | --- | ---
Range of Exercise Prices |  | Number Outstanding |  | Weighted- average Remaining Contractual Life in Years |  | Weighted- average Exercise Prices |  | Options Exercisable |  | Weighted- average Remaining Contractual Life in Years |  | Weighted- average Exercise Price |
$3.10 |  |  | 557 |  |  | 1.3 |  | $ | 3.10 |  |  | 557 |  |  | 1.3 |  | $ | 3.10 |
$6.15 - $6.70 |  |  | 145 |  |  | 6.9 |  |  | 6.19 |  |  | 99 |  |  | 6.9 |  |  | 6.18 |
$8.53 |  |  | 218 |  |  | 0.4 |  |  | 8.53 |  |  | 218 |  |  | 0.4 |  |  | 8.53 |
$9.69 |  |  | 1,172 |  |  | 2.3 |  |  | 9.69 |  |  | 1,172 |  |  | 2.3 |  |  | 9.69 |
$9.70 - $16.00 |  |  | 924 |  |  | 5.1 |  |  | 14.69 |  |  | 749 |  |  | 4.5 |  |  | 15.00 |
$16.01 - $21.96 |  |  | 1,493 |  |  | 5.6 |  |  | 18.52 |  |  | 1,061 |  |  | 4.1 |  |  | 18.34 |
$21.97 - $29.70 |  |  | 1,385 |  |  | 5.5 |  |  | 27.34 |  |  | 1,136 |  |  | 4.7 |  |  | 28.00 |
$29.71 - $35.46 |  |  | 997 |  |  | 5.2 |  |  | 33.52 |  |  | 997 |  |  | 5.2 |  |  | 33.52 |
Total |  |  | 6,891 |  |  | 4.4 |  |  | 18.62 |  |  | 5,989 |  |  | 3.7 |  |  | 18.61 |

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 93-6 -Paragraph 53 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64, 65, A240 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 + Details
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