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Stockholders' Equity
 12 Months Ended
Dec. 31, 2012
Stockholders' Equity

13.    Stockholders’ Equity

Stock Plans

As of December 31, 2012, we had four share-based compensation plans.

1997 Equity Incentive Plan (“1997 Plan”)

The 1997 Plan was adopted on January 22, 1997 and provided for the issuance of up to 3,443,630 shares of our common stock to employees and non-employees of the Company. Options granted under the 1997 Plan were either incentive stock options or nonqualified stock options. Options under the 1997 Plan were granted for periods of up to ten years and at prices no less than 85% of the estimated fair value of the shares on the date of grant as determined by the Board of Directors, provided, however, that (i) the exercise price of the incentive stock options shall not be less than 100% of the estimated fair value of the shares on the date of grant and (ii) the exercise price of the incentive stock options granted to a 10% stockholder shall not be less than 110% of the estimated fair value of the shares on the date of grant. The options were exercisable immediately and generally vested over a four-year period for stock options issued to employees, directors and scientific advisors and vested quarterly over a four-year period or immediately for stock options issued to all other non-employees. All unvested shares issued under the 1997 Plan are subject to repurchase rights by the Company under such conditions as agreed to by the Company and the optionee. The 1997 Plan expired in the first quarter of 2007. Upon expiration of the 1997 Plan, 273,188 shares previously available for grant expired. Any outstanding options under the 1997 Plan that are cancelled in future periods will automatically expire and will no longer be available for grant. As of December 31, 2012, options to purchase 471,788 shares of common stock remained outstanding under the 1997 Plan.

2004 Stock Incentive Plan (“2004 Plan”)

The 2004 Plan was adopted in January 2004 by the Board of Directors and stockholders and became effective on February 11, 2004. This plan provided for the issuance of up to 3,500,000 shares of our common stock plus an annual increase. Subsequently, we discontinued granting stock options under the 1997 Plan. Options under the 2004 Plan were granted for periods of up to ten years and the exercise price of all incentive stock options granted under the 2004 Plan was at least equal to 100% of the fair market value of the common stock on the date of grant. If, however, incentive stock options were granted to an employee who owns stock possessing more than 10% of the voting power of all classes of the Company’s stock or the stock of any parent or subsidiary of the Company, the exercise price of any incentive stock option granted must equal at least 110% of the fair market value on the grant date and the maximum term of these incentive stock options must not exceed five years. The maximum term of an incentive stock option granted to any other participant must not exceed ten years. The 2004 Plan authorizes the issuance of various forms of stock-based awards including stock options, restricted stock, restricted stock units and other equity awards to employees, consultants and members of the board of directors. As of December 31, 2012, options to purchase 4,298,027 shares of common stock remained outstanding under the 2004 Plan.

2010 Employment Inducement Award Plan (“Inducement Plan”)

The Inducement Plan was adopted in January 2010 by our Board of Directors to induce qualified individuals to join Dynavax. This Inducement Plan provided for the issuance of up to 1,500,000 shares of our common stock and became effective on January 8, 2010. Stockholder approval of the Inducement Plan is not required under NASDAQ Marketplace Rule 5635(c)(4). As of December 31, 2012, options to purchase 779,000 shares of common stock remained outstanding under the Inducement Plan.

2011 Equity Incentive Plan (“2011 Plan”)

The 2011 Plan was approved by the Company’s stockholders and adopted in January 2011. The 2011 Plan provides for the issuance of up to 15,000,000 shares of our common stock to employees and non-employees of the Company and became effective on January 6, 2011. The 2011 Plan is administered by our Board of Directors, or a designated committee of the Board of Directors, and awards granted under the 2011 Plan have a term of 10 years unless earlier terminated by the Board of Directors. Under the 2011 Plan, no additional awards will be granted under either the 2004 Plan or the Inducement Plan. As of January 6, 2011, all shares subject to awards outstanding under the 2004 Plan and Inducement Plan that expire or are forfeited will be included in the reserve for the 2011 Plan to the extent such shares would otherwise return to such plans. As of December 31, 2012, options to purchase 8,257,406 shares of common stock remained outstanding under the 2011 Plan.

 

Activity under our stock plans is set forth below:

 

     Shares Underlying
Outstanding Options (in
thousands)		     Weighted-Average Exercise
Price Per Share (in
thousands)		      Weighted-Average
Remaining
Contractual Term
(years)		      Aggregate
Intrinsic
Value		  

Balance at December 31, 2011

      10,987      $ 3.10         

Options granted

      4,534        3.68         

Options exercised

      (1,166 )      1.79         

Options cancelled:

           

Options forfeited (unvested)

      (505 )      3.32         

Options cancelled (vested)

      (44 )      5.53         
  

 

 

    

 

 

        

Balance at December 31, 2012

      13,806      $ 3.38         7.26       $ 4,015   
  

 

 

    

 

 

     

 

 

     

 

 

  

Vested and expected to vest at December 31, 2012

      12,886      $ 3.37         7.13       $ 3,955   
  

 

 

    

 

 

     

 

 

     

 

 

  

Exercisable at December 31, 2012

      7,226      $ 3.49         5.91       $ 2,825   
  

 

 

    

 

 

     

 

 

     

 

 

  

The total intrinsic value of stock options exercised during the years ended December 31, 2012, 2011 and 2010 was, $2.7 million, $0.1 million and $0.1 million, respectively. The total intrinsic value of exercised stock options is calculated based on the difference between the exercise price and the quoted market price of our common stock as of the close of the exercise date.

The total fair value of stock options vested during the years ended December 31, 2012, 2011 and 2010 was, $9.6 million, $2.8 million and $4.1 million, respectively.

Our non-vested stock awards are comprised of restricted stock units granted with performance-based vesting criteria. A summary of the status of non-vested restricted stock units as of December 31, 2012, and activities during 2012 is summarized as follows:

 

     Number of
Shares
(In thousands)		     Weighted-Average
Grant-Date Fair
Value		  

Non-vested as of December 31, 2011

      115      $ 1.98   

Granted

      1,815      $ 4.23   

Vested

      (115 )    $ 1.98   

Forfeited or expired

      (60 )    $ 4.22   
  

 

 

    

 

 

  

Non-vested as of December 31, 2012

      1,755      $ 4.23   
  

 

 

    

 

 

  

Stock-based compensation expense related to restricted stock units was approximately $0.2 million for the year ended December 31, 2012. The aggregate intrinsic value of the restricted stock units outstanding as of December 31, 2012, based on our stock price on that date, was $5.0 million.

The weighted average grant-date fair value of restricted stock units granted during the years ended December 31, 2012 and 2010 was, $4.23 and $1.98, respectively. No restricted stock units were granted during 2011. The total fair value of restricted stock units vested during the years ended December 31, 2012 and 2011 was, $0.2 million and $0.8 million, respectively. No restricted stock units vested during 2010.

 

Employee Stock Purchase Plan

In January 2004, the Board of Directors and stockholders adopted the 2004 Employee Stock Purchase Plan (the “Purchase Plan”). The Purchase Plan provides for the purchase of common stock by eligible employees and became effective on February 11, 2004. The purchase price per share is the lesser of (i) 85% of the fair market value of the common stock on the commencement of the offer period (generally, the fifteenth day in February or August) or (ii) 85% of the fair market value of the common stock on the exercise date, which is the last day of a purchase period (generally, the fourteenth day in February or August).

As of December 31, 2012, 996,000 shares were reserved and approved for issuance under the Purchase Plan, subject to adjustment for a stock split, or any future stock dividend or other similar change in our common stock or capital structure. To date, employees have acquired 698,724 shares of our common stock under the Purchase Plan. As of December 31, 2012, 297,276 shares of our common stock remained available for future purchases.

Stock-Based Compensation

Under our stock-based compensation plans, option awards generally vest over a four-year period contingent upon continuous service and expire ten years from the date of grant (or earlier upon termination of continuous service). The Company has also granted performance-based equity awards to certain of our employees under the 2011 Plan, the 2004 Plan and the Inducement Plan. As of December 31, 2012, 2,617,966 shares were outstanding related to options and restricted stock units subject to these performance-based vesting criteria. The fair value of each option is estimated on the date of grant using the Black-Scholes option valuation model and the following weighted-average assumptions:

 

     Stock Options     Employee Stock
Purchase Plan		  
     Years Ended December 31,     Years Ended December 31,  
     2012     2011     2010     2012     2011     2010  

Weighted-average fair value

    $ 3.30      $ 2.76      $ 1.49      $ 3.53      $ 2.09      $ 1.47   

Risk-free interest rate

      0.5 %      1.3 %      1.7 %      0.2 %      0.3 %      0.4 % 

Expected life (in years)

      4.2        4.0        4.0        1.1        1.2        0.9   

Volatility

      1.6        1.6        1.6        1.6        1.6        1.6   

Expected volatility is based on historical volatility of our stock price. The expected life of options granted is estimated based on historical option exercise and employee termination data, while giving consideration to options that have not yet completed a full life cycle. Our senior management, who hold a majority of the options outstanding, and other employees were grouped and considered separately for valuation purposes. The expected life of the options for senior management is six years and for other employees five and a half years. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is zero percent for all years and is based on our history and expectation of dividend payouts.

Compensation expense is based on awards ultimately expected to vest and reflects estimated forfeitures. For equity awards with time-based vesting, the fair value is amortized to expense on a straight-line basis over the vesting periods. For equity awards with performance-based vesting criteria, the fair value is amortized to expense when the achievement of the vesting criteria becomes probable.

We recognized the following amounts of stock-based compensation expense (in thousands):

 

     Years Ended December 31,  
     2012      2011      2010  

Employees and directors stock-based compensation expense

    $ 10,439       $ 5,185       $ 2,378   

Non-employees stock-based compensation expense

      —           4         32   
  

 

 

     

 

 

     

 

 

  

Total

    $ 10,439       $ 5,189       $ 2,410   
  

 

 

     

 

 

     

 

 

  

 

     Years Ended December 31,  
     2012      2011      2010  

Research and development

    $ 3,514       $ 2,103       $ 632   

General and administrative

      6,925         3,086         1,778   
  

 

 

     

 

 

     

 

 

  

Total

    $ 10,439       $ 5,189       $ 2,410   
  

 

 

     

 

 

     

 

 

  

In the fourth quarter of 2012, we recognized $1.5 million in additional stock-based compensation expense due to a modification of the terms of stock options related to an amended management continuity and severance agreement with one of our executive officers.

As of December 31, 2012, the total unrecognized compensation cost related to non-vested stock options deemed probable of vesting, including all stock options with time-based vesting, net of estimated forfeitures, amounted to $14.3 million, which is expected to be recognized over the remaining weighted-average vesting period of 2.3 years. As of December 31, 2012, the total unrecognized compensation cost related to non-vested stock options not deemed probable of vesting, net of estimated forfeitures, amounted to $0.3 million.

As of December 31, 2012, the total unrecognized compensation cost related to non-vested equity awards not deemed probable of vesting, net of estimated forfeitures, amounted to $6.3 million.

As of December 31, 2012, the total unrecognized compensation cost related to shares of our common stock under the Purchase Plan, amounted to $0.3 million, which is expected to be recognized over the remaining weighted-average vesting period of 1.0 years.

Warrants

As December 31, 2012, warrants to purchase an aggregate of approximately 12,700,000 shares of our common stock were outstanding. The warrants are exercisable at $1.50 to $5.65 per share. During the years ended December 31, 2012, and 2011, warrants were exercised to purchase an aggregate of approximately 13,000,000 and 4,500,000 shares, respectively, of our common stock.

Preferred Stock Rights

On November 4, 2008, our Board of Directors declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of our Common Stock, par value $0.001 per share (the “Common Shares”). The dividend was payable on November 17, 2008 to the stockholders of record on that date. Each Right entitles the registered holder to purchase from us one one-hundredth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share (the “Preferred Shares”), at a price of $6.00 per one one-hundredth of a Preferred Share, subject to adjustment. Upon the acquisition of, or announcement of the intent to acquire, 20 percent or more of our outstanding Common Shares by a person, entity or group of affiliated or associated persons (“Acquiring Person”), each holder of a Right, other than Rights held by the Acquiring Person, will have the right to purchase that number of Common Shares having a market value of two times the exercise price of the Right. If we are acquired in a merger or other business combination transaction or 50 percent or more of our assets or earning power are sold to an Acquiring Person, each holder of a Right will thereafter have the right to purchase, at the then current exercise price of the Right, that number of shares of common stock of the acquiring company which at the time of such transaction will have a market value of two times the exercise price of the Right. The Rights plan is intended to maximize the value of the Company in the event of an unsolicited attempt to take over the Company in a manner or on terms not approved by the Company’s Board of Directors. The Rights will expire on November 17, 2018, unless the Rights are earlier redeemed or exchanged by the Company.