Note 13—Stock-Based Compensation

The Company has stock-based compensation plans (“Plans”) for Non-employee Directors (“Non-employee Directors’ Stock-Based Compensation Plan”) and stock-based incentive compensation plans for employees (“Employees’ Stock-Based Compensation Plan”).

Total compensation expense recorded for these Plans was as follows for the three months and six months ended June 30, 2013 and 2012:

	For the three months ended June 30,				For the six months ended June 30,
(in thousands)	2013		2012		2013		2012
Employees’ Stock-based Compensation plan	$	616	$	(142)	$	1,657	$	84
Non-employee Directors’ Stock-based Compensation plan		62		75		125		125
Total	$	678	$	(67)	$	1,782	$	209

Employees’ Stock-Based Compensation Plan

The Employees’ Stock-Based Compensation Plan has 6,722,033 shares authorized to be issued, of which 1,870,936 shares were available to be issued at June 30, 2013. The Employees’ Stock-Based Compensation Plan authorizes grants of a broad variety of awards; however, the Company primarily has outstanding non-qualified common stock options and restricted shares.

Employee Common Stock Options

The Company measures the fair value of options granted with solely time-based vesting using a lattice model for purposes of recognizing compensation expense. The Company believes the lattice model provides a better estimate of the fair value of time-based options as it uses a range of possible outcomes over an option term and can be adjusted for exercise patterns. The Company measures the fair value of options granted with specific stock price targets using a Monte Carlo simulation for purposes of recognizing compensation expense. Because the options granted with stock price targets contain a “market condition” under FASB’s Accounting Standards Codification Topic 718, a Monte Carlo simulation is used to simulate future stock price movements for the Company. The Company believes a Monte Carlo simulation provides a better estimate of the fair value of performance-based options as the model’s flexibility allows for the fair value to account for the vesting provisions as well as the different stock price outcomes.

The following table summarizes option activity under the Employees’ Stock-Based Compensation Plan:

(in thousands, except per option data)	Number of Options		Weighted- average Exercise Price per Option		Weighted- average Remaining Contractual Life per Option (in years)		Aggregate Intrinsic Value		Period End Liability
Outstanding at January 1, 2012		1,145	$	7.01		7.2	$	-	$	181
Granted		1,200		0.36
Outstanding at December 31, 2012		2,345		3.61		7.8		58		355
Forfeited/Expired		(264)		26.50
Outstanding at June 30, 2013		2,081		0.70		7.9		1,514		1,922

Number of options that were exercisable at:
December 31, 2012		1,333		6.08		6.6
June 30, 2013		1,346		0.89		7.4

The value of employee options increased by $1.6 million in the first six months of 2013 and was recognized as additional compensation expense.

Employee Deferred Shares

The following table summarizes the deferred shares granted to employees. The deferred shares that were issued to employees in the second quarter of 2013 have time and price vesting requirements. Half of the shares vest in three equal tranches over the next three years. The other half of the deferred shares will vest when certain average stock prices have been met.

(in thousands, except per share data)	Deferred Share Grants	Weighted- average Grant Date Share Price
January 1, 2013	28,904	$	24.98
Granted	312,500		1.46
June 30, 2013	341,404		3.45

The Company recognized $0.1 million of additional compensation expense related to employee deferred shares, mainly driven by new grants executed in the second quarter of 2013.

Non-employee Directors’ Stock-Based Compensation Plan

The Non-employee Directors’ Stock-based Compensation Plans authorize a total of 5,650,000 shares for issuance, of which 2,287,725 were available to be issued at June 30, 2013. The Non-employee Directors’ Stock-based Compensation Plans provide for grants of non-qualified common stock options, common shares, restricted shares and deferred shares.

The following table summarizes option activity under the Non-employee Directors’ Stock-based Compensation Plan:

(in thousands, except per option data)	Number of Options		Weighted- average Exercise Price per Option		Weighted- average Remaining Contractual Life per Option (in years)		Aggregate Intrinsic Value
Outstanding at January 1, 2012		27.0	$	24.69		1.1	$	-
Expired/Forfeited		(10.0)		24.74
Granted		78.1		0.36		9.8
Outstanding at December 31, 2012		95.1		4.70		8.3		-
Expired/Forfeited		(10.0)		24.07		-
Outstanding at June 30, 2013		85.1		2.4		8.7		54

Number of options that were exercisable at:
December 31, 2012		17.0		24.67		0.4
June 30, 2013		46.1		4.18		8.1

Stock options awarded in 2012 were valued at $25,000 at the date of issuance and will vest in four equal installments on the last day of each of each quarter during 2013. See the table below which summarizes the director options that vested during the period presented and the deferred shares granted to the directors for services rendered for the six months ended June 30, 2013 and 2012. The directors are fully vested in the deferred shares at the grant date.

(in thousands, except per share data)	Deferred Share Grants		Weighted- average Grant Date Share Price	Options Vested		Directors’ Fees Expense
June 30, 2013	42,935	$	1.16		39,062	$	125
June 30, 2012	184,596		0.34		-		125

For the six months ended June 30, 2013 and 2012, the Company recognized $125,000 in Director fees, of which $62,500 was paid in cash, and the balance in deferred shares and vested options. Director fees are reflected in “General and administrative” on the consolidated statements of operations.

For the six months ended June 30, 2013 and 2012, the Company incurred Director fees for five independent directors.