Equity Compensation, Employment Agreements and Other Benefit Plans

(a) 2010 Equity Compensation Plan

In accordance with the terms of the Company’s Amended and Restated 2010 Equity Compensation Plan (the “2010 Plan”), directors, officers and employees of the Company and any of its subsidiaries and other persons expected to provide significant services for the Company and any of its subsidiaries are eligible to receive grants of stock options (“Options”), restricted stock, RSUs, DERs and other stock-based awards under the 2010 Plan.

Subject to certain exceptions, stock-based awards relating to a maximum of 13.5 million shares of common stock may be granted under the 2010 Plan; forfeitures and/or awards that expire unexercised do not count towards such limit. At June 30, 2014, approximately 9.2 million shares of common stock remained available for grant in connection with stock-based awards under the 2010 Plan. A participant may generally not receive stock-based awards in excess of 1,500,000 shares of common stock in any one year and no award may be granted to any person who, assuming exercise of all Options and payment of all awards held by such person, would own or be deemed to own more than 9.8% of the outstanding shares of the Company’s common stock. Unless previously terminated by the Board, awards may be granted under the 2010 Plan until May 20, 2020.

DERs

A DER is a right to receive a distribution equal to the dividend distributions that would be paid on a share of the Company’s common stock. DERs may be granted separately or together with other awards and are paid in cash or other consideration at such times and in accordance with such rules, as the Compensation Committee of the Board (the “Compensation Committee”) shall determine at its discretion. Payments made on the Company’s existing DERs are charged to stockholders’ equity when the common stock dividends are declared to the extent that such DERs are expected to vest. The Company made DER payments of approximately $193,000 and $922,000 during the three months ended June 30, 2014 and 2013, and approximately $362,000 and $1.2 million during the six months ended June 30, 2014 and 2013, respectively. DER payments for the six months ended June 30, 2013 reflect the special cash dividend of $0.50 per share paid on April 10, 2013. At June 30, 2014, the Company had 1,251,233 DERs outstanding, of which 1,249,983 were awarded in connection with, or attached to, RSUs and 1,250 were attached to common stock options. A 0% forfeiture rate was assumed with respect to DERs outstanding at June 30, 2014. The DERs were scheduled to elapse over a weighted average period of 2.1 years.

Options

Pursuant to Section 422(b) of the Code, in order for Options granted under the 2010 Plan and vesting in any one calendar year to qualify as an incentive stock option (“ISO”) for tax purposes, the market value of the common stock to be received upon exercise of such Options as determined on the date of grant shall not exceed $100,000 during such calendar year. The exercise price of an ISO may not be lower than 100% (110% in the case of an ISO granted to a 10% stockholder) of the fair market value of the Company’s common stock on the date of grant. The exercise price for any other type of Option issued under the 2010 Plan may not be less than the fair market value on the date of grant. Each Option is exercisable after the period or periods specified in the award agreement, which will generally not exceed ten years from the date of grant.

The Company did not grant any stock options during the six months ended June 30, 2014 and 2013. There were no stock options exercised and no stock options cancelled during the six months ended June 30, 2014. There were 20,000 stock options exercised and no stock options cancelled during the three and six months ended June 30, 2013. At June 30, 2014, 5,000 stock options were outstanding, all of which were vested and exercisable, with a weighted average exercise price of $8.40. As of June 30, 2014, the aggregate intrinsic value of total Options outstanding was zero.

Restricted Stock

The Company awarded 63,060 shares of restricted common stock during the three and six months ended June 30, 2014 and awarded 16,412 and 28,743 shares of restricted common stock during the three and six months ended June 30, 2013. At June 30, 2014 and December 31, 2013, the Company had unrecognized compensation expense of $2.5 million and $3.3 million, respectively, related to the unvested shares of restricted common stock. The Company had accrued dividends payable of approximately $385,000 and $413,000 on unvested shares of restricted stock at June 30, 2014 and December 31, 2013, respectively. The unrecognized compensation expense at June 30, 2014 is expected to be recognized over a weighted average period of 2.4 years.

Restricted Stock Units and Associated DERs

Under the terms of the 2010 Plan, RSUs are instruments that provide the holder with the right to receive, subject to the satisfaction of conditions set by the Compensation Committee at the time of grant, a payment of a specified value, which may be a share of the Company’s common stock, the fair market value of a share of the Company’s common stock, or such fair market value to the extent in excess of an established base value, on the applicable settlement date. Although the 2010 Plan permits the Company to issue RSUs that can settle in cash, all of the Company’s outstanding RSUs as of June 30, 2014 are designated to be settled in shares of the Company’s common stock. The Company granted 16,860 and 627,481 RSUs during the three and six months ended June 30, 2014, respectively and granted 40,324 RSUs during the three and six months ended June 30, 2013. In addition, an aggregate of 97,164 previously awarded RSUs were forfeited by the holders’ thereof during the six months ended June 30, 2014 in connection with the negotiation of such holders’ respective new employment agreements. All RSUs outstanding at June 30, 2014 had DERs attached or issued as separate associated instruments in connection with RSUs. At June 30, 2014 and December 31, 2013, the Company had unrecognized compensation expense of $4.0 million and $1.6 million, respectively, related to RSUs and DERs. The unrecognized compensation expense at June 30, 2014 is expected to be recognized over a weighted average period of 2.2 years. A 0% forfeiture rate was assumed with respect to unvested RSUs at June 30, 2014.

Expense Recognized for Equity-Based Compensation Instruments

The following table presents the Company’s expenses related to its equity-based compensation instruments for the three and six months ended June 30, 2014 and 2013:



	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2014		2013		2014			2013
Restricted shares of common stock	$	882	$	591	$	1,249		$	1,135
RSUs	683		659		1,763		(1)	949
DERs	37		51		74			102
Total	$	1,602	$	1,301	$	3,086		$	2,186

(1) RSU expense for the six months ended June 30, 2014 includes approximately $500,000 for a one-time grant to the Company’s chief executive officer.

(b) Employment Agreements

At June 30, 2014, the Company had employment agreements with five of its officers, with varying terms that provide for, among other things, base salary, bonus and change-in-control payments upon the occurrence of certain triggering events.

The Company administers deferred compensation plans for its senior officers and non-employee directors (collectively, the “Deferred Plans”), pursuant to which participants may elect to defer up to 100% of certain cash compensation. The Deferred Plans are designed to align participants’ interests with those of the Company’s stockholders.

Amounts deferred under the Deferred Plans are considered to be converted into “stock units” of the Company. Stock units do not represent stock of the Company, but rather are a liability of the Company that changes in value as would equivalent shares of the Company’s common stock. Deferred compensation liabilities are settled in cash at the termination of the deferral period, based on the value of the stock units at that time. The Deferred Plans are non-qualified plans under the Employee Retirement Income Security Act of 1974 and, as such, are not funded. Prior to the time that the deferred accounts are settled, participants are unsecured creditors of the Company.

The Company’s liability for stock units in the Deferred Plans is based on the market price of the Company’s common stock at the measurement date. The following table presents the Company’s expenses related to its Deferred Plans for its non-employee directors and senior officers for the three and six months ended June 30, 2014 and 2013:



	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2014		2013		2014		2013
Non-employee directors	$	27	$	—	$	63	$	52
Total	$	27	$	—	$	63	$	52

The following table presents the aggregate amount of income deferred by participants of the Deferred Plans through June 30, 2014 and December 31, 2013 that had not been distributed and the Company’s associated liability for such deferrals at June 30, 2014 and December 31, 2013:



	June 30, 2014				December 31, 2013
	Undistributed Income Deferred (1)		Liability Under Deferred Plans		Undistributed Income Deferred (1)		Liability Under Deferred Plans
(In Thousands)	Undistributed Income Deferred (1)		Liability Under Deferred Plans		Undistributed Income Deferred (1)		Liability Under Deferred Plans
Non-employee directors	$	236	$	351	$	270	$	382
Total	$	236	$	351	$	270	$	382

(1) Represents the cumulative amounts that were deferred by participants through June 30, 2014 and December 31, 2013, which had not been distributed through such date.

(d) Savings Plan

The Company sponsors a tax-qualified employee savings plan (the “Savings Plan”), in accordance with Section 401(k) of the Code. Subject to certain restrictions, all of the Company’s employees are eligible to make tax deferred contributions to the Savings Plan subject to limitations under applicable law. Participant’s accounts are self-directed and the Company bears the costs of administering the Savings Plan. The Company matches 100% of the first 3% of eligible compensation deferred by employees and 50% of the next 2%, subject to a maximum as provided by the Code. The Company has elected to operate the Savings Plan under the applicable safe harbor provisions of the Code, whereby among other things, the Company must make contributions for all participating employees and all matches contributed by the Company immediately vest 100%. For the three months ended June 30, 2014 and 2013, the Company recognized expenses for matching contributions of $65,000 and $63,000, respectively, and $130,000 and $125,000 for the six months ended June 30, 2014 and 2013, respectively.