Stockholders’ Equity

Stock Repurchase Programs

In February 2008, the Company’s Board of Directors authorized its most recent stock repurchase program whereby the Company may purchase up to 1,500,000 shares of its common stock, subject to terms of the Company’s Credit Agreement. The shares may be repurchased from time-to-time in the open market and the repurchase program may be discontinued at any time at the Company’s discretion.

During the year ended December 31, 2012, the Company repurchased, under this program, a total of 71,653 shares at an average price of $5.22. The cost of such purchases was $374,248. All of the common stock was retired. During the year ended December 31, 2011, the Company repurchased, under this program, a total of 427,043 shares at an average price of $5.23. The cost of such purchases was $2,234,585. All of the common stock was retired.

At December 31, 2013, the Company had 942,443 shares of common stock left remaining to repurchase under its February 2008 authorization, subject to the limitations of the Company’s Credit Agreement. Subject to certain conditions as described in its Loan Agreement entered into on January 9, 2013, the Company may repurchase up to an aggregate amount of $5,000,000 of its Equity Interests. See Note 8- Long-term Debt for further information.

Stock Options

2007 Stock Incentive Plan

The Company’s 2007 Stock Incentive Plan (2007 Plan) was approved by its stockholders at its Annual Meeting of Stockholders, held in May of 2007, and was amended at its Annual Meeting held in May of 2010. Key modifications in the amendment were to increase the aggregate share reserve and increase the share sub-limit for Awards that are not Appreciation Awards (as defined by the Plan). Other clarifying amendments to reflect recent developments in equity compensation practices and applicable law were also included.

The 2007 Plan provides for the issuance of stock options, stock appreciation rights, restricted stock, performance shares, and other stock-based awards, all as defined by the 2007 Plan, to eligible employees, consultants and non-employee Directors. The aggregate number of shares of common stock which may be issued or used for reference purposes under the 2007 Plan or with respect to which awards may be granted may not exceed 3,500,000 shares, which may be either authorized and unissued common stock or common stock held in or acquired for the treasury of the Company; provided, however, that 1,700,000 shares of this aggregate limit may be used for awards that are not Appreciation Awards (including restricted stock, performance shares or certain other stock-based awards).

Under the 2007 Plan, the Compensation Committee of the Company’s Board of Directors (the Committee), has the discretion to determine the terms of the awards at the time of the grant. Provided, however, that, in the case of stock options and stock appreciation rights (share options): 1) the exercise price per share of the award is not less than 100% (or, in the case of 10% or more stockholders, the exercise price of the incentive stock options (ISOs) granted may not be less than 110%) of the fair market value of the common stock at the time of the grant; and 2) the term of the award will be no more than 10 years after the date the option is granted (or, shall not exceed five years, in the case of a 10% or more stockholder). In the case of restricted stock, the purchase price may be zero to the extent permitted by applicable law.

The following awards were granted under the 2007 Plan to the Company’s non-employee Directors and management team:



	Year Ended December 31,
	2013	2012	2011
Stock appreciation rights	324,000	344,500	261,500
Restricted stock	340,509	337,220	216,538

The stock appreciation rights can only be settled with stock or cash, at the discretion of the Committee. The stock appreciation rights vest 25% per year over a 4 year period and expire after 7 years. The restricted stock awards vest 25% per year over a 4 year period on the anniversary date of the grant. The Company’s policy is to issue new shares from its authorized but unissued balance of common stock outstanding or shares of common stock reacquired by the Company if stock appreciation rights are settled with stock.

Due to the adoption of the 2007 Plan, no further grants will be issued under the Company’s 1999 Plans referred to below.

1999 Stock Option Plan and Equity Participation Plan

On December 16, 1999, the Company’s Board of Directors approved the 1999 Stock Option Plan and Equity Participation Plan (collectively, the 1999 Plans), which was amended and restated on October 25, 2001 and provided for the issuance of ISOs and non-qualified stock options to eligible employees and non-employee directors for the purchase of up to 4,398,001 shares of common stock.

The following table summarizes the Company’s activities with respect to all of its share option plans for the year ended 2013:



	Shares		Option Price	Weighted Average Exercise Price	Weighted- Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Share options outstanding at beginning of year	1,922,756		$4.16-$22.50	$9.67
Granted	324,000		$4.92-$5.61	$5.25
Exercised	(14,000	)	$4.35	$4.35
Forfeited/expired	(686,457	)	$4.35-$22.50	$9.36
Share options outstanding at end of year	1,546,299		$4.16-$22.50	$8.93	3.28	$	3,770,958
Share options exercisable at end of year	1,006,674		$4.16-$22.50	$10.79	1.99	$	1,329,153
Share options unvested at end of year	539,625		$4.16-$8.09	$5.46	5.69	$	2,441,805

As of December 31, 2013, the Company had 1,546,299 share options outstanding of which 1,433,047 were vested or expected to vest at a weighted average exercise price of $9.20, intrinsic value of $3,270,748 and a weighted average contractual life of 3.10 years. As of December 31, 2013, the Company had approximately $884,579 pretax of total unrecognized compensation cost related to share options which may be adjusted for future changes in forfeitures. The Company expects to recognize such cost over a period of 2.54 years.

The following table represents information about stock options and stock appreciation rights granted and exercised in each year. During the years ended December 31, 2013, 2012 and 2011, the Company issued options and stock appreciation rights at market price.



	Year Ended December 31,
	2013		2012		2011
Share option grants	324,000		344,500		261,500
Weighted average grant date fair value of options granted during the period	$	1.77	$	1.65	$	2.63
Total intrinsic value of options exercised	$	12,465	$	—	$	—

The Company records compensation expense for stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model with the assumptions included in the table below. The Company computes expected volatility using the historical volatility of the market price of the Company’s common stock. Historical data is used to estimate the expected option life and the expected forfeiture rate. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option. The following assumptions were used to estimate the fair value of options granted using the Black-Scholes option-pricing model:



	Year Ended December 31,
	2013		2012		2011
Expected dividend yield	—	%	—	%	—	%
Expected volatility	48.00	%	47.00	%	42.00	%
Risk-free interest rate	0.79	%	0.58	%	1.33	%
Expected life	4.2 years		4.3 years		4.3 years

Restricted Stock

Restricted stock awards granted under the Company’s 2007 Plan entitle the holder to receive, at the end of a vesting period, a specified number of shares of the Company’s common stock. Share-based compensation expense is measured by the market value of the Company’s stock on the date of grant. The shares vest ratably over a four year period ending on the anniversary date of the grant. There is no partial vesting and any unvested portion is forfeited.

The following table summarizes restricted stock award activity for the year ended December 31, 2013:



	Number of Shares		Weighted Average Grant Date Fair Value
Unvested restricted stock awards, January 1, 2013	661,648		$	6.08
Granted	340,509		$	4.64
Vested	(238,296	)	$	6.86
Forfeited	(211,630	)	$	4.73
Unvested restricted stock awards, December 31, 2013	552,231		$	5.37

As of December 31, 2013, the Company had approximately $2,372,238 pretax of total unrecognized compensation cost related to non-vested restricted stock awards which may be adjusted for future changes in forfeitures. The Company expects to recognize such cost over a weighted average period of 2.59 years. The fair value of shares vested was approximately $2,378,194; $944,976 and $1,190,000 during the years ended December 31, 2013, 2012 and 2011, respectively.

Secondary Offerings

In November 2004, the Company filed a registration statement on Form S-3 with the Securities and Exchange Commission for the registration of 11,403,455 shares of common stock held by three of its existing shareholders. No members of management registered shares pursuant to this registration statement. Prior to 2013, 8,172,868 shares were sold in a public offering with net proceeds from the sale going to the selling stockholders. During 2013, the remaining shares were sold by the existing shareholders and as a result, the registration statement is no longer active.