Stock-Based Compensation

The Compensation Committee of the Company’s Board of Directors is responsible for the administration of the Company’s stock incentive plans, which include the balance of shares remaining under the 2007 Long Term Incentive Plan (the "2007 LTIP) and the 2011 Long Term Incentive Plan (the "2011 LTIP") which was approved by the shareholders in May 2011 and authorized the maximum aggregate number of shares to be issued of 3,000,000. In general, the Company's plans provide for grants of restricted stock and stock options to be issued with a per-share price equal to the fair market value of a share of common stock on the date of grant. Option terms are specified at each grant date, but are generally are 10 years from the date of issuance. Options generally vest over a three to five year period.

Restricted Stock

The following table summarizes the restricted stock activity under the Company's equity incentive plans :



	Number of Shares		Weighted Average Fair Value Per Share
Nonvested at January 1, 2011	128,232		$	1.65
Granted	400,417		$	6.00
Vested	(63,299	)	$	1.99
Forfeited/repurchased shares	(12,783	)	$	15.24
Nonvested at December 31, 2011	452,567		$	14.72
Granted	36,640		$	6.55
Vested	(171,986	)	$	8.14
Forfeited/repurchased shares	—		$	—
Nonvested at December 31, 2012	317,221		$	6.46
Granted	24,824		$	11.28
Vested	(124,998	)	$	7.17
Forfeited/repurchased shares	—		$	—
Nonvested at December 31, 2013	217,047		$	6.60

Independent directors receive equity compensation each year in the form of grants with a fair value of $60,000, with vesting in six months from the date of grant. In 2013, the fair value of the grant was increased to $70,000, with vesting six months from the date of grant. In August, 2011, awards of restricted stock, totaling 360,417 shares, with a fair value of $6.00 per share, were granted to the Company's named executive officers with vesting over a five year period. On the same day, the Company's independent directors each received grants of 10,000 shares with a fair value of $6.00 per share, which vest over six months. In November, 2012, the Company's independent directors received their annual equity compensation grants of 9,160 shares, with a fair value of $6.55, and in November 2013, the independent directors received annual equity compensation grants of 6,206 shares, with a fair value of $11.29 per share.

Stock Options

The following table summarizes the stock option activity under the Company's equity incentive plans:



	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2011	1,308,998		$	12.30
Granted	953,800		$	6.02
Exercised	(32,124	)	$	5.78
Forfeited	(101,768	)	$	15.68
Outstanding at December 31, 2011	2,128,906		$	9.42
Granted	262,051		$	6.56
Exercised	(56,658	)	$	5.27
Forfeited	(50,457	)	$	7.97
Outstanding at December 31, 2012	2,283,842		$	9.23
Granted	35,081		$	9.48
Exercised	(155,731	)	$	5.51
Forfeited	(90,433	)	$	9.73
Outstanding at December 31, 2013	2,072,759		$	9.49

Vested at December 31, 2013 and expected to vest	2,045,835		$	10.89	8.04 years	$	947
Exercisable at December 31, 2013	1,438,240		$	10.89	6.52 years	$	373

The Company calculates the fair value of each option on the date of grant using the Black-Scholes pricing model and the following weighted-average assumptions in each year:



	2013			2012			2011
Weighted average grant-date fair value of options granted	$	4.11		$	4.08		$	4.03
Risk-free interest rate	1		%	1.42		%	1.5		%
Expected volatility	62.4		%	68.5		%	68.4		%
Expected term of options (in years)	3.2			6.2			7.5
Dividend yield	—		%	—		%	—		%

The risk-free interest rate is based on interest rates on U.S. Treasury zero-coupon issues that match the contractual terms of the stock option grants. The expected term represents the period in which the Company’s equity awards are expected to be outstanding, which for the years presented is based on the exercise history.

For years ended December 31, 2013, 2012 and 2011 , compensation expense related to stock based awards outstanding for the periods was $2.1 million, $3.1 million and $2.7 million, respectively.

The Company applies a 5.5% forfeiture rate to its option grants. No options were granted in the quarter ended December 31, 2013.

In the year ended December 31, 2013, the Company received proceeds of approximately $858,000 upon the exercise of 155,731 options. In the year ended December 31, 2012, proceeds of $298,000 upon the exercise of 56,658 options and in the year ended December 31, 2011, 32,124 options were exercised, generating proceeds of $185,000.

As of December 31, 2013, there was $3.4 million of unrecognized compensation cost, net of estimated forfeitures, related to the Company’s non-vested equity awards, which is expected to be recognized over a weighted average period of 2.5 years.



	2013		2012		2011
Total intrinsic value of options exercised	$	804	$	130	$	143
Total fair value of shares vested	$	1,457	$	1,997	$	1,383