Stock Incentive Plans

9 Months Ended

Sep. 30, 2012

Stock Incentive Plans [Abstract]

STOCK INCENTIVE PLANS

8. STOCK INCENTIVE PLANS

The Company sponsored a stock option plan, the 2001 Plan, which allowed for the granting of incentive and nonqualified stock options for the purchase of common stock. The maximum number of shares that may be awarded or sold under the 2001 Plan was 1,449,667 shares. Each option entitles the holder to purchase one share of common stock at the specified option exercise price. The exercise price of each incentive stock option granted must not be less than the fair market value on the grant date. At the discretion of management and with the approval of the Board of Directors, the Company granted options under the 2001 Plan. Management and the Board of Directors determined vesting periods and expiration dates at the time of the grant. On August 2, 2011, the plan expired.

In August 2007, the Company adopted the 2007 Plan, which allows for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and bonus shares. On June 22, 2011, the stockholders of the Company approved an amendment to the 2007 Plan to increase the maximum number of shares that may be awarded or sold under the 2007 Plan by 2,100,000, from 2,307,692 to 4,407,692 shares. The Board of Directors has appointed a committee to administer the plan. The plan committee determines the type of award to be granted, the fair market value, the number of shares covered by the award, and the time when the award vests and may be exercised.

The Company uses the Black-Scholes option pricing model to value stock options issued after January 1, 2006. The Company uses historical stock prices of companies that it considers as a peer group as the basis for its volatility assumptions. The assumed risk-free rates were based on U.S. Treasury rates in effect at the time of grant with a term consistent with the expected option lives. The expected term is based upon the vesting term of the Company’s options, a review of a peer group of companies, and expected exercise behavior. The forfeiture rate is based on past history of forfeited options. The expense is being allocated using the straight-line method. For the three and nine months ended September 30, 2012, the Company recorded $455,000 and $1.4 million, respectively, of stock compensation expense. For the three and nine months ended September 30, 2011, the Company recorded $857,000 and $2.5 million, respectively, of stock compensation expense. As of September 30, 2012, the Company has $3.6 million of total unrecognized compensation cost related to non-vested awards granted under the Company’s stock-based plans that it expects to recognize over a weighted-average period of 2.29 years. The Company accounts for options issued prior to January 1, 2006 under the intrinsic value method.

The following table summarizes the activity of the stock incentive and equity plans as of September 30, 2012 and changes during the nine months then ended:

	Shares available for grant			Number of options outstanding			Weighted- average option exercise price		Number of restricted stock and board shares issued
At December 31, 2011		2,259,999			2,093,108		$	13.45		42,587
Granted		(94,595	)		77,250			9.74		17,345
Exercised		—			(2,885	)		4.00		—
Cancelled/forfeited		24,600			(24,754	)		16.44		—
At September 30, 2012		2,190,004			2,142,719		$	13.27		59,932

The Company’s aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock. Based on the fair market value of the common stock at September 30, 2012 and 2011, there is no intrinsic value for options outstanding. The weighted average fair value per share of options granted for the nine months ended September 30, 2012 was $9.74 and the fair value of each option grant was estimated at the date of grant using the Black-Scholes option pricing model using an expected term of 5.3 years, risk-free interest rates of 0.83%-1.04%, expected volatility of 52% and no dividend yield. The Company used an expected forfeiture rate of 16.59%.

For the three and nine months ended September 30, 2012, the Company recorded $41,000 and $122,000, respectively, of stock compensation expense related to restricted stock. For the three and nine months ended September 30, 2011, the Company recorded $41,000 and $125,000, respectively, of stock compensation expense related to restricted stock.

A summary of the Company’s non-vested options during the nine month period ended September 30, 2012 is presented below:

	Options			Weighted- average exercise price
Non-vested at January 1, 2012		1,313,177		$	15.42
Granted		77,250			9.74
Vested		(402,163	)		14.37
Forfeited		(21,650	)		17.68
Non-vested at September 30, 2012		966,614		$	15.36

An analysis of restricted stock issued is as follows:

Non-vested restricted stock as of December 31, 2011	1,931
Granted	17,345
Vested	(10,603	)
Non-vested restricted stock as of September 30, 2012	8,673