Share Based Compensation

6 Months Ended

Jun. 30, 2011

Stock-Based Compensation

Stock-Based Compensation

(12)   Stock-Based Compensation

In connection with the Company's initial public offering, the Company established the Imperial Holdings 2010 Omnibus Incentive Plan (the "Omnibus Plan"). The purpose of the Omnibus Plan is to attract, retain and motivate participating employees and to attract and retain well-qualified individuals to serve as members of the board of directors, consultants and advisors through the use of incentives based upon the value of our common stock. Awards under the Omnibus Plan may consist of incentive awards, stock options, stock appreciation rights, performance shares, performance units, and shares of common stock, restricted stock, restricted stock units or other stock-based awards as determined by the compensation committee. The Omnibus Plan provides that an aggregate of 1,200,000 shares of common stock are reserved for issuance under the Omnibus Plan, subject to adjustment as provided in the Omnibus Plan. The Company recognized approximately $502,000 and $727,000 in stock-based compensation expense relating to stock options it granted under the Omnibus Plan during the three months and six months ended June 30, 2011, respectively. The Company incurred additional stock-based compensation expense of approximately $290,000 related to the conversion of two phantom stock agreements it had with two employees into

27,000 shares of common stock in connection with its corporate conversion in the first quarter of 2011 and approximately $10,000 and $15,000 in stock-based compensation relating to restricted stock granted to its board of directors during the three months and six months ended June 30, 2011, respectively. Prior to our initial public offering, the Company had no equity compensation plan.

Options

As of June 30, 2011, options to purchase 643,967 shares of common stock were outstanding and unexercised under the Omnibus Plan at a weighted average exercise price of $10.75 per share. All of the outstanding options expire seven years after the date of grant and were granted with a strike price at $10.75 which was the offering price of our initial public offering or fair market value (closing price) of the stock on the date of grant and vest over three years.

The Company has used the Black-Scholes model to calculate fair values of options awarded. This model requires assumptions as to expected volatility, dividends, terms, and risk free rates. Assumptions used for the periods covered herein, are outlined in the table below:

	Six Months Ended
	June 30, 2011
Expected Volatility	54.18% — 54.23%
Expected Dividend	0%
Expected Term in Years	4.5
Risk Free Rate	2.16% — 2.29%

There were no options granted in the three months ended June 30, 2011.

The Company commenced its initial public offering of common stock in February 2011. Accordingly, there was no public market for the Company's common stock prior to this date. Therefore, the Company identified comparable public entities and used the average volatility of those entities to reasonably estimate its expected volatility. The Company does not expect to pay dividends on its common stock for the foreseeable future. Expected term is the period of time over which the options granted are expected to remain outstanding and is based on the simplified method as outlined in the SEC Staff Accounting Bulletin 110. The Company will continue to estimate expected lives based on the simplified method until reliable historical data becomes available. The risk free rate is based on the U.S Treasury yield curve in effect at the time of grant for the appropriate life of each option.

The following table presents the activity of the Company's outstanding stock options of common stock for the six-month period ended June 30, 2011:

						Weighted
						Average
				Weighted		Remaining		Aggregate
	Number of			Average Price		Contractual		Intrinsic
Common Stock Options	Shares			per Share		Term		Value
Options outstanding, December 31, 2010		—			—		—
Options granted		665,956		$	10.75		6.62	$	—
Options exercised		—			—		—
Options forfeited		(21,989	)		—		—
Options expired		—			—		—
Options outstanding, June 30, 2011		643,967		$	10.75		6.62	$	—
Exercisable at June 30, 2011		27,500		$	10.75		6.61	$	—
Unvested at June 30, 2011		616,467		$	10.75		6.62	$	—

As of June 30, 2011, all outstanding stock options had an exercise price above the fair market value of the common stock on that date.

The following table presents the values of option grants and exercises for the six-month period ended June 30, 2011:

	Six Months Ended
	June 30, 2011
Grant date weighted average fair value per share of options granted during the period	$	4.98
Total intrinsic value of options exercised	$	—
Cash received from options exercised	$	—
Actual tax benefit to be realized from option exercises	$	—

There were no options granted during the three months ended June 30, 2011.

Restricted Stock

As of June 30, 2011, 3,507 shares of restricted stock was granted to our directors under the Omnibus Plan subject to a one year vesting schedule commencing on the date of grant. The fair value of the unvested restricted stock was valued at $38,016 based on the closing price of the Company's shares on the grant date.

The following table presents the activity of the Company's unvested restricted common shares for the six-month period ended June 30, 2011:

	Number of
Common Unvested Shares	Shares
Outstanding December 31, 2010		—
Granted		3,507
Vested		—
Forfeited		—
Outstanding June 30, 2011		3,507

The aggregate intrinsic value for these awards is $35,631 and the remaining weighted average life of these awards is 0.61 years as of June 30, 2011. There were no restricted stock awards granted during the three months ended June 30, 2011.