Stock-Based Compensation

The Company’s board of directors adopted, and the Company’s stockholders approved, the Amended and Restated 2005 Incentive Stock Plan, or the 2005 Stock Plan, effective January 1, 2008. The total number of shares of common stock authorized for issue pursuant to awards granted under the 2005 Stock Plan was 2,500,000 shares. The 2005 Stock Plan provided for the grant of non-qualified stock options, stock appreciation rights, restricted stock, performance shares, phantom stock, restricted stock units and other awards that are valued in whole or in part by reference to the Company’s stock.

On May 9, 2011, the Company’s board of directors adopted, and the Company’s stockholders approved, the 2011 Equity Incentive Award Plan, or 2011 Plan. The principal purpose of the 2011 Plan is to attract, retain and engage selected employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards. Under the 2011 Plan, 3,000,000 shares of common stock are reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, or SARs, restricted stock awards, restricted stock unit awards, deferred stock awards, dividend equivalent awards, stock payment awards and performance awards and other stock-based awards, plus the number of shares remaining available for future awards under the Company’s 2005 Stock Plan. The number of shares reserved for issuance or transfer pursuant to awards under the 2011 Plan will be increased by the number of shares represented by awards outstanding under the Company’s 2005 Stock Plan that are forfeited or lapse unexercised and which, following the effective date of the 2011 Plan, are not issued under the 2005 Stock Plan. No further awards will be granted under the 2005 Stock Plan, and all outstanding awards will continue to be governed by their existing terms. As of December 31, 2011, 3,336,614 shares of the Company’s common stock remained available for future issuance under the 2011 Plan.

Restricted stock awards are valued at the fair value of the shares on the date of grant if vesting is based on a service or a performance condition. Granted shares vest 25% per year on each anniversary of issuance. Compensation expense is recognized on a straight-line basis over the requisite service period.

Stock option awards are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant and graded vest based on four years of continuous service and have 10-year contractual terms. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes model. For option grants during 2011, the Company’s weighted average assumptions for expected volatility, dividends, term, and risk-free interest rate were 46.25%, 0%, 6.25 years and 2.03%, respectively. For option granted during 2010, the Company’s weighted average assumptions for expected volatility, dividends, term, and risk-free interest rate were 51.6%, 0%, 6.25 years and 2.12%, respectively. Expected volatilities are based on the historical volatility of a group of peer entities within the same industry. The expected term of options is based upon the simplified method, which represents the average of the vesting term and the contractual term. The risk-free interest rate is based on U.S. Treasury yields for securities with terms approximating the expected term of the option. There were no grants of option awards prior to 2010.

To the extent a market price was not available, the fair value of the Company’s common stock was estimated using a discounted cash flow analysis and market multiples, based on management’s estimates of revenue, driven by assumed market growth rates, and estimated costs as well as appropriate discount rates. These estimates are consistent with the plans and estimates management uses to manage the Company’s business. Share-based compensation cost is included within salaries, wages and benefits in operating expenses in the accompanying statements of operations amounted to $0.5 million, $0.6 million and $0.1 million for 2011, 2010, and 2009, respectively. During the years ended 2011, 2010, and 2009, there was no tax benefit recognized in income.

A summary of share option activity under the plan as of December 31, 2011, and changes during 2011 are presented below:



	Number of Shares		Weighted- Average Exercise Price ($)	Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value ($000)
Outstanding at December 31, 2010	469,000		7.89	9.3	910
Granted	101,000		12.13
Exercised	(54,250	)	7.80
Forfeited or expired	(203,750	)	7.80
Outstanding at December 31, 2011	312,000		9.33	8.9	1,946
Exercisable at December 31, 2011	52,375		8.00	8.6	397
Vested or Expected to Vest at December 31, 2011	293,811		9.29	8.9	1,846

The weighted-average fair value of option awards granted during the years ended December 31, 2011 and December 31, 2010 was $5.73 and $4.06 per share, respectively. There were no options granted during the year ended December 31, 2009. The total intrinsic value of share options exercised during the year ended December 31, 2011 was $0.2 million. There were no options exercised during the years ended December 31, 2010 or 2009.

A summary of the status of the Company’s restricted stock awards as of December 31, 2011 and changes during the year ended 2011 is presented below:



	Number of Shares		Weighted-Average Grant Date Fair Value ($)
Outstanding at December 31, 2010	573,250		$	1.12
Granted	—		—
Vested	(283,126	)	0.81
Forfeited	(18,125	)	1.09
Outstanding at December 31, 2011	271,999		$	1.43

The weighted-average fair value of restricted stock awards granted during the years ended 2010 and 2009 was $6.39 per share, and $1.10 per share, respectively. There were no restricted stock awards granted during the year ended December 31, 2011. The total fair value of shares vested during the years ended 2011, 2010 and 2009, was $3.2 million, $2.2 million, and $0.2 million, respectively.

As of December 31, 2011, there was $1.3 million total unrecognized compensation cost related to nonvested shares and options granted under the plan expected to be recognized over a weighted-average period of 2.6 years.