Shared-Based Compensation - Note 12

12 Months Ended

Dec. 31, 2011

Disclosure Of Compensation Related Costs

Share-based compensation - Note 12

12. Share-based compensation

We use the straight-line attribution method to allocate the fair value of share-based compensation awards over the requisite service period for each award. The valuation of and accounting for share-based awards includes a number of complex and subjective estimates. These estimates include, but are not limited to, the future volatility of our stock price, future stock option exercise behaviors, estimated employee turnover and award forfeiture rates.

As part of our 2011 plan to conserve cash used in operations, we implemented two share-based compensation programs during the second quarter of 2011 under which we issued shares of our common stock as compensation instead of cash. We have allocated the expense related to these programs to various financial statement lines consistent with the method used for allocating all share-based compensation.

In May 2011, we issued 52,000 shares of our common stock as incentive awards to non-executive employees under the 2006 Incentive Plan. The shares were valued using our closing stock price on the date of grant. We expensed $560,000 of share-based employee compensation for these awards at grant.

In June 2011, we implemented a voluntary program in which certain non-executive senior professional employees could elect to receive a portion of their 2011 salary in stock instead of cash. During 2011, we issued 136,000 shares of our common stock under the 2006 Incentive Plan as payment of salary. The shares were valued using our closing stock price on the date of grant. The total share-based compensation expense for these awards was $998,000, for service completed during 2011.

Description of Incentive Plans

The Company currently has two share-based incentive plans. The 2006 Incentive Plan described below is administered by the Board of Directors, or its designated committee ("Plan Administrator"), and provides for various awards as determined by the Plan Administrator. In June 2008, we determined not to issue additional options from a second share-based incentive plan, the Independent Director Stock Option Plan described below.

The 2006 Incentive Plan has 2.1 million shares authorized, of which 609,000 shares were available for awards as of December 31, 2011. The 2006 Incentive Plan permits granting non-qualified stock options (NSOs), incentive stock options (ISOs), stock appreciation rights, restricted or unrestricted stock, deferred stock, other share-based awards, or cash awards to employees, officers, directors and certain non-employees of the Company. Any award may be a performance-based award. Awards granted under the 2006 Incentive Plan have generally been to employees under non-qualified stock option agreements with the following provisions: exercise prices greater than or equal to the Company's closing stock price on the date of grant; vesting periods ranging from three years to four years; expiration 10 years from the date of grant; and optionees who terminate their service after vesting have a limited time to exercise their options (typically three to twelve months).

The Independent Director Stock Option Plan (IDSOP) has 113,000 shares authorized, of which 88,000 are issued and outstanding as of December 31, 2011. The IDSOP permits granting NSOs to independent directors of the Company. Grants awarded under the IDSOP generally have the following terms: exercise price equal to the Company's closing stock price on the date of grant, expiration 10 years from the date of grant, and vested grants remain exercisable until their expiration dates if a director leaves the Board. In June 2008, the Company shareholders approved an amendment to the 2006 Incentive Plan described above to allow non-employee directors to participate in the plan. The Company does not intend to issue additional options from the IDSOP.

Options Valuation Methodology and Assumptions

We use the Black-Scholes option valuation model to determine the fair value of options granted and use the closing price of our common stock as the fair market value of our stock on that date.

We consider historical stock price volatilities, volatilities of similar companies and other factors in determining estimates of future volatilities.

We use historical lives, including post-termination exercise behavior, publications, comparable company estimates, and other factors as the basis for estimating expected lives.

Risk free rates are based on the U.S. Treasury Yield Curve as published by the U.S. Treasury.

The following table summarizes the weighted-average valuation assumptions and weighted-average grant date fair value of options granted during the periods shown below:

		Year Ended December 31,
		2011		2010		2009
Assumptions (weighted average)
Volatility		85%		84%		75%
Expected term (in years)		4.0		4.3		5.1
Risk-free rate		1.3%		2.0%		2.0%
Expected dividends		0.0%		0.0%		0.0%
Pre-vest forfeiture rate		7.5%		5.0%		5.0%
Grant date fair value of options granted	$	6.10	$	16.19	$	9.62

Options Activity and Positions

The following table summarizes activity and positions with respect to options for the year ended December 31, 2011:

				Weighted
				Average
			Weighted	Remaining
			Average	Contractual		Aggregate
			Exercise	Term		Intrinsic
Options	Shares		Price	(years)		Value
Outstanding as of December 31, 2008	875,000	$	31.84	7.2	$	63,000
Granted	249,000		15.76
Exercised	(42,000)		20.64
Forfeited or expired	(43,000)		24.08
Outstanding as of December 31, 2009	1,039,000		28.72	7.0		4,823,000
Granted	220,000		25.68
Exercised	(30,000)		15.92
Forfeited or expired	(137,000)		38.64
Outstanding as of December 31, 2010	1,092,000		27.20	5.9		96,309
Granted	121,000		10.00
Exercised	(5,000)		15.12
Forfeited or expired	(244,000)		31.60
Outstanding as of December 31, 2011	964,000	$	24.00	5.8	$	-
Vested and expected to vest as of December 31, 2011	946,000	$	24.16	5.7	$	-
Exercisable as of December 31, 2011	716,000	$	26.72	5.0	$	-

The total intrinsic value of options exercised during the years ended December 31, 2011, 2010, and 2009 were $12,000, $185,000, and $455,000, respectively.

The total grant date fair value of options vested during the years ended December 31, 2011, 2010, and 2009, was $4.1 million, $4.1 million, and $1.6 million, respectively. As of December 31, 2011, our unamortized share-based compensation was $2.0 million which we plan to amortize over the next 2.1 years.

In March 2011, we issued 85,000 nonvested equity shares of the Company's common stock to executive employees. These shares vest conditionally upon completion of certain service and performance objectives by June 30, 2014. The nonvested equity shares were valued at fair value on the date of grant and the share-based compensation expense will be amortized over the service period.

In April 2010, we issued 11,000 nonvested equity shares of the Company's common stock to executive employees under the 2006 Incentive Plan.

In April 2009, we issued 36,000 nonvested equity shares of the Company's common stock to executive employees under the 2006 Incentive Plan. Included was a grant of 21,000 shares to one executive which vests conditionally upon completion of certain service and performance objectives the later of three years from the date of grant or the first day thereafter that the executive is not in a closed window, and 2,000 shares to the same executive in lieu of a cash salary increase which vested in four equal installments through December 31, 2009. The remaining shares vest over a three year period from the date of grant. The nonvested equity shares were valued at fair value on the date of grant and the share-based compensation expense will be amortized over the service period.

As of December 31, 2011, our unamortized nonvested equity share-based compensation was $655,000 which we plan to amortize over the next 1.9 years.