(12) Employee Benefit Plans

Share-Based Compensation Plans

In September 2009 the Board of Directors adopted the 2009 Long Term Incentive Plan (the “2009 LTIP”). The purpose of the 2009 LTIP is to provide a means to enhance our profitable growth by attracting and retaining directors, officers and other key employees through affording such individuals a means to acquire and maintain stock ownership or awards the value of which is tied to the performance of our common stock. All directors, officers and other key employees providing services to the Company are potentially eligible to participate in the 2009 LTIP. The 2009 LTIP provides for grants of (i) incentive stock options qualified as such under income tax rules and regulations, (ii) stock options that do not qualify as incentive stock options, (iii) restricted stock awards, (iv) restricted stock units, (v) stock appreciation rights, (vi) bonus stock and awards in lieu of Company obligations, (vii) dividend equivalents in connection with other awards, (viii) deferred shares, (ix) performance units or shares, or (x) any combination of such awards (collectively referred to as “Awards”). The 2009 LTIP is administered by a committee of our Board of Directors.

The maximum aggregate number of shares of our common stock that may be issued pursuant to any and all Awards under the 2009 LTIP is limited to 2,474,000 shares, subject to adjustment due to recapitalization or reorganization, or related to forfeitures or the expiration of Awards, as provided under the 2009 LTIP. As of December 31, 2012, 679,608 shares remained available for future grants.

Without stockholder or participant approval, the Board of Directors may amend, alter, suspend, discontinue or terminate the 2009 LTIP or the Committee’s authority to grant Awards under the 2009 LTIP, except that any amendment or alteration of the 2009 LTIP, including any increase in any share limitation, shall be subject to the approval of the stockholders not later than the next annual meeting if stockholder approval is required by any state or federal law or regulation or the rules of any stock exchange or automated quotation system on which the common stock may then be listed or quoted.

The 2009 LTIP provides for the grant of stock options for which the exercise price, set at the time of the grant, will not be less than the fair market value per share at the date of grant. Our outstanding stock options generally have a term of 10 years and vest ratably on an annual basis over a three-year period from the date of grant, other than the stock option grant to our chief executive officer described in the following paragraph.

Pursuant to an employment agreement and the 2009 LTIP, on September 30, 2009, our new chief executive officer was granted an option to purchase 68,116 shares of our common stock, which was memorialized in an option award agreement dated as of October 1, 2009 (the “Option Agreement”). The terms of the Option Agreement provided for an exercise price equal to $10.00 per share. The closing price of our common stock on the NYSE on September 30, 2009 was $7.46 per share. The option vested ratably on a monthly basis over a 36-month period from the date of grant; however, the vesting for the first six months of the vesting period (the “Initial Period”) was deferred until the end of the Initial Period and any remaining unvested portion vested ratably on a monthly basis over the remainder of the 36-month vesting period, subject to the executive remaining continuously employed. Under the original terms of the award agreement, vested stock options under the Option Agreement were to expire 30 months following the applicable vesting date of such stock options. On May 1, 2012, the Compensation Committee modified the terms of the Option Agreement to extend the expiration of the stock options granted thereunder to September 30, 2019, resulting in additional compensation expense of $0.1 million in the year ended December 31, 2012. Upon a change in control as defined in the 2009 LTIP, all remaining unvested stock options under the Option Agreement automatically vest and remain exercisable for a period of not less than 30 months following the change in control.

Pursuant to the 2009 LTIP, on the date of the 2012 Annual Meeting of Stockholders, the five members of the Board of Directors were awarded, in the aggregate, a total of 31,095 shares of restricted stock, of which one-half vested immediately and one-half will vest on the day immediately preceding the date of the 2013 Annual Meeting of Stockholders. Pursuant to the 2009 LTIP, on the date of the 2011 Annual Meeting of Stockholders, the five members of the Board of Directors were awarded, in the aggregate, a total of 31,405 shares of restricted stock, of which one-half vested immediately and one-half vested on the day immediately preceding the date of the 2012 Annual Meeting of Stockholders. Pursuant to the 2009 LTIP, on the date of the 2010 Annual Meeting of Stockholders, the five members of the Board of Directors were awarded, in the aggregate, a total of 42,735 shares of restricted stock, of which one-half vested immediately and one-half vested on the day immediately preceding the date of the 2011 Annual Meeting of Stockholders. Pursuant to elections made by two directors applicable to certain awards, the receipt of such awards totaling 32,887 shares is deferred until such directors cease to serve on our Board of Directors.

The following table sets forth our stock option activity for the year ended December 31, 2012.


	Options		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Terms		Aggregate Intrinsic Value
					(in years)		(in thousands)
Outstanding on December 31, 2011		934,013	$	13.05
Granted		338,204		16.94
Exercised		(48,130)		9.16
Forfeited/Cancelled		(31,929)		13.62
Outstanding on December 31, 2012		1,192,158	$	14.30		8.2	$	9,836
Exercisable on December 31, 2012		427,374	$	12.47		7.4	$	4,310

The fair value of each stock option award was estimated on the date of grant using the Black-Scholes option valuation model using the weighted average assumptions in the table below.


	Year Ended December 31,
	2012		2011		2010
Black-Scholes option pricing model assumptions:
Risk free interest rate	1.0	%	1.9	%	2.9	%
Expected life (years)	6.0		6.0		6.0
Expected volatility	56	%	53	%	50	%
Dividend yield	-		-		-

Expected volatility is generally based on the historical volatility of our stock over the period of time equivalent to the expected term of the options granted. As a result of our Chapter 11 reorganization in 2009 for purposes of determining expected volatility in 2012, 2011 and 2010, we included consideration of the historical volatility of the share prices of our peers over the relevant time periods in addition to our historical volatility before, during and after our reorganization. We disregarded our share price for the periods during which our stock price was impacted by factors leading up to the Chapter 11 filing and during the period of the Chapter 11 reorganization proceedings because we do not expect these events to reoccur during the expected term of the options. The expected term of options granted is generally derived from historical exercise patterns over a period of time, with consideration of expected term of unvested options. However, because we do not have sufficient historical stock option exercise experience upon which to base an estimate of expected term, we used the simplified method for estimating expected term in 2012, 2011 and 2010. The risk-free interest rate is based on the interest rate on constant maturity bonds published by the Federal Reserve with a maturity commensurate with the expected term of the options granted.

The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2012, 2011 and 2010 was $8.84, $7.97 and $5.32, respectively. The aggregate intrinsic value (the amount by which the market price of the stock on the date of exercise exceeded the market price of the stock on the date of grant) of stock options exercised during the years ended December 31, 2012 and 2011 was $0.5 million and $0.1 million, respectively. No stock options were exercised during the year ended December 31, 2010.

The following table sets forth the activity related to our non-vested share awards for the year ended December 31, 2012.


	Shares		Weighted- Average Grant- Date Fair Value
Non-vested share awards outstanding at December 31, 2011		185,733	$	15.25
Granted		238,199		16.33
Vested		(86,834)		15.52
Forfeited		(10,146)		15.04
Non-vested share awards outstanding at December 31, 2012		326,952	$	15.98

The fair value of non-vested share awards equals the market value of the underlying stock on the date of grant. The weighted-average grant-date fair value of the non-vested share awards granted during the years ended December 31, 2012, 2011 and 2010 was $16.33, $15.34 and $11.70 per share, respectively. The total fair value of non-vested share awards that vested during the years ended December 31, 2012, 2011 2010 was $2.0 million, $0.6 million and $0.5 million, respectively.

The following table sets forth share-based compensation expense and related recognized tax benefits.


		Year Ended December 31,
		2012		2011	2010
Compensation Expense:
Stock Options	$	2,621	$	1,497	673
Non-vested share awards		2,096		1,012	500
Employee bonus share awards		-		-	82
Deferred Income Tax Benefit		1,726		936	429

As of December 31, 2012, $3.9 million of total unrecognized compensation expense related to outstanding stock options was expected to be recognized over a weighted-average period of 2.0 years. As of December 31, 2012, $3.4 million of total unrecognized compensation expense related to non-vested share awards was expected to be recognized over a weighted-average period of approximately 2.0 years.

401(K) Plan

We also have a 401(K) Plan that covers all employees. We match 100% of each individual participant’s contribution not to exceed 6% of the participant’s compensation. Our matching contributions are made in cash. During the years ended December 31, 2012, 2011 and 2010, we made matching contributions to the 401(K) Plan of approximately $0.8 million, $0.7 million and $0.6 million, respectively.

Employee Retention Plans

The Company has two plans under which, in the event of termination of employment in connection with a change of control of our company, our officers and employees are entitled to receive a multiple of their salaries and bonuses (typically up to one or two-and-one-half times such amount) and certain other benefits in a lump sum cash payment. Additionally, all options, restricted stock, restricted share units and other similar awards would become fully vested.