Stock-Based Compensation and Stockholders’ Rights

Stock Incentive Plans

The Company's two stock plans are the 2011 Employee Stock Incentive Plan (the “2011 Plan”) and the 2007 Employee Incentive Stock Plan (the “2007 Plan”). Under the 2011 Plan, the Company may grant an aggregate of 1,000,000 shares to its employees and non-employee directors in the form of stock options or awards. Restricted stock or stock units awarded under the 2011 Plan are expensed ratably over the vesting period of the awards. The Company determines the fair value of its restricted stock unit awards and related compensation expense as the difference between the market value of the awards on the date of grant less the exercise price of the awards granted. The Company granted 551,250 awards during fiscal 2012. As of January 31, 2013, there were approximately 448,750 shares available for future issuance under the 2011 Plan.

Under the 2007 Plan, the Company may grant an aggregate of 1,000,000 shares to its employees and non-employee directors in the form of stock options or awards. Restricted stock or stock units awarded under the 2007 Plan are expensed ratably over the vesting period of the awards. The Company determines the fair value of its restricted stock unit awards and related compensation expense as the difference between the market value of the awards on the date of grant less the exercise price of the awards granted. The Company granted 118,125 awards during fiscal 2012. As of January 31, 2013, there were approximately 13,075 shares available for future issuance under the 2007 Plan.

The shares of common stock issued upon exercise of a previously granted stock option are considered new issuances from shares reserved for issuance upon adoption of the various plans. While the Company does not have a formal written policy detailing such issuance, it requires that the option holders provide a written notice of exercise to the stock plan administrator and payment for the shares prior to issuance of the shares.

Accounting for the Plans

A summary of the Company’s stock option activity, and related information for the years ended January 31, is as follows:



	2013			2012				2011
	Options	Weighted- Average Exercise Price		Options		Weighted- Average Exercise Price		Options	Weighted- Average Exercise Price
Outstanding at beginning of year	—	$	—	12,100		$	8.82	12,100	$	8.82
Granted	—	—		—		—		—	—
Exercised	—	—		—		—		—	—
Forfeited	—	—		(12,100	)	—		—	—
Outstanding at end of year	—	—		—		—		12,100	8.82
Exercisable at end of year	—	—		—		—		12,100	8.82

The data included in the above table has been retroactively adjusted, if applicable, for stock dividends.

Restricted Stock Unit Awards

The following table presents a summary of restricted stock and stock unit awards:



	Expense for 12 months ended						Unrecognized Compensation Cost at
	1/31/2013		1/31/2012		1/31/2011		1/31/2013
2011 Plan
31,250 Grants of Restricted Stock, issued 6/19/2012, vesting over 1 year	$	33,000	$	—	$	—	$	17,000
520,000 Grants of Restricted Stock, issued 6/19/2012, vesting over 5 years	111,000		—		—		721,000
2007 Plan
78,125 Grants of Restricted Stock, issued 6/19/2012, vesting over 1 year	82,000		—		—		41,000
40,000 Grants of Restricted Stock, issued 3/21/2012, vesting immediately	80,000		—		—		—
68,960 Grants of Restricted Stock, issued 6/21/2011, vesting over 1 year	67,000		133,000		—		—
56,455 Grants of Restricted Stock, issued 6/8/2010, vesting over 1 year	—		58,000		116,000		—
382,500 Restricted Stock Units, issued 6/16/2009, vesting over 5 years	226,000		235,000		268,000		301,000
49,854 Restricted Stock Units, issued 6/16/2009, vesting over 1 year	—		—		58,000		—
262,500 Restricted Stock Units, issued 6/19/2007, vesting over 5 years	99,000		309,000		357,000		—
Totals for the period	$	698,000	$	735,000	$	799,000	$	1,080,000

A summary of the Company’s restricted stock unit awards activity, and related information for the following years ended January 31, is as follows:



	2013				2012				2011
	Restricted stock units		Weighted- average fair value of restricted stock units		Restricted stock units		Weighted- average fair value of restricted stock units		Restricted stock units		Weighted- average fair value of restricted stock units
Outstanding at beginning of year	290,960		$	3.80	467,455		$	4.19	589,854		$	4.38
Granted	669,375		1.62		68,960		2.89		56,455		3.10
Vested	(204,960	)	3.63		(178,455	)	4.29		(178,854	)	4.47
Forfeited	(12,000	)	3.50		(67,000	)	4.31		—
Outstanding at end of year	743,375		1.89		290,960		3.80		467,455		4.19
Weighted-average fair value of restricted stock units granted during the year			$	1.62			$	2.89			$	3.10

The aggregate fair value of restricted stock unit awards vested during fiscal years 2012, 2011 and 2010 were $744,000, $766,000 and $799,000 respectively.

Stockholders’ Rights

On October 15, 1996, the Board of Directors declared a dividend of one preferred stock purchase right (the “Rights”) for each outstanding share of the Company’s common stock. Each of the Rights entitles a stockholder to purchase for an exercise price of $50.00 ($20.70, as adjusted for stock splits and stock dividends), subject to adjustment, one one-hundredth of a share of Series A Junior Participating Cumulative Preferred Stock of the Company, or under certain circumstances, shares of common stock of the Company or a successor company with a market value equal to two times the exercise price. The Rights are not exercisable, and would only become exercisable for all other persons when any person has acquired or commences to acquire a beneficial interest of at least 20% of the Company’s outstanding common stock. The Rights have no voting privileges, and may be redeemed by the Board of Directors at a price of $.001 per Right at any time prior to the acquisition of a beneficial ownership of 20% of the outstanding common stock. There are 200,000 shares, (483,153 shares as adjusted by stock splits and stock dividends) of Series A Junior Participating Cumulative Preferred Stock reserved for issuance upon exercise of the Rights. On July 31, 2007, the Company and Mellon Investor Services LLC entered into an amendment to the Rights Agreement governing the Rights. The amendment, among other things, extended the term of the Rights issued under the Rights Agreement to October 25, 2016, removed the dead-hand provisions from the Rights Agreement, and formally replaced the former Rights Agent, The Chase Manhattan Bank, with its successor-in-interest, Mellon Investor Services LLC.