Stock-Based Compensation

6 Months Ended

Jun. 30, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation

(11) Stock-Based Compensation

     The Company recognizes all share-based payments to employees and directors in the financial statements based on their fair values. The Company records compensation expense over an award’s requisite service period, or vesting period, based on the award’s fair value at the date of grant. The Company’s policy is to charge the fair value of stock options as an expense on a straight-line basis over the vesting period, which is generally four years for employees and three years for directors. The Company included charges of $779,000 and $974,000 in its statements of operations for the three months ended June 30, 2011 and 2010, respectively, and $1,439,000 and $2,147,000 in its statements of operations for the six months ended June 30, 2011 and 2010, respectively, representing the stock-based compensation expense attributable to share-based payments made to employees and directors.

     The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model and expensed over the requisite service period on a straight-line basis. The following assumptions apply to the options to purchase 160,750 and 131,000 shares of common stock granted to employees and directors during the six months ended June 30, 2011 and 2010, respectively:

	Six Months Ended			Six Months Ended
	June 30, 2011			June 30, 2010
Average risk free interest rate		3.0	%		2.5	%
Expected dividend yield		—			—
Expected lives (years)		9.7			5.6
Expected volatility		62.0	%		66.3	%
Weighted average grant date fair value of options granted during the period (per share)	$	1.55		$	2.67
Weighted average exercise price of options granted during the period (per share)	$	2.18		$	4.48

     The Company’s adoption of policies with respect to the treatment of stock options in the event of director or employee retirement during 2010 resulted in the modification of stock options by accelerating the vesting of nonvested stock options held by, and by extending the post-retirement period during which stock options may be exercised by, those directors and employees whose retirement qualifies under the terms of the policy. The stock option modifications increased the fair value of those options by $111,000 when modified, of which $2,000 and $21,000 was expensed during the three months ended June 30, 2011 and 2010, respectively, and $4,000 and $79,000 was expensed during the six months ended June 30, 2011 and 2010, respectively.

     As a result of the stock option modifications, the Company recognized $2,000 and $292,000 more of stock-based compensation expense during the three and six months ended June 30, 2010, respectively, than it would have recognized if the stock options had not been modified. Of those amounts, $21,000 and $79,000, respectively, was attributable to the increase in fair value of the modified options and $(19,000) and $213,000, respectively, was attributable to the accelerated recognition of the original fair value of options held by directors who were or would become eligible for retirement prior to the completion of the option vesting period, which amounts would otherwise have been expensed over the vesting period on a straight line basis. As a result of the stock option modifications, the Company did not recognize $22,000 and $50,000 of stock-based compensation expense during the three and six months ended June 30, 2011, respectively, that it otherwise would have recognized if the stock options had not been modified, which amounts consisted of $24,000 and $54,000 that resulted from the accelerated recognition of the original fair value of options held by directors who were or will become eligible for retirement prior to the completion of the option vesting period, offset by $2,000 and $4,000 increases in expense attributable to the increase in fair value.

     During prior periods, the Company awarded stock options to purchase shares of common stock to persons who were neither employees nor directors. The fair value of the nonvested portion of the non-employee, non-director options is remeasured each quarter. This remeasured fair value is partially expensed each quarter based upon the percentage of the nonvested portion of the option’s vesting period that has elapsed to date, less the amount expensed in prior periods. The remeasurement as of June 30, 2010 resulted in a reduction of expense for non-employee, non-director options of $25,000 and $11,000 for the three and six months ended June 30, 2010, respectively. The Company recorded an expense of $6,000 for non-employee, non-director options in the six months ended June 30, 2011. There was no such expense during the three months ended June 30, 2011.