Share-Based Compensation

Share-based compensation expense is reflected as a component of the Company’s general and administrative expense. A detail of share-based compensation expense for the periods ended December 31, 2012, 2011 and 2010 is as follows (in thousands):



	Year Ended December 31,
	2012		2011		2010
Stock options:
Incentive Stock Options	$	786	$	493	$	793
Non-Qualified Stock Options	660		703		2,081
Restricted stock	5,464		3,637		4,263
Restricted stock units	277		—		—
Share based compensation	$	7,187	$	4,833	$	7,137

During the years ended December 31, 2012, 2011 and 2010, the Company recorded income tax benefits of approximately $2.3 million, $1.6 million and $2.4 million, respectively, related to share-based compensation expense recognized during those periods. Share-based compensation expense for the year ended December 31, 2010 included a charge of approximately $0.5 million related to the voluntary early cancellation of certain stock options and accelerated recognition of associated compensation expense. Any excess tax benefits from the vesting of restricted stock and the exercise of stock options will not be recognized in paid-in capital until the Company is in a current tax paying position. Presently, all of the Company’s income taxes are deferred and the Company has net operating losses available to carryover to future periods. Accordingly, no excess tax benefits have been recognized for any periods presented.

At December 31, 2012, the Company had $6.7 million of unrecognized compensation cost related to granted restricted stock and stock options. This amount will be recognized as compensation expense over a weighted average period of approximately two years.

Stock Options

Stock options generally vest equally over a three-year period, must be exercised within 10 years of the grant date and may be granted only to employees, directors and consultants. The exercise price of each option may not be less than 100% of the fair market value of a share of Common Stock on the date of grant. Upon a change in control of the Company, all outstanding options become immediately exercisable.

The Company computes the fair value of its stock options using the Black-Scholes option-pricing model assuming a stock option forfeiture rate and expected term based on historical activity and expected volatility computed using historical stock price fluctuations on a weekly basis for a period of time equal to the expected term of the option. The Company recognizes compensation expense using the accelerated expense attribution method over the vesting period. Periodically, the Company adjusts compensation expense based on the difference between actual and estimated forfeitures.

The following table outlines the assumptions used in computing the fair value of stock options granted during 2012, 2011 and 2010:



	Years Ended December 31,
	2012		2011		2010
Dividend yield	—%		—%		—%
Expected volatility	79.2% - 79.6%		78.5% - 79.7%		78.2% - 80.3%
Risk-free rate	0.8% - 1.1%		1.1% - 2.2%		1.5% - 3.0%
Expected term	6 years		6 years		6 years
Forfeiture rate	5.0%		5.0%		5.0%
Stock options granted (1)	125,487		395,280		69,500
Wgtd. avg. grant date fair value per share	$	3.71	$	5.09	$	4.21
Fair value of grants (1)	$	465,000	$	2,011,000	$	293,000


(1)	Prior to applying estimated forfeiture rate

The following table details stock option activity during the year ended December 31, 2012:



	Number of Options		Wgtd. Avg. Exercise Price		Wgtd. Avg. Remaining Life	Aggregate Intrinsic Value (000’s)
Outstanding at beginning of year	1,922,408		$	5.56
Granted	125,487		5.51
Expired/cancelled/forfeited	(44,554	)	6.71
Exercised	(78,400	)	3.32
Outstanding at end of year	1,924,941		5.61		5.0 years	$	1,114

Options exercisable at end of year	1,534,311		$	5.31	4.1 years	$	1,114
Options expected to vest	371,098		6.79		8.8 years	$	48

The total fair value of stock options that vested during the years ended December 31, 2012, 2011 and 2010 was $1.7 million, $1.1 million and $3.6 million, respectively. The intrinsic value of stock options exercised was immaterial for all periods presented.

The following table summarizes information regarding stock options outstanding at December 31, 2012:




Range of	Options	Wgtd. Avg.	Wgtd. Avg.	Options	Wgtd. Avg.
Exercise	Outstanding	Remaining	Exercise	Exercisable	Exercise
Price	12/31/2012	Contractual Life	Price	12/31/2012	Price
$0.0—$3.17	450,667	1.0 years	$2.92	450,667	$2.92
$3.17—$5.91	422,818	4.1 years	$4.53	308,831	$4.23
$5.91—$7.08	672,862	6.4 years	$6.98	639,195	$7.01
$7.08—$9.99	378,594	8.4 years	$7.59	135,618	$7.71
	1,924,941	5.0 years	$5.61	1,534,311	$5.31

Restricted Stock

The Company computes the fair value of its service based restricted stock using the closing price of the Company’s stock at the date of grant, and compensation expense is recognized assuming a 5% estimated forfeiture rate. Restricted stock granted to employees prior to 2011 generally vests over a five-year period with one-fourth vesting on each of the first, second, third and fifth anniversaries of the date of the grant. No portion of the restricted stock vests on the fourth anniversary of the date of the grant. Restricted stock granted to directors generally vests evenly over a three year period. Beginning January 1, 2011, restricted stock granted to employees generally vests evenly over a three year period. Upon a change in control of the Company, all outstanding shares of restricted stock will become immediately vested. Compensation expense related to restricted stock is recognized over the vesting period using the accelerated expense attribution method.

The following table details restricted stock activity during 2012:



	Number of Shares		Wgtd. Avg. Fair Value per Share
Outstanding at beginning of year	1,988,602		$	6.69
Granted	659,915		5.24
Expired/cancelled/forfeited	(109,236	)	6.64
Lapse of restrictions	(733,452	)	6.40
Outstanding at December 31, 2012	1,805,829		$	6.28

The weighted average grant date fair value of restricted stock granted during the years ended December 31, 2012, 2011 and 2010 was $5.24, $7.54 and $5.44, respectively, per share. The total fair value of restricted stock that vested during the years ended December 31, 2012, 2011 and 2010 was $4.7 million, $5.6 million and $2.6 million, respectively. At December 31, 2012, the weighted average remaining life of restricted stock outstanding was two years and the intrinsic value of restricted stock outstanding, using the closing stock price on December 31, 2012, was $8.9 million.

Restricted Stock Units

The Company granted restricted stock units ("RSUs") to employees during 2012. The RSUs vest in one-third increments on each of the first, second and third anniversaries of the date of grant. Cash payment will be made to employees on each vesting date based upon the Company's closing stock price on that date. Upon change in control of the Company, all of the RSUs will become immediately vested. Compensation expense is recognized on a straight line basis over the vesting period assuming a 5% estimated forfeiture rate. The Company computes the fair value of the RSUs using the closing price of the Company's stock for purposes of determining the amount of the liability at the end of each period. As of December 31, 2012, the Company had 1.1 million RSUs outstanding with an aggregate fair value of $5.2 million. There were no cash payments made to settle RSUs during 2012 and no RSUs were vested as of December 31, 2012.