Stock Option Plan and Stock Grants

The Company’s Stock Option and Stock Award Plan (the “Plan”) was adopted in December 1992 and amended and restated from time to time, most recently effective March 23, 2001. Pursuant to the Plan, officers, directors, employees and consultants of the Company are offered the opportunity (i) to acquire shares of common stock through the grant of stock options (“Options”), including non-qualified stock options and, for key employees, incentive stock options within the meaning of Section 422 of the Internal Revenue Code; and (ii) to be awarded shares of common stock (“Restricted Stock Grants”), subject to conditions and restrictions determined by the Compensation, Nominating, and Corporate Governance Committee of the Company’s Board of Directors (the “Compensation Committee”). The Compensation Committee will determine the vesting schedule, if any, of each Option and the term, which term shall not exceed ten years from the date of grant. As to the Options that have been granted through December 31, 2012 to officers and employees, generally, one-third are exercisable one year after the initial grant, one-third are exercisable two years following the date such Options were granted and the remaining one-third are exercisable three years following the date such Options were granted. Shares that did not vest were forfeited. Dividends are paid on restricted stock and are not returnable, even if the underlying stock does not entirely vest. Stock Options are awarded at the New York Stock Exchange closing price of the Company’s common stock on the grant date. A maximum of 6,000,000 shares of common stock are available for grant under the Plan and no more than 250,000 shares may be subject to grants to any one individual in any calendar year.

Grants under the Plan are made by the Compensation Committee, which determines the individuals eligible to receive awards, the types of awards, and the terms, conditions and restrictions applicable to any award. In addition, the terms of two specific types of awards are contemplated under the Plan:

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The first type of award is a grant of Options or Restricted Stock Grants of common stock made to each member of the Board at the meeting held immediately after each annual meeting of the Company’s stockholders. Generally, if the director elects to receive Options, the grant will cover 10,000 shares of common stock at an exercise price equal to the fair market value on the date of grant. If the director elects to receive a Restricted Stock Grant of common stock, he or she will receive an award of 2,000 shares of common stock. Exercisability or vesting with respect to either type of award will be one-third of the award after six months, two-thirds of the award after one year, and the full award after two years.


•	The second type of award is a grant of common stock in lieu of 50% of their bonus otherwise payable to individuals with a title of Vice President or above. A recipient can request that the Compensation Committee pay a greater or lesser portion of the bonus in shares of common stock.

The Company accounts for its stock-based compensation in accordance with FASB ASC 718.

Restricted Stock Grants

On January 31, 2013, the Company awarded Restricted Stock Grants for 31,000 shares of common stock at a fair market value of approximately $2.2 million to the Board of Directors. One-third of the shares of restricted common stock covered by these awards vests on each of December 31, 2013, December 31, 2014, and December 31, 2015.

On February 1, 2013, the Company awarded Restricted Stock Grants for 34,333 shares of common stock to certain members of senior management of the Company. These Restricted Stock Grants will vest on December 31, 2013. The fair market value of these Restricted Stock Grants was approximately $2.5 million as of the date of grant and is recorded as a compensation expense and paid in capital over the vesting period.

On May 8, 2012, the Company awarded Restricted Stock Grants for 16,000 shares of common stock at a fair market value of approximately $1.1 million to the Board of Directors. One-third of the shares of restricted common stock covered by these awards vests on each of November 8, 2012, May 8, 2013, and May 8, 2014.

On January 31, 2012, the Company awarded Restricted Stock Grants for 31,000 shares of common stock at a fair market value of approximately $2.2 million to certain members of the Board of Directors for services rendered in 2011. One-third of the shares of restricted common stock covered by these awards vests on each of December 31, 2012, December 31, 2013, and December 31, 2014.

On January 31, 2012, the Company awarded Restricted Stock Grants for 60,332 shares of common stock to certain members of senior management of the Company. These Restricted Stock Grants vested on December 31, 2012. The fair market value of these Restricted Stock Grants was approximately $4.2 million as of the date of grant and is recorded as a compensation expense and paid in capital over the vesting period. During 2012, 18,333 shares of this restricted stock grant valued at issuance date of approximately $1.3 million were relinquished by certain members of senior management.

Note 14—Stock Option Plan and Stock Grants (continued)

On May 11, 2011, the Company awarded Restricted Stock Grants for 16,000 shares of common stock at a fair market value of approximately $0.9 million to the Board of Directors. One-third of the shares of restricted common stock covered by these awards vests on each of November 11, 2011, May 11, 2012, and May 11, 2013.

On February 1, 2011, the Company awarded Restricted Stock Grants for 72,665 shares of common stock to certain members of senior management of the Company. These Restricted Stock Grants vested December 31, 2011. The fair market value of these Restricted Stock Grants was approximately $4.2 million as of the date of grant and is recorded as a compensation expense and paid in capital over the vesting period.

On January 31, 2011, the Company awarded Restricted Stock Grants for 31,000 shares of common stock at a fair market value of approximately $1.8 million to certain members of the Board of Directors. One-third of the shares of restricted common stock covered by these awards vests on each of December 31, 2011, December 31, 2012, and December 31, 2013.

On May 11, 2010, the Company awarded Restricted Stock Grants for 16,000 shares of common stock at a fair market value of approximately $0.9 million to the Board of Directors. One-third of the shares of restricted common stock covered by these awards vests on each of November 11, 2010, May 11, 2011, and May 11, 2012.

On February 1, 2010, the Company awarded Restricted Stock Grants for 74,665 shares of common stock to certain members of senior management of the Company. These Restricted Stock Grants vested on December 31, 2010. The fair market value of these Restricted Stock Grants was approximately $3.7 million as of the date of grant and was recorded as compensation expense and paid in capital over the vesting period.

On February 1, 2010, the Company awarded Restricted Stock Grants for 31,000 shares of common stock at a fair market value of approximately $1.5 million to certain members of the Board of Directors. One-third of the shares of restricted common stock covered by these awards vests on each of December 31, 2010, December 31, 2011, and December 31, 2012.

The Company recognized compensation expense of approximately $5.8 million, $5.6 million and $5.1 million primarily related to Restricted Stock Grants in 2012, 2011 and 2010, respectively.

A summary of the Company’s restricted stock activity, and related information for the years ended December 31, 2012, 2011, and 2010 follows:



	Number of Shares		Weighted Average Grant Date Fair Value
Balance at December 31, 2009	56,008		$	24.99
Shares granted	121,665		50.03
Share vested	(125,330	)	44.19
Balance at December 31, 2010	52,343		37.22
Shares granted	119,665		57.49
Shares canceled/forfeited	(11,333	)	57.40
Shares vested	(113,665	)	48.99
Balance at December 31, 2011	47,010		55.50
Shares granted	107,332		70.12
Shares canceled/forfeited	(18,333	)	70.14
Shares vested	(88,999	)	64.60
Balance at December 31, 2012	47,010		65.93

Compensation expense to be recognized subsequent to December 31, 2012 for Restricted Stock Grants issued prior to 2013 that has not yet vested was approximately $2.8 million, which is expected to be recognized over a weighted average term of 1.5 years.

Note 14—Stock Option Plan and Stock Grants (continued)

Stock Options

The fair value of each grant is estimated on the grant date using the Black-Scholes-Merton model. No options were issued. forfeited or expired during the year ended December 31, 2012, 2011, and 2010.

A summary of the Company’s stock option activity, and related information for the years ended December 31, 2012, 2011, and 2010 follows:



	Shares Subject To Options		Weighted Average Exercise Price Per Share		Weighted Average Outstanding Contractual Life (in years)
Balance at December 31, 2009	841,851		$	39.94	6.0
Options exercised	(33,767	)	32.77
Options canceled	(2,900	)	17.50
Balance at December 31, 2010	805,184		40.32		5.1
Options exercised	(172,384	)	26.28
Balance at December 31, 2011	632,800		44.14		5.0
Options exercised	(80,000	)	48.20
Balance at December 31, 2012	552,800		43.56		4.0
Exercisable at December 31, 2012	552,800		43.56		4.0

The intrinsic value of outstanding and exercisable stock options represents the excess of the closing stock price as of the end of the year, over the exercise price multiplied by the applicable number of shares that may be acquired upon exercise of stock options. For the years ending December 31, 2012, 2011 and 2010, the intrinsic value of exercised options was $1.7 million, $5.7 million and $0.8 million, respectively. For the years ending December 31, 2012, 2011 and 2010, the intrinsic value of outstanding and exercisable options was $13.1 million, $14.3 million and $12.6 million, respectively.

As of December 31, 2012, 2011 and 2010, 654,346 shares, 743,345 shares and 851,677 shares remained available for grant, respectively; of these 254,529 shares, 343,528 shares and 451,860 shares, respectively, remained available for Restricted Stock Grants.