STOCK-BASED COMPENSATION

6,000,000 shares have been authorized for issuance in respect of equity awards under our Amended and Restated Stock Incentive Plan (“the Plan”). Under the Plan, awards are made to employees at the discretion of the Compensation Committee and to directors pursuant to an annual automatic grant under the Plan or at the discretion of the Board of Directors.

Grants of options allow the holders to purchase shares of Class A common stock or Class B common stock at an exercise price, which is generally the market price prevailing at the date of the grant, with vesting between one and four years after the awards are granted.

The charge for stock-based compensation in our Consolidated Statements of Operations was as follows:



	For the Years Ending December 31,
	2011		2010		2009
Stock-based compensation charged	$	5,898	$	6,837	$	6,218
Income tax benefit recognized	—		—		(317		)

A summary of option activity for the twelve months ended December 31, 2011 is presented below:



	Shares		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding at January 1, 2011	2,539,062		$	35.44	4.95	$	2,189
Granted	555,000		22.33
Exercised	(23,625	)	10.23
Forfeited	(168,750	)	40.17
Outstanding at December 31, 2011	2,901,687		$	32.86	4.49	$	71
Vested or expected to vest	2,778,007		33.30		4.38	71
Exercisable at December 31, 2011	1,829,813		$	38.27	3.33	$	71

When options are vested, holders may exercise them at any time up to the maximum contractual life of the instrument which is specified in the option agreement. At December 31, 2011, the maximum life of options that had been issued under the Plan was 10 years. Upon providing the appropriate written notification, holders pay the exercise price and receive shares. Shares delivered under the Plan are newly issued shares. We received US$ 0.2 million and US$ 0.6 million in cash from the awards that were exercised in 2011 and 2010 which had an intrinsic value of US$ 0.3 million and US$ 0.2 million, respectively. No options were exercised in 2009. The income tax benefits realized thereon was US$ nil in 2011 and 2010.

The fair value of stock options is estimated on the grant date using the Black-Scholes option-pricing model and recognized ratably over the requisite service period.

The exercise of stock options has generated a net operating loss brought forward in our Delaware subsidiary of US$ 5.2 million at January 1, 2011 and US$ 7.4 million at January 1, 2010. In the years ended December 31, 2011 and 2010, tax benefits of US$ nil and US$ 0.7 million, respectively, were recognized in respect of the utilization of part of this loss, and were recorded as additional paid-in capital, net of US$ nil and US$ 0.1 million of transfers related to the write-off of deferred tax assets arising upon forfeitures for the periods ending December 31, 2011 and 2010, respectively. The losses are subject to examination by the tax authorities and to restriction on their utilization.

The aggregate intrinsic value (the difference between the stock price on the last day of trading of the fourth quarter of 2011 and the exercise prices multiplied by the number of in-the-money options) represents the total intrinsic value that would have been received by the option holders had they exercised all in-the-money options as of December 31, 2011. This amount changes based on the fair value of our common stock. As of December 31, 2011, there was US$ 8.9 million of total unrecognized compensation expense related to options. The expense is expected to be recognized over a weighted average period of 1.1 years.

2011 Option Grants

Pursuant to our Amended and Restated Stock Incentive Plan, options were awarded to members of staff, members of executive management and members of our Board of Directors during the year ended December 31, 2011.

The fair value of these option grants was estimated on the date of the grant using the Black-Scholes option-pricing model, with the following assumptions used:



Date of Option Grant	Number of Options Granted	Risk-free Interest Rate (%)	Expected Term (years)	Expected Volatility (%)	Fair Value (US$/share)	Exercise Price (US$/share)
January 3, 2011	15,000	2.11	5.3	55.6	10.71	21.20
May 16, 2011	100,000	0.93	3.0	67.6	10.06	22.38
May 16, 2011	435,000	1.83	5.3	55.7	11.23	22.38
June 14, 2011	5,000	0.79	3.0	67.5	9.01	20.11

The fair value of stock options that are expected to vest is estimated on the grant date using the Black-Scholes option-pricing model and recognized ratably over the requisite servicing period. The calculation of compensation cost requires the use of several significant assumptions which are calculated as follows:

•

Expected forfeitures. ASC 718 requires that compensation cost only be calculated on those instruments that are expected to vest in the future. The number of options that actually vest will usually differ from the total number issued because employees forfeit options when they do not meet the service conditions stipulated in the agreement. Since all forfeitures result from failure to meet service conditions, we have calculated the forfeiture rate by reference to the historical employee turnover rate.


•	Expected volatility. Expected volatility has been calculated based on an analysis of the historical stock price volatility of the company and its peers for the preceding period corresponding to the options' expected life. We consider this basis to represent the best indicator of expected volatility over the life of the option.


•	Expected term. The expected term of options granted has been calculated following the “shortcut” method as outlined in ASC 718 because our options meet the definition of “plain vanilla” therein. Since insufficient data about holder exercise behavior is available to make estimates of expected term, we have continued to apply the shortcut method in accordance with ASC 718.

The weighted average assumptions used in the Black-Scholes model for grants made in the years ending December 31, 2011, 2010 and 2009 were as follows:



	For the Years Ending December 31,
	2011			2010			2009
Risk -free interest rate	1.67		%	2.02		%	1.40		%
Expected term (years)	4.82			4.9			3.9
Expected volatility	57.90		%	57.26		%	57.20		%
Dividend yield	0		%	0		%	0		%
Weighted-average fair value	$	10.98		$	12.64		$	8.31

The following table summarizes information about stock option activity during 2011, 2010, and 2009:



	2011		2010				2009
	Shares	Weighted Average Exercise Price (US$/share)	Shares		Weighted Average Exercise Price (US$/share)		Shares		Weighted Average Exercise Price (US$/share)
Outstanding at beginning of year	2,539,062	35.44	2,000,750		$	39.59	1,439,042		$	50.81
Awards granted	555,000	22.33	720,000		25.59		691,875		18.68
Awards exercised	(23,625)	10.23	(32,313	)	18.31		—		—
Awards forfeited	(168,750)	40.17	(149,375	)	47.28		(130,167	)	52.48
Outstanding at end of year	2,901,687	32.86	2,539,062		$	35.44	2,000,750		$	39.59

The following table summarizes information about stock options outstanding at December 31, 2011:



	Options outstanding
Range of exercise prices	Shares	Average remaining contractual life (years)	Aggregate intrinsic value (US$)		Weighted average exercise price (US$)
$ 0.01 - 20.00	603,938	2.63	$	71,427	$	17.30
$ 20.01 - 40.00	1,719,374	5.64	—		23.77
$ 40.01 - 60.00	197,125	3.75	—		51.93
$ 60.01 - 80.00	183,000	2.44	—		66.73
$ 80.01 - 100.00	30,000	0.43	—		90.54
$ 100.01 - 120.00	168,250	3.19	—		112.07
Total	2,901,687	4.49	$	71,427	$	32.86

The following table summarizes information about stock options exercisable at December 31, 2011:



	Options exercisable
Range of exercise prices	Shares	Average remaining contractual life (years)	Aggregate intrinsic value (US$)		Weighted average exercise price (US$)
$ 0.01 - 20.00	603,938	2.63	$	71,427	$	17.30
$ 20.01 - 40.00	647,500	4.27	0		24.04
$ 40.01 - 60.00	197,125	3.75	0		51.93
$ 60.01 - 80.00	183,000	2.48	0		66.73
$ 80.01 - 100.00	30,000	0.43	0		90.54
$ 100.01 - 120.00	168,250	3.19	0		112.07
Total	1,829,813	3.33	$	71,427	$	38.27