19. Stock-Based Compensation

The Company has the following stock compensation plans that form part of its employees’ remuneration:

Employee Share Incentive Plan (Preferred Shares)

The Company awards preferred shares for $nil consideration under the Employee Share Incentive Plan as part of compensation for certain eligible employees, excluding Directors and certain Officers, that require future services as a condition to the delivery of common shares. In addition, options are granted to purchase preferred shares at a fixed price, determined annually, which will typically represent a discount to the market value of the common stock. In consideration for preferred shares, the Company issues shares of common stock on a share for share basis. Under the plan, the conversion is conditional on the grantee’s satisfying requirements outlined in the award agreements. Preferred shares are only redeemable with the Company’s approval. Each employee’s option to purchase preferred shares must be exercised within 30 days of the grant date, which is the 90th day after the date of the auditor’s opinion on the financial statements for the relevant year. Options granted during the years ended December 31, 2011 and 2010 totaled 7,455 options and 5,379 options, respectively.

Employee Share Option Plan (Common Stock Options)

The Company has an employee stock option plan for certain long-serving employees of the Company. Under the plan, these employees are granted in each calendar year, as long as the employee is a participant in the Employee Share Incentive Plan, options to purchase common shares. The price at which the option may be exercised will be the closing market price on the grant date, which is the 40th day after the date of the Company’s Annual Shareholder Meeting. The number of options each employee is granted is equal to five times the sum of (i) the number of preferred shares which that employee receives for $nil consideration and (ii) the number of preferred share options which that employee exercises in that given year. Options may be exercised during the period commencing on the fourth anniversary of the grant date and ending on the thirtieth day after the fourth anniversary of the grant date. Options granted during the years ended December 31, 2011 and 2010 totaled 5,440 and 3,165, respectively.

Non-Executive Directors’ Share Plan

This stock grant plan provides part of Directors’ remuneration. Under this plan, Directors receive a combination of cash and common stock for their participation in Board meetings. All Directors are eligible except Executive Officers, who are covered by individual employment contracts, and the board member designated by Cayman Island government. The number of common stock granted is calculated based upon the market price of the Company’s common stock on October 1 of the year preceding the grant. Stock granted during the years ended December 31, 2011 and 2010 totaled 7,614 shares and 3,471 shares, respectively. The Company recognized stock-based compensation of $71,945 and $47,203 for the years ended December 31, 2011 and 2010, respectively.

2008 Equity Incentive Plan

On May 14, 2008, the Company’s stockholders approved the 2008 Equity Incentive Plan (the “2008 Plan”) and reserved 1,500,000 shares of the Company’s Class A common shares for issuance under this plan. All Directors, executives and key employees of the Company or its affiliates are eligible for participation in the 2008 Plan which provides for the issuance of options, restricted stock and stock equivalents at the discretion of the Board. In 2009, 101,697 options were granted under the 2008 Plan at an exercise price of $7.90. No options were granted in 2010. In February 2011, a total of 143,612 options were granted under the 2008 Plan at an exercise price of $10.68. In July 2011, a total of 18,000 options to purchase shares of common stock were granted to a new member of management under the 2008 Equity Incentive Plan at an exercise price of $9.11.

The Company measures and recognizes compensation expense at fair value for all share-based payments, including stock options. Stock-based compensation totaled $494,648 and $257,799 for the years ended December 31, 2011 and 2010, respectively and is included in general and administrative expenses in the consolidated statements of income.

The fair value of each option award is estimated on the date of grant using a Black-Scholes option-pricing model that uses the assumptions noted in the table below. Expected volatilities are based on historical volatilities of the Company’s common stock. The Company uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding. The Company uses historical data to estimate stock option exercises and forfeitures within its valuation model. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

The significant weighted average assumptions for the years ended December 31, 2011, 2010 and 2009 were as follows:

	2011			2010			2009
Risk free interest rate		1.33	%		0.54	%		1.28	%
Expected option life (years)		3.4			1.6			3.4
Expected volatility		68.18	%		56.97	%		68.62	%
Expected dividend yield		2.89	%		2.49	%		3.17	%

A summary of the Company’s stock option activity for the year ended December 31, 2011 is as follows:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value ⁽¹⁾
Outstanding at beginning of period		213,067		$	18.49
Granted		174,507			10.34
Exercised		(890	)		7.35
Forfeited		(8,290	)		11.54
Outstanding as of December 31, 2011		378,394		$	14.91		2.75 years	$	69,154
Exercisable as of December 31, 2011		169,453		$	20.72		1.30 years	$	46,103

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(1)	The intrinsic value of a stock option represents the amount by which the fair value of the underlying stock, measured by reference to the closing price of the common shares of $8.58 on the Nasdaq Global Select Market on December 31, 2011, exceeds the exercise price of the option.

As of December 31, 2011, 208,941 non-vested options and 169,453 vested options were outstanding, with weighted average exercise prices of $10.19 and $20.72, respectively, and average remaining contractual lives of 3.93 years and 1.30 years, respectively. The total remaining unrecognized compensation costs related to unvested stock-based arrangements were $421,080 as of December 31, 2011 and are expected to be recognized over a weighted average period of 3.93 years.

As of December 31, 2011, unrecognized compensation costs relating to redeemable preferred stock outstanding were $101,406, and are expected to be recognized over a weighted average period of 1.15 years.

The following table summarizes the weighted average fair value of options at the date of grant and the intrinsic value of options exercised during the years ended December 31, 2011, 2010 and 2009:

	2011		2010		2009
Options granted with an exercise price below market price on the date of grant:
Employees — preferred stock	$	1.47	$	0.70	$	8.31
Overall weighted average	$	1.47	$	0.70	$	8.31

Options granted with an exercise price at market price on the date of grant:
Management employees	$	4.45	$	-	$	3.28
Employees — common stock	$	4.17	$	1.40	$	8.05
Overall weighted average	$	4.44	$	1.40	$	5.66

Options granted with an exercise price above market price on the date of grant:
Management employees	$	-	$	-	$	-
Employees — preferred stock	$	-	$	-	$	-
Overall weighted average	$	-	$	-	$	-

Total intrinsic value of options exercised	$	1,325	$	365	$	9,313