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Stock-Based Compensation Plans
 12 Months Ended
Dec. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation Plans
Stock-Based Compensation Plans
The Company has grants outstanding under three equity compensation plans, with two available for future grants of equity compensation awards to employees, consultants and directors. All of the equity plans were approved by shareholders. The 2007 Long-Term Incentive Compensation Plan (the 2007 Plan) and the 2007 Directors’ Incentive Plan (the Directors’ Plan) superseded the 1999 Stock Option Plan. The 2007 Plan and the Directors’ Plan provide for the issuance of stock options, stock appreciation rights and restricted stock. Vesting is determined on a grant-by-grant basis in accordance with the terms of the plans and the related grant agreements. The Company has reserved 2.4 million shares of common stock for issuance under the 2007 Plan and 250,000 shares for issuance under the Directors’ Plan.
The exercise price of stock options is generally 100% of the fair market value of the underlying common stock on the grant date. The exercise price of incentive stock options granted to a shareholder who owns more than 10% of the total combined voting power of all classes of stock must be at least 110% of the fair market value of the underlying common stock on the grant date. The maximum contractual term of stock options is ten years from the date of grant, except for incentive stock options granted to 10% shareholders, which are five years.
During 2011, the Company began issuing shares of restricted stock with no exercise price to employees and directors. Restricted stock issued to employees generally cliff-vests on the fourth anniversary of the date of grant. Restricted stock issued to directors vests on the one year anniversary of the date of grant.
Stock compensation expense is presented as a component of general and administrative expense in the consolidated statements of income. Stock compensation expense recorded as a component of equity consisted of the following for the years ended December 31:
 
 
2012
 
2011
 
2010
 
 
 
 
 
 
 
Share-based compensation - employees
 
$
555,898

 
$
627,353

 
$
688,408

Share-based compensation - nonemployees
 
76,920

 
128,158

 
98,241

Total share-based compensation
 
$
632,818

 
$
755,511

 
$
786,649


At December 31, 2012, there was approximately $1.4 million of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted-average period of 3.0 years. This amount relates primarily to unrecognized compensation cost for employees.
Stock Options
Stock option activity for 2012 and 2011 was as follows:
 
 
Number of
shares
 
Weighted-
average
exercise
price per
share
 
Weighted-
average
remaining
contractual
term (years)
 
Aggregate
intrinsic
value
 
 
 
 
 
 
 
 
 
Outstanding, December 31, 2010
 
1,905,470

 
$
6.45

 
3.3
 
$
2,853,707

Options granted
 
—

 
—

 
 
 
 
Options exercised
 
(503,411
)
 
2.19

 
 
 
 
Options forfeited or expired
 
(125,901
)
 
10.24

 
 
 
 
Outstanding, December 31, 2011
 
1,276,158

 
7.75

 
2.9
 
700,294

Options granted
 
—

 
—

 
 
 
 
Options exercised
 
(173,688
)
 
3.55

 
 
 
 
Options forfeited or expired
 
(435,599
)
 
12.22

 
 
 
 
Outstanding, December 31, 2012
 
666,871

 
5.93

 
1.4
 
$
132,348

Exercisable at December 31, 2012
 
660,023

 
$
5.88

 
1.4
 
$
132,348


Information related to the stock option plans during 2012, 2011 and 2010 was as follows:
 
 
2012
 
2011
 
2010
 
 
 
 
 
 
 
Intrinsic value of options exercised
 
$
495,480

 
$
1,742,103

 
$
5,519,588

Weighted-average fair value of
options exercised
 
$
1.00

 
$
2.06

 
$
4.13


The Company did not grant any stock options during 2012 and 2011. The fair value of employee and nonemployee options granted during 2010 was estimated using the Black-Scholes option-pricing model and consisted of the following assumptions:
 
 
Range of Assumptions
 
 
Employee
Options
 
Non-Employee Options
 
 
 
 
 
Dividend yield
 
—
 
—
Expected term (years)
 
2.5 – 6.0
 
5.0
Expected volatility
 
49% – 53%
 
52% – 53%
Risk-free interest rate
 
0.8% – 2.8%
 
2.2% – 2.4%

The Company determined the expected life of employee share options based on the simplified method allowed by SEC Staff Accounting Bulletin (SAB) No. 107, as amended by SAB No. 110. Under this approach, the expected term is presumed to be the average between the weighted-average vesting period and the contractual term. The expected term for options granted to nonemployees is generally the contractual term of the option. The expected volatility over the term of the respective option was based on the volatility of similar publicly-traded entities. In evaluating similarity, the Company considered factors such as industry, stage of life cycle, size, and financial leverage. The risk-free interest rate is based on the U.S. Treasury Note, Stripped Principal, on the date of grant with a term substantially equal to the corresponding option’s expected term. The Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeable future.
The Company agreed to repurchase up to $1.9 million in common stock during the first quarter of 2010 to provide for the settlement of the remaining tax liabilities associated with the exercise of stock options in 2009. The repurchase of these shares was completed in 2010.
Restricted Stock Awards
As previously noted, the Company began issuing restricted stock to employees and directors in 2011 under the provisions of the 2007 Plan and the Directors’ Plan. Restricted stock activity was as follows:
 
 
Number
of shares
 
Weighted-
average
grant-date
fair value
 
 
 
 
 
Nonvested, December 31, 2010
 
—

 
$
—

Shares granted
 
149,320

 
5.40

Shares vested
 
(1,000
)
 
5.28

Shares forfeited
 
(12,150
)
 
5.28

Nonvested, December 31, 2011
 
136,170

 
5.41

Shares granted
 
286,453

 
4.87

Shares vested
 
(7,000
)
 
5.28

Shares forfeited
 
(32,093
)
 
5.68

Nonvested, December 31, 2012
 
383,530

 
4.99


The fair value of restricted stock granted was based on the closing market price of the Company’s common stock on the date of grant.