v2.4.0.6
SHARE-BASED COMPENSATION
 12 Months Ended
Dec. 31, 2012
SHARE-BASED COMPENSATION [Abstract]  
SHARE-BASED COMPENSATION

 

15 SHARE-BASED COMPENSATION

 

In May 2007, the Board of Directors approved a share incentive plan, in which the Group may grant either options to purchase the Company's ordinary shares or restricted stock units ("RSU"). A maximum of 8,000,000 stock options or RSU were granted to the directors of the Company and senior officers of the Group to subscribe to 48,000,000 shares of the Company. The share based awards granted under this plan have a requisite service period of four years. The Board of Directors also has the right to terminate any unvested share based awards.

 

The share based awards vest over four years and expire six years from grant date. For some of the employees, twenty-five percent of the share based awards vest on each of the four years following the grant date. For the other employees, fifteen, twenty, thirty and thirty five percent, respectively, will vest on each of the four years following the grant date.

 

On February 26, 2009, the Board of directors modified the share incentive plan to reduce the option exercise price from $3.30 to $1.40 and extended the first vesting period to May 21, 2010 for all granted options and as a result extended the vesting period to 5 years from grant date and contractual maturity to 7 years from grant date. The incremental increase in the fair value of the options as a result of the modification of approximately $2,614 is amortized over the remaining vesting period.

 

In May 2011, the Board of Directors approved and granted a further 1,400,000 stock options or RSU to the senior officers and key employees of the Company to subscribe to 8,400,000 shares of the Company under the share incentive plan.

 

In addition to options granted during the years ended December 31, 2009, 2010 and 2011, RSU were also granted to the senior officers and key employees of the Company since May 2011.

 

In July 2010, the Group revised its estimate of the number of options that are expect to ultimately vest. The number of stock options granted expected to vest has been reduced to reflect historical experience of forfeiture of 5% to 10% of options granted prior to completion of vesting period and accordingly the share-based compensation expense has been adjusted.

 

In July 2011, the Group further revised its estimate of the number of options that are expect to ultimately vest. The number of share-based awards granted expected to vest has been reduced to reflect historical experience of forfeiture of 10% to 15% of share-based awards granted prior to completion of vesting period and accordingly the share-based compensation expense has been adjusted.

 

For the year ended December 31, 2012, forfeiture rate for share-based awards granted expected to vest has remain stable at 15%.

 

The fair value of each share-based award is estimated at grant date during 2012 using the Black-Scholes option-pricing model based on the following assumptions:

 

Year ended December 31   2011   2012
         
Risk-free interest rate (1)   0.11% - 2.66%   0.11% - 2.66%
Expected life (2)   2-5 years   2-5 years
Expected volatility (3)   42.04%- 48.30%   39.97%-42.04%
Dividend yield (4)   Nil   Nil

 

  (1) Risk-free interest rate

 

Risk-free interest rate adopted the yield to maturity of United States government bonds with the same maturity as the respective expected term of the options.

 

  (2) Expected life

 

The expected life was estimated as the average between the vesting term of the options and the original contractual term.

 

  (3) Expected volatility

 

The expected volatility of the underlying ADS during the life of the options was calculated based on the Company's historical stock price volatility over the period from initial public offering through to the grant date.

 

  (4) Dividend yield

 

The dividend yield was expected to be nil based on the Company's historical dividend distribution record and its policy.

 

  (5) Share price

 

The fair value of the ordinary shares on the grant date was the closing price of the Company's stock at each grant date.

 

Stock options

 

A summary of stock option activity is as follows:

 

          Weighted     Weighted  
          average     average  
    Number     exercise price     fair value  
    of options     per option     at grant date  
                   
Outstanding at December 31, 2010     6,962,675     $ 1.40     $ 1.22  
Granted on January 25, 2011     27,000     $ 1.40     $ 1.13  
Granted on December 15, 2010 but effective on May 10, 2011 (note)     812,700     $ 1.40     $ 1.12  
Granted on May 10, 2011     274,000     $ 1.40     $ 1.12  
Granted on August 9, 2011     532,100     $ 1.40     $ 0.79  
Granted on November 8, 2011     15,000     $ 1.40     $ 0.91  
Exercised     (479,196 )   $ 1.40     $ 1.22  
Forfeited     (777,280 )   $ 1.40     $ 1.22  
Expired     (10,750 )   $ 1.40     $ 1.22  
Outstanding at December 31, 2011     7,356,249     $ 1.40     $ 1.01  
Exercised     (1,635,252 )   $ 1.40     $ 1.01  
Forfeited     (751,425 )   $ 1.40     $ 1.01  
Expired     (91,475 )   $ 1.40     $ 1.01  
Outstanding at December 31, 2012     4,878,097     $ 1.40     $ 1.01  

 

Note: The stock options were approved by the shareholder and Board of Directors on May 10, 2011.

 

The following table summarizes information with respect to stock options outstanding at December 31, 2011 and 2012:

 

                            Options exercisable  
    Options outstanding as of December 31, 2011     as of December 31, 2011  
                Weighted                 Weighted        
          Weighted     average                 average        
          average     exercise     Aggregate     Number     exercise     Aggregate  
    Number     contractual     price     intrinsic     of     price     intrinsic  
    of option     period     per option     value     options     per option     value  
                                                         
Ordinary shares     7,356,249       5 years     $ 1.40     $ 8,984       2,195,234     $ 1.40     $ 2,106  

 

                            Options exercisable  
    Options outstanding as of December 31, 2012     as of December 31, 2012  
                Weighted                 Weighted        
          Weighted     average                 average        
          average     exercise     Aggregate     Number     exercise     Aggregate  
    Number     contractual     price     intrinsic     of     price     intrinsic  
    of option     period     per option     value     options     per option     value  
                                                         
Ordinary shares     4,878,097       5 years     $ 1.40     $ 17,957       2,839,857     $ 1.40     $ 2,507  

 

As at December 31, 2012, there was $204 (2011: $1,210) of unrecognized compensation expense related to non-vested stock options that are expected to be recognized over a weighted-average period of 3 years (2011: 4 years) on a straight-line basis.

 

RSU

 

The fair value of each RSU is estimated based on the market price at grant date. RSU were first grant to the directors of the Company and senior management of the Group since May 2011. A summary of RSU activity is as follows:

 

    For the year ended  
    December 31, 2012  
          Weighted  
          average  
    Number     fair value  
    of options     at grant date  
             
Outstanding at December 31, 2010     -     $ -  
Granted on December 15, 2010 but effective on May 10, 2011 (note)     183,000     $ 2.36  
Granted on May 10, 2011     12,000     $ 2.36  
Granted on August 9, 2011     48,000     $ 1.98  
Forfeited     (9,000 )   $ 2.36  
Outstanding at December 31, 2011     234,000     $ 2.28  
Granted on January 17, 2012     100,000     $ 1.87  
Granted on May 8, 2012     313,250     $ 1.69  
Exercised     (31,500 )   $ 2.28  
Forfeited     (34,100 )   $ 2.28  
Outstanding at December 31, 2012     581,650     $ 1.93  

 

Note: The RSU were approved by the shareholder and Board of Directors on May 10, 2011.

 

As at December 31, 2012, there was $190 (2011: 164) of unrecognized compensation expenses related to non-vested RSU that are expected to be recognized over a weighted-average period of 2 years (2011: 2.13 years) on a straight-line basis.

 

As at December 31, 2012, 3,940,253 (2011: 1,809,751) options to purchase ordinary shares or RSU were available for future grant.