12. Stock‑Based Compensation

Amended and Restated 2004 Stock Incentive Plan

As of December 31, 2015, no additional shares of common stock were reserved for issuance upon the exercise of stock options under the Company’s Amended and Restated 2004 Stock Incentive Plan (the “A&R 2004 Plan”).   No further awards are permitted to be issued under the A&R 2004 Plan.  

2010 Stock Incentive Plan

In connection with the IPO, in May 2010, the Company’s Board of Directors and stockholders adopted the 2010 Stock Incentive Plan (the “2010 Plan”). The material terms of the performance goals under the 2010 Plan, as amended and restated, were approved by stockholders at the Company’s 2014 annual meeting of stockholders.  The 2010 Plan provides for the issuance of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock awards and restricted stock units, any of which may be performance‑based, and for incentive bonuses, which may be paid in cash or stock or a combination of both, to eligible employees, officers, non‑employee directors and other service providers to the Company and its subsidiaries. A maximum of 2,130,000 shares of common stock may be issued pursuant to all awards under the 2010 Plan. As of December 31, 2015, the Company had 1,372,159 shares of common stock available for future issuance of awards under the 2010 Plan. The shares of common stock to be issued under the 2010 Plan will be made available from authorized and unissued Company common stock.

Stock Options

There were 26,350 stock options exercised with respect to the Company’s stock under the A&R 2004 Plan during the year ended December 31, 2015.   The option holder paid the Company the required aggregate exercise price of $111 for options exercised at the time of the exercise.   Stock options were previously expensed over the vesting period and therefore no additional expense was recorded at the time of the exercise.   There were no stock options exercised in the years ended December 31, 2014 or 2013.  Meanwhile, there were 37,240 options outstanding at both December 31, 2014 and December 31, 2013 with a weighted average exercise price of $4.21 per share.   There were 10,890 shares that were cancelled during the year ended December 31, 2015.

 

As of December 31, 2015,  there were no unexercised stock options.    As of December 31, 2014 and 2013, the weighted‑average remaining contractual life of all outstanding options was 1.7 and 2.7 years, respectively. As of 2014 and 2013, the weighted‑average remaining contractual life of all exercisable options was 1.7 and 2.7 years, respectively.

The aggregate intrinsic value of the options at December 31, 2014 was $641 for both options outstanding and exercisable.

Restricted Stock

Restricted stock carries both voting and dividend rights. A summary of restricted stock activity for the years ended December 31, 2015, 2014 and 2013 is as follows:

 

 

 

 

 

The fair value of the Company’s restricted stock awards is the closing stock price on the date of grant. The Company recognized $385,  $891, and $1,126 of compensation expense related to restricted stock awards for the years ended December 31, 2015, 2014, and 2013, respectively. The unrecognized compensation expense for shares expected to vest as of December 31, 2015 and 2014 was approximately $0 and $360, respectively.

Restricted Stock Units

Restricted stock units (“RSUs”) are granted to both non‑employee directors and management. Prior to 2013, RSUs were only issued to directors. However, in 2013, the Company changed the timing and form of management’s annual stock grants and began to grant RSUs to management. For both non‑employee directors and management, RSUs carry dividend equivalent rights but do not carry voting rights. Each RSU represents the right to receive one share of the Company’s common stock and is subject to time based vesting restrictions. Participants are not required to pay any consideration to the Company at either the time of grant of a RSU or upon vesting.

In 2013, the Company’s compensation committee approved a retirement provision for RSUs issued to management. The retirement provision provides that members of management who either (1) are age 65 or older or (2) have at least ten years of service and are at least age 55 will continue to vest in unvested RSUs upon retirement. As the retirement provision does not qualify as a substantive service condition, the Company incurred $303 and $278 in additional expense in the years ended December 31, 2015 and 2014, respectively, as a result of accelerated stock based compensation expense for employees who meet the thresholds of the retirement provision. The Company’s nominating and governance committee also approved a retirement provision for the RSUs issued to non‑employee directors that accelerates the vesting of such RSUs upon retirement. Such awards are fully expensed immediately upon grant in accordance with ASC 718, as the retirement provision eliminates substantive service conditions associated with the awards.

A summary of RSU activity for the years ended December 31, 2015, 2014 and 2013 is as follows:

 

 

 

 

The Company recognized $1,643,  $1,247 and $852 of compensation expense related to the RSU awards in the years ended December 31, 2015, 2014 and 2013, respectively. The unrecognized compensation expense, net of expected forfeitures, calculated under the fair value method for shares that were, as of December 31, 2015, expected to be earned through the requisite service period was approximately $403 and is expected to be recognized through 2018.

Vested RSUs are “settled” by the delivery to the participant or a designated brokerage firm of one share of common stock per vested RSU as soon as reasonably practicable following a termination of service of the participant that constitutes a separation from service, and in all events no later than the end of the calendar year in which such termination of service occurs or, if later, two and one‑half months after such termination of service.

Performance Share Unit Awards

The Company granted performance share units as performance based awards under the 2010 Plan in the first quarter of 2015, 2014 and 2013 that are subject to performance conditions. Upon meeting the prescribed performance conditions, in the first quarter of the year subsequent to grant, employees will be issued RSUs of which one third will vest immediately upon issuance. The remaining RSU’s issued will be subject to vesting over the two years following the end of the performance period. In accordance with ASC 718, such awards are being expensed over the vesting period from the date of grant through the requisite service period, based upon the most probable outcome. As of December 31, 2015, the performance conditions for share units granted in the year ended December 31, 2015 have been met. Thus, in the first quarter of 2016, management estimates that 71,428 performance shares units will be converted into RSU’s. Meanwhile, in the first quarter of 2015 and 2014 there were 71,981 and 74,516 performance share units that converted into RSU’s, respectively. Upon conversion, the first third of the RSU’s issued will immediately vest and be converted into common shares. The remaining two thirds of the RSU’s issued will vest ratably over the remaining two‑year vesting period. The fair value per share of the awards is the closing stock price on the date of grant, which was $22.63,  $16.30 and $14.40 for the 2015, 2014 and 2013 grants, respectively.  The Company recognized $1,247,  $730 and $609 of compensation expense related to the awards granted in the years ended December 31, 2015 2014, and 2013, respectively. The unrecognized compensation expense calculated under the fair value method for shares that were, as of December 31, 2015, expected to be recognized through the requisite service period was $349  and is expected to be recognized through 2018.