11.  Employee Stock Plans

Amended and Restated 2004 Stock Incentive Plan

In connection with the Company’s initial public offering (“IPO”), in May 2010, the Company’s Board of Directors and stockholders amended and restated the Company’s 2004 Stock Incentive Plan (as amended and restated, the “A&R 2004 Plan”) and certain outstanding award agreements thereunder, to among other things, eliminate the ability of the holders thereunder to use a promissory note to pay any portion of the exercise price of the options, to provide that the use of “net exercises” to pay any portion of the exercise price of the options shall be at the sole discretion of the committee administering the A&R 2004 Plan, and to effect certain ministerial changes under the A&R 2004 Plan.  In addition, in connection with the IPO, the Board of Directors also resolved not to issue any further awards under the A&R 2004 Plan.  As of September 30, 2011, 53,022 shares of common stock are reserved for issuance upon the exercise of outstanding options under the A&R 2004 Plan.  All outstanding options are fully vested.   Previously unvested shares vested upon the completion of the secondary offering in May 2011.   All options expire ten years from the date of grant.

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 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.

The following summarizes restricted stock grants under the 2010 Plan:

·                  May 2010 - An aggregate of 208,130 shares of restricted stock were granted to certain officers and employees under the 2010 Plan.  The restricted stock awards were time-based and vest over a five-year period in equal annual installments of 20% per year, commencing on the first anniversary of the grant date.  The first tranche of 41,621 shares vested and thus converted from participating securities to common shares in May 2011.

·                  October 2010-  An aggregate of 33,954 shares of restricted stock were granted to certain officers and employees under the 2010 Plan.  The restricted stock awards were time based and vest over a three-year period in equal annual installments.  The first tranche vested upon issuance in January 2011 and the remaining two tranches will vest in January 2012 and 2013, contingent on the continuous employment through the applicable vesting date.

·                  January 2011- An aggregate of 4,500 shares of restricted stock were granted to certain employees under the 2010 Plan.   The restricted stock awards are time based and vest over a three-year period in equal annual installments commencing on January 1, 2012.

·                  March 2011- An aggregate of 38,190 shares of restricted stock were granted to certain officers and employees under the 2010 Plan.  The restricted stock awards are time based and vest over a three-year period in equal annual installments commencing on January 1, 2012.

The restricted stock does not carry voting rights until the stock vests.   However, restricted stock holders do participate in dividends.

In March 2011, long-term incentive awards relating to an aggregate of 57,305 shares of unrestricted stock were granted to certain officers and employees under the 2010 Plan.  These awards are performance based and the shares underlying the units will be issued as unrestricted stock in March 2012 if performance targets for the 2009-2011 performance period are achieved.  The Company recognized $249 and $580 of compensation expense related to unrestricted stock awards granted for the three and nine months ended September 30, 2011.  The awards do not carry voting rights or participate in dividends until the underlying stock is issued.

As of September 30, 2011, the Company had 1,801,214 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

The following table summarizes information with respect to the Company’s stock option activity under the A&R 2004 Plan for the nine months ended September 30, 2011. Certain of the Company’s stockholders exercised 303,616 stock options during the nine months ended September 30, 2011, of which 182,082 options were exercised utilizing a broker assisted cashless exercise for the nine month period.    The options exercised were granted under APB 25 with an exercise price equal to fair value at date of grant, and accordingly so, no compensation expense was recorded at the time of grant.  The Company did not bear the risk and rewards of the options and thus, did not record stock based compensation expense.  The option holders paid the Company the required exercise price for the remaining options at the time of exercise and therefore did not record any stock based compensation expense. The following is a rollforward of stock option activity for the periods presented.

Restricted Stock Awards

A summary of restricted stock activity for the nine months ended September 30, 2011 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 $215  and $630 of compensation expense related to restricted stock awards granted for the three and nine months ended September 30, 2011, respectively.  The unrecognized compensation expense calculated under the fair value method for shares expected to vest as of September 30, 2011 was approximately $2,360 and is expected to be recognized over a weighted average period of 3.09 years.