10.Employee Stock Plans

 

Amended and Restated 2004 Stock Incentive Plan

 

As of March 31, 2014, 37,240 shares of common stock are reserved for issuance upon the exercise of outstanding options under the Company’s Amended and Restated 2004 Stock Incentive Plan (the “A&R 2004 Plan”).  All outstanding options are fully vested.  All options expire 10 years from the date of grant. No further awards are permitted to be issued under the A&R 2004 Plan.

 

There were no stock options exercised with respect to the Company’s stock under the A&R 2004 Plan for the three months ended March 31, 2014.

 

2010 Stock Incentive Plan

 

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 (“RSUs”), 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.

 

Restricted Stock Share Awards

 

A summary of restricted stock activity for the three months ended March 31, 2014 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 of compensation expense related to restricted stock awards granted for the three months ended March 31, 2014.  The unrecognized compensation expense calculated under the fair value method for shares expected to vest as of March 31, 2014 was approximately $1,004 and is expected to be recognized over a weighted average period of 1.20 years.

 

Performance Share Unit Awards

 

The Company granted performance share units as performance based awards under the 2010 Plan in the first quarter of 2014 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 a portion of which 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.  The fair value per share of the awards is the closing stock price on the date of grant, which was $16.30. The Company recognized $49 of compensation expense related to the awards in the three months ended March 31, 2014. The unrecognized compensation expense calculated under the fair value method for shares that were, as of March 31, 2014, expected to be earned through the requisite service period was approximately $723 and is expected to be recognized through 2017.

 

Restricted Stock Unit Awards

 

RSUs are granted to 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.

 

RSUs issued to management include a retirement provision under which 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 $278 and $261 in additional expense in the first quarter of 2014 and 2013, respectively, for employees who meet the thresholds of the retirement provision.  In 2013, the Company’s nominating and governance committee 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 three months ended March 31, 2014 is as follows:

 

 

 

 

 

The Company recognized $758 of compensation expense related to the RSU awards in the three months ended March 31, 2014. The unrecognized compensation expense, net of expected forfeitures, calculated under the fair value method for shares that were, as of March 31, 2014, expected to be earned through the requisite service period was approximately $1,106 and is expected to be recognized through 2017.

 

Vested director 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.  Vested management 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 vesting.