10.Employee Stock Plans

 

Amended and Restated 2004 Stock Incentive Plan

 

As of September 30, 2015, no additional shares of common stock were 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”).  No further awards are permitted to be issued under the A&R 2004 Plan.

 

There were 26,350 stock options exercised with respect to the Company’s stock under the A&R 2004 Plan during both the three months and nine months ended September 30, 2015.  The option holder paid the Company the required aggregate exercise price of $111 for options exercised at the time of exercise.   Stock options were previously expensed over the vesting period and therefore no additional expense was recorded at the time of exercise. There were no stock options exercised with respect to the Company’s stock under the A&R 2004 Plan for the three and nine months ended September 30, 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 Company’s Board of Directors approved an amendment and restatement of the 2010 Plan on March 5, 2014, contingent on stockholder approval of the performance goals under the 2010 Plan, and the amendment and restatement became effective upon stockholder approval of the performance goals at the 2014 annual meeting of stockholders held on April 30, 2014.  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 Awards

 

A summary of restricted stock activity for the nine months ended September 30, 2015 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 $52 and $325 of compensation expense related to restricted stock awards granted for the three and nine months ended September 30, 2015, respectively.  The Company recognized $215 and $660 of compensation expense related to restricted stock awards granted for the three and nine months ended September 30, 2014, respectively.  The unrecognized compensation expense calculated under the fair value method for shares expected to vest as of September 30, 2015 was approximately $52 and is expected to be recognized over a weighted average period of 0.25 years.

 

Performance Share Unit Awards

 

The Company granted performance share units as performance based awards under the 2010 Plan in the first quarter of 2015 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 $22.63. The Company recognized $396 and $925 of compensation expense related to the awards in the three and nine months ended September 30, 2015, respectively.  The Company recognized $171 and $390 of compensation expense related to the awards in the three and nine months ended September 30, 2014, respectively. The unrecognized compensation expense calculated under the fair value method for shares that were, as of September 30, 2015, expected to be earned through the requisite service period was approximately $767 and is expected to be recognized through 2018.

 

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 $303 and $278 in additional expense in the first quarter of 2015 and 2014, 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 nine months ended September 30, 2015 is as follows:

 

 

 

 

 

The Company recognized $311 and $1,490 of compensation expense related to the RSU awards in the three and nine months ended September 30, 2015, respectively.  The Company recognized $160 and $1,093 of compensation expense related to the RSU awards in the three and nine months ended September 30, 2014, respectively.  The unrecognized compensation expense, net of expected forfeitures, calculated under the fair value method for shares that were, as of September 30, 2015, expected to be earned through the requisite service period was approximately $544 and is expected to be recognized through 2018.

 

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.