Stock-Based Compensation

12 Months Ended

Dec. 31, 2011

STOCK-BASED COMPENSATION [Abstract]

STOCK-BASED COMPENSATION

(13) STOCK-BASED COMPENSATION

The Company currently has three stock-based compensation plans under which awards have been granted: (1) the Stock Incentive Plan (“SIP”), (2) the 2006 Management Incentive Plan (“2006 MIP”), and (3) the 2008 Equity Incentive Plan (“2008 EIP”). The Company generally issues authorized but previously unissued shares to satisfy stock option exercises, grants of restricted stock awards and vesting of restricted stock units.

The SIP, as amended, authorized the grant of options or other stock-based awards, with respect to up to 1,237,500 shares of the Company’s common stock to key employees, directors, consultants and advisors. The majority of options granted pursuant to the SIP had five to seven year terms and vested and became fully exercisable on a ratable basis over one to five years of continued employment or service. The SIP expired in June 2008.

During the first quarter of 2008, the Board of Directors of the Company adopted the 2008 EIP, which was approved by the shareholders at the annual meeting of the shareholders on May 29, 2008. The 2008 EIP authorizes the grant of incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other incentive awards. Two million shares of the Company’s common stock initially were reserved for issuance under the 2008 EIP pursuant to award grants to key employees, directors and service providers. The options granted pursuant to the 2008 EIP have seven year terms.

An amendment to the 2008 EIP was adopted by the Company’s Board of Directors in April 2010 and approved at the Company’s annual meeting of shareholders held on June 15, 2010. This amendment, among other things, increases the number of shares reserved for issuance under the 2008 EIP by 3,400,000 shares to a total of 5,400,000 shares and provides that restricted stock awards and other full value awards will count as 1.41 shares against the available pool of shares under the plan. As of December 31, 2011, there were 999,918 shares available for future grants under the 2008 EIP.

Stock options granted under the 2008 EIP generally have a term of seven years and vest in equal annual increments over the vesting period, which typically is three years for employees and one year for directors. The following table summarizes stock option grants during the years ended December 31, 2011, 2010 and 2009:

	Grantee Type	# of Options Granted		Vesting Period	Weighted Average Exercise Price		Grant Date Fair Value
2011
	Director group		65,801	1 year or less	$	7.23	$	267,360
	Director group		16,237	3 years		6.32		64,666
	Employee group		140,000	2 years		6.09		521,108
	Employee group		475,064	3 years		7.38		2,056,677
	Employee inducement		200,000	3-4 years (1)		5.37		625,940
2010
	Director group		51,276	1 year	$	4.20	$	129,604
	Director		8,546	3 years		5.39		34,146
	Employee group		649,010	3 years		4.14		1,739,687
2009
	Employee Inducement		296,296	4 years	$	3.57	$	763,529
	Director group		42,730	1 year		2.82		88,011
	Employee group		505,755	3 years		2.92		1,088,334

(1) The Company granted non-qualified stock options outside its existing stock-based compensation plans in the fourth quarter of 2011 to three employees in connection with their joining the company. Vesting for 100,000 of the three grants is subject to specific performance conditions that require the employee to achieve certain performance targets. These targets include specified cumulative revenue targets over a four-year period or minimum levels of claims-related criteria over a three-year period. The remaining 100,000 awards vest ratably over a four-year period.

Nonvested stock awards, including both restricted stock and restricted stock units, generally are nontransferable until vesting and the holders are entitled to receive dividends with respect to the nonvested shares. Prior to vesting, the grantees of restricted stock are entitled to vote the shares, but the grantees of restricted stock units are not entitled to vote the shares. Generally, nonvested stock awards vest in equal annual increments over the vesting period, which typically is three years for employees and one year for directors. The following table summarizes nonvested stock awards (restricted stock and restricted stock units) grants during the years ended December 31, 2011, 2010 and 2009:

	Grantee Type	# of Shares Granted		Vesting Period	Grant Date Fair Value
2011
	Director group		65,801	1 year or less	$	475,493
	Director group		17,237	3 years		109,229
	Employee group		60,000	2 years		365,400
	Employee group		455,064	3 years		3,372,024
	Employee inducement		120,000	3-4 years (1)		679,400
2010
	Director		51,276	1 year	$	215,274
	Director group		8,546	3 years		46,063
	Employee group		600,010	3 years		2,410,965
2009
	Employee Inducement		344,445	4 years	$	1,229,669
	Director group		42,730	1 year		120,499
	Employee		20,000	3 years		57,400
	Employee group		522,832	3 years		1,546,636
	Employee group		25,000	3 years		168,500

(1) The Company granted nonvested stock awards (restricted stock) outside its existing stock-based compensation plans in the fourth quarter of 2011 to two employees in connection with their joining the company. Vesting for each of the two grants is subject to specific performance conditions that require the employee to achieve certain performance targets. These targets include specified cumulative revenue targets over a four-year period for one grant and minimum levels of claims-related criteria over a three-year period for the other grant.

A summary of option activity as of December 31, 2011, and changes during the year then ended is presented below:

Options	Shares			Weighted- Average Exercise Price (Per Share)		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value ($ 000’s)
Outstanding at January 1, 2011		2,268,779		$	6.54
Granted		897,102			6.70
Exercised		(116,073	)		3.04			$	390
Forfeited		(171,837	)		8.33
Expired		(17,081	)		9.51
Outstanding at December 31, 2011		2,860,890		$	6.61		4.83 years	$	3,031
Exercisable at December 31, 2011		1,305,481		$	8.01		3.65 years	$	1,447

The weighted-average grant date fair value of options granted was $3.94 per share in 2011, $2.69 per share in 2010 and $2.31 per share in 2009. The total intrinsic value of options exercised was $0.4 million in 2011, $0.1 million in 2010 and less than $0.1 million in 2009.

A summary of nonvested stock awards (restricted stock and restricted stock units) activity as of December 31, 2011, and changes during the year then ended is presented below:

Nonvested Stock	Shares			Weighted Average Grant Date Fair Value (Per Share)
Nonvested at January 1, 2011		1,489,031		$	4.61
Granted		718,102			6.96
Vested		(521,693	)		3.95
Forfeited		(266,946	)		8.18
Nonvested at December 31, 2011		1,418,494		$	5.37

The weighted-average grant date fair value of nonvested stock awards (restricted stock and restricted stock units) granted was $6.96 per share in 2011, $4.05 per share in 2010 and $3.27 per share in 2009. The total vest date fair value of stock awards vested during the year was $3.6 million in 2011, $1.5 million in 2010, and $0.5 million in 2009.

2006 MIP Performance Units

At the annual meeting of shareholders held on August 11, 2006, the shareholders of the Company approved a proposal granting authorization to issue up to 2.1 million shares of the Company’s common stock under the 2006 MIP. On September 29, 2006, an aggregate of 682,301 Performance Units were awarded under the 2006 MIP to seven executive officers of the Company. The awards had an aggregate grant date fair value of $4.0 million. At Performance Unit settlement dates (which varied), participants were issued that number of shares of Company common stock equal to 60% of the number of Performance Units being settled, and were paid in cash an amount equal to 40% of the fair market value of that number of shares of common stock equal to the number of Performance Units being settled. The awards were 50% vested at the award date and the remainder of the awards vested ratably over approximately the following eighteen months with the awards fully vesting on March 17, 2008. The awards contain certain anti-dilution and change of control provisions. As a result, the number of Performance Units awarded were automatically adjusted on a pro-rata basis upon the conversion into common stock of any of the Company’s senior convertible notes or Series A convertible preferred stock. During 2006, the Company granted an additional 122,073 Performance Units with aggregate grant date fair values of $1.6 million as a result of this automatic adjustment provision.

On March 28, 2007, the Company granted 20,000 Performance Units to an additional executive officer under the 2006 MIP. The award had a grant date fair value of $0.3 million and was scheduled to vest ratably over four years. During 2007, the Company granted an additional 1,436,484 Performance Units to the eight executive officers with aggregate grant date fair values of $24.0 million as a result of the automatic adjustment provision related to the conversions of convertible securities into common stock.

All Performance Units must be settled before April 30, 2016. We recognized compensation expense (credit) of $0.1 million in 2011, $0.1 million in 2010, and $(0.2 million) in 2009 related to these 2006 MIP Performance Unit awards. The 2009 compensation credit resulted from the remeasurement of the liability-classified portion of the awards to fair value based on the market price of our common stock. We determined the amount of compensation expense recognized on the assumption that none of the Performance Unit awards would be forfeited.

During 2011, one current executive officer settled the remaining 44,831 Performance Units outstanding, resulting in the issuance of 26,898 shares of common stock and a cash payment of $0.1 million. There were no Performance Units outstanding as of December 31, 2011.

During 2010, three current and former executive officers settled an aggregate of 224,158 Performance Units under the 2006 MIP. These settlements resulted in the issuance of 134,490 shares of common stock and cash payments totaling $0.6 million.

During 2009, eight current and former executive officers settled an aggregate of 1,474,129 Performance Units under the 2006 MIP. These settlements resulted in the issuance of 884,473 shares of common stock and cash payments totaling $1.9 million.

Stock-based compensation charges aggregated $5.1 million in 2011, $4.0 million in 2010 and $3.3 million in 2009. We include these charges in “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Operations and Comprehensive Income. As of December 31, 2011, there was $9.2 million of unrecognized stock-based compensation expense related to stock options and nonvested stock which we expect to be recognized over a weighted average period of 1.79 years.