Stock-Based Compensation Plans

6 Months Ended

Dec. 31, 2011

Stock-Based Compensation Plans [Abstract]

Stock-Based Compensation Plans

5. Stock-Based Compensation Plans

Employee Stock-Based Incentive Plan

The Company has issued stock options (“Stock Option Awards”) and restricted common stock (“Restricted Stock Awards”) to employees and directors under its Amended and Restated First Acceptance Corporation 2002 Long Term Incentive Plan (the “Plan”) and accounts for such issuances in accordance with FASB ASC 718, Compensation – Stock Compensation. At December 31, 2011, there were 2,858,086 shares remaining available for issuance under the Plan. Stock Option Awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Stock Option Awards expire over ten years and generally vest equally in annual installments over five years through March 2013, while the Restricted Stock Awards vest in designated installments through November 2014. Certain awards provide for accelerated vesting if there is a change in control (as defined in the Plan).

On November 17, 2009, the Company’s stockholders approved a value-for-value option exchange whereby certain outstanding stock options were exchanged for shares of restricted common stock (the “Exchange”). As approved by the Company’s stockholders, restricted common stock issued in the Exchange vests in equal annual installments beginning on the first anniversary of the date of the grant of the restricted stock, and no participant in the Exchange was permitted to receive restricted stock having an aggregate value greater than $150,000.

On November 18, 2009, consistent with the terms of the Exchange, the Company entered into an Option Cancellation and Restricted Stock Award Agreement (the “Agreement”) with certain employees to surrender, and have the Company cancel, certain outstanding Stock Option Awards held by the employees in exchange for shares of restricted common stock having a value equal to or less than the surrendered Stock Option Awards. The Exchange included 605,000 shares of the Company’s common stock underlying Stock Option Awards that were surrendered and cancelled in exchange for 160,577 shares of restricted common stock.

Compensation expense related to Stock Option Awards is calculated under the fair value method and is recorded on a straight-line basis over the vesting period. There were no Stock Option Awards granted during the six months ended December 31, 2011 and the years ended June 30, 2011, 2010 and 2009. At December 31, 2011, the weighted average remaining contractual life of options outstanding and exercisable/vested is approximately 1.9 years and 1.7 years, respectively.

A summary of the activity for the Company’s Stock Option Awards is presented below (in thousands, except per share data).

	Options			Exercise Price		Weighted Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at June 30, 2008		5,456		$	3.00-$11.81	$	4.13
Forfeited		(148	)	$	3.00-$11.81	$	7.51
Options outstanding at June 30, 2009		5,308		$	3.00-$11.81	$	4.04
Exchanged and Cancelled		(605	)	$	6.64-$11.81	$	10.69
Forfeited		(142	)	$	3.10-$11.81	$	6.91
Options outstanding at June 30, 2010		4,561		$	3.00-$8.13	$	3.06
Forfeited		(61	)	$	3.04	$	3.04
Options outstanding at June 30, 2011 and December 31, 2011		4,500		$	3.00-$8.13	$	3.06		—
Options exercisable/vested at December 31, 2011		4,319				$	3.06		—

A summary of the activity for the Company’s Restricted Stock Awards is presented below (in thousands, except per share data).

	Restricted Stock Awards			Weighted Average Grant Date Fair Value
Restricted Stock Awards outstanding at June 30, 2008		400		$	3.04
Granted		225		$	2.63
Restricted Stock Awards outstanding at June 30, 2009		625		$	2.89
Granted		160		$	1.97
Vested		(309	)	$	3.01
Forfeited		(4	)	$	2.50
Restricted Stock Awards outstanding at June 30, 2010		472		$	2.50
Vested		(307	)	$	2.60
Forfeited		(29	)	$	2.51
Restricted Stock Awards outstanding at June 30, 2011		136		$	2.30
Vested		(21	)	$	2.13
Forfeited		(20	)	$	2.20
Restricted Stock Awards outstanding at December 31, 2011		95		$	2.36

In the table above, the number of shares vested includes 61,681 shares surrendered by the employees to the Company for payment of minimum tax withholding obligations. Shares of stock withheld for purposes of satisfying minimum tax withholding obligations are again available for issuance under the Plan.

There were no Restricted Stock Awards granted during the six months ended December 31, 2011 and the year ended June 30, 2011. The aggregate fair values of Restricted Stock Awards vested during the six months ended December 31, 2011 and the years ended June 30, 2011 and 2010 were $44 thousand, $0.8 million and $0.9 million, respectively, at the date of vesting. There were no Restricted Stock Awards that vested during the year ended June 30, 2009. Expected future compensation expense related to the issuance of Restricted Stock Awards is $0.3 million, which will be amortized through November 2014.

Employee Stock Purchase Plan

The Company’s Board of Directors adopted the First Acceptance Corporation Employee Stock Purchase Plan (“ESPP”) whereby eligible employees may purchase shares of the Company’s common stock at a price equal to the lower of the closing market price on the first or last trading day of a six-month period. ESPP participants can authorize payroll deductions, administered through an independent plan custodian, of up to 15% of their salary to purchase semi-annually (June 30 and December 31) up to $25,000 of the Company’s common stock during each calendar year. The Company has reserved 400,000 shares of common stock for issuance under the ESPP. Employees purchased approximately 18,000, 32,000, 37,000 and 27,000 shares during the six months ended December 31, 2011 and the years ended June 30, 2011, 2010 and 2009, respectively. Compensation expense attributable to subscriptions to purchase shares under the ESPP was $2,000, $8,000, $16,000 and $17,000 for the six months ended December 31, 2011 and the years ended June 30, 2011, 2010 and 2009, respectively. At June 30, 2011, 193,169 shares remain available for issuance under the ESPP.