Note 10 - Equity-based Compensation and Retirement Investment Plans

12 Months Ended

Dec. 31, 2011

Note 10 - Equity-based Compensation and Retirement Investment Plans Disclosure

Note 10 - Equity-based Compensation and Retirement Investment Plans

10.     EQUITY-BASED COMPENSATION AND RETIREMENT INVESTMENT PLANS

On November 24, 2004, the 2004 Equity Incentive Plan (“2004 Plan”) was approved by the Company’s stockholders. The Company’s board of directors approved the 2004 Plan in September 2004. The 2004 Plan:

· transferred up to 3,991,089 remaining shares available for issuance under the Company’s 1997 Plan and terminated the 1997 Plan for any new grants;

· transferred up to an additional 767,000 shares subject to outstanding options under the 1997 Plan if they expire without being exercised, of which 647,000 shares have been transferred as of December 31, 2011; and

· includes the ability to grant restricted stock, restricted stock units, performance units, dividend equivalent rights, and other stock-based compensation, including O.P. Units of the Operating Partnerships, as well as incentive and non-statutory stock options.

The 2004 Plan was adopted so that the Company may attract and retain the high quality employees, directors and consultants necessary to build the Company’s infrastructure and to provide ongoing incentives to the Company’s employees in the form of options to purchase the Company’s common stock by enabling them to participate in the Company’s success.

The 2004 Plan provides for the granting to employees, including officers (whether or not they are directors) of “incentive stock options” within the meaning of Section 422 of the Code, and for the granting of non-statutory options to employees, directors and consultants of the Company, of which 1,674,535 and 1,084,535 shares of common stock were available for future option or award grants under the 2004 Plan as of December 31, 2011 and 2010, respectively.

The Company’s stock-based compensation expense was approximately $57, $67 and $352 for the years ended December 31, 2011, 2010 and 2009, respectively.

Determining Fair Value of Stock Options

The fair value of stock options granted during the years ended December 31, 2010 and 2009 were determined by the Company using the Black-Scholes option pricing model and assumptions of certain components within the model. These components consist of the expected dividend, expected volatility, risk-free interest rate, expected term and forfeiture rate.

In April 2011, stock options to purchase 590,000 shares of common stock held by employees and directors of the Company expired.

In February 2010, stock options to purchase 171,000 shares of common stock were granted to an employee. Of this total grant, options to purchase 85,500 shares vested immediately and options to purchase 85,500 shares vest monthly for 24 months, subject to continued employment with the Company. Each option grant has a term of six years from the date of grant subject to earlier termination in certain events related to termination of employment. The options were granted at an exercise price of $6.99 per share. The estimated fair value of the options granted was $0.43 per share on the date of grant using the Black-Scholes option pricing model with the following assumptions: dividend yield of 8.58%, volatility of 22.57%, risk free rates of 2.40% and an expected life of 5.5 years. Forfeiture rate was estimated to be 0%. All options were granted at fair market value on the date of grant and were approved by the Compensation Committee of the board of directors.

In January 2009, the Compensation Committee of the board of directors approved the rescission of stock options to purchase a total of 650,000 shares of common stock granted to an employee under its 2004 Equity Incentive Plan in November 2008. The rescission was effected because the number of shares subject to the option grant exceeded the maximum number of shares that can be granted by the Company to one individual in any calendar year under its 2004 Equity Incentive Plan.

In January 2009, stock options to purchase 200,000 shares of common stock held by an employee of the Company expired.

In March 2009, stock options to purchase 500,000 shares of common stock were granted to an employee. Of this total grant, options to purchase 175,000 shares vested immediately, options to purchase 100,000 shares vest monthly for nine months and options to purchase 225,000 shares vest monthly for 36 months, subject to continued employment with the Company. Each option grant has a term of six years from the date of grant subject to earlier termination in certain events related to termination of employment. The options were granted at an exercise price of $5.99 per share. The estimated fair value of the options granted was $0.14 per share on the date of grant using the Black-Scholes option pricing model with the following assumptions: dividend yield of 13.36%, volatility of 23.77%, risk free rates of 1.83% and an expected life of 5.5 years. Forfeiture rate was estimated to be 0%. All options were granted at fair market value on the date of grant and were approved by the Compensation Committee.

In April 2009, stock options to purchase 375,000 shares of common stock held by an employee of the Company expired.

The following table shows the activity and detail for the 2004 Plan for each of the three years in the period ended December 31, 2011.

	Shares Available For Grant			Options Outstanding			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value ($ in thousands)
Balance, December 31, 2008		1,180,535			3,332,500		$	9.62		4.0	$	224
Options granted		(500,000	)		500,000		$	5.99
Options forfeited		575,000			(575,000	)	$	10.70
Balance, December 31, 2009		1,255,535			3,257,500		$	8.87		3.7	$	738
Options granted		(171,000	)		171,000		$	6.99
Options exercised		-			(10,859	)	$	6.14
Balance, December 31, 2010		1,084,535			3,417,641		$	8.79		2.8	$	554
Options forfeited		590,000			(590,000	)	$	10.00
Balance, December 31, 2011		1,674,535			2,827,641		$	8.54		2.4	$	3,678
Vested and expected to vest – December 31, 2011					2,827,641		$	8.54		2.4	$	3,678
Exercisable – December 31, 2011					2,739,319		$	8.58		2.3	$	3,678

The following table summarizes information regarding options outstanding for the 2004 Plan at December 31, 2011:

	Options Outstanding						Options Exercisable				Options Not Exercisable
Range of Exercise Prices	Options		Weighted Average Remaining Contractual Life in Years		Exercise Price		Options		Exercise Price		Options		Exercise Price
$5.99		500,000		3.17	$	5.99		481,250	$	5.99		18,750	$	5.99
$6.14		694,141		2.92	$	6.14		655,183	$	6.14		38,958	$	6.14
$6.99		171,000		4.08	$	6.99		163,875	$	6.99		7,125	$	6.99
$9.51		760,000		2.00	$	9.51		744,167	$	9.51		15,833	$	9.51
$11.36		52,500		2.58	$	11.36		44,844	$	11.36		7,656	$	11.36
$12.09		650,000		1.08	$	12.09		650,000	$	12.09		-	$	12.09
$5.99 to $12.09		2,827,641		2.36	$	8.54		2,739,319	$	8.58		88,322	$	7.23

As of December 31, 2011, total compensation cost related to unvested stock-based awards granted, but not yet recognized, was approximately $3, net of estimated forfeitures. The cost will be amortized on a straight-line basis over a weighted-average remaining period of 8.3 months. Future option grants will increase the amount of compensation expense that will be recorded.

None of the options granted are contingent upon the attainment of performance goals or subject to other restrictions. As of December 31, 2011 and 2010, “in-the-money” outstanding options to purchase 1,300,308 and 896,329 shares of common stock, respectively, were exercisable.

The 2004 Plan allows the Company to grant to employees and directors a wider range of awards, including restricted stock, stock grants, restricted stock units, performance units, other stock-based compensation, including O.P. Units exchangeable for shares of common stock, and dividend equivalent rights, which will help the Company achieve its goal of attracting, retaining and motivating its personnel which is necessary to build the Company’s infrastructure, achieve the Company’s business goals and enhance stockholder value. No options or awards may be granted under the 2004 Plan after November 24, 2014.

Awards and options granted under the 2004 Plan may be granted to any employees, non-employee directors or consultants of the Company and any corporation or other entity affiliated with the Company, including the Operating Partnerships. Only employees of the Company or a corporate subsidiary may receive incentive stock options. Options can be granted to non-employee directors and consultants of the Company and to employees of the Company or a corporate subsidiary. No individual may receive in any one calendar year options for more than 500,000 of the total number of shares of stock.

The options generally are granted at the fair market value of the Company’s common shares at the date of grant, vest over a four year period, are exercisable upon vesting and expire six years from the date of grant. The exercise price for all incentive stock options under the 2004 Plan shall not be less than the fair market value of the underlying common shares at the time the option was granted.

Under the 2004 Plan, each non-employee member of the board of directors who became or becomes a member of the board of the directors after November 24, 2004, the date on which the 2004 Plan was approved by the Company’s stockholders, receives automatically a grant of an option to purchase 50,000 shares of common stock at an exercise price equal to 100% of the fair market value of the common stock at the date of grant of such option. Such options become exercisable cumulatively with respect to 1/48th of the underlying shares on the first day of each month following the date of grant. Generally, the options must be exercised while the optionee remains a director. In addition, the board of directors may authorize annual option grants or awards to non-employee directors in the board’s discretion as long as the number of shares or equivalent number of underlying shares of common stock in the case of certain awards, does not exceed 50,000 per year. A disinterested majority of the board also may authorize additional options and awards to a director serving as a committee chair or providing other extraordinary service to the Board. The 2004 Plan further provides that upon an acquisition of the Company in which more than 50% of the total voting power of the Company’s outstanding securities is transferred to the acquirer or acquiring parties, options and awards held by non-employee directors will vest in full and become exercisable prior to their expiration.

The board of directors may terminate the 2004 Plan at any earlier time or make modifications of the 2004 Plan as it deems advisable.  Awards and options granted at any time during the term of the 2004 Plan will not expire solely because of the termination of the 2004 Plan, and no amendment or modification of the 2004 Plan shall affect the terms of any outstanding award unless the board expressly provides otherwise. Termination or amendment of the 2004 Plan may not adversely affect the rights of the recipient of an award without his or her consent.  The Compensation Committee of the board of directors may amend the terms of any option or award previously granted, but such amendment may not impair the rights of the recipient without his or her consent.

An initial total of 4,638,089 shares of common stock are reserved for issuance under the 2004 Plan. At no time may the number of shares issued pursuant to or subject to outstanding awards granted under the 2004 Plan exceed this number, subject to the provisions for increase and adjustment set forth in the 2004 Plan. If any option or award expires, terminates or is cancelled without being exercised in full, or any other award is forfeited, the shares forfeited or not purchased will be available for future grant of awards.

The Company has adopted an employee investment plan (the “Plan”), under Section 401(k) of the Internal Revenue Code. Employees who are at least 21 years old and who have completed six months of eligibility service may become participants in the Plan. Each participant may make contributions to the Plan through salary deferrals in amounts of at least 1% to a maximum of 15% of the participant’s compensation, subject to certain limitations imposed by the Internal Revenue Code. The Company contributes an amount up to 15% of the participant’s compensation, based upon management’s discretion. A participant’s contribution to the Plan is 100% vested and non-forfeitable. A participant will become vested in 100% of the Company’s contributions after two years of eligible service. For the years ended December 31, 2011, 2010 and 2009, the Company recognized approximately $127, $125 and $125, respectively, of expense for employer contributions made in connection with this Plan.