Employee Benefits

12 Months Ended

Dec. 31, 2011

Employee Benefits

Employee Benefits

NOTE 11: Employee Benefits

Stock-Based Compensation

Stock-based compensation costs is measured at the date of the grant, based on the calculated fair value of the award, and is recognized as expense over the employee’s service period, which is generally the vesting period of the equity grant.

The Company adopted the 2010 Stock Awards Plan (“2010 Plan”) effective April 1, 2010, the 2007 Stock Awards Plan (“2007 Plan”) during May 2007 and the 2002 Stock Awards Plan (“2002 Plan”) during March 2002.  All Plans provide for granting of (i) incentive stock options, (ii) nonqualified stock options, (iii) stock appreciation rights, (iv) restricted stock awards, (v) phantom stock awards or (vi) any combination of the foregoing to directors, officers and select employees.  The Company is authorized to grant a total of 3,150,000 shares of common stock under these three plans: 1,600,000 shares under the 2010 Plan, 750,000 shares under the 2007 Plan and 800,000 shares under the 2002 Plan.  At December 31, 2011, 1,017,250 shares remained available for grant under the 2010 Plan, 20,127 shares under the 2007 Plan, and 116,841 shares under the 2002 Plan.  Stock option exercises and restricted stock are funded through the issuance of authorized but unissued shares of common stock.

Stock Options

The Company granted both incentive stock options and non-qualified stock options to employees and non-employee directors.

On June 26, 2009, the Company announced the commencement of a voluntary stock option exchange program (“Exchange Offer”).  Eligible employees were provided the opportunity to surrender certain outstanding underwater incentive stock options granted in December 2007 with an exercise price of $28.00 in exchange for a lesser amount of replacement incentive stock options with a lower exercise price.  The Exchange Offer expired on July 27, 2009.  Pursuant to the Exchange Offer, 238,850 eligible stock options were tendered, representing 99.3% of the total stock options eligible for exchange in the Exchange Offer.  On July 27, 2009, the Company granted an aggregate of 218,178 new stock options in exchange for eligible stock options surrendered in the Exchange Offer.  The exercise price of the new stock option was $14.73, which was the closing price of Geokinetics common stock on July 27, 2009.  The incremental change to the Company’s unrecognized stock option expense related to these options was not material to the Company’s financial results.

Total compensation expense related to stock options recognized during the years ended December 31, 2011, 2010 and 2009 totaled $1.2 million, $1.0 million and $0.5 million, respectively.

The fair value of each option is estimated on the date of grant using the Black-Scholes pricing model.  The following weighted-average assumptions were made in estimating fair value:

	2011		2010		2009 (1)
Dividend Yield	0.00	%	0.00	%	—	%
Risk-Free Interest Rate	1.49	%	1.40	%	—	%
Expected Life (Years)	6.0		6.0		—
Expected Volatility	75.99	%	80.13	%	—	%

(1)Except for the new stock options granted in connection with the Exchange Offer described above, there were no new grants of stock options in 2009 that required fair value measurements.

The fair value of each option award is estimated on the date of grant using a Black-Scholes option pricing model. Expected volatilities are based on a number of factors, including historical volatility of the Company’s stock.  The Company uses historical data to estimate option exercise and employee termination for determining the estimated forfeitures.  The Company uses the simplified method for determining the expected life used in the valuation model.  The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.  As the Company has not declared dividends since it became a public entity, no dividend yield is used in the calculation.

A summary of the status of our common stock options awards is presented in the table below:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)
Balance at December 31, 2010	506,463		$	12.16	4.41
Granted	289,100		5.04		—
Exercised	—		—		—
Forfeited	(61,579	)	6.67		—
Cancelled	(24,434	)	10.60		—
Expired	—		—		—
Balance at December 31, 2011	709,550		$	9.82	4.28
Exercisable at December 31, 2011	303,114		$	15.50	2.75

During the years ended December 31, 2011, 2010, and 2009, no options were exercised.

The weighted-average grant-date fair value per share of stock options granted during the years ended December 31, 2011, 2010 and 2009 was $3.26, $4.55, and $12.34, respectively.

Options outstanding at December 31, 2011, expire between December 2013 and November 2017, and have exercise prices ranging from $3.39 to $28.00.

A summary of the status of our non-vested stock options as of December 31, 2011, and changes during the year ended December 31, 2011 are presented below:

	Number of Shares		Weighted Average Grant-Date Fair Value per Share
Non-vested at December 31, 2010	337,169		$	6.49
Granted	289,100		3.26
Vested	(158,254	)	8.42
Forfeited	(61,579	)	4.75
Expired	—		—
Non-vested at December 31, 2011	406,436		$	3.70

As of December 31, 2011, there was approximately $1.3 million of total unrecognized compensation expense related to stock options outstanding.  That cost is expected to be recognized over the next three years.

Restricted Stock

In addition to stock options, employees and non-employee directors may be granted restricted stock awards (“RSA”), which are awards of common stock with no exercise price. RSA expense is calculated by multiplying the stock price on the date of award by the number of shares awarded and amortizing this amount over the vesting period of the stock.

The Company recorded compensation expense related to restricted stock of approximately $1.4 million, or $0.07 per common share, $1.9 million, or $0.10 per common share, and $1.7 million, or $0.15 per common share for the years ended December 31, 2011, 2010 and 2009, respectively.

Restricted stock awards activity for 2011 is summarized below:

	Number of Shares of Restricted Stock		Weighted Average Grant-Date Fair Value per Share
Total non-vested at December 31, 2010	313,831		$	9.98
Granted	164,730		6.95
Vested	(125,895	)	10.49
Forfeited	(53,467	)	8.04
Total non-vested at December 31, 2011	299,199		$	8.44

The weighted average grant date fair value per share for RSA granted in 2011, 2010 and 2009 was $6.95, $6.72 and $14.02, respectively. The total fair value of RSA vested in 2011, 2010 and 2009 was $1.32 million, $2.0 million and $0.5 million, respectively.

Because the Company maintained a full valuation allowance on its U.S. deferred tax assets, the Company did not recognize any tax benefit related to stock-based compensation expense for the years ended December 31, 2011, 2010 and 2009.

As of December 31, 2011, there was approximately $1.9 million of total unrecognized compensation related to restricted stock outstanding.  That cost is expected to be recognized over the next three years.

Employee Retirement Plans

At December 31, 2011, the Company maintained two retirement plans in which the Company’s employees were eligible to participate.

U.S. domestic employees participated in a 401(k) plan in which the Company made matching contributions of approximately $1.5 million, $1.3 million, and $0.9 million for the years ended December 31, 2011, 2010 and 2009, respectively, whereby the Company matched 100% on the first 3% of the employee’s contribution and 50% on the second 3% of the employee’s contribution.

International employees participated in an international defined contribution plan in which the Company made matching contributions of approximately $0.7 million, $0.5 million, and $0.3 million for the years ended December 31, 2011, 2010 and 2009, respectively, whereby the Company matched 100% on the first 3% of the employee’s contribution and 50% on the second 3% of the employee’s contribution.

All employees of the Company paid out of the United States, both domestically and internationally, are eligible to participate effective the first of the month following three months from their hire date.

The Company does not offer any pension or other retirement benefits.