Note 15. Stock Option Plans, Stock Grants, Stock Appreciation Rights and Employee Stock Purchase Plan

At our May 2005 Annual Meeting, the stockholders approved the 2005 Stock Incentive Plan. The 2005 Stock Incentive Plan authorizes the issuance in the aggregate of 1,000,000 incentive stock options, non-incentive stock options, restricted shares and stock appreciation rights for our common stock. In April 2009, the stockholders approved an amendment to the 2005 Stock Incentive Plan increasing the available number of incentive stock options, non-incentive stock options, restricted shares and stock appreciation rights from 1,000,000 to 1,500,000. Stockholders further amended and restated the 2005 Stock Incentive Plan in 2010. Now, known as the 2005 Amended and Restated Stock Incentive Plan, but no additional shares authorized for issuance. As of December 31, 2012, 1,225,805 of such awards were issued leaving 274,195 awards available to be issued in subsequent periods. Upon the approval of the 2005 Amended and Restated Stock Incentive Plan, no further awards are being issued under any of our other stock plans or the stock appreciation rights plan. All stock options issued under the 2005 Amended and Restated Stock Incentive Plan are exercisable upon vesting for one share of our common stock and are granted at exercise prices no less than the fair market value of our common stock on the date of grant.

Stock-based compensation granted under the Company’s stock plans is expensed in tranches over the vesting period. Options and non-performance based grants generally vest equally over a three or four year period and the options have a maximum term of ten years. Certain non-performance based grants vest over five years with one-third vesting in each of the third, fourth and fifth years. The Company’s performance based share grants generally consist of two types of awards. The restricted stock units issued in 2011 and after will cliff vest over a three year period, with 50% vesting in full, and 50% dependent on the rate of compound annual growth in book value per share for the three years immediately prior to the vesting date, with actual shares that vest ranging between 150% to 0% of that portion of the original award. Those performance based restricted stock units issued prior to 2011 generally vest over five years with one-third vesting in each of the third, fourth and fifth years, dependent on the rolling three-year average return on equity based on the three years prior to the year in which the vesting occurs, with actual shares that vest ranging between 150% to 0% of the original award.

The amounts charged to expense for stock-based compensation for the years ended December 31, 2012, 2011 and 2010 are presented in the following table:


	Year Ended December 31,
In thousands	2012		2011			2010
Restricted stock units⁽¹⁾	$	7,380	$	139		$	5,551
Directors restricted stock grants⁽²⁾		390		248			210
Employee stock purchase plan		82		173			221
Stock appreciation rights⁽³⁾		—		(100	)		(77	)
Stock options		—		—			—

Total stock based compensation	$	7,852	$	460		$	5,905

(1) —

The increase in RSU expense for 2012 as compared to 2011 is largely impacted by a $6.2 million reversal of RSU expense recorded in 2011 related to performance based awards that are not expected to vest, and to a lesser extent, the issuance of additional performance and non-performance RSU granted in 2012, partially offset by the impact of cancellations. The decrease in RSU expense for 2011 as compared to 2010 was primarily due to the reduction in RSU expense related to performance based awards not expected to vest.

(2) —

Relates to non-employee directors serving on the Parent Company’s Board of Directors, all of whom have been elected by the Company’s stockholders, as well as non-employee directors serving on NUAL’s Board of Directors.

(3) —

All outstanding stock appreciation rights were exercised during 2011. The Company has no current plans to issue stock appreciation rights under the 2005 Amended and Restated Stock Incentive Plan.

Unvested restricted stock units outstanding as of December 31, 2012, 2011 and 2010, and changes during the years ended on those dates, are presented in the following table:


	December 31,
	2012			2011			2010
Beginning balance		526,972			590,661			619,739

Granted—Performance		97,145			86,118			90,634
Granted—Non Performance		146,915			98,640			78,500

Total Granted		244,060			184,758			169,134

Vested—Performance Earned		—			(22,993	)		(8,333	)
Vested—Performance Unearned		(46,998	)		(42,334	)		(12,000	)
Vested—Non Performance		(91,323	)		(149,738	)		(148,390	)

Total Vested		(138,321	)		(215,065	)		(168,723	)

Forfeited		(45,082	)		(33,382	)		(29,489	)

Ending balance		587,629			526,972			590,661

As included in the table above, there were no performance based restricted stock units that vested during the year ended December 31, 2012. Performance based shares that vested during the years ended December 31, 2011 and 2010 were 22,933 and 8,333, respectively.

The fair value of total vested shares for the years ended December 31, 2012, 2011 and 2010 was $4.6 million, $8.6 million, and $7.8 million, respectively.

The weighted average grant date fair value of all RSU granted during the years ended December 31, 2012, 2011 and 2010 was $48.21, $50.06 and $39.54, respectively.

As of December 31, 2012 and 2011, the total unrecognized compensation expense, net of estimated forfeitures, related to unvested RSU was $11.9 million and $4.9 million, respectively, which is expected to be recognized as expense over weighted average periods of 2.2 years and 2.7 years, respectively. The aggregate fair value of all unvested RSU as of December 31, 2012 and 2011 was $30.0 million and $25.1 million, respectively.

Stock options outstanding as of December 31, 2012, 2011 and 2010 are as follows:


	December 31,
	2012					2011					2010
				Average					Average					Average
	# of Shares			Exercise Price		# of Shares			Exercise Price		# of Shares			Exercise Price
Beginning balance		105,250		$	29.50		157,500		$	27.13		191,000		$	26.21
Granted		—			—		—			—		—			—
Exercised		(15,000	)	$	26.90		(52,250	)	$	22.35		(29,000	)	$	21.12
Expired or forfeited		—			—		—			—		(4,500	)	$	26.69

Ending balance		90,250		$	29.94		105,250		$	29.50		157,500		$	27.13

Number of options exercisable		90,250		$	29.94		105,250		$	29.50		157,500		$	27.13

The following table summarizes information about stock options outstanding as of December 31, 2012:


			Average
	Outstanding		Remaining		Average		Average Aggregate		Exercisable		Average		Average Aggregate
Price Range	Options		Contract Life		Exercise Price		Intrinsic Value		Options		Exercise Price		Intrinsic Value
$21 to $30		68,750		1.1	$	28.86	$	22.21		68,750	$	28.86	$	22.21
$31 to $37		21,500		2.2	$	33.39	$	17.68		21,500	$	33.39	$	17.68

Total		90,250								90,250

The Company has a Stock Appreciation Rights Plan which allows for the grant of up to 300,000 stock appreciation rights (“SARs”) at prices of no less than 90% of the fair market value of the common stock. As a result of the approval of the 2005 Amended and Restated Stock Incentive Plan, no further awards will be issued from the Stock Appreciation Rights Plan. SARs outstanding as of December 31, 2012, 2011 and 2010 were as follows:


	December 31,
	2012				2011					2010
	SARs		Average Exercise Prices		SARs			Average Exercise Prices		SARs			Average Exercise Prices
Beginning balance		—	$	—		16,500		$	18.74		52,000		$	14.05
Granted		—		—		—			—		—			—
Exercised		—		—		(16,500	)	$	18.74		(35,500	)	$	11.86
Expired or forfeited		—		—		—			—		—			—

Ending balance		—	$	—		—		$	—		16,500		$	18.74

Number of SARs exercisable		—	$	—		—		$	—		16,500		$	18.74

We offer an Employee Stock Purchase Plan (the “ESPP”) to all of our eligible employees. Employees are offered the opportunity to purchase the Company’s common stock at 90% of fair market value at the lower of the price at the beginning or the end of each six month offering period. Employees can invest up to 10% of their base compensation through payroll withholding towards the purchase of our common stock subject to the lesser of 1,000 shares or total market value of $25,000. There will be 8,136 shares purchased in 2013 from funds withheld during the July 1, 2012 to December 31, 2012 offering period. There were 15,679 shares purchased in 2012 in the aggregate from funds withheld during the offering periods of July 1, 2011 to December 31, 2011 and January 1, 2012 to June 30, 2012. We expense both the value of the 10% discount and the “look-back” option which provides for the more favorable price at either the beginning or end of the offering period.