NOTE 11. STOCK OPTION PLAN

We have one stock option plan. The Amended and Restated 1999 Stock Incentive Plan (the “Plan”) allows the company to grant equity-based awards, including stock options and restricted share awards to employees, advisors and non-employee members of the Board of Directors to the company. A maximum of 3,100,000 shares are authorized under the Plan. Options generally vest over a four-year period and have a maximum term of five years from the vesting date. The Plan provides that vesting may be accelerated in certain corporate transactions of the company. The Plan provides that the Board of Directors, or a committee appointed by the Board, have discretion, subject to certain limits, to modify the terms of outstanding options. We recognize non-cash stock-based compensation expense related to the estimated fair value of stock options granted in accordance with FASB ASC Topic 718 “Compensation—Stock Compensation.”

The following table reflects the components of stock-based compensation expense recognized in the Consolidated Statements of Operations for the years ended December 31, 2009, 2010 and 2011:

Stock option and restricted stock grants

The Plan allows grants of equity-based awards, including stock options and restricted stock awards to employees, advisors and non-employee members of the Board of Directors of the company. The stock option exercise price is set at the closing price of the company’s common stock on the date of grant, and the related number of shares granted is fixed at that point in time. Eligible employees may receive stock options annually with the number of shares and type of instrument generally determined by the employee’s salary grade and performance level. Certain management and professional level employees may also receive a stock option grant upon commencement of employment. Non-employee directors of the company may receive restricted stock awards that vest one year from the date of issuance in addition to stock option awards that vest immediately. The Plan does not allow key employees and directors (restricted persons) to exercise options during pre-defined blackout periods. However, restricted persons may participate in 10b5-1 Plans that allow them to exercise options according to predefined criteria.

We use the Black-Scholes option valuation model to estimate the grant date fair value of stock options. The expected volatility reflects the consideration of the historical volatility of our stock as determined by the closing price over a six to ten year term that is generally commensurate with the expected term of the option. The expected dividend is zero, as the 2010 distribution was not expected to be recurring in nature. The expected term of each option is based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rate is based on the U.S. Treasury yield curve in effect during the period the options were granted. We use historical data to estimate future forfeiture rates to apply against the gross amount of compensation expense determined using the option valuation model.

The weighted-average assumptions used to estimate the fair value of the stock options using the Black-Scholes option valuation model were as follows for the years ended December 31, 2009, 2010 and 2011:

Stock option information with respect to the company’s stock-based compensation plans during the three years ended December 31, 2011 is as follows (Dollars in thousands, except weighted average exercise price and weighted average grant date fair value):

The aggregate intrinsic value represents the difference between the company’s closing stock price on December 30, 2011 of $2.57 and the option exercise price of the shares for stock options that were in the money, multiplied by the number of shares underlying such options. The total fair value of options vested during the years ended December 31, 2009, 2010 and 2011 was $0.8 million, $1.1 million and $1.0 million, respectively.

The fair values of shares of restricted stock are determined based on the closing price of the company common stock on the grant dates. Information regarding the company’s restricted stock during the three years ended December 31, 2011 is as follows:

As of December 31, 2011, there was $1.7 million of total unrecognized compensation cost related to non-vested awards of stock options and restricted shares. This cost is expected to be recognized over a weighted-average period of 2.2 years.

Additional information regarding options outstanding as of December 31, 2011, is as follows: