Annual report pursuant to section 13 and 15(d)

Stock Compensation Plans

v2.4.0.8
Stock Compensation Plans
 12 Months Ended
Dec. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Compensation Plans
Stock Compensation Plans








Employee Stock Purchase Plan

Under the Company’s amended and restated Qualified Employee Stock Purchase Plan, a total of 10,000,000 shares of common stock are available for issuance. As currently administered by the Company’s compensation committee, all full-time employees may use a portion of their salary to acquire shares of LTS common stock under this purchase plan at a 5% discount from the market price of LTS’ common stock at the end of each option period. Option periods have been set at three month periods and commence on January 1, April 1, July 1, and October 1 of each year and end on March 31, June 30, September 30 and December 31 of each year. The plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. During 2013, 112,646 shares of LTS common stock were issued to employees under this plan, at prices ranging from $1.57 to $2.97; during 2012, 98,513 shares of LTS common stock were issued to employees under this plan, at prices ranging from $1.25 to $1.69; during 2011, 58,884 shares of LTS common stock were issued to employees under this plan, at prices ranging from $1.09 to $2.36; resulting in a capital contribution of $201, $138 and $83 for 2013, 2012 and 2011, respectively.

Amended and Restated 1999 Performance Equity Plan and 2009 Incentive Compensation Plan

In 1999, the Company adopted the 1999 Performance Equity Plan (as amended and restated, the “1999 Plan”) and in 2009 the Company adopted the 2009 Incentive Compensation Plan (the “2009 Plan”), which provide for the grant of stock options and other awards to designated employees, officers and directors and certain other persons performing services for the Company and its subsidiaries, as designated by the board of directors. The plans each provide for the granting of up to 25,000,000 awards with an annual limit on grants to any individual of 1,500,000. Awards under the plans include stock options, stock appreciation rights, restricted stock, deferred stock, stock reload options and/or other stock-based awards. Dividends, if any, are not paid on unexercised stock options. The compensation committee of the Company’s board of directors administers the plans. Stock options granted under the 2009 Plan may be incentive stock options and non-qualified stock options. An incentive stock option may be granted only through August 27, 2019 under the 2009 Plan and may only be exercised within ten years of the date of grant (or five years in the case of an incentive stock option granted to an optionee who at the time of the grant possesses more than 10% of the total combined voting power of all classes of stock of LTS (“10% Shareholder”). Incentive stock options may no longer be granted under the 1999 Plan. The exercise price of both incentive and non-qualified options may not be less than 100% of the fair market value of LTS’ common stock at the date
of grant, provided, that the exercise price of an incentive stock option granted to a 10% Shareholder shall not be less than 110% of the fair market value of LTS’ common stock at the date of grant. As of December 31, 2013, 6,351,480 and 1,189,654 shares of common stock were available for issuance under the 2009 Plan and the 1999 Plan, respectively.

A summary of the status of the 1999 Plan at December 31, 2013 and changes during the years ended December 31, 2013, 2012 and 2011 are presented below:

 
 
Shares
 
Weighted- Average Exercise Price
 
Weighted- Average Remaining Contractual Term (Years)
 
Aggregate Intrinsic Value
Options outstanding, December 31, 2010
 
17,195,240

 
1.38

 
6.5
 
2,980

Granted
 
1,655,000

 
1.27

 
  
 
  

Exercised
 
(634,772
)
 
0.88

 
  
 
  

Forfeited
 
(65,000
)
 
1.73

 
  
 
  

Expired
 
(385,000
)
 
2.72

 
 
 
 
Options outstanding, December 31, 2011
 
17,765,468

 
1.36

 
6.0
 
19,977

Granted
 
500,000

 
2.80

 
  
 
  

Exercised
 
(881,500
)
 
0.88

 
  
 
  

Forfeited
 
(35,000
)
 
1.90

 
  
 
  

Expired
 
(46,500
)
 
0.27

 
 
 
 
Options outstanding, December 31, 2012
 
17,302,468

 
1.43

 
5.3
 
4,475

Granted
 
—

 
—

 
  
 
  

Exercised
 
(285,067
)
 
1.33

 
  
 
  

Forfeited
 
(30,000
)
 
1.38

 
  
 
  

Expired
 
(55,000
)
 
0.34

 
 
 
 
Options outstanding, December 31, 2013
 
16,932,401

 
$
1.43

 
4.4
 
$
28,748

Vested or expected to vest
 
16,926,441

 
$
1.43

 
4.4
 
$
28,743

Options exercisable, December 31, 2013
 
14,994,901

 
$
1.44

 
4.1
 
$
25,429



A summary of the status of the 2009 Plan at December 31, 2013 and changes during the years ended December 31, 2013, 2012 and 2011 are presented below:

 
 
 
 
 
 
 
 
 
 
 
Shares
 
Weighted- Average Exercise Price
 
Weighted- Average Remaining Contractual Term (Years)
 
Aggregate Intrinsic Value
Options outstanding, December 31, 2010
 
1,245,000

 
1.00

 
9.3
 
211

Granted
 
11,320,743

 
1.61

 
  
 
  

Exercised
 
(50,000
)
 
0.80

 
  
 
  

Forfeited
 
(11,749
)
 
1.68

 
 
 
 
Options outstanding, December 31, 2011
 
12,503,994

 
1.55

 
9.6
 
11,651

Granted
 
3,725,000

 
2.57

 
  
 
  

Forfeited
 
(291,279
)
 
1.73

 
 
 
 
Options outstanding, December 31, 2012
 
15,937,715

 
$
1.78

 
8.7
 
$
790

Granted
 
2,788,212

 
1.41

 
  
 
  

Exercised
 
(272,955
)
 
1.39

 
  
 
  

Forfeited
 
(307,408
)
 
1.51

 
  
 
  

Options outstanding, December 31, 2013
 
18,145,564

 
$
1.74

 
8.0
 
$
25,285

Vested or expected to vest
 
17,706,646

 
$
1.74

 
8.0
 
$
24,646

Options exercisable, December 31, 2013
 
7,252,152

 
$
1.64

 
7.7
 
$
11,202



Non-Plan Options

The Company has granted stock options to newly-hired employees in conjunction with their employment agreements or in connection with acquisitions, which are outside of the option plans. A summary of the status of these options at December 31, 2013 and changes during the years ended December 31, 2013, 2012 and 2011 are presented below:

 
 
Shares
 
Weighted- Average Exercise Price
 
Weighted- Average Remaining Contractual Term (Years)
 
Aggregate Intrinsic Value
Options outstanding, December 31, 2011 and 2012
 
4,475,000

 
$
1.63

 
4.4
 
$
516

Exercised
 
(50,000
)
 
1.05

 
  
 
  

Options outstanding, December 31, 2013
 
4,425,000

 
$
1.63

 
3.4
 
$
6,624

Vested or expected to vest
 
4,425,000

 
$
1.63

 
3.4
 
$
6,624

Options exercisable, December 31, 2013
 
4,425,000

 
$
1.63

 
3.4
 
$
6,624



The weighted-average grant date fair value of employee and director options granted during the years ended December 31, 2013, 2012 and 2011 was $0.74, $1.13 and $0.82, respectively. The fair value of each option award was estimated on the date of grant using the Black-Scholes option pricing model using the following weighted-average assumptions:

 
 
Year Ended December 31,
  
 
2013
 
2012
 
2011
Dividend yield
 
—
%
 
—
%
 
—
%
Expected volatility
 
65.66
%
 
62.87
%
 
81.15
%
Risk-free interest rate
 
1.17
%
 
1.00
%
 
2.28
%
Expected life (in years)
 
6.2

 
6.2

 
6.2



On November 4, 2011, in connection with the Securities America acquisition, the Company granted to independent financial advisors ten-year options to purchase an aggregate of 8,020,743 shares of the Company’s common stock at an exercise price of $1.68 per share. The options vest in four equal annual installments beginning on the first anniversary of the grant date.
The Company valued the options at $9,531 (fair value of $1.19 per option) on the date of grant using the Black-Sholes option pricing model using the following weighted-average assumptions.

 
Year Ended December 31, 2011
Dividend yield
—
%
Expected volatility
62.16
%
Risk-free interest rate
2.06
%
Expected life (in years)
10.0



The weighted average expected life for the 2013, 2012 and 2011 grants to employees and directors reflects the alternative simplified method permitted by authoritative guidance, which defines the expected life as the average of the contractual term of the options and the weighted-average vesting period for all option tranches. The Company estimates the expected term for stock options awarded to independent financial advisors using the contractual term. Expected volatility for the option grants for 2011, prior to the acquisition of Securities America, was based on the Company’ historical volatility over the same number of years as the expected life prior to the option grant date. Expected volatility in 2011 after the Securities America acquisition and in 2012 and 2013 was based on blended volatility comprised of the historical volatility of the common stock of the Company and its peers over the same number of years as the expected life, prior to the option grant date.

Compensation expense for share-based awards granted to independent financial advisors is measured at their vesting date fair value. The compensation expense recognized each period is based on the awards' estimated value at the most recent reporting date.

As of December 31, 2013, there was $12,498 of total unrecognized compensation cost related to non-vested share-based compensation arrangements. This cost is expected to be recognized over the vesting periods of the options, which on a weighted-average basis is approximately 1.84 years.

The total intrinsic value of options exercised during the years ended December 31, 2013, 2012 and 2011 amounted to $957,$1,267 and $762, respectively. Tax benefits related to option exercise were not deemed to be realized since net operating loss carryforwards are available to offset taxable income computed without giving effect to the deductions related to option exercises and the deferred tax assets related to those net operating losses have been fully reserved.

Non-cash compensation expense relating to stock options was calculated using the Black-Scholes option pricing model, amortizing the value calculated over the vesting period and applying a forfeiture percentage as estimated by the Company’s management, using historical information. The Company has elected to recognize compensation cost for option awards that have graded vesting schedules on a straight line basis over the requisite service period for the entire award. For the years ended December 31, 2013, 2012 and 2011, non-cash compensation expense relating to stock option agreements granted to employees, consultants and advisors amounted to $6,766, $4,690 and $3,909, respectively.

In September 2010, the Company granted 200,000 restricted shares of the Company’s common stock to employees pursuant to the 2009 Plan with vesting conditioned upon the employees continued employment at September 23, 2012. During 2012 and 2011, 12,500 and 5,000 shares, respectively, were forfeited. For the years ended December 31, 2012 and 2011, the Company has recorded an expense of $54 and $105, respectively, associated with the grants.