13.

Stock Options and Restricted Stock

2005 Incentive Plan

The AMERISAFE 2005 Equity Incentive Plan (the "2005 Incentive Plan") is administered by the Compensation Committee of the Board and is designed to provide incentive compensation to executive officers and other key management personnel. The 2005 Incentive Plan permits awards in the form of incentive stock options, as defined in Section 422(b) of the Internal Revenue Code of 1986, non-qualified stock options, restricted shares of common stock and restricted stock units. The maximum number of shares of common stock that may be issued pursuant to option grants and restricted stock and restricted stock unit awards under the 2005 Incentive Plan is 1,900,000 shares, subject to the authority of the Board to adjust this amount in the event of a merger, consolidation, reorganization, stock dividend, stock split, combination of shares, recapitalization or similar transaction affecting the common stock. Officers, other key employees, consultants and other persons performing services for the Company that are equivalent to those typically provided by Company employees are eligible to participate in the 2005 Incentive Plan. However, only employees (including Company officers) can receive grants of incentive stock options.

Stock options granted under the 2005 Incentive Plan have an exercise price of not less than 100% of the fair value of the common stock on the date of grant. However, any stock options granted to holders of more than 10% of the Company's voting stock will have an exercise price of not less than 110% of the fair value of the common stock on the date of grant. Stock option grants are exercisable, subject to vesting requirements determined by the Compensation Committee, for periods of up to ten years from the date of grant, except for any grants to holders of more than 10% of the Company's voting stock, which will have exercise periods limited to a maximum of five years. Stock options generally expire 90 days after the cessation of an optionee's service as an employee. However, in the case of an optionee's death or disability, the unexercised portion of a stock option remains exercisable for up to one year after the optionee's death or disability. Stock options granted under the 2005 Incentive Plan are not transferable, except by will or the laws of descent and distribution.

The Company uses the Black-Scholes-Merton option pricing model to estimate the fair value of each option on the date of grant. The expected terms of options are developed by considering the Company's historical attrition rate for those employees at the officer level, who are eligible to receive options. Further, the Company aggregates individual awards into homogenous groups based upon grant date. Expected volatility is estimated using daily historical volatility for six companies within the property and casualty insurance sector. The Company believes that historical volatility of this peer group is currently the best estimate of expected volatility of the market price of the Company's common shares. The dividend yield is assumed to be zero as the Company has not historically paid cash dividends nor expects to pay cash dividends in the near future. The risk-free interest rate is the yield on the grant date of U.S. Treasury zero coupon securities with a maturity comparable to the expected term of the options.

At December 31, 2011, 256,009 shares of common stock were available for future awards under the 2005 Incentive Plan.

No options were granted under the 2005 Incentive Plan in 2011 or 2010. The assumptions used in the Black-Scholes-Merton pricing model for options granted under the 2005 Incentive Plan in 2009 were as follows:


		2009
Expected Volatility		35.5% – 35.6%
Weighted-Average Risk-Free Interest Rate		3.5% – 4.5%
Weighted-Average Expected Life		6.5 years
Expected Dividend Yield		0.0%

The following table summarizes information about the stock options outstanding under the 2005 Incentive Plan at December 31, 2009, 2010 and 2011:


	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)
Outstanding at January 1, 2009		1,419,055			9.82		8.2
Granted		94,000			17.42		—
Exercised		(32,800	)		9.00		—
Canceled, forfeited, or expired		(11,400	)		—		—

Outstanding at December 31, 2009		1,468,855			10.34		7.4

Exercisable at December 31, 2009		974,255			9.39		7.0

Outstanding at January 1, 2010		1,468,855			10.34		7.4
Granted		—			—		—
Exercised		(153,157	)		9.50		—
Canceled, forfeited, or expired		(45,000	)		—		—

Outstanding at December 31, 2010		1,270,698			10.28		6.4

Exercisable at December 31, 2010		1,118,498			9.49		6.1

Outstanding at January 1, 2011		1,270,698			10.28		6.4
Granted		—			—		—
Exercised		(338,350	)		9.87		—
Canceled, forfeited, or expired		(13,000	)		—		—

Outstanding at December 31, 2011		919,348			10.37		5.5

Exercisable at December 31, 2011		832,948			9.70		5.2

The weighted-average grant date fair values of options granted during 2009 were $7.47. No options were granted in 2010 or 2011.


	2011		2010		2009
Cash received from option exercises	$	3,339,000	$	1,455,000	$	295,000
Total tax benefits realized for tax deductions from options exercised		1,025,000		233,000		47,000
Total intrinsic value of options exercised		4,240,000		1,238,000		252,000
Fair value of shares vested		315,000		1,245,000		1,160,000
Aggregate intrinsic value of vested shares outstanding		11,288,000		8,961,000		8,360,000

The following table summarizes information about the restricted stock outstanding under the 2005 Incentive Plan at December 31, 2011:


	Shares			Weighted-Average Grant-Date Fair Value per Share
Nonvested balance at January 1, 2009		9,198			13.15
Granted		—
Vested		(9,198	)		13.15
Forfeited		—

Nonvested balance at December 31, 2009		—

Granted		—
Vested		—
Forfeited		—

Nonvested balance at December 31, 2010		—

Granted		—
Vested		—
Forfeited		—

Nonvested balance at December 31, 2011		—

The Company recognized compensation expense of $261,000, $2,162,000 and $1,233,000 in 2011, 2010 and 2009, respectively, related to awards made under the 2005 Incentive Plan.

2010 Restricted Stock Plan

In 2010, the Company's shareholders approved an amendment to the AMERISAFE 2005 Non-Employee Director Restricted Stock Plan (the "2010 Restricted Stock Plan"). The Plan is administered by the Compensation Committee of the Board and provides for the automatic grant of restricted stock awards to non-employee directors of the Company. Awards to non-employee directors are generally subject to terms including non-transferability, immediate vesting upon death or total disability of a director, forfeiture of unvested shares upon termination of service by a director and acceleration of vesting upon a change of control of the Company. The maximum number of shares of common stock that may be issued pursuant to restricted stock awards under the 2010 Restricted Stock Plan is 100,000 shares, subject to the authority of the Board to adjust this amount in the event of a merger, consolidation, reorganization, stock split, combination of shares, recapitalization or similar transaction affecting the common stock. At December 31, 2011, there were 78,657 shares of common stock available for future awards under the 2010 Restricted Stock Plan.

Under the 2010 Restricted Stock Plan, each non-employee director is automatically granted a restricted stock award for a number of shares equal to $30,000 divided by the closing price of the Company's common stock on the date of the annual meeting of shareholders at which the non-employee director is elected or is continuing as a member of the Board. Each restricted stock award vests on the date of the next annual meeting of shareholders following the date of grant, subject to the continued service of the non-employee director.

As of December 31, 2011, there were 9,513 shares of restricted stock outstanding under the 2010 Restricted Stock Plan, all of which will vest on the date of the annual meeting of shareholders in 2012.

The following table summarizes information about the restricted stock outstanding under the 2010 Restricted Stock Plan at December 31, 2011:


	Shares			Weighted-Average Grant-Date Fair Value per Share
Nonvested balance at January 1, 2009		6,468			16.22
Granted		5,844			15.39
Vested		(6,468	)		16.22
Forfeited		—			—

Nonvested balance at December 31, 2009		5,844			15.39

Granted		12,246			17.76
Vested		(6,260	)		15.56
Forfeited		—			—

Nonvested balance at December 31, 2010		11,830			17.75

Granted		9,513			22.06
Vested		(11,830	)		17.75
Forfeited		—			—

Nonvested balance at December 31, 2011		9,513			22.06

The Company recognized compensation expense of $210,000 in 2011, $163,000 in 2010 and $131,000 in 2009 related to the 2010 Restricted Stock Plan. In 2011, total tax benefits realized for tax deductions from vesting of restricted stock was $18,000. In 2010, total tax benefits realized for tax deductions from vesting of restricted stock was $5,000. In 2009, total tax expense of $2,000 was for tax from vesting of restricted stock.