12. STOCK-BASED COMPENSATION

The following costs related to the Company’s stock compensation plans are included in the unaudited consolidated statements of income:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Cost of revenues	$	1,036	$	417	$	2,486	$	947
Selling, general and administrative		1,010		368		2,883		1,207

Total	$	2,046	$	785	$	5,369	$	2,154

On January 16, 2012, the Company issued 194,800 shares of non-vested (“restricted”) common stock to Mr. Robb, President of EU Operations and Executive Vice President. These restricted shares vested 25% on January 16, 2012, and are scheduled to vest 25% on each of January 1, 2013, 2014, and 2015. On termination of Mr. Robb’s service to the Company with Cause or without Good Reason (in each case, as defined in the award agreement), any unvested restricted shares will be forfeited. In addition, under the restricted stock award agreement, Mr. Robb is subject to perpetual confidentiality and non-disclosure obligations as well as non- competition and employee and customer non-solicitation obligations that survive for a period of 12 months after the termination of his service to the Company. Fair market value of these restricted shares on the date of grant was $2,338. The stock-based compensation charge related to the shares granted for the three and nine months ended September 30, 2012, was $146 and $1,023, respectively.

On May 25, 2012, the Company issued 217,272 shares of non-vested stock (“restricted”) common stock in connection with the acquisition of Thoughtcorp (Note 3). The shares vest 50% on each of the first and second anniversaries of the Closing Date. Upon termination of the Sellers’ services to the Company with Cause or without Good Reason (in each case, as defined in the escrow agreement), any unvested shares will be forfeited. Fair value of these shares on the date of grant was $3,607. The stock-based compensation charge related to the shares granted for the three and nine months ended September 30, 2012, was $451 and $645, respectively.

2012 Non-Employee Directors Compensation Plan — On January 11, 2012 the Company approved the 2012 Non-Employee Directors Compensation Plan (“2012 Directors Plan”), which will be used to issue equity grants to its non-employee directors. The Company authorized 600,000 shares of common stock to be reserved for issuance under the plan. The 2012 Directors Plan will expire after ten years and will be administered by the Company’s board of directors.

On January 18, 2012, the Company issued 11,764 shares of non-vested (“restricted”) common stock to its non-employee directors. The shares will vest and become non-forfeitable 25% on each of the first four anniversaries of the grant date. On termination of service from the Board at any time, a portion of restricted shares shall vest as of the date of such termination on a pro rata basis, determined by the number of days that the participant served on the Board from the grant date through the date of such termination. Fair market value of these restricted shares on the date of grant was $141. The stock-based compensation charge related to the shares granted for the three and nine months ended September 30, 2012, was $9 and $25, respectively.

On April 5, 2012, the Company granted 7,092 shares of non-vested (“restricted”) stock to its non-employee directors under the 2012 Non-Employee Director Compensation Plan. The restricted stock vests and becomes 100% non-forfeitable on the first anniversary of the grant date. Upon termination of service from the Board at any time, a portion of the restricted stock shall vest as of the date of such termination on a pro rata basis for the number of days that the participant served on the Board from the grant date through the date of such termination. The fair market value of the restricted stock on date of grant was $150. The stock-based compensation charge related to the shares granted for the three and nine months ended September 30, 2012, was $37 and $73, respectively.

2012 Long-Term Incentive Plan — On January 11, 2012 the Company approved the 2012 Long-Term Incentive Plan (“2012 Plan”), which will be used to issue equity grants to employees. The Company authorized 9,246,800 shares of common stock to be reserved for issuance under the plan. This is in addition to 733,808 shares that remained available for issuance under the 2006 Plan as of January 11, 2012 and which are available for issuance under the 2012 Plan. In addition, up to 6,595,136 shares that are subject to outstanding awards as of January 1, 2012, under the 2006 Plan and that expire or terminate for any reason prior to exercise or that would otherwise return to the 2006 Plan’s share reserve will be available for awards to be granted under the 2012 Plan.

During the nine months ended September 30, 2012, the Company issued 1,443,810 options to purchase common stock under the 2012 Plan with an aggregate grant date fair value of $10,870.

As of September 30, 2012, a total of 8,705,393 shares remained available for issuance under the 2012 Plan.

2006 Stock Option Plan — Effective May 31, 2006, the Board of Directors of the Company adopted the 2006 Stock Option Plan (the “2006 Plan”). The Company’s stock option plan permitted the granting of options to directors, employees, and certain independent contractors. The Compensation Committee of the Board of Directors generally had the authority to select individuals who are to receive options and to specify the terms and conditions of each option so granted, including the number of shares covered by the option, the exercise price, vesting provisions, and the overall option term. In January 2012, the 2006 Plan was discontinued; however, a total of 857,808 shares remain available for issuance under the 2012 Plan as of September 30, 2012. All of the options issued pursuant to the 2006 Plan expire ten years from the date of grant.

Stock option activity under the Company’s plans is set forth below:


	Number of Options			Weighted Average		Aggregate Intrinsic Value
Options outstanding at December 31, 2011		6,595,136		$	4.65	$	48,447
Options granted		1,443,810			16.80		3,090
Options exercised		(831,957	)		3.74		(12,646	)
Options forfeited/cancelled		(168,595	)		10.68		(1,393	)

Options outstanding at September 30, 2012		7,038,394		$	7.11	$	83,264

Options vested and exercisable at September 30, 2012		3,794,531		$	3.32	$	59,271
Options expected to vest		3,026,253		$	11.40	$	22,818

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model. The Company recognizes the fair value of each option as compensation expense ratably using the straight-line method over the service period (generally the vesting period). Additionally, the Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses a combination of historical data and other factors to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest.

As of September 30, 2012, total unrecognized compensation cost related to non-vested share-based compensation awards was $19,166. That cost is expected to be recognized over the next 2 years using the weighted average method.

Summary of restricted stock activity as of September 30, 2012, and changes during the nine months then ended is presented below:


	Number of Shares			Weighted Average Grant Date Fair Value Per Share
Unvested restricted stock outstanding at January 1, 2012		—		$	—
Restricted stock granted		430,928			14.47
Restricted stock vested		(48,700	)		12.00

Unvested restricted stock outstanding at September 30, 2012		382,228		$	14.78