NOTE 5—EQUITY BASED COMPENSATION

In March 2004, the Board of Directors adopted the Carmike Cinemas, Inc. 2004 Incentive Stock Plan (the “2004 Incentive Stock Plan”). The Company’s Compensation and Nominating Committee (or similar committee) may grant stock options, stock grants, stock units, and stock appreciation rights under the 2004 Incentive Stock Plan to certain eligible employees and to outside directors. As of June 30, 2013, there were 1,102,010 shares available for future grants under the 2004 Incentive Stock Plan. The Company’s policy is to issue new shares upon exercise of options and the issuance of stock grants.

The Company also issues restricted stock awards to certain key employees and directors. Generally, the restricted stock vests over a one to three year period and compensation expense is recognized over the one to three year period equal to the grant date fair value of the shares awarded. As of June 30, 2013, the Company also had 361,603 shares of performance-based awards outstanding which are dependent on the achievement of EBITDA targets that vest over a three-year period. As of June 30, 2013, 135,803 shares of these performance-based stock awards have been earned due to the achievement of EBITDA targets. Performance-based stock awards are recognized as compensation expense over the vesting period based on the fair value on the date of grant and the number of shares ultimately expected to vest. The Company has determined the achievement of the performance target for the unearned awards is probable.

The Company’s total stock-based compensation expense was approximately $607 and $638 for the three months ended June 30, 2013 and 2012, respectively, and $1,318 and $1,101 for the six months ended June 30, 2013 and 2012, respectively. Included in stock-based compensation expense for the three and six months ended June 30, 2012, is $115 related to the accelerated vesting of stock-based awards to the Company’s former Vice President-General Manager Theatre Operations. Stock-based compensation expense is included in general and administrative expenses in the consolidated statement of operations. As of June 30, 2013, the Company had approximately $5,376 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company’s plans. This cost is expected to be recognized as stock-based compensation expense over a weighted-average period of approximately 2.1 years. This expected cost does not include the impact of any future stock-based compensation awards.

Options—Service Condition Vesting

The Company currently uses the Black-Scholes option pricing model to determine the fair value of its stock options for which vesting is dependent only on employees providing future service. Such stock options vest equally over a three-year period, except for options granted to members of the Board of Directors that vest immediately upon issuance. The stock options expire 10 years after the grant date. The Company’s stock-based compensation expense is recorded based on an estimated forfeiture rate of 5%.

No options were granted during the first six months of 2013 or 2012. The following table sets forth the summary of option activity for stock options with service vesting conditions as of June 30, 2013:


						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Life (Yrs.)		Value
Outstanding at January 1, 2013		747,500		$	12.32		5.92
Granted		—		$	—
Exercised		—		$	—
Expired		(90,000	)	$	27.15
Forfeited		—		$	—

Outstanding at June 30, 2013		657,500		$	10.29		6.21	$	6,623


Exercisable on June 30, 2013		601,662		$	10.58		6.06	$	5,941


Expected to vest June 30, 2013		53,929		$	7.14		7.77	$	659

Restricted Stock

The following table sets forth the summary of activity for restricted stock grants, including performance-based awards, for the six months ended June 30, 2013:


				Weighted
				Average
				Grant Date
	Shares			Fair Value
Nonvested at January 1, 2013		458,981		$	10.85
Granted		213,954		$	15.78
Vested		(97,928	)	$	11.78
Forfeited		—		$	—

Nonvested at June 30, 2013		575,007		$	12.53