Equity Incentive Plan

3 Months Ended

Mar. 31, 2013

Equity Incentive Plan

5. Equity Incentive Plan

The Company estimates the fair value of stock options and stock appreciation rights using the Black-Scholes valuation model. Fair value of restricted stock is measured by the grant-date price of the Company’s shares. The fair value of each stock option award during the three months ended March 31, 2013 and 2012 was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Three Months Ended March 31,
	2013	2012
Risk free interest rate	0.70%	0.64%
Expected volatility	57.60%	57.60%
Expected lives (years)	4	4
Expected dividend yield	0.00%	0.00%

            The Company recorded $422,959 and $320,510 of share-based compensation expense for the three months ended March 31, 2013 and 2012, respectively, for equity compensation awards. The Company presents the expenses related to stock-based compensation awards in the same expense line items as cash compensation paid to the respective employees.

There were 354,500 stock options granted under the Second Amended and Restated 2003 Stock Option and Incentive Plan (the “Second Amended 2003 Plan”) during the three months ended March 31, 2013. There were 13,800 restricted stock units (“RSUs”) granted to members of the Company’s Board of Directors under the Second Amended 2003 Plan during the same period ended March 31, 2013. The stock options and RSUs granted to employees and directors become exercisable or vest ratably over four years from the date of grant.

As of March 31, 2013, there was approximately $3.3 million of total unrecognized compensation cost related to non-vested stock options, stock appreciation rights (“SARs”), and restricted stock awards (“RSAs”) granted under the Company’s incentive plans. This cost is expected to be recognized over a weighted-average period of 3.0 years.

The total intrinsic value of stock options and SARs exercised during the three month periods ended March 31, 2013 and 2012 was approximately $464,241 and $1,192,545, respectively. Cash received from the exercise of stock options during the three-month periods ended March 31, 2013 and 2012 was $1,097,016 and $114,656, respectively.

There were approximately 2.0 million options and SARs outstanding under the Company’s incentive plans at March 31, 2013 with a weighted-average exercise price of $8.72 per share, an aggregate intrinsic value of approximately $11.7 million, and a weighted-average remaining contractual term of 6.44 years.

None of the options or SARs outstanding at March 31, 2013 or 2012, respectively, had cash-settlement features.

The Company may satisfy the awards upon exercise, or upon fulfillment of the vesting requirements for other equity-based awards, with either authorized but unissued shares or shares reacquired by the Company. Stock-based awards are granted with an exercise price equal to the market price of the Company’s stock on the date of grant. Awards contain service or performance conditions and generally become exercisable ratably over one to four years and have a ten year contractual term.