Note 8 — Accounting for Stock Based Compensation

On May 10, 2012, the shareholders of the Company approved to amend the Gentherm Incorporated 2011 Equity Incentive Plan (the “2011 Plan”) to authorize an additional 2,000,000 shares of common stock to be available for issuance under this plan. The 2011 Plan permits the granting of various awards including stock options (including both nonqualified options and incentive options), stock appreciation rights, restricted stock and restricted stock units, performance shares and certain other awards to key employees, outside directors and consultants and advisors of the Company. In addition to the 2011 Plan, the Company issued options under the Amended and Restated 2006 Stock Incentive Plan (the “2006 Plan”), the Amended and Restated 1997 Stock Incentive Plan (the “1997 Plan”) and the 1993 Stock Option Plan (the “1993 Plan” and, together with the 2011 Plan, the 2006 Plan and the 1997 Plan, the “Plans”). As of December 31, 2012 the Company had an aggregate of 2,304,000 shares of common stock available to issue under the 2011 Plan, 8,578 shares of common stock available to issue under the 2006 Plan and no shares available to issue under the 1993 Plan or the 1997 Plan.

The 2006 Plan expires in May 2016. The 1997 plan and the 1993 Plan each expired in April 2007 and April 2003, respectively; however, certain options issued under such plans have not expired. The Plans are administered by the Board of Directors. The selection of participants, allotment of shares, determination of price and other conditions are determined by the Board of Directors at its sole discretion, in order to attract and retain personnel instrumental to the success of the Company. Stock options granted under the Plans have lives for a period of up to ten years from the date of grant at an exercise price which is not less than the fair market value of the Common Stock on the date of the grant.

Options are generally granted with various vesting periods generally ranging between three to five years for employees and one year for directors. Option vesting may be accelerated at the discretion of the Board of Directors.

The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model. This model incorporates certain assumptions for inputs including a risk-free interest rate, expected dividend yield of the underlying common stock, expected option life and expected volatility in the market value of the underlying common stock. The following assumptions were used for options issued in the following periods:


	2012			2011			2010
Expected volatility		47	%		49 - 55	%		48	%
Weighted average expected volatility		47	%		55	%		48	%
Expected lives		3 yrs.			3 - 5 yrs.			5 yrs.
Risk-free interest rate		0.43	%		0.37 - 0.94	%		2.69	%
Expected dividend yield		none			none			none

Expected volatilities are based on the historical volatility of the Company’s common stock and that of an index of companies in our industry group. Since the Company has little historical data to help evaluate the expected lives of options, we considered several other factors in developing this assumption including the average holding period of outstanding options, their remaining terms and the cycle of our long range business plan. The risk-free interest rate is based upon quoted market yields for United States Treasury debt securities. The expected dividend yield is based upon the Company’s history of having never issued a dividend and management’s current expectation of future action surrounding dividends. Based on our historical experience, we do not expect any of the options granted to be forfeited.

The following table summarizes stock option activity during the three year period ended December 31, 2012:


Options	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2009		2,508,828		$	5.71
Granted		198,343			9.29
Exercised		(548,331	)		4.46
Forfeited		(26,334	)		9.26

Outstanding at December 31, 2010		2,132,506		$	6.34		7.06	$	8,444
Granted		609,642			12.31
Exercised		(571,964	)		5.88
Forfeited		(6,359	)		5.66

Outstanding at December 31, 2011		2,163,825		$	8.12		6.74	$	15,408
Granted		160,000			12.88
Exercised		(176,896	)		4.46
Forfeited		(17,000	)		4.05

Outstanding at December 31, 2012		2,129,929		$	8.82		6.99	$	5,640

Exercisable at December 31, 2010		1,257,858		$	7.20		6.20	$	3,902

Exercisable at December 31, 2011		1,222,959		$	7.23		6.07	$	9,831

Exercisable at December 31, 2012		1,520,720		$	7.57		6.20	$	5,966

The weighted-average grant-date fair value of options granted during the year ended December 31, 2012, 2011 and 2010 was $4.13, $4.78 and $4.30, respectively. The total intrinsic value of options exercised during the year ended December 31, 2012, 2011 and 2010 was $1,663, $4,876 and $3,404, respectively.

Total unrecognized compensation cost related to nonvested options and restricted stock outstanding under all of the Company’s option plans was $3,690 and $4,319 as of December 31, 2012 and 2011, respectively. That cost is expected to be recognized over a weighted average period of two years. Compensation expense for the year ended December 31, 2012, 2011 and 2010 was $823, $1,403 and $1,275, respectively.

On a cumulative basis, options exercised under all of the Company’s option plans have had intrinsic value on the date of exercise in excess of their estimated fair value of approximately $11,583.