NOTE 9. STOCK-BASED COMPENSATION

The Company’s three stock option plans, consisting of the Directors’ Stock Option Plan, the Executive Long-term Incentive Plan and the Employee Stock Option Plan (the “Plans”), which collectively provide for the granting of options to purchase up to 3,250,000 common shares. The exercise price of stock options granted under the Plans is established by the respective plan committees, but the exercise price may not be less than the market price of the Company’s common stock on the date the option is granted. The Company stock options typically vest on a graded schedule, typically in equal, one-third increments, although the respective stock option committees have the discretion to impose different vesting periods or modify existing vesting periods. Options expire ten years from the grant date. By their amended terms, the Plans will expire in June 2014 after which no options may be granted unless the Plans are amended or replaced. Such amendment or replacement requires the approval of a majority of the Company’s stockholders.

A summary of the stock option activity as of and for the year ended December 31, 2013 is presented below:

			Weighted Average
Options	Shares		Exercise Price		Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at beginning of period	3,134,320		$	11.29	—	—
Granted	367,698		18.53		—	—
Exercised	(335,444	)	10.25		—	—
Forfeited	(280,000	)	8.95		—	—
Expired	—		—		—	—
Outstanding at end of period	2,886,574		$	12.51	6.1 yrs.	$	23,421,823
Exercisable at end of period	1,683,504		$	13.05	4.4 yrs.	$	13,095,301

A summary of the status of the Company’s nonvested shares as of, and for the year ended, December 31, 2013 is presented below:

Nonvested Shares	Shares		Weighted-Average Grant Date Fair Value
Nonvested at January 1, 2013	1,497,739		$	9.49
Granted	367,698		5.38
Vested	(382,367	)	2.94
Forfeited	(280,000	)	8.95
Nonvested at December 31, 2013	1,203,070		$	12.51

Expense Measurement and Recognition:

The Company recognizes stock-based compensation for all current award grants and for the unvested portion of previous award grants based on grant date fair values. Unrecognized costs related to all stock-based awards outstanding at December 31, 2013 totaled approximately $1.3 million and is expected to be recognized over a weighted average period of 2.7 years.

The Company uses historical data and projections to estimate expected employee, executive and director behaviors related to option exercises and forfeitures.

The Company estimates the fair value of each stock option award on the grant date using the Black-Scholes valuation model incorporating the assumptions noted in the following table. Option valuation models require the input of highly subjective assumptions, and changes in assumptions used can materially affect the fair value estimate. Option valuation assumptions for options granted during each year were as follows:

	Years ended December 31,
	2013			2012			2011
Expected volatility	37.03		%	56.1		%	56.1		%
Expected dividends	—			—			—
Expected life (in years)
Directors’ Plan	3.32			9.5			9.5
Executive Plan	4.48			3.1			3.1
Employee Plan	3.32			3.1			3.1
Weighted average risk free rate	0.85		%	0.40		%	0.70		%

Weighted average grant date fair value per share of options granted	$	5.38		$	3.43		$	3.89
Total fair value of shares vested	$	1,122,577		$	1,918,460		$	1,190,274
Total intrinsic value of options exercised	$	2,736,529		$	41,240		—
Cash received for all stock option exercises	$	3,438,091		$	52,995		—
Tax benefit realized from stock awards exercised	$	957,785		$	13,816		—

The risk-free interest rate is based on the U.S. treasury security rate in effect as of the date of grant. The expected lives of options are based on historical data of the Company. The Company has determined that an implied volatility is more reflective of market conditions and a better indicator of expected volatility.

Reported stock-based compensation expense was classified as follows:

	For the years ended December 31,
	2013			2012			2011
Casino	$	19,769		$	65,018		$	80,530
Food and beverage	33,355			80,520			70,633
Hotel	3,441			20,273			17,028
Selling, general and administrative	1,163,780			1,202,156			1,451,461
Total stock-based compensation, before taxes	1,220,345			1,367,967			1,619,652
Tax benefit	(427,121		)	(478,788		)	(581,601		)
Total stock-based compensation, net of tax	$	793,224		$	889,179		$	1,038,051