13.

STOCK COMPENSATION PLANS

The Company has five compensation plans that provide for the granting of stock options and other share-based awards to key employees and non-employee members of the Board of Directors. The 1997 Employee Stock Option Plan (1997 Plan) provided for granting incentive stock options and nonqualified stock options to officers and key employees of the Company. The 1997 Non-employee Director Stock Option Plan provided for granting nonqualified stock options and formula options to non-employee directors. The 2004 Equity Incentive Plan (2004 Plan), the 2009 Equity Incentive Plan (2009 Plan), and the 2014 Equity Incentive Plan (2014 Plan) provide for granting options, restricted stock, restricted stock units or stock appreciation rights to employees and non-employee directors.

The Company was authorized to grant awards for up to 1,400,000 shares of common stock under the 1997 Plan, of which no options remain outstanding. The Company was also authorized to grant awards for up to 250,000 shares of common stock under the 1997 Non-employee Director Stock Option Plan, of which no options remain outstanding. The Company was authorized to grant awards for up to 1,750,000 shares of common stock under the 2004 Plan, of which 120,988 options are currently outstanding at exercise prices between $13.04 and $31.06. The Company was also authorized to grant awards for up to 1,781,546 shares of common stock under the 2009 Plan, as well as any shares underlying awards outstanding under the 2004 Plan as of the effective date of the 2009 Plan that thereafter terminated or expired unexercised or were canceled, forfeited or lapsed for any reason. There are 768,941 options currently outstanding under the 2009 Plan at exercise prices between $24.30 and $57.54. The options outstanding under the 2004 Plan and the 2009 Plan have a 10-year term (7 years on grants beginning in 2010) and vest over a 3-year period.

In May 2014, the Company’s shareholders approved the 2014 Plan authorizing the Company to grant awards for up to 1,974,543 shares of common stock, as well as any shares underlying awards outstanding under the 2004 Plan and 2009 Plan as of the effective date of the 2014 Plan that thereafter terminate or expire unexercised or are canceled, forfeited or lapse for any reason. There are 8,500 options currently outstanding under the 2014 Plan at exercise prices between $46.40 and $51.75. The options outstanding under the 2014 Plan have a 7-year term and vest over a 3-year period. The Company will not make any further grants under the 1997 Plan, the 1997 Non-employee Director Stock Option Plan, the 2004 Plan or the 2009 Plan.

Prior to 2009, upon election to the Board, each non-employee director was granted 3,400 restricted shares of common stock that vested ratably over three years. On the day following the Annual Meeting of Shareholders, each non-employee director, other than a non-employee director who received the initial equity grant in that same year, was granted 2,200 restricted shares of common stock that vested ratably over three years.

Prior to 2013, upon election to the Board, each non-employee director received an initial equity grant of shares of restricted common stock with a value equal to $100,000, calculated using the closing share price on the date of the non-employee director’s election to the Board. The initial restricted stock grant vests on the third anniversary of the grant date, subject to the non-employee director’s continued membership on the Board. Annually on the first business day following the annual meeting of shareholders, each non-employee director was granted restricted shares of common stock with a value equal to $70,000, calculated as of the closing share price on that day. The shares of restricted stock vest on the day prior to the following year’s annual meeting date, subject to the non-employee director’s continued membership on the Board.

Beginning in 2013, upon election to the Board, each non-employee director receives an initial equity grant of shares of restricted common stock with a value equal to $100,000, calculated using the closing share price on the date of the non-employee director’s election to the Board. The initial restricted stock grant vests on the third anniversary of the grant date, subject to the non-employee director’s continued membership on the Board. Annually on the first business day following the annual meeting of shareholders, each non-employee director is granted restricted shares of common stock with a value equal to $80,000, calculated as of the closing share price on that day. The shares of restricted stock vest on the day prior to the following year’s annual meeting date, subject to a non-employee director’s continued membership on the Board. The Company records compensation cost associated with its restricted stock unit grants on a straight-line basis over the vesting term.

Compensation costs charged to operations associated with the Company’s stock incentive plans were $4,678, $4,409 and $4,080 in 2014, 2013 and 2012, respectively.

The Company used the Black-Scholes option-pricing model to determine the fair value of stock option grants made using the following assumptions:


	Years Ended December 31,
	2014	2013	2012

Risk-free interest rate	0.95% - 1.32%	0.55% - 1.03%	0.50% - 0.66%

Expected dividend yield	0%	0%	0%

Expected option life	3-4 years	4 years	4 years

Expected volatility	42.5% - 45.4%	46.1% - 48.4%	50.4% - 50.7%

Weighted-average expected volatility	42.6%	48.2%	50.7%

Historical information was the primary basis for the selection of the expected dividend yield, expected volatility and the expected lives of the options. The risk-free interest rate was based on yields of U.S. zero coupon issues and U.S. Treasury issues, with a term equal to the expected life of the option being valued.

A summary of stock option activity and weighted average exercise prices follows:


	Options			Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value as of December 31, 2014
Outstanding at January 1, 2014		814,291		$	39.56
Granted		248,388			56.81
Forfeited		(59,545	)		43.47
Exercised		(104,705	)		35.48

Outstanding at December 31, 2014		898,429		$	44.40		4.3	$	16,427


Options exercisable at December 31, 2014		446,760		$	36.78		2.9	$	11,569

The weighted-average grant-date fair value of the stock options granted during the years ended December 31, 2014, 2013 and 2012 were $19.38, $14.41 and $22.28, respectively. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2014, 2013 and 2012 was $2.2 million, $3.7 million and $7.1 million, respectively. The total fair value of stock options using the Black-Scholes option pricing model vested during the years ended December 31, 2014, 2013 and 2012 was $3.7 million, $3.3 million and $1.7 million, respectively.

The following table summarizes the restricted stock activity and weighted average grant-date fair values for the year ended December 31, 2014:


	Shares			Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2014		31,448		$	41.39
Granted		13,706			43.43
Forfeited		—			—
Vested		(31,199	)		41.31

Non-vested at December 31, 2014		13,955		$	43.57

As of December 31, 2014, there was $5.2 million in total unrecognized stock-based compensation expense related to non-vested stock-based compensation arrangements. The expense is expected to be recognized over a weighted average period of 1.8 years.