11.

Equity-Based Compensation

As of December 31, 2012, incentive or non-qualified stock options may be granted to ICG employees, directors and consultants under ICG’s 2005 Omnibus Equity Compensation Plan, as such has been amended from time to time (the “Plan”). Generally, the grants vest over a period from one to four years and expire eight to ten years after the grant date. At December 31, 2012, ICG had 365,208 shares of Common Stock reserved under the Plans for possible future issuance. Most companies in which ICG holds equity ownership interests also maintain their own equity incentive/compensation plans.

ICG issues the following types of equity-based compensation to its employees and non-employee directors: (1) stock appreciation rights (SARs), (2) stock options, (3) restricted stock and (4) deferred stock units (DSUs). The following table summarizes the equity-based compensation recognized in the respective periods; that equity-based compensation is primarily included in the line item “Selling, general and administrative” on ICG’s Consolidated Statements of Operations (in thousands, except weighted average years):


	Year Ended December 31,						Unrecognized Equity-Based Compensation at Dec. 31, 2012		Weighted Average Years Remaining of Equity-Based Compensation Expense at Dec. 31, 2012
	(in thousands, except weighted average years remaining)
	2012		2011		2010

Stock Appreciation Rights	$	2,488	$	2,252	$	2,037	$	4,009		2.24
Stock Options		—		—		1		—		—
Restricted Stock		2,871		832		103		8,149		3.0
Deferred Stock Units		419		703		204		58		0.2

Equity-Based Compensation		5,778		3,787		2,345		12,216
Equity-Based Compensation for Consolidated Core Companies		856		473		722		3,176		3.1

	$	6,634	$	4,260	$	3,067	$	15,392

Stock Appreciation Rights (SARs)

Each SAR represents the right of the holder to receive, upon exercise of that SAR, shares of ICG Common Stock equal to the amount by which the fair market value of a share of that Common Stock on the date of exercise of the SAR exceeds the base price of the SAR. The base price is determined by the NASDAQ closing price of ICG’s Common Stock on the date of grant (or the closing price on the next trading day if there are no trades in ICG’s stock on the date of grant). The fair value of each SAR is estimated on the grant date using the Black-Scholes option-pricing model. SARs generally vest over four years, with 25% vesting on the first anniversary of the grant date and the remaining 75% vesting equally each month over the subsequent 36 months.

Changes in SARs for the years ended December 31, 2012, 2011 and 2010 were as follows:


	Years Ended December 31,
	2012						2011						2010
	Number of SARs		Weighted Average Base Price		Weighted Average Fair Value		Number of SARs		Weighted Average Base Price		Weighted Average Fair Value		Number of SARs		Weighted Average Base Price		Weighted Average Fair Value
Granted		260,125	$	9.25	$	4.90		275,625	$	12.15	$	6.58		1,506,940	$	7.11	$	4.14
Exercised ⁽¹⁾		54,873	$	7.89	$	4.65		100,119	$	9.74	$	5.82		1,440,488	$	7.52	$	4.53
Forfeited		1,598	$	10.54	$	5.83		—	$	—	$	—		64,937	$	9.24	$	5.11
Cancelled		12.795	$	6.70	$	3.93		—	$	—	$	—		—	$	—	$	—

⁽¹⁾	The exercise of those SARs resulted in the issuance of 9,818 , 20,229 and 372,499 shares of ICG’s Common Stock during the years ended December 31, 2012, 2011 and 2010, respectively.

The following table summarizes information about SARs outstanding at December 31, 2012:


Grant Price	SARs Outstanding		SARs Exercisable		Weighted Average Remaining Contractual Life of SARs Outstanding (in years)		Aggregate Intrinsic Value of SARs Outstanding at December 31, 2012 (in thousands)
$6.70-$7.00		1,369,717		1,008,742		7.0	$	4,709
$7.34		1,946,110		1,946,110		2.6	$	5,488
$8.13-$8.76		298,948		271,134		6.1	$	528
$9.50-$12.15		723,475		242,819		8.1	$	269

		4,338,250		3,468,805			$	10,994

At December 31, 2012, 2011 and 2010, there were 3,468,805, 2,979,552 and 2,298,884 SARs exercisable, respectively, at a weighted average base price of $7.53, $7.42 and $7.61 per share, respectively, under the Plan. As of December 31, 2012, ICG expects an additional 869,445 SARs to vest in the future.

Stock Options

The fair value of each stock option is estimated on the grant date using the Black-Scholes option-pricing model. Stock options generally vest annually over four years.

Changes in stock options for the years ended December 31, 2012, 2011 and 2010 were as follows:


	For Years Ended December 31,
	2012						2011						2010
	Number of Options		Weighted Average Base Price		Weighted Average Fair Value		Number of Options		Weighted Average Base Price		Weighted Average Fair Value		Number of Options		Weighted Average Base Price		Weighted Average Fair Value
Exercised		173,208	$	6.03	$	4.83		18,725	$	8.06	$	6.22		180,923	$	10.48	$	9.13
Cancelled		8,229	$	10.62	$	8.16		109,236	$	42.07	$	36.36		37,312	$	315.18	$	249.10
Forfeited		21	$	8.41	$	4.96			$	—	$	—		—	$	—	$	—

The following tables summarize information about stock options outstanding at December 31, 2012:


Exercise Price	Shares Outstanding		Shares Vested and Exercisable		Weighted Average Remaining Contractual Life of Shares Outstanding (in years)		Aggregate Intrinsic Value at December 31, 2012 (in thousands)
$4.30-$7.77		1,750		1,729		3.1	$	6

At December 31, 2012, 2011 and 2010 there were 1,729, 183,082 and 310,919 options exercisable, respectively, at a weighted average exercise price of $6.94, $6.25 and $16.65 per share, respectively, under the Plan. As of December 31, 2012, ICG expects an additional 21 stock options to vest in the future.

SARs and Stock Options Fair Value Assumptions

ICG estimates the grant date fair value of SARs and stock options using the Black-Scholes option-pricing model, which requires the input of highly subjective assumptions. These assumptions include estimating the expected life of the award and estimating volatility of ICG’s stock price over the expected term. Expected volatility approximates the historical volatility of ICG’s Common Stock over the period commensurate with the expected term of the award. The expected term calculation is based on an average of the award vesting term and the life of the award. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for an instrument with a maturity that is commensurate with the expected term of the award. Changes in these assumptions, the estimated forfeitures and the requisite service period can materially affect the amount of equity-based compensation recognized in ICG’s Consolidated Statements of Operations.

The following assumptions were used to determine the fair value of SARs granted to employees by ICG for the years ended December 31, 2012, 2011 and 2010:


	2012			2011	2010
Expected volatility		56	%	56%	60%
Average expected option life		6.25		5.25-6.25 years	2.75-6.25 years
Risk-free interest rate		0.92	%	1.62-1.97%	1.54-2.92%
Dividend yield		0.0	%	0.0%	0.0%

Restricted Stock

Recipients of restricted stock do not pay any cash consideration to ICG for the shares and have the right to vote all shares subject to the grant and receive all dividends with respect to the shares, whether or not the shares have vested.

Changes in restricted stock for the years ended December 31, 2012, 2011 and 2010 are shown in the following table:


	Years Ended December 31,
	2012				2011				2010
	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value
Granted		116,973	$	9.11		1,181,910	$	9.15		42,500	$	8.75
Vested		124,920	$	10.01		16,625	$	8.12		9,025	$	7.54
Forfeited		375	$	12.15		—	$	—		7,500	$	12.01

The total aggregate fair value of restricted stock awards that vested during the years ended December 31, 2012, 2011 and 2010 was $1.3 million, $0.2 million and $0.1 million, respectively. During the years ended December 31, 2012, 2011 and 2010, 39,817 shares, 3,351 shares and 2,777 shares, respectively, were surrendered for satisfying withholding taxes.

Restricted stock grants for the years ended December 31, 2012, 2011 and 2010 were valued at $1.1 million, $10.8 million and $0.4 million, respectively, and are being amortized over each grant’s relevant vesting period.

There were three restricted stock grants in 2012. Of these grants, grants to employees for 69,875 shares will vest 12.5% at the nine-month anniversary of the grant date and the remaining 87.5% will vest every six months subsequent to the first vesting date. The second grant, granted to non-management directors for 18,750 shares will vest on the one year anniversary of the grant. The third grant, for executives of one of our consolidated companies for 28,348 will vest upon the achievement of certain performance conditions.

ICG made three sets of grants of its restricted stock to its employees and the employees of its companies during 2011. The first set of grants, of 15,035 shares of restricted stock to executives of a consolidated subsidiary, vest 100% in May 2018 (the seventh anniversary of the grant date). The issuance of those awards is included in the line item “Issuance of RS, net of forfeitures” in ICG’s Consolidated Statements of Changes in Equity for the year ended December 31, 2011. The amortization of the expense associated with those awards is included in the line item “Equity-based compensation related to RS” in ICG’s Consolidated Statements of Changes in Equity for the year ended December 31, 2011. The expense associated with those awards is included in the line item “Equity-Based Compensation for Consolidated Core Companies” in the summarized Equity-Based Compensation table above. The second set of grants, of 66,875 shares of restricted stock to ICG employees, vested 25% in 2012 and 25% each June through 2015. The third set of grants, of 550,000 shares of restricted stock to each of Walter W. Buckley, III, ICG’s Chief Executive Officer and Douglas A. Alexander, ICG’s President, for a total of 1,100,000 shares, vest based on service, performance conditions and market conditions, as follows. One-third (183,334) of these restricted shares vest ratably on a semi-annual basis over four years, commencing in May 2012, provided the executives remain employees of ICG. One-third (183,333) of these restricted shares vest upon (1) ICG’s achievement of trailing twelve-month consolidated revenue in excess of $500.0 million at any time on or before December 31, 2015, or (2) ICG’s achievement of its share of trailing twelve-month consolidated adjusted earnings before interest, taxes, depreciation and amortization, excluding equity-based compensation and unusual items in excess of $70.0 million at any time on or before December 31, 2015. As of December 31, 2012, ICG believes one or both of these performance targets are probable of achievement. If neither of the above financial metrics is met, but ICG achieves at least 75% of either of these targets, a portion (at least 91,667) of these restricted shares vests, with ratable vesting (up to 183,333) for the achievement of any percentage of the financial targets between 75% and 100%, on the second business day following ICG’s public disclosure of its earnings for the year ended December 31, 2015. The remaining one-third (183,333) of these restricted shares vest if the thirty-day volume weighted average price per share of ICG’s Common Stock equals or exceeds $25.00 at any time prior to December 31, 2015. A portion (91,667) of these restricted shares vests on the second business day following ICG’s public disclosure of its earnings for the year ended December 31, 2015 if the $25.00 per share stock price target is not achieved, but ICG’s total stockholder return is in the top 40% of all NASDAQ Component members for the period beginning on the date of grant and ending on December 31, 2015. In the event of a change of control (as defined in ICG’s Third Amended and Restated 2005 Omnibus Equity Compensation Plan) before December 31, 2015, all of of the shares contingent upon the achievement of the financial and stock price metrics would automatically vest and any unrecognized equity-based compensation expense associated with those awards would be immediately recognized. Additionally, in the event of a change of control during which Mr. Buckley and Mr. Alexander are terminated, the 183,334 service-based awards would automatically vest and any unrecognized equity-based compensation expense associated with those awards would be immediately recognized.

There were two restricted stock grants in 2010. The first grant vested 25% in 2011 and 25% will vest each January through 2014. The second grant also vested 25% in 2011, then 25% will vest each October through 2014.

There were 1,217,463 and 1,225,785 shares of restricted stock issued and unvested at December 31, 2012 and 2011, respectively. At December 31, 2012 ICG expects 1,208,786 shares of restricted Stock to vest.

Subsequent to December 31, 2012, ICG granted 130,440 shares of restricted Stock to certain ICG employees that will vest upon achievement of performance metrics in accordance with ICG’s established 2013 performance plan. These shares were valued at approximately $1.7 million.

Subsequent to December 31, 2012, ICG granted 30,750 restricted stock awards to certain of ICG’s non-management directors under ICG’s Amended and Restated Non-Management Director Compensation Plan (the “Director Plan”) valued at $0.4 million. See the “Deferred Stock Units (DSUs)” subtopic in this Note 11 for additional discussion of ICG’s non-management director compensation.

Deferred Stock Units (DSUs)

ICG periodically issues DSUs to its non-management directors. Each DSU represents a share of Common Stock into which that DSU will be converted upon the termination of the recipient’s service at ICG. During 2012, 2011 and 2010, non-management members of ICG’s Board of Directors received annual DSU grants for service on the Board and its committees under the Director Plan. These awards vest on the one-year anniversary of the grant and are expensed over that twelve-month period. The expense for these awards is reflected in the summarized Equity-Based Compensation table above. Beginning in 2012, each director that has achieved the minimum ownership of ICG’s equity required by ICG’s director stock ownership guidelines may elect to receive, in lieu of all or any portion of the annual service grant DSUs to which such director is entitled, an equal number of restricted shares of Common Stock. Those shares of restricted Common Stock, like the DSUs they replace, vest on the first anniversary of their grant date. Unlike the DSUs, which a director must hold until his or her service on the Board is terminated, the shares of restricted Common Stock become (subject to ICG policy and applicable securities laws) freely tradable shares of Common Stock upon vesting.

Changes in DSUs related to these annual grants for the years ended December 31, 2012, 2011 and 2010 are shown in the following table:


	For Years Ended December 31,
	2012				2011				2010
	Number of DSUs		Grant Date Fair Value		Number of DSUs		Grant Date Fair Value		Number of DSUs		Grant Date Fair Value
Granted		41,250	$	8.40		60,000	$	13.32		36,000	$	6.80
Vested		52,500	$	13.32		39,000	$	8.05		36,000	$	4.05
Forfeited		—	$	—		—	$	—		4,500	$	6.80

Subsequent to December 31, 2012, ICG issued 29,250 DSUs to ICG’s non-management directors valued at $0.4 million under the Director Plan. Consistent with previously-issued annual awards, these DSUs vest on the one-year anniversary of the grant and are expensed over that twelve-month period.

ICG issues quarterly compensation payments to each non-management director for his service on the Board of Directors and its committees, as applicable, under the Director Plan. Each director had the right to elect to receive such payments in whole or in part in the form of DSUs in lieu of cash. Each participating director receives DSUs representing shares of ICG’s Common Stock with a fair market value equal to the relevant cash fees (with such fair market value determined by reference to the closing Common Stock price reported by NASDAQ on the date these cash fees otherwise would have been paid). These DSUs vest immediately. The expense for these DSUs is recorded when the fees to which the DSUs relate are earned. ICG issued 32,923 DSUs, 13,571 DSUs and 25,847 DSUs in lieu of cash for services provided by participating directors during the years ended December 31, 2012, 2011 and 2010. Expense associated with these DSUs of $0.3 million, $0.2 million and $0.2 million for the years ended December 31, 2012, 2011 and 2010, respectively, is included in the line item “Selling, general and administrative” on ICG’s Consolidated Statements of Operations, but is not reflected in the summarized Equity-Based Compensation table above.

Consolidated Core Companies

Expense related to equity-based awards recorded by ICG’s consolidated core companies for the years ended December 31, 2012, 2011 and 2010 relate primarily to Procurian. Procurian grants stock options that generally vest over 4 years, with 25% vesting on the first anniversary of the grant date and the remaining 75% vesting equally each month over the next 36 months. The fair value of each of Procurian’s option awards was estimated on the grant date using the Black-Scholes option pricing model.