SHARE-BASED COMPENSATION

Incentive Compensation Plan

On December 17, 2009, the Company established the 2009 Omnibus Incentive Plan (the “Incentive Plan”) which allows for grants of options, stock appreciation rights, restricted stock, other stock-based awards and performance-based compensation awards. The Incentive Plan is administered by the Board of Directors, the Compensation Committee of the Board of Directors, or any other committee designated by the Board of Directors to administer the Incentive Plan (the “Committee”). Participants consist of such employees, directors and other individuals providing services to the Company, or any subsidiary or affiliate, as the Committee in its sole discretion determines and whom the Committee may designate from time to time to receive awards.

Under the 2009 Plan, 2,885,907 shares were authorized for grant through December 17, 2019, of which 1,076,555 may be in the form of incentive stock options. The maximum number of shares for which options and stock appreciation rights may be granted to any participant in any calendar year is 627,990, and the maximum number of shares with respect to other awards denominated in shares in any calendar year is 627,990. The maximum value of cash payable with respect to awards denominated in cash or property that may be granted to any participant in any plan year is $5.0 million, subject to certain adjustments as defined. In the event that any outstanding award expires, is forfeited, canceled or otherwise terminated without the issuance of shares or is otherwise settled for cash, the shares subject to such award shall again be available for awards. At December 31, 2013, there are 1,249,317 remaining shares available for grant under the Incentive Plan.

Stock Options

The Company has awarded options with time based vesting to certain key employees. These options vest annually, on the anniversary of the date of grant, over three or five years provided the recipient remains employed by the Company. All options expire on the tenth anniversary of the grant date, unless terminated earlier.

The following table summarizes the Company's common stock option transactions for the three years ended December 31, 2013.



	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Outstanding, December 31, 2010	780,981		$	18.10
Granted	210,000		26.82
Exercised	(28,928	)	17.50			$	0.7
Forfeited	(244,937	)	17.50
Canceled	(2,250	)	17.50
Outstanding, December 31, 2011	714,866		$	20.89
Granted	116,119		42.69
Exercised	(143,652	)	17.50			$	6.4
Forfeited	(27,000	)	17.50
Outstanding, December 31, 2012	660,333		$	25.60
Granted	85,930		72.42
Exercised	(74,430	)	20.62			$	3.7
Forfeited	(41,153	)	29.61
Outstanding, December 31, 2013	630,680		$	32.31	7.5

Options vested and exercisable as of December 31, 2013	275,011		$	24.93	7.1	$	13.7	⁽¹⁾

Remaining options expected to vest as of December 31, 2013	332,718		$	37.98	8.1	$	12.2	⁽¹⁾

(1)

The aggregate intrinsic value of options represents the total pre-tax intrinsic value (the difference between the estimated fair value of the Company's stock on December 31, 2013 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2013. This amount changes based upon the fair market value of the Company's common stock.

The weighted average grant date fair value of options granted was approximately $28.27, $17.66 and $11.37 during the years ended December 31, 2013, 2012 and 2011, respectively.

The estimated fair value of the options granted was measured on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:



	December 31,
	2013	2012	2011
Risk-Free Interest Rate	0.77%	1.16%	1.37%
Expected Term	6 years	6.6 years	6.50 years
Expected Volatility	40.0%	40.0%	40.7%
Expected Dividend Yield	—%	—%	—%

The risk-free interest rate for periods within the life of the option is based upon a blend of U.S. Treasury bond rates with maturities equal to the expected term of the options. Commencing with grants made in December 2011, the expected term assumption was derived using the simplified method, as described in SEC Staff Accounting Bulletin Topic 14.D.2, "Share-Based Payment - Certain Assumptions Used in Valuation Methods". This change in estimation methodology did not have a material impact on the resulting estimated fair value of options granted. The expected volatility assumption is based upon the historical volatility of comparable public companies’ stock as well as the implied volatility of outstanding options for the comparable companies that had such options. The dividend yield represents the expected dividends on the Company's common stock for the expected term of the option.

As of December 31, 2013, there was approximately $4.2 million of unrecognized compensation cost related to stock options granted under the Incentive Plan. This cost is expected to be recognized on a straight-line basis over a weighted average period of approximately 2.2 years. Total compensation expense related to stock options was approximately $2.2 million, $1.3 million and $0.4 million for the three years ended December 31, 2013, 2012 and 2011, respectively. The related tax benefit recognized for 2013 and 2012 totaled approximately $0.8 million and $0.3 million, respectively. There was no tax benefit recorded for 2011.

Restricted Stock

The Company has awarded performance based restricted shares of common stock to certain key employees. These shares are eligible to become vested in annual installments based upon the achievement of specified levels of Adjusted EBITDA, as defined, for each year. The shares, if any, are vested as of December 31 of each year. However, as the number of shares vesting is contingent upon the Company's financial results, determined based upon the issuance of audited financial statements, the actual issuance of shares to recipients does not occur until the first quarter of the following year.

The Company has also awarded time-based restricted shares of common stock to certain key employees. These shares vest annually, on the anniversary of the date of grant, over three or five years provided the recipient remains employed by the Company.

Restricted stock has the same cash dividend and voting rights as other common stock and, once issued, is considered to be legally issued and outstanding (even when unvested). Recipients of restricted stock are entitled to receive dividends when and if the Company pays a cash dividend on its common stock. Such dividends are payable to the recipient only upon the vesting of the related restricted shares.

The following table summarizes the Company's restricted stock activity for the years ended December 31:



	Time-Based				Performance-Based
	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value

Unvested, December 31, 2010	—		$	—	526,220		$	11.29
Granted	105,616		29.04		—		—
Vested	—		—		(500	)	10.85
Forfeited / Canceled	(5,000	)	35.98		(259,484	)	11.29
Unvested, December 31, 2011	100,616		$	28.70	266,236		$	11.29
Granted	55,870		42.08		184,192		52.71
Vested	(26,865	)	29.33		(47,120	)	29.20
Forfeited / Canceled	(1,342	)	37.32		(30,809	)	14.93
Unvested, December 31, 2012	128,279		$	34.30	372,499		$	29.20
Granted	51,465		72.45		98,018		72.46
Vested	(43,514	)	35.68		(121,794	)	40.75
Forfeited / Canceled	(16,911	)	46.64		(133,007	)	43.89
Unvested, December 31, 2013	119,319		$	48.50	215,716		$	60.76

The aggregate fair value of shares vesting during the years ended December 31, 2013, 2012 and 2011 was approximately $6.5 million, $2.2 million and $0.0 million, respectively.

The cost of the performance based restricted stock awards, calculated as the estimated grant date fair value, net of estimated forfeitures, is recognized over the remaining service period if it is probable that the restricted shares, or any portion thereof, will vest. The cost of the time-based restricted stock awards, net of estimated forfeitures, is being recognized on a straight-line basis over the related vesting period. The estimated fair value of the grants is based upon the closing price of the Company's stock on the date of grant. Total compensation expense recognized for the years ended December 31, 2013, 2012 and 2011 related to restricted stock was approximately $8.3 million, $3.3 million and $0.2 million, respectively. The related tax benefit recognized for the years ended December 31, 2013, 2012 and 2011 totaled approximately $3.2 million, $1.3 million and $0.1 million, respectively. At December 31, 2013, there was approximately $9.0 million of unrecognized compensation cost with respect to restricted stock granted under the Incentive Plan. This cost is expected to be recognized over a weighted average period of approximately 2.2 years.