5. STOCK OPTIONS AND NON-VESTED SHARES

In 2003, the Company established the 2003 Stock Option and Stock Incentive Plan (2003 Plan), which provided for the issuance of up to 4.7 million options and non-vested shares to eligible employees and officers of the Company. In 2007, the Company adopted the 2007 Equity Incentive Plan (2007 Plan) and ceased awarding equity grants under the 2003 Plan. As of September 30, 2014, the Company had granted a total of 2.1 million options and 0.5 million non-vested shares that remained outstanding under the 2007 Plan. Awards for 1.6 million shares, representing approximately 5.0% of the Company’s outstanding common stock as of September 30, 2014, remained available for additional grants under the 2007 Plan.

The Company records non-cash share-based compensation expense in connection with any grant of options and non-vested shares to its employees. The Company calculates the expense associated with its stock options and non-vested shares by determining the fair value of the options and non-vested shares.

Options

All options granted under the 2003 Plan and the 2007 Plan have an exercise price equal to the market value of the underlying common stock on the date of the grant. During the three months ended September 30, 2014, the Company did not grant any options. During the nine months ended September 30, 2014, the Company granted less than 0.1 million options at a weighted average exercise price of $13.86. During the three months ended September 30, 2013, the Company did not grant any options. During the nine months ended September 30, 2013, the Company granted 0.7 million options at a weighted average exercise price of $3.40.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The following table summarizes the assumptions used for estimating the fair value of options for the nine months ended September 30, 2014 and September 30, 2013:

	September 30,		September 30,
	2014		2013
Expected life	7.2 years		7.3 years
Risk-free interest rate		2.1%		1.3%
Expected dividends		2.1%		0.0%
Volatility		60.0%		45.0%

The weighted average fair value of options granted, as determined by using the Black-Scholes valuation model, during the nine months ended September 30, 2014 and 2013 was $6.90 and $1.64, respectively. The total grant date fair value of options that vested during the nine months ended September 30, 2014 and 2013 was approximately $0.9 million and $2.2 million, respectively. The total intrinsic value (market value of stock option less option exercise price) of stock options exercised was $3.0 million and $0.7 million during the nine months ended September 30, 2014 and 2013, respectively.

The following table summarizes activity under the Company’s stock option plan for the nine months ended September 30, 2014:

				Weighted		Aggregate		Weighted
				Average		Intrinsic		Average
	Shares			Exercise		Value		Remaining
	(000)			Price		($000)		Term (yrs)
Options outstanding — January 1, 2014		2,991		$	12.91
Granted		40			13.86
Exercised		(739	)		10.51
Cancelled		(221	)		20.08
Options outstanding — September 30, 2014		2,071		$	13.03	$	5,095		5.21
Vested or expected to vest — September 30, 2014		2,058		$	13.08	$	4,990		5.19
Exercisable — September 30, 2014		1,547		$	15.98	$	783		4.16

The unrecognized compensation cost associated with options outstanding at September 30, 2014 and December 31, 2013 was $1.2 million and $1.7 million, respectively. The weighted average remaining term that the compensation will be recorded is 2.1 years and 2.1 years as of September 30, 2014 and December 31, 2013, respectively.

Non-vested Shares

During the three and nine months ended September 30, 2014, the Company granted less than 0.1 million and 0.2 million of non-vested shares, respectively, to members of the Company’s executive management team as well as various employees within the Company. During the three and nine months ended September 30, 2013, the Company granted less than 0.1 million and 0.3 million non-vested shares, respectively, to members of the Company’s executive management team as well as various employees within the Company. The non-vested shares were issued as part of the 2007 Plan. The shares typically vest over a four-year period. The fair value of the non-vested shares is determined using the Company’s closing stock price on the grant date. Compensation cost, measured using the grant date fair value, is recognized over the requisite service period on a straight-line basis.

A summary of the Company’s non-vested share activity and related information for the nine months ended September 30, 2014 is as follows:

				Weighted		Aggregate
				Average		Intrinsic
	Shares			Grant Date		Value
	(000)			Fair Value		($000)
Non-vested shares outstanding — January 1, 2014		477		$	9.66
Granted		216			12.82
Vested		(234	)		10.12
Cancelled		—			—
Non-vested shares outstanding — September 30, 2014		459		$	10.91	$	5,715
Non-vested shares vested or expected to vest —September 30, 2014		429		$	10.91	$	5,341

The aggregate intrinsic value represents the total pre-tax intrinsic value based on the Company’s closing stock price of $12.45 on September 30, 2014. The amount changes based upon the fair market value of the Company’s common stock.

The unrecognized compensation cost associated with non-vested shares was $3.9 million at both September 30, 2014 and December 31, 2013. The weighted average remaining term that the compensation will be recorded was 2.0 years and 1.7 years as of September 30, 2014 and December 31, 2013, respectively.