(8)Stock–Based Compensation Plan

Stock Options

The Company grants stock options to certain employees and independent directors pursuant to its 2007 Equity Incentive Plan (Plan) which was adopted on April 23, 2007 and amended on June 5, 2009, June 3, 2011 and June 8, 2012. Under the Plan, a maximum of 1,721,980 share awards may be granted.

All of our stock options have a contractual term of ten years and vest over four years for the employees and one year for the independent directors.

The following table summarizes the activity in the Company’s stock option plan for the three years ended December 31, 2014:



				Weighted
				Average
		Weighted		Remaining		Aggregate
		Average		Contractual		Intrinsic
	Number of	Exercise		Term		Value
	Shares	Price		(in years)		(in thousands)
Options outstanding, December 31, 2011	1,192,680	$	12.89
Options granted - employees	111,000	$	17.77
Options granted - directors	40,000	$	17.77
Options forfeited - employees	(8,000)	$	17.77
Options outstanding, December 31, 2012	1,335,680	$	13.41
Options granted - employees	51,300	$	26.41
Options granted - directors	40,000	$	26.41
Options forfeited - employees	(3,501)	$	14.87
Options exercised - employees	(159,994)	$	9.53
Options outstanding, December 31, 2013	1,263,485	$	14.84
Options granted - employees	120,000	$	22.09
Options granted - directors	50,000	$	22.09
Options forfeited - employees	(5,417)	$	22.55
Options exercised - employees	(7,319)	$	15.60
Options outstanding, December 31, 2014	1,420,749	$	15.67		5.4	$	11,270
Options exercisable at December 31, 2014	1,169,312	$	14.28		4.6	$	10,887
Expected to vest after December 31, 2014	251,437	$	22.16		8.9	$	382

The aggregate intrinsic value represents the value by which the Company’s closing stock price of $23.20 per share on the last trading day of the year ended December 31, 2014 exceeds the exercise price of the stock multiplied by the number of options outstanding or exercisable, excluding options that have a zero or negative intrinsic value. The aggregate intrinsic value of options exercised during 2014 and 2013, based on the closing share price on the date each option was exercised, was less than $0.1 million and $2.3 million, respectively.

The total fair value of stock options granted to the Company’s employees and independent directors at the time of grant was approximately $1.9 million, or $11.02 per share, $1.3 million, or $14.10 per share, and $1.3 million, or $8.36 per share for the years ended December 31, 2014, 2013 and 2012, respectively, calculated using the Black-Scholes-Merton pricing model under the following weighted average assumptions:



	2014			2013			2012
Stock price	$	22.09		$	26.41		$	17.77
Exercise price	$	22.09		$	26.41		$	17.77
Expected term:
Employees		6.25 years			6.25 years			6.25 years
Directors		5.5 years			5.5 years			5.5 years
Expected volatility:
Employees		53.50	%		56.70	%		49.50	%
Directors		44.80	%		58.60	%		50.20	%
Dividend yield		-	%		-	%		-	%
Risk free rate:
Employees		1.98	%		1.35	%		0.75	%
Directors		1.79	%		1.16	%		0.75	%

The expected option term is calculated using the simplified method in accordance with SEC guidance. Prior to 2013, in the absence of sufficient historical data, 50% of the assumed volatility was derived from the average volatility of common shares for similar companies over a period approximating the expected term of the options. The remaining 50% of the expected volatility was derived from the average volatility of the Company’s common shares since their initial public offering in 2007. Stock options granted since 2013 use 100% of the average volatility of the Company’s stock over a period approximating the expected term of the options. The risk-free rate is based on daily U.S. Treasury yield curve with a term approximating the expected term of the option. No forfeiture was estimated on all options granted during the years ended December 31, 2014, 2013 and 2012 as management believes that none of the grantees will leave the Company within the option vesting period.

The Company recorded stock-based compensation expense of $1.6 million, $1.4 million and $1.3 million relating to stock options for the years ended December 31, 2014, 2013 and 2012, respectively. As of December 31, 2014, the remaining unamortized stock-based compensation cost relating to stock options granted to the Company’s employees and independent directors was approximately $2.3 million which is to be recognized over the remaining average vesting period of 2.5 years.

Restricted Stock

The Company grants restricted stock to certain employees pursuant to the Company’s Plan. The restricted stock is valued based on the closing price of the Company’s stock on the date of grant and has a vesting period of four years. The following table summarizes the activity of restricted stock under the Company’s Plan:



		Weighted
		Average
	Restricted	Grant Date
	Share Units	Fair Value
Share units outstanding, December 31, 2012	-	$	-
Share units granted	28,150	$	26.11
Share units outstanding, December 31, 2013	28,150	$	26.11
Share units granted	23,500	$	22.09
Share units vested	(7,648)	$	26.13
Share units forfeited	(1,500)	$	26.41
Share units outstanding, December 31, 2014	42,502	$	23.87

The Company recognized $0.3 million and $0.1 million of stock compensation expense relating to restricted stock for the years ended December 31, 2014 and 2013, respectively, and none for the year ended December 31, 2012. Unamortized stock compensation expense relating to restricted stock as of December 31, 2014 was $0.8 million to be recognized over the remaining average vesting period of 2.9 years.

Stock-based compensation expense is recorded as a component of marketing, general and administrative expenses in the Company’s consolidated statements of income with a corresponding credit to additional paid-in capital in the Company’s consolidated balance sheets.