(9)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), as amended, which was originally adopted on April 23, 2007. Under the Plan, a maximum of 1,921,980 share awards may be granted.

Stock options granted to employees have a vesting period of four years from grant date, with 25% vesting after one year, and 1/48th vesting each month thereafter until fully vested. Stock options granted to independent directors vest in one year. All of the stock options have a contractual term of ten years.

The following table summarizes the Company’s stock option activities for the nine months ended September 30, 2015 and 2014:



	Nine Months Ended September 30,
	2015			2014
		Weighted			Weighted
		Average			Average
	Number of	Exercise		Number of	Exercise
	Shares	Price		Shares	Price
Options outstanding at January 1	1,420,749	$	15.67	1,263,485	$	14.84
Options granted - employees	133,000	$	21.66	120,000	$	22.09
Options granted - directors	50,000	$	21.89	50,000	$	22.09
Options forfeited - employees	-	$	-	(5,417)	$	22.55
Options exercised - employees	(414,494)	$	11.45	(1,583)	$	17.77

Options outstanding at September 30	1,189,255	$	18.08	1,426,485	$	15.67
Options exercisable	884,817	$	16.76	1,154,844	$	14.13
Weighted average remaining term	5.1 years			4.8 years

The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2015 and 2014 was $4.9 million and less than $0.1 million, respectively. The aggregate intrinsic value of all options outstanding as of September 30, 2015 was $1.0 million based on the closing price of the Company’s common stock of $10.08 per share on September 30, 2015, the last trading day of the quarter.

CAI INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company recorded stock-based compensation expense of $0.4 million for both the three months ended September 30, 2015 and 2014, and $1.2 million for both the nine months ended September 30, 2015 and 2014. As of September 30, 2015, the remaining unamortized stock-based compensation cost relating to stock options granted to the Company’s employees and independent directors was approximately $2.8 million which is to be recognized over the remaining weighted average vesting period of approximately 2.7 years.

The fair value of the stock options granted to the Company’s employees and independent directors was estimated using the Black-Scholes-Merton pricing model using the following weighted average assumptions:



	Nine Months Ended September 30,
	2015			2014
Stock price	$	21.72		$	22.09
Exercise price	$	21.72		$	22.09
Expected term:
Employees		6.25 years			6.25 years
Directors		5.5 years			5.5 years
Expected volatility:
Employees		41.76	%		53.50	%
Directors		39.50	%		44.80	%
Dividend yield		-	%		-	%
Risk free rate:
Employees		2.00	%		1.98	%
Directors		1.85	%		1.79	%

The expected option term is calculated using the simplified method in accordance with SEC guidance. The expected volatility was derived from 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 the daily U.S. Treasury yield curve with a term approximating the expected term of the options. No forfeiture rate was estimated on all options granted during the nine months ended September 30, 2015 and 2014 as management believes that none of the grantees will leave the Company within the option vesting period.

Restricted Stock

The Company grants restricted stock to certain employees pursuant to the 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:



	Number of	Weighted
	Shares of	Average
	Restricted	Grant Date
	Stock	Fair Value
Restricted stock outstanding, December 31, 2014	42,502	$	23.87
Restricted stock granted	21,000	$	21.15
Restricted stock vested	(13,584)	$	23.92
Restricted stock forfeited	-	$	-
Restricted stock outstanding, September 30, 2015	49,918	$	22.71

The Company recognized $0.1 million of stock-based compensation expense relating to restricted stock for both the three months ended September 30, 2015 and 2014, and $0.3 million and $0.2 million for the nine months ended September 30, 2015 and 2014, respectively. As of September 30, 2015, unamortized stock-based compensation expense relating to restricted stock was $1.0 million, which will be recognized over the remaining average vesting period of 2.7 years.

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