Note 13. Share-Based and Long-Term Compensation

2010 Equity Incentive Plan

The Company adopted an equity incentive plan in connection with its 2010 initial public offering that allows for the grants of stock options, restricted stock awards, other equity-based awards, and certain cash-based awards to be made pursuant to the plan. The eligibility requirements and terms governing the allocation of any common stock, and the receipt of other consideration under the 2010 Equity Incentive Plan, are determined by the Board of Directors and/or its Compensation Committee. The number of shares of common stock that may be issued or delivered may not exceed 4.6 million shares, in the aggregate. Cash settled awards do not count against the maximum aggregate number.

On April 25, 2014, the 2010 Equity Incentive Plan was amended and restated. The number of shares of common stock available for issuance pursuant to new awards under the 2010 Equity Incentive Plan has been reduced to 850,000 shares (plus shares subject to awards that were forfeited, cancelled, or otherwise terminated without payment since December 31, 2013).

Share-Based Compensation

At March 31, 2014, before the amendment and restatement of the 2010 Equity Incentive Plan as described above, 1,086,832 shares were available for future grants of options and other types of awards under the 2010 Equity Incentive Plan. Forfeited shares may be re-issued under the plan up to the maximum amount to be issued, as defined by the plan.

The following table summarizes the Company’s award activity during the three months ended March 31, 2014:

	Options				Restricted Stock Units
Outstanding at:	Shares		Weighted Average Exercise Price		Shares		Weighted Average Grant Date Fair Value
December 31, 2013		742,384	$	12.28		719,904	$	11.04
Granted		-		-		81,793		26.45
Options exercised or RSUs vested		(53,444)		12.41		(103,406)		13.43
Forfeited		(5,702)		12.05		(2,650)		12.82
March 31, 2014		683,238	$	12.27		695,641	$	12.49

Stock Options

The exercise price of each stock option equals the market price of the Company’s common stock on the grant date. Compensation expense is recorded at the grant date fair value and is recognized on a straight-line basis over the applicable vesting periods. The Company’s stock options generally vest over three years, with a maximum term of ten years.

During the three months ended March 31, 2014 and 2013, the Company recognized an expense of $0.4 million and $0.5 million, respectively, relating to the options. The Company did not recognize any tax benefit related to this compensation expense. As of March 31, 2014, the Company has $1 million of unrecognized compensation expense associated with these stock options that will be amortized on a straight-line basis over the next eleven months on a weighted average basis.

As of March 31, 2014, the Company has an aggregate of 683,238 stock options that have been granted, but have not yet been exercised. As of March 31, 2014, the remaining average contractual life for the options is approximately eight years. During the three months ended March 31, 2014, 53,444 stock options were exercised, which had an aggregate intrinsic value of $0.7 million. As of March 31, 2014, 511,822 stock options were exercisable, which had an aggregate intrinsic value of $7.6 million. During the three months ended March 31, 2014, 5,702 stock options were forfeited and no options were granted.

Restricted Stock Units (“RSUs”)

The grant date fair value of each RSU equals the market price of the Company’s common stock on the grant date. Compensation expense is recorded at the grant date fair value, less an estimated forfeiture amount, and is recognized on a straight-line basis over the applicable vesting periods.

During the three months ended March 31, 2014 and 2013, the Company recognized an expense of $0.8 million and $0.7 million, respectively, relating to the RSUs. The Company did not recognize any tax benefit related to this compensation expense. As of March 31, 2014, the Company has $4.5 million of unrecognized compensation expense associated with these RSUs that will be amortized on a straight-line basis over the next 14 months on a weighted average basis. The Company’s RSUs generally vest over a three year period.

As of March 31, 2014, the Company has an aggregate of 695,641 RSUs that have been granted but have not yet vested. During the three months ended March 31, 2014, 2,650 RSUs were forfeited.

On March 1, 2013, one third of the RSUs granted on March 3, 2011 vested, resulting in the issuance of 26,837 shares at a fair value of $0.3 million. After offsets for withholding taxes, a total of 17,934 shares of common stock were issued in connection with this vesting. This total is net of shares repurchased to provide payment for certain executives’ minimum statutory withholding tax. The Company paid $0.1 million to acquire 8,903 vested shares to cover the minimum statutory withholding taxes.

On March 6, 2013, one third of the RSUs granted on March 6, 2012 vested resulting in the issuance of 40,305 shares at a fair value of $0.5 million. After offsets for withholding taxes, a total of 27,164 shares of common stock were issued in connection with this vesting. This total is net of shares repurchased to provide payment for certain executives’ minimum statutory withholding tax. The Company paid $0.2 million to acquire 13,141 vested shares to cover the minimum statutory withholding taxes.

On March 1, 2014, one third of the RSUs granted on March 3, 2011 vested, resulting in the issuance of 25,995 shares at a fair value of $0.7 million. After offsets for withholding taxes, a total of 17,366 shares of common stock were issued in connection with this vesting. This total is net of shares repurchased to provide payment for certain executives’ minimum statutory withholding tax. The Company paid $0.2 million to acquire 8,629 vested shares to cover the minimum statutory withholding taxes.

On March 6, 2014, one third of the RSUs granted on March 6, 2012 and one third of the RSUs granted on March 5, 2013 vested, resulting in the issuance of 77,411 shares at a fair value of $2 million. After offsets for withholding taxes, a total of 52,163 shares of common stock were issued in connection with this vesting. This total is net of shares repurchased to provide payment for certain executives’ minimum statutory withholding tax. The Company paid $0.7 million to acquire 25,248 vested shares to cover the minimum statutory withholding taxes.

Long-Term Compensation

Performance Award Agreements

Under the provisions of the 2010 Equity Incentive Plan, the Company granted certain awards pursuant to Performance Award Agreements to approximately 80 executives on March 5, 2013. Additional awards were granted on March 6, 2014. The purpose of these awards is to provide the executives an incentive to participate in the long-term success and growth of the Company. The Performance Award Agreements provide for cash-based awards that vest upon payment. The awards granted on March 5, 2013, will be paid after December 31, 2015, and the awards granted on March 6, 2014, will be paid after December 31, 2016, if certain performance conditions are met. These awards are also subject to payment upon a change in control or termination of employment, if certain criteria are met. One half of the awards will be based on the Company's Adjusted EPS Growth Rate, which is defined as the Company’s cumulative Adjusted EPS for the performance period of the awards, stated in terms of a percentage growth rate. The performance period of the awards granted on March 5, 2013, is January 1, 2013 through December 31, 2015, and the performance period of the awards granted on March 6, 2014, is January 1, 2014 through December 31, 2016. The Company's earnings per share will be adjusted to exclude the effect of extraordinary, unusual, and/or nonrecurring items and then will be divided by the number of fiscal years in the specified period, stated in terms of a percentage growth rate. The remaining half of the awards will be based on the Company's percentile ranking of total shareholder return, compared to a peer group of companies ("TSR Percentile"), for the performance period. The awards represent unfunded, unsecured obligations of the Company.

During the three months ended March 31, 2014 and 2013, the Company recorded an expense related to these awards of $1.1 million and $0.1 million, respectively. At March 31, 2014, the Company had a liability of $2 million related to these awards. This liability is presented as other non-current liabilities in the Condensed Consolidated Balance Sheet.