SHARE-BASED COMPENSATION

9 Months Ended

Sep. 30, 2011

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

10.          SHARE-BASED COMPENSATION

On February 18, 2011, we completed an option exchange program (the “Exchange Program”) pursuant to which we exchanged outstanding employee stock options previously granted under our 2005 Stock Incentive Plan with an exercise price greater than $5.00 per share, vested and unvested (the “Eligible Options”), for new, unvested options to purchase Common Stock (the “New Options”).

The Exchange Program was effected with certain employees, including each of our named executive officers. Under the Exchange Program, a total of 1,093,240 Eligible Options with a weighted average exercise price of $11.24 per share were exchanged for 1,093,240 New Options with an exercise price of $5.00 per share. The table below sets forth the number of vested Eligible Options exchanged for an equivalent number of unvested New Options, and the weighted average exercise price of such Eligible Options held by each of our named executive officers.

	Eligible Options	Weighted Average Exercise Price
Allan D. Keel	500,000	$	11.97
E. Joseph Grady	225,000	$	11.38
Thomas H. Atkins	38,300	$	11.60
Jay S. Mengle	45,000	$	11.60
Tracy Price	90,000	$	11.60
Total	898,300	$	11.75

Under the terms of the Exchange Program, New Options which will have an exercise price per share equal to the greater of $5.00 per share and the closing price per share of Crimson common stock on The NASDAQ Global Market on the last business day of the Exchange Offer.  Therefore, since the Closing Price of the Common Stock on February 18, 2011 was $3.95, the exercise price per share of the New Options was fixed at $5.00 per share.

Due to an annual limitation in the number of options to purchase Common Stock that may be issued in any single year under the 2005 Stock Incentive Plan, Allan D. Keel, our Chief Executive Officer, was limited to exchanging only the portion of Eligible Options held by him that was not in excess of such annual limitation.  We may offer to exchange at a later date the remaining 175,000 Eligible Options that are held by Mr. Keel, which have a weighted average exercise price of $9.70, under the same terms as the Exchange Program.

The fair value of the Eligible Options exchanged, calculated using the Black-Scholes valuation model, was $1.8 million immediately prior to the exchange and the fair value of the New Options was calculated at $2.7 million.  Therefore, the $0.9 million incremental value of the New Options over the Eligible Options and the $0.2 million of unrecognized compensation expense for the original award, or $1.1 million, will be amortized on a straight line basis, over the four-year vesting period of the New Options, or approximately $22,000 per month.

The Second Amendment to the Amended and Restated 2005 Stock Incentive Plan, approved by shareholders at the Annual Shareholders’ Meeting on May 17, 2011, increased the annual limitation on option share grants to 750,000 shares thereby allowing the balance of Mr. Keel’s Eligible Options to be exchanged.  The remaining 175,000 Eligible Options that were held by Mr. Keel, which had a weighted average exercise price of $9.70, were exchanged on June 16, 2011 under the same terms as the Exchange Program.  This final transaction completes the Exchange Program.