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Share-Based Payments
9 Months Ended
Sep. 30, 2011
Share-Based Payments
8. 
Share-Based Payments:

We maintain a stock option program for key employees, executives and directors. The plans, all of which have been approved by shareholder vote, provide for the granting of both nonqualified and incentive options. Options granted under the plans typically have a six year term and vest over a four to five-year period. The fair value of shares vested during the nine months ended September 30, 2011 and 2010 aggregated $0.05 million and $0.04 million, respectively. Compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. It is generally our policy to issue new shares upon exercise of stock options.
 
The following table sets forth information with respect to nonvested options for the nine month period ended September 30, 2011:
 
   
Number of Shares
    
Weighted Average
Grant Date Fair Value
  
Nonvested options – beginning of period
     480,843     $ 4.32  
Nonvested options granted
     3,500     $ 5.27  
Nonvested options vested or forfeited
     (17,260 )   $ 4.08  
Nonvested options – end of period
     467,083     $ 4.34  
         
Share-based payment expense decreased income before income taxes by $0.27 million and $0.81 million for the three and nine month periods ended September 30, 2011, respectively, as compared to $0.17 million and $0.65 million for the corresponding periods of the prior year. Share-based payment expense decreased income attributable to Inter Parfums, Inc. by $0.14 million and $0.45 million for the three and nine month periods ended September 30, 2011, respectively, as compared to $0.10 million and $0.37 million for the corresponding periods of the prior year.
   
The following table summarizes stock option information as of September 30, 2011:
 
   
Shares
    
Weighted Average
Exercise Price
  
             
Outstanding at January 1, 2011
     807,620     $ 12.78  
Options granted
     3,500       17.94  
Options cancelled
     (4,570 )     14.46  
Options exercised
     (93,500 )     12.67  
                 
Outstanding at September 30, 2011
     713,050     $ 12.81  
                 
Options exercisable
     245,967     $ 12.12  
Options available for future grants
     824,145          

As of September 30, 2011, the weighted average remaining contractual life of options outstanding is 2.87 years (2.0 years for options exercisable), the aggregate intrinsic value of options outstanding and options exercisable is $2.3 million and $0.8 million, respectively and unrecognized compensation cost related to stock options outstanding of Inter Parfums, Inc. aggregated $1.1 million. The amount of unrecognized compensation cost related to stock options outstanding of our majority-owned subsidiary, Interparfums, S.A., was €0.75 million. Options under Interparfums, S.A. plans vest over a four-year period.
 
Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the nine months ended September 30, 2011 and September 30, 2010 were as follows:
 
(In thousands)
  
September 30,
 2011
    
September 30,
 2010
  
             
Cash proceeds from stock options exercised
   $ 1,184     $ 771  
Tax benefits
     —       162  
Intrinsic value of stock options exercised
     708       1,195  
 
The weighted average fair values of the options granted by Inter Parfums, Inc. during the nine months ended September 30, 2011 and 2010 were $5.27 and $5.26 per share, respectively, on the date of grant using the Black-Scholes option pricing model to calculate the fair value of options granted.
             
The assumptions used in the Black-Scholes pricing model for the periods ended September 30, 2011 and 2010 are set forth in the following table. Expected volatility is estimated based on the historic volatility of our common stock. We use the simplified method in developing our estimate of the expected term of the option as historic data regarding employee exercise behavior is incomplete for the new vesting parameters instituted. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant of the option and the dividend yield reflects the assumption that the dividend payout in place at the time of stock-based award grant would continue with no anticipated increases.
 
   
September 30,
 2011
    
September 30,
 2010
  
             
Weighted-average expected stock-price volatility
     38 %     49 %
Weighted-average expected option life
  
4.5 years
    
4.18 years
  
Weighted-average risk-free interest rate
     2.0 %     2.5 %
Weighted-average dividend yield
     1.7 %     2.0 %