23. SHARE-BASED COMPENSATION

In March 2006, the Company adopted a share incentive plan, or the Plan. The purpose of the Plan is to promote the success and enhance the value of the Company by linking the personal interests of the directors, employees and consultants to those of the shareholders and providing the directors, employees and consultants with an incentive for outstanding performance to generate superior returns to the shareholders. The Plan is also intended to motivate, attract and retain the services of the directors, employees and consultants upon whose judgment, interest and effort the successful conduct of the Company's operations is largely dependent. In September 2010, the shareholders approved an amendment to the Plan to increase the maximum number of common shares which may be issued pursuant to all awards of options, restricted shares and RSUs under the Plan to the sum of (i) 2,330,000 plus (ii) the sum of (a) 1% of the number of outstanding common shares of the Company on the first day of each of 2007, 2008 and 2009 and (b) 2.5% of the number of outstanding common shares of the Company outstanding on the first day of each calendar year after 2009. The Plan will expire on, and no awards may be granted after, May 8, 2021. Under the terms of the Plan, options are generally granted with an exercise price equal to the fair market value of the Company's ordinary shares and expire ten years from the date of grant.

Options to Employees

As of December 31, 2014, there was $417,697 in total unrecognized compensation expense related to share-based compensation awards, which is expected to be recognized over a weighted-average period of 0.64 years. During the years ended December 31, 2012, 2013 and 2014, $3,433,077, $2,186,407 and $1,321,239 was recognized as compensation expense, respectively.

The Company utilizes the Binomial option-pricing model to estimate the fair value of stock options.

The following assumptions were used to estimate the fair value of stock options granted in 2012, 2013 and 2014:

	2012			2013			2014
Risk free rate		3.15	%		2.47	%		—
Volatility ratio		78.79	%		89.60	%		—
Dividend yield		—			—			—
Annual exit rate		3.49	%		3.58	%		—
Exercise multiple		4.40			4.10			—

The Company used the market yield of U.S. dollar dominated Chinese International government bonds with maturity periods that can cover the contractual life of the shares option for the risk-free rates. In 2012, the expected volatility of the future ordinary share price was based on the price volatility of the Company and the shares of comparable companies in the industry, which are listed and publicly traded over the most recent period, equal to the expected maturity period of the issued options. Volatility is estimated based on annualized standard deviation of daily stock price return of the Company and the comparable companies. In 2013, since the Company has been listed for approximately 7 years and its share price history is more comparable to the life of the issued options, the Company estimated the expected volatility based on the annualized standard deviation of its daily stock price return from the date of listing to the valuation date. The Company's dividend policy is to retain earnings for reinvestment purpose and the Company does not intend to distribute dividends, thus the dividend yield is assumed to be zero. The Company estimated the annual exit rates based on the historical general exit rate of staff at different levels. The Company estimated the exercise multiple based on the historical exercise pattern of prior employee stock options granted by the Company.

A summary of the option activity is as follows:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contract Terms	Aggregate Intrinsic Value
				$			$
Options outstanding at January 1, 2014		1,176,860			11.73	6 years		22,405,886
Granted		—			—
Exercised		(307,810	)		10.62
Forfeited		(22,937	)		8.85

Options outstanding at December 31, 2014		846,113			12.21	5 years		11,793,938

Options vested or expected to be vested at December 31, 2014		822,866			12.25	4 years		11,476,756

Options exercisable at December 31, 2014		739,676			12.59	4 years		10,236,165

The weighted average grant-date fair value of options granted in 2012, 2013 and 2014 was $2.22, $6.07 and nil, respectively. The total intrinsic value of options exercised during the years ended December 31, 2012, 2013 and 2014 was $38,958, $20,439,470 and $7,493,277, respectively.

RSUs to Employees

The Company granted 1,400,237, 1,361,623 and 283,862 RSUs to employees in 2012, 2013 and 2014, respectively. The RSUs entitle the holders to receive the Company's common shares upon vesting. The RSUs were granted for free and generally vest over periods from one to four years based on the specific terms of the grants. The fair market value of the Company's ordinary shares at the date of grant resulted in total compensation cost of approximately $3.7 million, $4.9 million and $7.3 million that will be recognized ratably over the vesting period for the RSUs granted in 2012, 2013 and 2014, respectively. In the years ended December 31, 2012, 2013 and 2014, the Company recognized nil, $2,321,143 and $3,766,686 in compensation expense associated with these awards, respectively.

As of December 31, 2014, there was $10,647,260 of total unrecognized share-based compensation related to unvested RSUs, which is expected to be recognized over a weighted-average period of 1.48 years.

A summary of the RSU activity is as follows:

	Number of Shares			Weighted Average Grant-Date Fair Value
				$
Unvested at January 1, 2014		2,077,640			4.32
Granted		283,862			27.57
Vested		(625,003	)		4.70
Forfeited		(126,280	)		5.60

Unvested at December 31, 2014		1,610,219			7.76

The total fair value of RSUs vested during the years ended December 31, 2012, 2013 and 2014 was $1,007,340, $1,944,483 and $2,965,491, respectively.