Stock-Based Compensation

Restricted Stock

On June 16, 2009, at our annual meeting of shareholders, our shareholders adopted the 2009 Restricted Stock/Unit Plan. On June 3, 2014, at our annual meeting of shareholders, our shareholders approved a proposed amendment to the Plan to add additional 500,000 shares of common stock to the Plan, thereby authorizing the issuance of up to 800,000 shares of common stock under the Plan. On March 20, 2014, the Compensation Committee awarded 15,000 shares of restricted common stock to each of G. Larry Lawrence, our CFO, and James Hazlett our Vice President of Technical Services, subject to the approval at our June 2014 annual meeting of shareholders of a proposal to increase the number of shares reserved for issuance under our 2009 restricted Stock\Unit Plan. As the proposal was approved by shareholders at the 2014 annual meeting, we issued the restricted shares to Messrs. Hazlett and Lawrence which vest one year from the grant date. We also awarded and issued 13,152 shares of restricted common stock to our Board of Directors as partial payment for 2014 Directors' fees. The restricted stock issued to our Directors vests over one year, in quarterly installments, beginning March 31, 2015. In accordance with the Company's employment agreement with Stephen Taylor, the Company's Chief Executive Officer, the Compensation Committee reviewed his performance in determining the issuance of restricted common stock. Based on this review which included consideration of the Company's 2013 performance, Mr. Taylor, was awarded 49,420 restricted shares on January 23, 2014, which vest one year from the date of grant. Compensation expense related to the restricted shares was approximately $2,818,000, $1,485,000 and $978,000 for the years ended December 31, 2014, 2013, and 2012, respectively. As of December 31, 2014, there was a total of approximately $608,000 of unrecognized compensation expense related to the nonvested portion of these restricted shares. This expense is expected to be recognized within one year. As of December 31, 2014, 423,717 shares were still available for issuance under the 2009 Restricted Stock/Unit Plan.

A summary of all restricted stock activity as of December 31, 2014 and changes during the year then ended is presented below.



	Number of Shares		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2013	103,618		$	18.94	9.07	$	2,857
Granted	92,572		29.18		—	2,701
Vested	(96,952	)	19.21		—	2,935
Canceled/Forfeited	—		—		—	—
Outstanding, December 31, 2014	99,238		$	28.22	9.00	$	2,286

Stock Option Plan

Our 1998 Stock Option Plan (the "Plan"), which is stockholder approved, permits the grant of stock options to its employees for up to 550,000 shares of common stock. On June 16, 2009, at our annual meeting of shareholders, our shareholders approved a proposed amendment to the Plan to add additional 200,000 shares of common stock to the Plan, thereby authorizing the issuance of up to 750,000 shares of common stock under the Plan. We believe that such awards better align the interests of our employees with our stockholders. Option awards are generally granted with an exercise price equal to the market price of our stock at the date of grant; those option awards generally vest based on three years of continuous service and have ten-year contractual terms. Certain option and share awards provide for accelerated vesting if there is a change in control of the Company (as defined in the Plan). The last date that grants can be made under the Plan is March 1, 2016. As of December 31, 2014, 186,419 shares were still available for issue under the Plan.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected life of options granted is based on the vesting period and historical exercise and post-vesting employment termination behavior for similar grants. We use historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes.



Weighted average Black -Scholes fair value assumption during the years ended December 31, are as follows:	2014		2013		2012
Risk free rate	1.96	%	1.02	%	0.98	%
Expected life	6 years		6 years		5 years
Expected volatility	58.44	%	60.39	%	62.37	%
Expected dividend yield	—		—		—

A summary of all option activity as of December 31, 2014 and changes during the year then ended is presented below.



	Number of Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2013	378,852		$	15.61	5.23	$	4,533
Granted	60,000		30.06
Exercised	(3,500	)	17.13			48
Canceled/Forfeited	(3,083	)	22.13			24
Expired	—		—
Outstanding, December 31, 2014	432,269		$	17.55	10.10	$	2,786
Exercisable, December 31, 2014	340,435		$	15.34	8.99	$	2,622

We granted three options to purchase a total of 60,000 shares to non-executive employees in March, July and October 2014 at an exercise price of $30.41, $33.36 and $23.30, respectively with a three year vesting period.

The weighted average grant date fair value of options granted during the years 2014, 2013, and 2012 was $16.56, $10.30, and $8.22 respectively. The total intrinsic value, or the difference between the exercise price and the market price on the date of exercise, of options exercised during the years ended December 31, 2014, 2013, and 2012 was approximately $48,000, $458,000, and $151,000 respectively. Cash received from stock options exercised during the years ended December 31, 2014, 2013, and 2012 was $59,000, $829,000, and $180,000, respectively.

The following table summarizes information about our stock options outstanding at December 31, 2014:



Range of Exercise Prices	Options Outstanding				Options Exercisable
Range of Exercise Prices	Shares	Weighted Average Remaining Contractual Life (years)	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
$0.01-9.43	71,352	1.97	$	8.72	71,352	$	8.72
$9.44-15.60	70,000	4.06	$	12.51	64,166	$	12.30
$15.61-18.75	146,917	5.60	$	17.81	119,917	$	17.60
$18.76-33.36	144,000	6.03	$	24.12	85,000	$	20.00
	432,269	4.89	$	17.55	340,435	$	15.34

The summary of the status of our unvested stock options as of December 31, 2014 and changes during the year then ended is presented below.



Unvested stock options:	Shares		Weighted Average Grant Date Fair Value
Unvested at December 31, 2013	63,082		$	9.87
Granted	60,000		$	16.56
Vested	(28,915	)	$	9.80
Cancelled/Forfeited	(2,333	)	$	12.87
Unvested at December 31, 2014	91,834		$	14.19

We recognized stock compensation expense from stock options vesting of $426,000, $198,000, and $440,000 for the years ended December 31, 2014, 2013 and 2012, respectively. As of December 31, 2014, there was approximately $808,000 of total unamortized compensation cost related to unvested stock options. We expect to recognize such cost over a weighted-average period of 3.0 years.