Prior to the IPO, the Company granted options and SARs under a stock-based compensation award program (the “Program”). The options were exercisable into shares of unvested restricted common stock. The Program was administered by the board of directors. The board determined the terms of an award, including the amount, number of rights or shares, and vesting period, among others. Options issued generally had terms of one year or less and the restricted common stock issued upon exercise of the options generally vested over three to five years. The exercise price of the options was based upon a formula equivalent to the net book value of common stock as of the end of the fiscal year immediately preceding the date of issuance. The Company had not formally reserved any shares of its common stock for future stock awards under the Program.

In prior years and during the nine months ended September 30, 2013, employees of the Company exercised stock options through the issuance of notes receivable. Cash payments on notes receivable were presented as an increase in consolidated stockholders’ equity. Such notes bore interest at a rate of 5% or 6% per annum and were due in defined installments on various remaining dates through April 15, 2016, which was consistent with the vesting periods of the restricted common stock.

There were no redemptions or cancelations of stock options during the three and nine ended September 30, 2013 or September 30, 2012.

The following is a summary of the Company’s stock option activity:

The following is a summary of the Company’s restricted common stock activity:

The following is a summary of the Company’s SARs activity:

Stock-based Compensation Expense and Deemed Capital Contribution (Distribution) From MMC

Historically, MMC assumed the Company’s obligation with respect to any appreciation in the value of the underlying vested awards and SARs in excess of the employees’ exercise price. MMC was deemed to make a capital contribution to the Company’s additional paid-in capital equal to the amount of compensation expense recorded, net of the applicable taxes. Based on the tax-sharing agreement between the Company and MMC, the tax deduction on the compensation expense recorded by the Company was allocated to MMC. MMC recorded the liability related to the appreciation in the value of the underlying stock and SARs in its consolidated financial statements. To the extent of any depreciation in the value of the underlying vested awards and SARs (limited to the amount of any appreciation previously recorded from the employees’ original exercise price), compensation expense was reduced and MMC was deemed to receive a capital distribution.

The total compensation cost related to unvested stock and SARs was generally recognized over approximately four years. Restricted common stock issued upon exercise of stock options was generally vested over three to five years and stock options typically were exercised immediately for a note receivable.

The total formula-settlement value and total compensation cost related to non-vested stock and SARs are as follows:

During the three months ended September 30, 2013 and 2012, total stock based compensation expense was $2,053 and $1,760, respectively. During the nine months ended September 30, 2013 and 2012, total stock based compensation expense was $4,679 and $3,943, respectively.

The total fair value of stock and SARs that vested during the nine months ended September 30 was as follows:

In conjunction with the IPO, the vesting of all unvested restricted stock and all unvested SARs was accelerated. See Note 9 - Subsequent Events for additional information.