Employee Benefit Plans

12 Months Ended

Dec. 31, 2012

11. Employee Benefit Plans

Stock Incentive Plan

In February 2010, the Company adopted the 2010 Stock Option Plan (the "Plan") pursuant to which the Company may grant restricted stock and stock options for the benefit of selected employees and directors. The Plan was amended in September 2010 to increase the number of shares of Class A Common Stock that may be issued under the Plan to 1,000,000 shares. Grants are issued at prices equal to the estimated fair market value of the stock as defined in the Plan on the date of the grant, vest over various terms (generally three years), and expire ten years from the date of the grant. The Plan allows vesting based upon performance criteria. 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 fair value of share based options granted is calculated using the Black-Scholes option pricing model. A total of 956,265 shares of Class A Common Stock are reserved for issuance under the Plan at December 31, 2012. As of December 31, 2012, all remaining options outstanding related to the Plan had either expired or been forfeited and there were no outstanding options as of December 31, 2012.

The Company accounts for stock-based compensation by estimating the fair value of options granted using a Black-Scholes option valuation model. The Company recognizes the expense for grants of stock options on a straight-line basis in the statement of operations as operating expense based on their fair value over the requisite service period. The Company recorded compensation expense for the years ended December, 31, 2012 and 2011 of $2,363 and $14,821, respectively, for the estimated fair value of options issued.

The Company's policy is to issue new shares of stock on exercise of stock options.

A summary of option activity under the Plan as of December 31, 2012 and changes during the years ended December 31, 2012 and 2011 is presented below:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Outstanding at December 31, 2010		-		$	-
Granted		897,950			0.19
Exercised		(58,901	)		0.20
Forfeited		(84,910	)		0.16
Outstanding at December 31, 2011		754,139		$	0.20		8.1
Granted		-			-
Exercised		(18,487	)		.14
Forfeited		(735,652	)		.20
Outstanding at December 31, 2012		-		$	-		-

Exercisable at December 31, 2012		-		$	-		-

During the year ended December 31, 2012, in a cashless exercise transaction, options to purchase a total of 18,487 shares of Class A Common Stock were exercised resulting in the issuance of 6,004 shares and the cancellation of 12,483 option shares as consideration for the exercise price. The intrinsic value of options exercised during the year ended December 31, 2012 totaled $4,993.

During the year ended December 31, 2011, in a cashless exercise transaction, a total of 58,901 options were exercised resulting in the issuance of 37,731 shares and the cancelation of 21,170 options as consideration for the exercise price. The intrinsic value of options exercised during the year ended December 31, 2011 totaled $79,516.

401(k) Savings Plan

Employees loaned to the Company under the Restated Administrative Services Agreement are eligible to participate in a 401(k) Savings Plan sponsored by Aequitas. The Company through reimbursement to Aequitas under the Restated Administrative Services Agreement matches 100% of the first 3% of eligible compensation and 50% of the next 2% of eligible compensation that employees contribute to the plan; the Company's matching contributions vest immediately. The Company recorded matching expense of $74,319 and $82,360 for the years ended December 31, 2012 and 2011, respectively.

CarePayment Technologies, Inc. 10-K