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15. Stock-Based Compensation Expense
On October 20, 2010, October 27, 2010 and March 1, 2011 our board of directors granted certain employees and directors options to purchase a combined total of 2,757,524 shares of our common stock under the Restricted Stock and Stock Option Plan. The exercise price for these options was $5.20 per share for the grants issued in October and $9.82 for the grants issued in March. All options granted have a ten year term. The options are for the purchase of shares of common stock of Thermon Group Holdings, Inc. At the completion of the IPO, all outstanding options that were granted under our Restricted Stock and Stock Option Plan became vested and exercisable. Although the options were exercisable at the time of the IPO, the sale of the underlying option shares were restricted under the lock-up agreements with the IPO underwriters, which began to expire on October 31, 2011. During the three months ended December 31, 2011, 307,048 common shares were issued in connection with option exercises. At the date of the IPO on May 5, 2011, the Company recorded stock compensation expense of $6,310 which represented all unamortized stock compensation expense related to the outstanding stock options under the Restricted Stock and Stock Option Plan.
There were no stock compensation awards issued during the three months ended December 31, 2011. On May 5, 2011, 117,600 shares, each with an exercise price of $12.00 per share, were granted under our 2011 Long-Term Incentive Plan for which stock compensation expense was not accelerated. They vest ratably over five years with 20% at each anniversary date of the grant. We valued these options with a Black-Scholes model. Due to the fact that the common stock underlying the options was not publicly traded prior to the IPO, we based the expected volatility on a comparable group of companies. The expected term is based on the simplified method due to the lack of historical exercise data. The risk-free rate for periods within the contractual life of the option is based on the Treasury bill coupon rate for U.S. Treasury securities with a maturity that approximates the expected term. We do not intend to pay dividends on our common stock for the foreseeable future, and accordingly we used a dividend yield of zero. Accordingly the assumptions we used included an estimated volatility of 45%, life of option of 6.66 years, risk free rate of 3.25% and no dividend assumption. The weighted-average estimated grant date fair value for employee stock options granted in fiscal 2012 was $5.99 per share. Excluding the $6,310 stock compensation expense associated with the acceleration of the pre-IPO options, the Company recorded stock compensation expense related to unvested awards for the three and nine months ended December 31, 2011 of $58 and $147, respectively.
During the nine months ended December 31, 2011, the Company issued a total of 15,136 shares of restricted stock to members of its board of directors. The restricted shares vest in one half increments over two years at the anniversary of the grant date. While the restricted shares are considered issued for purposes of total common shares outstanding at the time of the grant, they are subject to restrictions on transfer or sale until each anniversary vesting date. We valued the restricted shares at $11.89 per share, which was the market closing price at the date of the grant. We will expense the value of the restricted shares as stock compensation expense ratably over the vesting period unless any portion is forfeited.
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