STOCK-BASED COMPENSATION PLANS

3 Months Ended

Mar. 31, 2012

14. STOCK-BASED COMPENSATION PLANS

Pre-tax stock-based compensation expense for the three months ended March 31, 2012 and 2011 was approximately $(0.3) million and $1.7 million, respectively, which was charged to selling, general and administrative expense in the condensed consolidated statement of operations.

Equity Awards

During the three months ended March 31, 2012, the Company awarded 45,156 stock options to certain employees. These awards have a graded vesting schedule in which one-third of the awards will vest each year on each of the first 3 anniversaries of the grant date. The determination of the fair value of the stock option awards, using the Black Scholes Option Pricing Model, is based on the assumptions in the following table. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant over the expected term. Expected volatility is calculated by considering the expected volatilities of public companies engaged in similar industries. The Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term of the options. As a result, the expected option term is calculated using the “simplified” method permitted by Staff Accounting Bulletin 110. Assumptions for options granted during the three months ended March 31, 2012 are as follows:

	Three Months Ended March 31,
	2012
Expected stock price volatility	101.8		%
Expected term (in years)	6.0
Risk-free interest rate	1.1		%
Expected dividend yield	0.0		%
Weighted average fair value	$	2.82

Certain stock options held by our Chief Executive Officer were modified in February 2012. Of the 100,000 stock options that were granted to the executive in 2010, 77,519 were modified to reduce the exercise price of the options from $43.75 to $3.55. The Company recognized an incremental fair value amount of $0.1 million in pre-tax stock-based compensation expense related to the modification for the three months ended March 31, 2012.

On March 19, 2012, the Company’s Senior Vice President, Commodity Risk Management resigned. Pursuant to the separation agreement, the executive forfeited certain unvested equity awards. The Company recognized a reduction in pre-tax stock-based compensation expense of $0.6 million related to these forfeitures during the three months ended March 31, 2012.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References

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Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Staff Accounting Bulletin (SAB)

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Reference 4: http://www.xbrl.org/2003/role/presentationRef

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef

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+ Details

AVENTINE RENEWABLE ENERGY HOLDINGS INC 10-Q