5.	Stock-Based Compensation Plans

Employee Stock-Based Incentive Plan

The Company has issued stock options (“Stock Option Awards”) and restricted common stock (“Restricted Stock Awards”) to employees and directors under its Amended and Restated First Acceptance Corporation 2002 Long Term Incentive Plan (the “Plan”) and accounts for such issuances in accordance with FASB ASC 718, Compensation – Stock Compensation. At December 31, 2014, there were 6,255,156 shares remaining available for issuance under the Plan. Stock Option Awards are generally granted with an exercise price equal to or greater than the market price of the Company’s stock at the date of grant. Stock Option Awards expire over five or ten years from the date of grant and vest in designated installments over four or five years through January 2016, while the Restricted Stock Awards vested in designated installments through November 2014. Certain awards provide for accelerated vesting if there is a change in control (as defined in the Plan).

On January 31, 2012, the Compensation Committee of the Board of Directors of the Company awarded two executive officers Stock Option Awards to purchase 750,000 and 75,000 shares of the Company’s common stock at an exercise price of $1.45 per share and vest 40% and 20%, respectively, upon grant with the remainder vesting in equal installments over three and four years, respectively. Additionally, these Stock Option Awards expire on January 31, 2017. Compensation expense related to these Stock Option Awards was $522 thousand, of which $504 thousand was amortized through December 2014 and the remaining $18 thousand will be amortized through January 2016. The fair value of these Stock Option Awards was estimated at the grant date using the Black-Scholes option pricing model with an expected volatility of 73%, a risk-free interest rate of 0.71%, a dividend yield rate of zero, and a five-year expected term. Based on the calculation using the Black-Scholes option pricing model, the grant date fair value of options granted was $0.63 per share. Expected volatility is based on the historical volatility in the price of the Company’s common stock since April 2004. The risk-free interest rate is the five-year Treasury rate, based on the term of the options. The dividend yield assumption is based on our history and expectation of dividend payments on common stock. The expected term represents the period of time that these Stock Option Awards are expected to remain outstanding.

Compensation expense related to Stock Option Awards is calculated under the fair value method and is recorded on a straight-line basis over the vesting period. There were no Stock Option Awards granted during the years ended December 31, 2014 and 2013. At December 31, 2014, the weighted average remaining contractual life of options outstanding and exercisable/vested was approximately 2.4 years for both.

A summary of the activity for the Company’s Stock Option Awards is presented below (in thousands, except per share data).

	Options			Exercise Price		Weighted Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at December 31, 2011		4,500			$3.00-$8.13	$	3.06
Granted		825			$1.45	$	1.45
Forfeited		(3,730	)		$3.00-$3.04	$	3.00
Options outstanding at December 31, 2012		1,595			$1.45-$8.13	$	2.38
Forfeited		(358	)		$3.04	$	3.04
Options outstanding at December 31, 2013		1,237			$1.45-$8.13	$	2.19
Forfeited		(117	)		$5.22	$	5.22
Options outstanding at December 31, 2014		1,120			$1.45-$3.04	$	1.87	$	908
Options exercisable/vested at December 31, 2014		940				$	1.95	$	710

A summary of the activity for the Company’s Restricted Stock Awards is presented below (in thousands, except per share data).

	Restricted Stock Awards			Weighted Average Grant Date Fair Value
Restricted Stock Awards outstanding at December 31, 2011		95		$	2.36
Vested		(34	)	$	2.36
Forfeited		(1	)	$	2.50
Restricted Stock Awards outstanding at December 31, 2012		60		$	2.35
Vested		(29	)	$	2.38
Forfeited		(14	)	$	2.36
Restricted Stock Awards outstanding at December 31, 2013		17		$	2.29
Vested		(17	)	$	2.29
Restricted Stock Awards outstanding at December 31, 2014		-		$	0.00

In the table above, the number of shares vested includes 75,135 shares surrendered by the employees to the Company for payment of minimum tax withholding obligations. Shares of stock withheld for purposes of satisfying minimum tax withholding obligations are again available for issuance under the Plan.

There were no Restricted Stock Awards granted during the years ended December 31, 2014, 2013 and 2012. The aggregate fair values of Restricted Stock Awards vested during the years ended December 31, 2014, 2013 and 2012 were $54 thousand, $99 thousand and $134 thousand, respectively, at the date of vesting.

Employee Stock Purchase Plan

The Company’s Board of Directors adopted the First Acceptance Corporation Employee Stock Purchase Plan (“ESPP”) whereby eligible employees may purchase shares of the Company’s common stock at a price equal to the lower of the closing market price on the first or last trading day of a six-month period. ESPP participants can authorize payroll deductions, administered through an independent plan custodian, of up to 15% of their salary to purchase semi-annually (June 30 and December 31) up to $25,000 of the Company’s common stock during each calendar year. The Company has reserved 400,000 shares of common stock for issuance under the ESPP. Employees purchased approximately 31,000, 35,000, and 40,000 shares during the years ended December 31, 2014, 2013 and 2012, respectively. Compensation expense attributable to subscriptions to purchase shares under the ESPP was $11,000, $7,000 and $11,000 for the years ended December 31, 2014, 2013 and 2012, respectively. At December 31, 2014, 87,635 shares remain available for issuance under the ESPP.