4. Employee Stock-Based Compensation

Time Based Restricted Stock Unit Grants

In the first quarter of 2017, our board of directors granted 405,000 RSUs to employees under our 2007 and 2014 Incentive Plans for which vesting is based solely on continuous employment over the requisite service period. 348,000 of the RSUs vest at 33% per year at each anniversary of the grant date over the next three years and 57,000 RSUs vest at 25% per year at each anniversary of the grant date over the next four years. The weighted average grant date fair value for these RSUs was $14.31 per share, which was based on the closing stock price on the grant dates.

Performance and Service Condition Based Restricted Stock Unit Grants

In the first quarter of 2017, our board of directors granted 174,000 RSUs to employees under our 2007 and 2014 Incentive Plans, that vest if the compound annual growth rate of the Company’s total sales in 2019 over 2016 exceeds a composite annual growth rate based on single-family housing starts, multi-family housing starts, and growth in repair and remodeling sales over the same period. Assuming continued employment and if the performance vesting condition is achieved, these awards will cliff vest on the third anniversary of the grant date. The weighted average grant date fair value for these RSUs was $14.54 per share, which was based on the closing stock price on the grant dates.

Market and Service Condition Based Restricted Stock Unit Grants

In the first quarter of 2017, our board of directors granted 174,000 RSUs to employees under our 2007 and 2014 Incentive Plans for which vesting is contingent upon the Company’s total shareholder return exceeding the median total shareholder return of the Company’s peer group over a three year measurement period. Assuming continued employment and if the market vesting condition is met, these awards will cliff vest on the third anniversary of the grant date. The weighted average grant date fair value for these RSUs was $11.49 per share, which was determined using the Monte Carlo simulation model using the following weighted average assumptions:

Expected volatility (company)	73.7%
Expected volatility (peer group median)	33.8%
Correlation between the company and peer group median	0.33
Expected dividend yield	0.00%
Risk-free rate	1.5%

The expected volatilities and correlation are based on the historical daily returns of our common stock and the common stocks of the constituents of the Company’s peer group over the most recent period equal to the measurement period. The expected dividend yield is based on our history of not paying regular dividends in the past and our current intention to not pay regular dividends in the foreseeable future. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant and has a term equal to the measurement period.

Stock Option Grant

In the first quarter of 2017, our board of directors granted 57,000 stock options to employees under our 2014 Incentive Plan. All the awards vest at 25% per year at each anniversary of the grant date over four years. The exercise price for the options was $12.94 per share, which was the closing stock price on the grant date. The weighted average grant date fair value of the options was $7.26 and was determined using the Black-Scholes option-pricing model with the following weighted average assumptions:

Expected life	6.0 years
Expected volatility	59.2%
Expected dividend yield	0.00%
Risk-free rate	2.2%

The expected life represents the period of time the options are expected to be outstanding. We used the simplified method for determining the expected life assumption due to limited historical exercise experience on our stock options. The expected volatility is based on the historical volatility of our common stock over the most recent period equal to the expected life of the option. The expected dividend yield is based on our history of not paying regular dividends in the past and our current intention to not pay regular dividends in the foreseeable future. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant and has a term equal to the expected life of the options.