Share-Based Compensation

In 2011, the Company’s Board of Directors approved adoption of the 2011 Cooper-Standard Holdings Inc. Omnibus Incentive Plan (the “Omnibus Plan”). Under the Omnibus Plan, 3,450,000 shares of common stock are authorized for awards granted under the plan. The Omnibus Plan provides for the grant of stock options, stock appreciation rights, shares of common stock, restricted stock, restricted stock units, restricted preferred stock, incentive awards and certain other types of awards to key employees and directors of the Company and its affiliates.

The Company measures share-based compensation expense at fair value and recognizes such expense on a straight-line basis over the vesting period of the share-based employee awards. The compensation expense related to stock options, restricted stock and performance units granted to key employees and directors of the Company, which is quantified below, does not represent payments actually made to these employees. Rather, the amounts represent the non-cash compensation expense recognized by the Company in connection with these awards for financial reporting purposes. The actual value of these awards to the recipients will depend on the trading price of the Company’s stock when the awards vest. In accordance with the Omnibus Plan, share-based compensation awards that settle in shares of Company stock may be delivered on a gross settlement basis or a net settlement basis, as determined by the recipient.

In the second quarter of 2016, the Company early adopted ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The provisions related to forfeitures were adopted on the modified retrospective basis to record actual forfeitures as they occur in the consolidated financial statements, and the impact from adoption resulted in a cumulative effect adjustment of $473 to retained earnings. Provisions related to income taxes were adopted prospectively from January 1, 2016, and resulted in a tax benefit of $3,212 upon adoption in the second quarter. Provisions related to the statement of cash flows have been adopted prospectively and resulted in the recognition of excess tax benefits in cash provided by operating activities instead of financing activities.

Stock Options. Stock option awards are granted at the fair market value of the Company’s stock price at the date of the grant and have a 7- or 10-year term. The stock option grants vest over three, four or five years from the date of grant.

A summary of stock option transactions and related information for the year ended December 31, 2016 is presented below:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding as of January 1, 2016	1,089,538		$	44.95
Granted	155,100		$	68.73
Exercised	(487,203	)	$	39.44
Forfeited	(9,064	)	$	64.20
Outstanding as of December 31, 2016	748,371		$	53.24	7.1	$	37,523
Exercisable as of December 31, 2016	384,679		$	45.82	5.6	$	22,142

The weighted-average grant date fair value of stock options granted during the years ended December 31, 2016, 2015 and 2014 was $20.26, $17.28 and $20.91, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2016, 2015 and 2014 was $31,153, $2,307 and $3,448, respectively.

Total compensation expense recognized for stock options amounted to $3,701, $3,024 and $4,354 for the years ended December 31, 2016, 2015 and 2014, respectively. As of December 31, 2016, unrecognized compensation expense for stock options amounted to $4,079. Such cost is expected to be recognized over a weighted average period of approximately 1.2 years.

The fair value of the options was estimated at the date of the grant using the Black-Scholes option pricing model. Expected volatility was based on the historical volatility of the Company’s common stock. The expected option life was calculated using the simplified method. The risk-free rate is based on the U.S. Treasury zero-coupon issues with a term equal to the expected option life on the date the stock options were granted. The fair value of each option was estimated using the following assumptions:



	2016		2015		2014
Expected volatility	27.58% - 27.70%		27.95% - 28.00%		27.96% - 28.32%
Dividend yield	0.00	%	0.00	%	0.00	%
Expected option life - years	6.0		6.0		6.0
Risk-free rate	1.1% - 1.4%		1.5% - 1.7%		1.9% - 2.0%

Restricted Common Stock and Restricted Common Units. The fair value of the restricted common stock and restricted common units is determined based on the closing price of the common stock on the date of grant. The restricted common stock and restricted common units vest over one, three or four years.

A summary of restricted common stock and restricted common units transactions and related information for the year ended December 31, 2016 is presented below:



	Restricted Common Stock and Restricted Common Units		Weighted Average Grant Date Fair Value
Non-vested as of January 1, 2016	378,746		$	53.56
Granted	153,818		$	70.09
Vested	(133,564	)	$	41.79
Forfeited	(27,441	)	$	62.39
Non-vested as of December 31, 2016	371,559		$	63.98

The weighted-average grant date fair value of restricted common stock and restricted common units granted during the years ended December 31, 2016, 2015 and 2014 was $70.09, $56.85 and $66.34, respectively. The total fair value of restricted common stock and restricted common units vested during the years ended December 31, 2016, 2015 and 2014 was $5,923, $4,146 and $4,740, respectively.

Total compensation expense recognized for restricted common stock and restricted common units amounted to $7,846, $6,032 and $7,311 for the years ended December 31, 2016, 2015 and 2014, respectively. As of December 31, 2016, unrecognized compensation expense for restricted common stock and restricted common units amounted to $10,999. Such cost is expected to be recognized over a weighted-average period of approximately 1.7 years.

Performance Units. The fair value of the performance units is determined based on the closing price of the common stock on the date of grant. The actual number of performance units that will vest depends on the Company’s achievement of target performance goals related to the Company’s return on invested capital (“ROIC”) over a three-year period, which may range from 0% to 200% of the target award amount.

A summary of performance units transactions and related information for the year ended December 31, 2016 is presented below:



	Performance Units		Weighted Average Grant Date Fair Value
Non-vested as of January 1, 2016	172,400		$	60.97
Granted	86,150		$	68.71
Forfeited	(10,583	)	$	63.87
Non-vested as of December 31, 2016	247,967		$	63.53

The weighted-average grant date fair value of performance units granted during the years ended December 31, 2016, 2015 and 2014 was $68.71, $56.74 and $66.33, respectively. No performance units vested during the years ended December 31, 2016, 2015 and 2014.

Total compensation expense recognized for performance units was $12,120, $4,899 and $922 for the years ended December 31, 2016, 2015 and 2014, respectively. As of December 31, 2016, unrecognized compensation expense for the performance units was $11,173. Such cost is expected to be recognized over a weighted-average period of approximately 1.2 years.

In July 2016, the Company granted performance awards to certain of the Company’s executive officers. These grants are settled in shares of the Company’s stock and vest over a three-year performance period. The payout of these awards is based on the Company’s relative total shareholder return (“TSR”) compared to a pre-established comparator group during the performance period.

The fair value of the TSR-based performance units was estimated at the date of grant using the Monte Carlo simulation. Expected volatility was calculated based on a rolling average of the daily stock closing prices of the comparator group at the beginning of the performance period. The risk-free rate was based on the U.S. Treasury yield curve, generally represented by U.S. Treasury securities, with a term equal to the expected life of the TSR-based performance units. The dividend yield was assumed to be zero based on Company’s historical patterns and future expectation. The fair value of the TSR-based performance grant was estimated using the following assumptions:



	2016
Expected volatility	27.60	%
Dividend yield	0.00	%
Expected life - years	3
Risk-free rate	0.87	%

Total compensation expense recognized for the TSR awards was $365 for the year ended December 31, 2016. As of December 31, 2016, unrecognized compensation expense for the TSR awards was $2,251. There were no TSR-based performance units granted during the years ended December 31, 2015 and 2014.