Stock-Based Compensation

2013 Long-Term Incentive Plan

Under our 2013 Long-Term Incentive Plan (the “LTIP”), stock options, SARs, restricted stock, restricted stock units, dividend equivalent rights and other types of equity and cash incentive awards may be granted to employees, non-employee directors and service providers. The LTIP expires after 10 years, unless prior to that date the maximum number of shares available for issuance under the plan has been issued or our board of directors terminates the plan. There are 20,000,000 shares of common stock reserved for issuance under the LTIP. As of December 31, 2017, 14,015,471 shares remained available for issuance.

Restricted Stock Units

Upon completion of the IPO and pursuant to the LTIP, we began granting restricted stock units. Substantially all RSUs granted under the LTIP vest ratably over a period of one to three years. Our treasury stock consists of shares that were withheld from employees to settle personal tax obligations that arose as a result of restricted stock units that vested. Certain restricted stock unit awards provide for accelerated vesting for qualifying terminations of employment or service.

Employees granted RSUs are not entitled to dividends declared on the underlying shares while the restricted stock unit is unvested. As such, the grant date fair value of the award is measured by reducing the grant date price of our common stock by the present value of the dividends expected to be paid on the underlying shares during the requisite service period, discounted at the appropriate risk-free interest rate. The weighted average grant date fair value of RSUs granted during the years ended December 31, 2017, 2016 and 2015 was $12.1 million, $11.6 million and $14.6 million, respectively. Compensation expense is recognized ratably over the vesting period. Forfeitures are recorded as they occur.

Stock-based compensation expense relating to RSUs included in general and administrative expenses on the consolidated statements of operations for the years ended December 31, 2017, 2016 and 2015 was $12.8 million, $15.6 million and $26.1 million, respectively. The total fair value of RSUs vested during the years ended December 31, 2017, 2016 and 2015 was $9.9 million, $22.6 million and $17.4 million, respectively. Unamortized stock compensation expense as of December 31, 2017 relating to RSUs totaled approximately $9.5 million, which will be expensed over a weighted average period of 1.75 years.

Non-vested RSUs outstanding as of December 31, 2017 and the changes during the year were as follows:



	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2016	1,633,478		$	14.40
Granted	1,368,999		8.83
Vested	(995,845	)	14.66
Forfeited	(141,332	)	9.46
Non-vested at December 31, 2017	1,865,300		$	10.55

Performance Restricted Stock Units

The purpose of the PRSUs is to closely align the incentive compensation of the executive leadership team for the duration of the three-year performance cycle with returns to FINV's shareholders and thereby further motivate the executive leadership team to create sustained value to FINV shareholders. The design of the PRSU grants effectuates this purpose by placing a material amount of incentive compensation for each executive at risk by offering an extraordinary reward for the attainment of extraordinary results. Design features of the PRSU grant that in furtherance of this purpose include the following: (1) The vesting of the PRSUs is based on total shareholder return ("TSR") based on a comparison to the returns of a peer group. (2) TSR is computed over the entire three-year Performance Period (using a 30-day averaging period for the first 30 calendar days and the last 30 calendar days of the Performance Period to mitigate the effect of stock price volatility). The TSR calculation will assume reinvestment of dividends. (3) The ultimate number of shares to be issued pursuant to the PRSU awards will vary in proportion to the actual TSR achieved as a percentile compared to the peer group during the Performance Period as follows: (i) no shares will be issued if the Company's performance falls below the 25th percentile; (ii) 50% of the Target Level if the Company achieves a rank in the 25th percentile (the threshold level); (iii) 100% of the Target Level if the Company achieves a rank in the 50th percentile (the target level); and (iv) 150% of the Target Level if the Company achieves a rank in the 75th percentile and above (the maximum level). (4) Unless there is a qualifying termination as defined in the PRSU award agreement, the PRSU's of an executive will be forfeited upon an executive's termination of employment during the Performance Period.

Though the value of the PRSU grant may change for each participant, the compensation expense recorded by the Company is determined on the date of grant. Expected volatility is based on historical equity volatility of our stock based on 50% of historical and 50% of implied volatility weighting commensurate with the expected term of the PRSU. The expected volatility considers factors such as the historical volatility of our share price and our peer group companies, implied volatility of our share price, length of time our shares have been publicly traded, and split- and dividend-adjusted closing stock prices. We assumed no forfeiture rate for the PRSUs.

In 2017, we granted PRSUs with a fair value of $2.6 million or 293,083 units ("Target Level"). The performance period for these grants is a three-year period from either January 1, 2017 to December 31, 2019 or September 27, 2017 to September 26, 2020 ("Performance Period").

The weighted average assumptions for the PRSUs granted in 2017 are as follows:



	2017
Expected term (in years)	2.92
Expected volatility	42.1%
Risk-free interest rate	1.51%
Correlation range	26.8% to 76.0%

In 2016, we granted PRSUs with a fair value of $2.8 million or 199,168 units ("Target Level"). The performance period for these grants is a three-year period from January 1, 2016 to December 31, 2018 ("Performance Period").

The weighted average assumptions for the PRSUs granted in 2016 are as follows:



	2016
Expected term (in years)	2.86
Expected volatility	42.7%
Risk-free interest rate	0.88%
Correlation range	24.4% to 71.0%

In the event of death, the restrictions related to forfeiture as defined in the performance awards agreement will lapse with respect to 100% of the PRSUs at the target level effective on the date of such death. In the event of involuntary termination except for cause, the Company will enter into a special vesting agreement with the executive under which the restrictions for forfeiture will not lapse upon such termination. In the event of a termination for any other reason prior to the end of the Performance Period, all PRSUs will be forfeited.

Stock-based compensation expense related to PRSUs included in general and administrative expenses on the consolidated statements of operations for the years ended December 31, 2017 and 2016 was $0.6 million and $0.8 million, respectively. We had no stock-based compensation expense related to PRSUs for the year ended December 31, 2015. The total fair value of PRSUs vested during the year ended December 31, 2017 was $0.2 million. Unamortized stock compensation expense as of December 31, 2017 relating to PRSUs totaled approximately $2.2 million, which will be expensed over a weighted average period of 2.29 years.

Non-vested PRSUs outstanding as of December 31, 2017 and the changes during the year were as follows:



	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2016	199,168		$	14.21
Granted	293,083		8.74
Vested	(26,126	)	6.99
Forfeited	(81,880	)	9.60
Non-vested at December 31, 2017	384,245		$	9.01

Employee Stock Purchase Plan

Under the Frank's International N.V. ESPP, eligible employees have the right to purchase shares of common stock at the lesser of (i) 85% of the last reported sale price of our common stock on the last trading date immediately preceding the first day of the option period, or (ii) 85% of the last reported sale price of our common stock on the last trading date immediately preceding the last day of the option period. The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code. We have reserved 3.0 million shares of our common stock for issuance under the ESPP, of which 2.7 million shares were available for issuance as of December 31, 2017. Shares issued to our employees under the ESPP totaled 155,673 in 2017 and 75,974 shares in 2016. For the years ended December 31, 2017, 2016 and 2015, we recognized $0.4 million, $0.3 million and $0.2 million of compensation expense related to stock purchased under the ESPP, respectively.

In January 2017, we issued 50,141 shares of our common stock to our employees under this plan to satisfy the employee purchase period from July 1, 2016 to December 31, 2016, which increased our common stock outstanding.

In July 2017, we issued 105,532 shares out of treasury stock to our employees under this plan to satisfy the employee purchase period from January 1, 2017 to June 30, 2017.