NOTE 12 - SHARE-BASED COMPENSATION

The table below sets forth compensation cost charged as an expense for share-based compensation plans, including stock options and share grants, recognized in the statements of income for the years ended December 31, 2015, 2014 and 2013:

	2015		2014		2013
Cost of goods sold	$	716	$	438	$	522
Selling, general and administrative expense		16,228		12,438		11,645
Research and development expense		2,026		1,228		1,384
Total share-based compensation expense	$	18,970	$	14,104	$	13,551

Stock Options – Stock options under our 2001 Omnibus Equity Incentive Plan (“2001 Plan”) generally vest in equal annual installments over a four-year period and expire ten years after the grant date. For the years ended December 31, 2015, 2014 and 2013, stock option expense was approximately $3 million, $3 million and $4 million, respectively.

In May 2013, our stockholders approved our 2013 Equity Incentive Plan (“2013 Plan”). Since the approval of the 2013 Plan, all stock options are granted under the 2013 Plan, and we will not grant any further stock options under our 2001 Plan. Stock options under the 2013 Plan generally vest in equal annual installments over a four-year period and expire eight years after the grant date. The number of shares authorized to be awarded under the 2013 Plan is 6 million shares. For additional information on the 2013 Plan, see our definitive proxy statement filed with the SEC.

Share-based compensation expense for stock options granted during 2014 and 2013 was calculated on the date of grant using the Black-Scholes-Merton option-pricing model with the following weighted-average assumptions:

	2014			2013
Weighted-average grant date fair value (1)	$	15.68		$	12.88
Weighted-average assumptions used:
Expected volatility		53.36	%		53.36	%
Expected term (years)		7.2			7.2
Risk-free interest rate		2.08	%		1.49	%
Forfeiture rate		0.00	%		0.78	%
Expected dividend yield		0.00	%		0.00	%
(1) No stock options were granted in 2015.

Expected volatility – We estimate expected volatility using historical volatility. Public trading volume on options in our stock is not material. As a result, we determined that utilizing an implied volatility factor would not be appropriate. We calculate historical volatility for the period that is commensurate with the options’ expected term assumption.

Expected term – We have evaluated expected term based on history and exercise patterns across our demographic population. We believe that this historical data is the best estimate of the expected term of a new option.

Risk free interest rate – We estimate the risk-free interest rate based on zero-coupon U.S. treasury securities for a period that is commensurate with the expected term assumption.

Forfeiture rate - The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest as forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinguished from “cancellations” or “expirations” and represents only the unvested portion of the surrendered option. This analysis will be re-evaluated at least annually, and the forfeiture rate for all grants will be adjusted as necessary.

Total cash received from option exercises was approximately $10 million, $6 million and $3 million during 2015, 2014 and 2013, respectively.

At December 31, 2015, unamortized compensation expense related to unvested options, net of estimated forfeitures, was approximately $3 million. The weighted average period over which share-based compensation expense related to these options will be recognized is approximately 2 years.

The table below sets forth a summary of activity in our stock option plans:

Stock Options	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2013		3,713		$	17.85
Granted		186			23.35
Exercised		(341	)		7.70
Forfeited or expired		(432	)		20.34
Outstanding at December 31, 2013		3,126			18.93
Granted		176			27.92
Exercised		(564	)		10.37
Forfeited or expired ⁽¹⁾		(2	)		29.21
Outstanding at December 31, 2014		2,736			21.26
Granted		-			-
Exercised		(653	)		15.63
Forfeited or expired		(20	)		22.91
Outstanding at December 31, 2015		2,063		$	23.03		3.9	$	4,111
Exercisable at December 31, 2015		1,776		$	22.82		3.6	$	3,840

⁽¹⁾

The Compensation Committee of the Board of Directors reviewed the grants of stock options to the Chief Executive Officer (“CEO”) in 2009, 2010, 2011 and 2012 (each such annual grant, an “Option Grant”), and approved a Confirmation Agreement, dated April 1, 2013, in which we and our CEO agreed and confirmed that our CEO will assert no claim that any Option Grant in 2009, 2010, 2011 or 2012 provided for the purchase of more than 100,000 shares of our Common Stock, and that each Option Grant document be deemed amended to reflect the foregoing 100,000 share limitation.

The table below summarizes information about stock options outstanding at December 31, 2015:

Plan	Range of exercise prices		Number outstanding		Weighted average remaining contractual life (years)		Weighted average exercise price
2001 Plan	$	15.05-29.21		1,722		3.5	$	22.52
2013 Plan	$	23.35-27.92		341		5.9	$	25.61

The table below summarizes information about stock options exercisable at December 31, 2015:

Plan	Range of exercise prices		Number exercisable		Weighted average remaining contractual life (years)		Weighted average exercise price
2001 Plan	$	15.05-29.21		1,648		3.4	$	22.66
2013 Plan	$	23.35-27.92		128		5.8	$	24.86

Share Grants—Restricted stock awards and restricted stock units generally vest in equal annual installments over a four-year period. Since the approval of the 2013 Plan, all new grants are granted under the 2013 Plan, and we will not grant any further grants under our 2001 Plan.

The table below sets forth a summary of our non-vested share grants in 2015, 2014 and 2013:

Restricted Stock Grants	Shares			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Nonvested at December 31, 2012		1,164			20.42
Granted		453			24.66
Vested		(428	)		19.90
Forfeited		(58	)		21.66
Nonvested at December 31, 2013		1,131			22.35
Granted		788			25.08
Vested		(346	)		22.34
Forfeited		(38	)		24.98
Nonvested at December 31, 2014		1,535			23.32	$	42,324
Granted		1,557			22.46
Vested		(370	)		25.02	$	9,462
Forfeited		(43	)		26.08
Nonvested at December 31, 2015		2,679		$	23.51	$	61,247

For the years ended December 31, 2015, 2014 and 2013, share-based compensation expense related to restricted stock arrangements granted was approximately $16 million, $11 million and $9 million, respectively. Included in the restricted stock grant for 2015 were 724,000 shares granted to Pericom employees. In 2015 approximately $4 million of the increase in restricted stock expense was related to Diodes restricted stock grants issued as replacement for unvested Pericom employee awards outstanding at the date of the acquisition. The total unrecognized share-based compensation expense as of December 31, 2015 was approximately $34 million, which is expected to be recognized over a weighted average period of approximately 3 years.