STOCK-BASED COMPENSATION

Stock-based Compensation Plans

Forest maintains the 2001 and 2007 Stock Incentive Plans (the “Plans”) under which qualified and non-qualified stock options, restricted stock, performance units, phantom stock units, and other awards may be granted to employees, consultants, and non-employee directors of Forest and its subsidiaries.

Compensation Costs

The table below sets forth stock-based compensation for the three months ended March 31, 2014 and 2013, and the remaining unamortized amounts and weighted average amortization period as of March 31, 2014.



	Restricted Stock			Performance Units			Phantom Stock Units			Total⁽¹⁾⁽²⁾
	(In Thousands)
Three Months Ended March 31, 2014:
Total stock-based compensation costs	$	1,571		$	2		$	175		$	1,748
Less: stock-based compensation costs capitalized	(799		)	(6		)	(114		)	(919		)
Stock-based compensation costs expensed	$	772		$	(4	)	$	61		$	829
Unamortized stock-based compensation costs⁽³⁾	$	6,887		$	2,749		$	2,078		$	11,714
Weighted average amortization period remaining	1.3 years			1.7 years			1.7 years			1.5 years
Three Months Ended March 31, 2013:
Total stock-based compensation costs	$	4,235		$	1,628		$	1,262		$	7,125
Less: stock-based compensation costs capitalized	(1,822		)	(473		)	(669		)	(2,964		)
Stock-based compensation costs expensed	$	2,413		$	1,155		$	593		$	4,161

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(1)	Forest also maintains an employee stock purchase plan (which is not included in the table) under which $.03 million and $.1 million of compensation cost was recognized for the three month periods ended March 31, 2014, and 2013, respectively,


(2)	In connection with the divestiture of the South Texas oil and natural gas properties in the first quarter of 2013, Forest incurred $2.0 million ($1.0 million net of capitalized amounts) in stock-based compensation costs due to accelerated vesting of involuntarily terminated employees’ awards. See Note 5 for more information regarding this divestiture.


(3)	The unamortized stock-based compensation costs for liability-based awards are based on the closing price of Forest’s common stock at the reporting period end.

Stock Options

The following table summarizes stock option activity in the Plans for the three months ended March 31, 2014.



	Number of Options		Weighted Average Exercise Price		Aggregate Intrinsic Value (In Thousands)⁽¹⁾		Number of Options Exercisable
Outstanding at January 1, 2014	631,206		$	17.21	$	—	631,206
Granted	—		—
Exercised	—		—		—
Cancelled	(171,377	)	13.88
Outstanding at March 31, 2014	459,829		$	18.45	$	—	459,829

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(1)	The intrinsic value of a stock option is the amount by which the market value of the underlying stock, as of the date outstanding or exercised, exceeds the exercise price of the option.

Restricted Stock, Performance Units, and Phantom Stock Units

The following table summarizes the restricted stock, performance unit, and phantom stock unit activity in the Plans for the three months ended March 31, 2014.



	Restricted Stock						Performance Units						Phantom Stock Units
	Number of Shares⁽¹⁾		Weighted Average Grant Date Fair Value		Vest Date Fair Value (In Thousands)		Number of Units⁽²⁾		Weighted Average Grant Date Fair Value		Vest Date Fair Value (In Thousands)		Number of Units⁽³⁾		Weighted Average Grant Date Fair Value		Vest Date Fair Value (In Thousands)
Unvested at January 1, 2014	2,790,542		$	10.23			1,511,140		$	8.48			1,924,819		$	6.75
Awarded	1,000		1.82				—		—				67,000		3.51
Vested	(349,118	)	8.68		$	1,166	—		—		$	—	(313,287	)	7.07		$	1,065
Forfeited	(217,173	)	9.85				(170,300	)	9.33				(139,128	)	7.19
Unvested at March 31, 2014	2,225,251		$	10.51			1,340,840		$	8.38			1,539,404		$	6.51

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(1)	Of the unvested restricted stock as of March 31, 2014, 486,385 shares, which were granted in 2013, vest in one-third increments on each of the first three anniversary dates of the grant. All other unvested shares of restricted stock cliff vest on the third anniversary of the date of grant.

(2)

Of the unvested performance units as of March 31, 2014, 598,500, which were granted in 2013, are cash-based and the remaining unvested performance units are share-based. For both cash- and share-based performance units, the actual settlement amount is dependent upon Forest’s relative total shareholder return in comparison to a specified peer group over a thirty-six month performance period. The cash-based performance units are accounted for as a liability within the Condensed Consolidated Financial Statements.

(3)

All of the unvested phantom stock units as of March 31, 2014 must be settled in cash. The phantom stock units have been accounted for as a liability within the Condensed Consolidated Financial Statements. All of the phantom stock units that vested during the three months ended March 31, 2014 were settled in cash. Of the unvested phantom stock units as of March 31, 2014, (i) 136,619 were granted in 2011 and 527,785 were granted in 2013 and vest in one-third increments on each of the first three anniversaries of the grant date, (ii) 493,000 were granted in 2013 and 67,000 were granted in 2014 and cliff vest on the third anniversary of the grant date, (iii) and 270,000 were granted in 2012 and 45,000 were granted in 2013 and vest over a four-year period in accordance with the following schedule: (a) 10% on the first anniversary of the grant date; (b) 20% on the second anniversary of the grant date; (c) 30% on the third anniversary of the grant date; and (d) 40% on the fourth anniversary of the grant date.