Note 11 — Stock Based Compensation and Other Benefit Plans

The following describes stockholder approved plans utilized by the Company for the issuance of stock based awards.

2014 Non-Employee Directors’ Restricted Stock Plan

In May 2014, our stockholders approved the 2014 Non-Employee Directors’ Restricted Stock Plan (the “2014 Director Plan”) which authorizes grants of restricted stock to non-employee directors based on a pre-determined dollar amount on the date of each annual meeting of stockholders. The pre-determined dollar amount for determining the number of restricted shares granted is subject to change by the Board of Directors or its committee but is initially set at $150,000 for each non-employee director, except for the Chairman of the Board who will receive an annual grant of restricted shares equal to $170,000. Each restricted share granted to a non-employee director vests in full on the earlier of the day prior to the next annual meeting of stockholders following the grant date or the first anniversary of the grant. During 2015, non-employee directors received shares of restricted stock totaling 102,218 shares at a weighted average fair value on the date of grant of $9.00 per share.

The maximum number of shares of common stock issuable under the 2014 Director Plan is 1,000,000 leaving 815,933 shares available for grant as of December 31, 2015.

2015 Equity Incentive Plan

In May 2015, our stockholders approved the 2015 Employee Equity Incentive Plan (“2015 Plan”), pursuant to which the Compensation Committee of our Board of Directors (“Compensation Committee”) may grant to key employees, including executive officers and other corporate and divisional officers, a variety of forms of equity-based compensation, including options to purchase shares of common stock, shares of restricted common stock, restricted stock units, stock appreciation rights, other stock-based awards, and performance-based awards. The maximum number of shares of common stock issuable under the 2015 Plan is 6,000,000. Under the 2015 Plan, grants of stock options and stock appreciation rights will reduce the number of available shares on a 1 to 1 basis, while full value awards will reduce the number of available shares on a 1.85 to 1 basis. At December 31, 2015, 2,975,525 shares remained available for award under the 2015 Plan.

Prior to approval of the 2015 Plan, equity-based compensation was provided pursuant to the 2006 Equity Incentive Plan (“2006 Plan”). No additional grants of equity-based compensation may be granted under the 2006 Plan following approval of the 2015 Plan, however, unexpired options and other awards previously granted continue in effect in accordance with their terms until they vest or are otherwise exercised or expire.

The Compensation Committee approves the granting of all stock based compensation to employees, utilizing shares available under the 2015 Plan. Activity under each of these programs is described below.

Stock Options & Cash-Settled Stock Appreciation Rights

Stock options granted by the Compensation Committee are generally granted with a three year vesting period and a term of ten years. During 2015, 695,698 options were granted with a three year vesting period and a ten year term. The exercise price of each stock option granted was equal to the fair market value on the date of grant.

The following table summarizes activity for our outstanding stock options for the year ended December 31, 2015:

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value

Outstanding at beginning of period		3,342,015		$	7.67
Granted		695,698			9.00
Exercised		(104,339	)		5.30
Expired or cancelled		(45,541	)		8.94
Outstanding at end of period		3,887,833		$	7.96		6.20	$	877,383

Vested or expected to vest at end of period		3,831,985		$	7.93		6.16	$	877,383
Options exercisable at end of period		2,715,043		$	7.10		5.06	$	877,383

We estimated the fair value of options granted on the date of grant using the Black-Scholes option-pricing model, with the following weighted average assumptions:

	Year Ended December 31,
	2015			2014			2013

Risk-free interest rate		1.57	%		1.53	%		1.02	%
Expected life of the option in years		5.22			5.22			5.22
Expected volatility		47.3	%		48.6	%		53.7	%
Dividend yield		-			-			-

The risk-free interest rate is based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the option. The expected life of the option is based on observed historical patterns. The expected volatility is based on historical volatility of the price of our common stock. The dividend yield is based on the projected annual dividend payment per share divided by the stock price at the date of grant, which is zero because we have not paid dividends for several years and do not expect to pay dividends in the foreseeable future.

The following table summarizes information about the weighted-average exercise price and the weighted-average grant date fair value of stock options granted:

	Year Ended December 31,
	2015		2014		2013

Weighted-average exercise price of the stock on the date of grant	$	9.00	$	11.20	$	11.43
Weighted-average grant date fair value on the date of grant	$	3.91	$	4.97	$	5.42

All stock options granted for the years ended December 31, 2015, 2014 and 2013 reflected an exercise price equal to the market value of the stock on the date of grant.

The total intrinsic value of options exercised was $0.3 million, $3.2 million and $6.1 million for the years ended December 31, 2015, 2014 and 2013, while cash from option exercises totaled $0.6 million, $3.4 million and $8.3 million, respectively.

The following table summarizes activity for outstanding cash-settled stock appreciation rights for the year-ended December 31, 2015:

	Rights

Outstanding at beginning of period		107,133
Exercised		-
Expired or cancelled		(4,000	)
Outstanding at end of period		103,133

Exercisable at end of period		103,133

During 2015, there were no additional grants of cash-settled stock appreciation rights. The remaining outstanding cash-settled stock appreciation rights, if exercised, will ultimately be settled in cash for the difference between market value of our outstanding shares at the date of exercise, and $7.89. As such, the projected cash settlement is adjusted each period based upon the ending fair market value of the underlying stock. At December 31, 2015, the fair market value of each cash-settled stock appreciation right was $1.04, resulting in a liability of $0.1 million.

Total compensation cost recognized for stock options and cash-settled stock appreciation rights during the years ended December 31, 2015, 2014 and 2013 was $2.6 million, $2.6 million and $3.3 million, respectively. For the years ended December 31, 2015, 2014 and 2013, we recognized tax benefits resulting from the exercise of stock options totaling $0.1 million, $1.0 million and $1.9 million, respectively.

Performance-Based Restricted Stock Units & Cash-Settled Performance-Based Restricted Stock Units

The Compensation Committee may use various business criteria to set the performance objectives for awards of performance-based restricted stock units. During 2015, 2014 and 2013, performance-based awards were awarded to executive officers. The performance-based restricted stock units will be settled in shares of common stock and will be based on the relative ranking of the Company’s total shareholder return (“TSR”) as compared to the TSR of the Company’s designated peer group over a three year period. During 2015, a total of 136,881 performance-based restricted stock units at target were granted with the payout of shares for each executive ranging from 0%-150% of target. The performance period began June 1, 2015 and ends May 31, 2018, with the ending TSR price being equal to the average closing price of our shares over the 30-calendar days ending May 31, 2018. During 2014, a total of 110,497 performance-based restricted stock units at target were granted with the payout of shares for each executive ranging from 0%-150% of target. The performance period began June 1, 2014 and ends May 31, 2017, with the ending TSR price being equal to the average closing price of our shares over the 30-calendar days ending May 31, 2017. During 2013, a total of 149,532 performance-based restricted stock units were granted with the payout of shares for each executive ranging from 0%-150% of target. The performance period began May 3, 2013 and ends June 1, 2016, with the ending TSR price being equal to the average closing price of our shares over the 30-calendar days ending June 1, 2016.

The following table summarizes activity for outstanding performance-based restricted stock units for the year-ended December 31, 2015:

Nonvested Shares (Performance-Based)	Shares		Weighted-Average Grant Date Fair Value

Outstanding at beginning of period		198,448	$	12.82
Granted		136,881		10.06
Forfeited		-
Outstanding at the end of period		335,329	$	11.69

	Year Ended December 31,
	2015		2014		2013

Estimated fair value at date of grant	$	10.06	$	12.55	$	13.11

We estimated the fair value of each restricted stock unit at the date of grant using the Monte Carlo valuation model, with the following weighted average assumptions:

	Year Ended December 31,
	2015				2014				2013

Risk-free interest rate		1.02	%			0.81	%			0.52	%
Average closing price	$	8.96		(1)	$	11.28		(2)	$	11.33	(3)
Expected volatility		38.4	%			44.5	%			53.6	%
Dividend yield		-				-				-

(1)

Average closing price of our shares over the 30-calendar days ending May 19, 2015.

(2)

Average closing price of our shares over the 30-calendar days ending May 16, 2014.

(3)

Average closing price of our shares over the 30-calendar days ending June 3, 2013.

During 2015, 2014 and 2013, $1.1 million, $0.5 million and $0.4 million in compensation cost was recognized for performance-based restricted stock units, respectively.

Restricted Stock Awards and Units

Time-vested restricted stock awards and restricted stock units are periodically granted to key employees, including grants for employment inducements, as well as to members of our Board of Directors. Employee awards provide for vesting periods ranging from three to four years. Non-employee director grants vest in full on the earlier of the day prior to the next annual meeting of stockholders following the grant date or the first anniversary of the grant. Upon vesting of these grants, shares are issued to award recipients.

The following tables summarize the activity for our outstanding time-vested restricted stock awards and restricted stock units for the year-ended December 31, 2015.

Nonvested Shares (Time-Vesting)	Shares			Weighted-Average Grant Date Fair Value

Nonvested at January 1, 2015		1,722,899		$	10.58
Granted		142,218			9.10
Vested		(932,161	)		9.95
Forfeited		(51,611	)		10.60
Nonvested at December 31, 2015		881,345		$	11.00

Nonvested Share Units (Time-Vesting)	Shares			Weighted-Average Grant Date Fair Value

Nonvested at January 1, 2015		158,878		$	10.22
Granted		1,074,937			8.95
Vested		(80,257	)		9.20
Forfeited		(20,015	)		9.12
Nonvested at December 31, 2015		1,133,543		$	9.11

Total compensation cost recognized for restricted stock awards and restricted stock units was $10.1 million, $8.6 million and $6.7 million for the years ended December 31, 2015, 2014 and 2013 respectively. Total unrecognized compensation cost at December 31, 2015 related to restricted stock awards and restricted stock units is approximately $14.0 million which is expected to be recognized over the next 1.9 years. During the years ended December 31, 2015, 2014 and 2013, the total fair value of shares vested was $8.1 million, $9.0 million and $9.5 million, respectively.

For the years ended December 31, 2015, 2014 and 2013, we recognized tax benefits resulting from the vesting of restricted share awards totaling $2.0 million, $2.8 million and $3.0 million, respectively.

Defined Contribution Plan

Substantially all of our U.S. employees are covered by a defined contribution plan (“401(k) Plan”). Employees may voluntarily contribute up to 50% of compensation, as defined in the 401(k) Plan. Participants’ contributions, up to 3% of compensation, are matched 100% by us, and the participants’ contributions, from 3% to 6% of compensation, are matched 50% by us. Under the 401(k) Plan, our cash contributions were $3.2 million, $3.6 million and $3.4 million in 2015, 2014 and 2013, respectively. In response to the continuing decline in activity in early 2016, we have initiated additional cost reduction programs which include the temporary elimination of our 401(k) matching contribution beginning in March 2016.