8. Share-Based Compensation

On April 3, 2017, the Company adopted the Tutor Perini Corporation Incentive Compensation Plan (“Compensation Plan”), which was approved by the Company’s shareholders on May 24, 2017. Additionally, the Company’s Amended and Restated Tutor Perini Corporation Long-Term Incentive Plan (“Incentive Plan” together with Compensation Plan the “Plans”) is still active. The Plans provide for various types of share-based grants, including restricted and unrestricted stock units and stock options. Restricted and unrestricted stock units give the holder the right to exchange their stock units for shares of the Company’s Common Stock on a one-for-one basis. Per the Plans, stock options give the holder the right to purchase shares of the Company’s Common Stock subsequent to the grant date at an defined exercise price equal to or greater than the fair value of the Company’s Common Stock on the date of the stock option’s award. Restricted stock units and stock options are usually subject to certain service and performance conditions and may not be sold or otherwise transferred until those restrictions have been satisfied; however, unrestricted stock units have no such restrictions. The term for stock options is limited to 10 years from the date of grant. The Compensation Plan allows for 2,335,000 shares of the Company’s Common Stock to be issued. As of December 31, 2017, there were 1,554,364 shares available to be granted under the Compensation Plan and 405,529 shares authorized to be issued under the Incentive Plan; however, as discussed in the Company’s Definitive Proxy Statement (Schedule 14A) filed on April 13, 2017, the Company will not issue the 405,529 shares remaining in the Incentive Plan. As of December 31, 2017, the Incentive Plan had an aggregate of 4,360,018 of restricted stock units and stock options from outstanding, historical awards that either have not vested or have vested but have not been exercised.

The terms of the Plans give the Company the right to settle the vesting of share-based grants in cash or shares. During the year ended December 31, 2017, the Company paid approximately $0.6 million to settle share-based awards.

Many of the awards issued under the Plans contain separate tranches, each for a separate performance period and each with a performance target to be established subsequent to the award date; accordingly, the tranches are accounted for under ASC 718, Stock Compensation (“ASC 718”) as separate grants, with the grant date being the date the performance targets for a given tranche are established and communicated to the grantee. Similarly, for these awards, compliance with the requirements of the Plan is also based on the number of units granted in a given year, as determined by ASC 718, rather than the number of units awarded in a given year. As a result, as of December 31, 2017, the Company had outstanding awards with 214,000 restricted stock units and 194,000 stock options that had not been granted yet. These units will be granted in 2018 and 2019 when the performance targets for those respective years are established.

The following table summarizes restricted stock unit and stock option activity:



	Restricted Stock Units			Stock Options
		Weighted-			Weighted-
		Average			Average
		Grant Date			Exercise/
		Fair Value			(Strike) Price
	Number	Per Share		Number	Per Share
Outstanding as of December 31, 2014	1,056,597	$	26.54	1,989,000	$	19.63
Granted	321,500		23.07	259,000		16.07
Expired or forfeited	(281,560)		23.89	(250,000)		15.97
Vested/exercised	(370,940)		27.07	—		—
Outstanding as of December 31, 2015	725,597	$	25.28	1,998,000	$	19.62
Granted	483,387		19.14	274,000		16.20
Vested/exercised	(52,500)		18.74	(97,500)		12.72
Outstanding as of December 31, 2016	1,156,484	$	22.64	2,174,500	$	19.50
Granted	1,064,000		30.02	539,000		24.54
Expired or cancelled	(20,985)		23.91	(19,466)		26.56
Vested/exercised	(801,515)		19.38	(140,000)		21.41
Outstanding as of December 31, 2017	1,397,984	$	30.11	2,554,034	$	20.45

The following table summarizes unrestricted stock units, which are generally issued to the non-employee members of the Company’s Board of Directors as part of their annual retainer fees:



	Unrestricted Stock Units
		Weighted-Average Grant
Year	Number	Date Fair Value Per Share
2015	68,160	$	21.93
2016	64,603		21.67
2017	99,155		26.26

The fair value of unrestricted stock units issued during 2017, 2016 and 2015 was approximately $2.6 million, $1.4 million and $1.5 million, respectively.

The fair value of restricted stock units that vested during 2017, 2016 and 2015 was approximately $25.3 million, $1.0 million and $8.0 million, respectively. The aggregate intrinsic value, representing the difference between the market value on the date of exercise and the option price of the stock options exercised during 2017 and 2016 was $1.3 million and $1.1 million, with a corresponding tax benefit of $0.6 million and $0.5 million, respectively. As of December 31, 2017, the balance of unamortized restricted stock and stock option expense was $22.5 million and $3.7 million, respectively, which will be recognized over weighted-average periods of 2.6 years for restricted stock units and 2.2 years for stock options.

The 2,554,034 outstanding stock options as of December 31, 2017 had an intrinsic value of $13.6 million and a weighted-average remaining contractual life of 4.4 years. Of those outstanding options: a) 1,988,034 were exercisable with an intrinsic value of $12.8 million, a weighted-average exercise price of $19.31 per share and a weighted-average remaining contractual life of 3.3 years; b) 566,000, with an intrinsic value of $0.7 million, a weighted-average exercise price of $24.27 and a weighted-average remaining contractual life of 8.2 years, have been granted but have not vested; and c) of the 566,000 granted but unvested options, 527,816 are expected to vest.

The fair value on the grant date and the significant assumptions used in the Black-Scholes option-pricing model are as follows:



	Year Ended December 31,
	2017			2016			2015
Total stock options granted		539,000			274,000			259,000
Weighted-average grant date fair value	$	13.11		$	5.31		$	12.48
Weighted-average assumptions:
Risk-free rate		1.81	%		1.2	%		1.3	%
Expected life of options(a)		4.8			4.2			4.7
Expected volatility(b)		43.09	%		40.6	%		45.5	%
Expected quarterly dividends	$	—		$	—		$	—

(a)

Calculated using the simplified method due to the terms of the stock options and the limited pool of grantees.

(b)

Calculated using historical volatility of the Company’s Common Stock over periods commensurate with the expected life of the option.

For the respective years ended December 31, 2017, 2016 and 2015, the Company recognized, as part of general and administrative expenses, costs for share-based payment arrangements for employees of $19.6 million, $13.4 million and $9.5 million. Additionally for the same periods, the Company also recognized as part of general and administrative expenses costs for share-based awards to non-employee directors of $1.6 million, $1.4 million and $1.5 million, respectively. The aggregate tax benefits for these awards were approximately $8.7 million, $6.1 million and $4.6 million, for the respective periods.