NOTE L — EQUITY-BASED COMPENSATION

We have various equity incentive compensation plans which provide for the granting of restricted common stock, options for the purchase of our common stock, and other performance-based, equity-based compensation awards to our executive officers, key employees, nonexecutive officers, consultants, and directors. Stock options are exercisable for periods of up to ten years. Compensation cost for all share-based payments is based on the grant date fair value and is recognized in earnings over the requisite service period. Total equity-based compensation expense, before tax, for the three years ended December 31, 2016, 2015, and 2014, was $13.7 million, $16.9 million, and $6.8 million, respectively, and is included in general and administrative expense. Total equity-based compensation expense, net of taxes, for the three years ended December 31, 2016, 2015, and 2014, was $9.5 million, $13.9 million, and $4.7 million, respectively. During 2015, we automated the computation of equity-based compensation expense, converting from a manual calculation of the overall impact of forfeitures and vesting on the amount of expense. As a result of this conversion, and performing a retroactive review of equity-based compensation expense for all periods from 2006 to 2015, we recorded a correcting pre-tax adjustment of $6.7 million during the fourth quarter of 2015. Management does not consider the impact of this cumulative adjustment to be material to any individual annual period.

Stock Incentive Plans

The TETRA Technologies, Inc. 1990 Stock Option Plan (the "1990 Plan") was initially adopted in 1985 and subsequently amended to change the name, the number, and the type of options that could be granted, as well as the time period for granting stock options. As of December 31, 2004, no further options may be granted under the 1990 Plan. We granted performance stock options under the 1990 Plan to certain executive officers. These granted options have an exercise price per share of not less than the market value at the date of issuance and are fully vested and exercisable.

During 1996, we adopted the 1996 Stock Option Plan for Nonexecutive Employees and Consultants (the "Nonqualified Plan") to enable us to award nonqualified stock options to nonexecutive employees and consultants who are key to our performance. As of May 2, 2006, no further options may be granted under the Nonqualified Plan.

In May 2006, our stockholders approved the adoption of the TETRA Technologies, Inc. 2006 Equity Incentive Compensation Plan. Pursuant to the TETRA Technologies, Inc. 2006 Equity Incentive Compensation Plan, we were authorized to grant up to 1,300,000 shares in the form of stock options (including incentive stock options and nonqualified stock options); restricted stock; bonus stock; stock appreciation rights; and performance awards to employees, consultants, and non-employee directors. As a result of the May 2006 adoption and approval of the TETRA Technologies, Inc. 2006 Equity Incentive Compensation Plan, no further awards may be granted under our other previously existing plans. As of May 4, 2008, no further awards may be granted under the TETRA Technologies, Inc. 2006 Equity Incentive Compensation Plan.

In May 2007, our stockholders approved the adoption of the TETRA Technologies, Inc. 2007 Equity Incentive Compensation Plan. In May 2008, our stockholders approved the adoption of the TETRA Technologies, Inc. Amended and Restated 2007 Equity Incentive Compensation Plan, which among other changes, resulted in an increase in the maximum number of shares authorized for issuance. In May 2010, our stockholders approved further amendments to the TETRA Technologies, Inc. Amended and Restated 2007 Equity Incentive Compensation Plan (renamed as the 2007 Long Term Incentive Compensation Plan) which, among other changes, resulted in an additional increase in the maximum number of shares authorized for issuance. Pursuant to the 2007 Long Term Incentive Compensation Plan, we are authorized to grant up to 5,590,000 shares in the form of stock options (including incentive stock options and nonqualified stock options); restricted stock; bonus stock; stock appreciation rights; and performance awards to employees, consultants, and non-employee directors.

In May 2011, our stockholders approved the adoption of the TETRA Technologies, Inc. 2011 Long Term Incentive Compensation Plan. Pursuant to this plan, we were authorized to grant up to 2,200,000 shares in the form of stock options, restricted stock, bonus stock, stock appreciation rights, and performance awards to employees, consultants, and non-employee directors. On May 3, 2013, shareholders approved the TETRA Technologies, Inc. 2011 Long Term Incentive Compensation Plan which, among other things, increased the number of authorized shares to 5,600,000.

In June 2011, the Compressco Partners, L.P. 2011 Long Term Incentive Plan ("CCLP Long Term Incentive Plan") was adopted by the board of directors of CCLP’s general partner. The CCLP Long Term Incentive Plan provides for grants of restricted units, phantom units, unit awards and other unit-based awards up to a plan maximum of 1,537,122 common units.

On May 3, 2016, shareholders approved the TETRA Technologies, Inc. Third Amended and Restated 2011 Long Term Incentive Compensation Plan which, among other things, increased the number of authorized shares to 11,000,000.

Grants of Equity Awards by CCLP

During each of the three years ended December 31, 2016, CCLP granted restricted unit, phantom unit, or performance phantom unit awards to certain employees, officers, and directors of its general partner or of our employees. Awards of restricted units and phantom units generally vest over a three year period. Awards of performance phantom units cliff vest at the end of a performance period and are settled based on achievement of related performance measures over the performance period. Phantom units are notional units that entitle the grantee to receive a common unit upon the vesting of the award. Each of the phantom unit and performance phantom unit awards includes distribution equivalent rights that enable the recipient to receive additional units equal in value to the accumulated cash distributions made on the units subject to the award from the date of grant. Accumulated distributions associated with each underlying unit are payable upon settlement of the related phantom unit award (and are forfeited if the related award is forfeited).

The following is a summary of CCLP’s equity award activity for the year ended December 31, 2016:



	Units		Weighted Average Grant Date Fair Value Per Unit
	(In Thousands)
Nonvested units outstanding at December 31, 2015⁽¹⁾	309		$	21.77
Units granted⁽¹⁾	397		8.34
Units cancelled	(74	)	20.07
Units vested	(23	)	17.07
Nonvested units outstanding at December 31, 2016⁽²⁾	609		$	13.41


(1)	The number of units granted shown above excludes 91,832 performance-based phantom units, which represents the maximum number of common units that would be issued if the maximum level of performance under the awards is achieved.

(2) The number of units granted shown above excludes 216,849 performance-based phantom units, which, when combined with the 289,830 granted, represents the maximum number of common units that would be issued if the maximum level of performance under the awards is achieved. The number of units actually issued under the awards may range from zero to 433,698.

Stock Options

The weighted average fair value of options granted during the years ended December 31, 2016, 2015, and 2014, was $3.16, $3.17, and $4.07, respectively, using the Black-Scholes option valuation model with the following weighted average assumptions:



	Year Ended December 31,
	2016	2015	2014
Expected stock price volatility	52%	49% to 51%	44% to 45%
Expected life of options	4.6 years	4.6 years	4.9 years
Risk free interest rate	1.2%	1.41% to 1.51%	.01%
Expected dividend yield	—	—	—

The risk-free interest rate is based on the U.S. Treasury yield curve in effect on the grant date for a period commensurate with the estimated expected life of the stock options. Expected volatility is based on the historical volatility of our stock over the period commensurate with the expected life of the stock options and other factors. The dividend yield is based on the current annualized dividend rate in effect during the quarter in which the grant was made. At the time of the stock option grants during each of the years ended December 31, 2016, 2015 and 2014, we had not historically paid any dividends and did not expect to pay any dividends during the expected life of the stock options.

The following is a summary of stock option activity for the year ended December 31, 2016:



	Shares Under Option		Weighted Average Option Price Per Share		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value (in thousands)
	(In Thousands)
Outstanding at January 1, 2016	4,167		$	11.23
Options granted	851		7.14
Options cancelled	(383	)	9.25
Options exercised	(28	)	4.07
Options expired	(220	)	$	28.00
Outstanding at December 31, 2016	4,387		$	9.81	5.8	$	629
Expected to vest at December 31, 2016	4,293		$	9.87	5.7	$	629
Exercisable at December 31, 2016	3,214		$	10.71	4.7	$	629

Intrinsic value is the difference between the market value of our stock option multiplied by the number of stock options outstanding for those stock options where the market value exceeds their exercise price. The total intrinsic value of stock options exercised during December 31, 2016, 2015, and 2014, was approximately $0.1 million, $0.2 million, and $1.4 million, respectively.

At December 31, 2016, total unrecognized compensation cost related to unvested stock options of

$2.8 million, is expected to be recognized over a weighted-average remaining service period of 1.82 years.

Restricted Stock

Restricted stock awards 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 five years. Non-employee director grants vest in full before the first anniversary of the grant. Upon vesting of these grants, shares are issued to award recipients. The following is a summary of activity for our outstanding restricted stock awards for the year ended December 31, 2016:



	Shares		Weighted Average Grant Date Fair Value Per Share
	(In Thousands)
Nonvested restricted shares outstanding at December 31, 2015	878		$	8.54
Granted	1,226		6.31
Vested	(1,205	)	6.97
Cancelled/Forfeited	(94	)	7.08
Nonvested restricted shares outstanding at December 31, 2016	805		$	7.65

Total compensation cost recognized for restricted stock awards was $8.4 million, $5.4 million, and $4.1 million for the years ended December 31, 2016, 2015, and 2014 respectively. Total unrecognized compensation cost at December 31, 2016, related to restricted stock awards is approximately $4.2 million which is expected to be recognized over a weighted-average remaining amortization period of 1.8 years. During the years ended December 31, 2016, 2015, and 2014, the total fair value of shares vested was $8.4 million, $4.8 million and $4.3 million, respectively.

During 2016, 2015, and 2014, we received 254,858, 57,336 and 56,071 shares, respectively, of our common stock related to the vesting of certain employee restricted stock. Such surrendered shares received by us are included in treasury stock. At December 31, 2016, net of options previously exercised pursuant to our various equity compensation plans, we have a maximum of 10,267,381 shares of common stock issuable pursuant to awards previously granted and outstanding and awards authorized to be granted in the future.