6.	Equity Compensation Plans

We have adopted the following equity compensation plans, referred to collectively as the “Plans”:

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2006 ITT Educational Services, Inc. Equity Compensation Plan – On May 9, 2006, our shareholders approved the 2006 ITT Educational Services, Inc. Equity Compensation Plan (the “Original 2006 Plan”).

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ITT Educational Services, Inc. Amended and Restated 2006 Equity Compensation Plan – On May 7, 2013, our shareholders approved the ITT Educational Services, Inc. Amended and Restated 2006 Equity Compensation Plan and on October 20, 2014, we approved an amendment to that plan (as so amended, the “Amended 2006 Plan”). Awards may be granted to our employees and directors under the Amended 2006 Plan in the form of stock options (incentive and nonqualified), stock appreciation rights (“SARs”), restricted stock, RSUs, performance shares, performance units and other stock-based awards as defined in the plan. The Amended 2006 Plan increased the maximum number of shares of our common stock that may be issued pursuant to awards under the plan to 7,350,000, an increase of 3,350,000 over the 4,000,000 maximum under the Original 2006 Plan. Each share underlying stock options and SARs granted and not forfeited or terminated, reduces the number of shares available for future awards by one share. The delivery of a share in connection with a “full-value award” (i.e., an award of restricted stock, RSUs, performance shares, performance units or any other stock-based award with value denominated in shares) reduces the number of shares remaining for other awards by two shares. As of December 31, 2014, restricted stock, RSUs and nonqualified stock options have been awarded under this plan.

All awards granted under equity compensation plans other than the Plans expired in or prior to 2014.

The amount of stock-based compensation expense and the line items in which those amounts are included in our Consolidated Statements of Operations and the related estimated income tax benefit recognized in the periods indicated were as follows:


	Year Ended December 31,
	2014			2013			2012
Cost of educational services	$	4,790		$	4,799		$	6,084
Student services and administrative expenses		5,546			6,839			10,574

Total stock-based compensation expense	$	10,336		$	11,638		$	16,658
Income tax (benefit)	($	3,980	)	($	4,481	)	($	6,414	)

As of December 31, 2014, we estimated that pre-tax compensation expense for unvested stock-based compensation grants in the amount of approximately $9,000, net of estimated forfeitures, will be recognized in future periods. This expense will be recognized over the remaining service period applicable to the grantees which, on a weighted-average basis, is approximately 1.6 years.

Stock Options. Under the Plans, the stock option exercise price may not be less than 100% of the fair market value of our common stock on the date of grant. The maximum term of any stock option granted under the Amended 2006 Plan and Original 2006 Plan may not exceed seven years from the date of grant, and those stock options will be exercisable at such times and under conditions as determined by the Compensation Committee of our Board of Directors, subject to the limitations contained in the plan. All stock options awarded under the Amended 2006 Plan and Original 2006 Plan typically vest and become exercisable in three equal installments commencing with the first anniversary of the date of grant.

The stock options granted, forfeited, exercised and expired in the period indicated were as follows:


	Year Ended December 31, 2014
	# of Shares			Weighted Average Exercise Price		Aggregate Exercise Price			Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value ⁽¹⁾
Outstanding at beginning of period		1,332,448		$	81.77	$	108,955
Granted		168,500		$	27.94		4,708
Forfeited		(10,334	)	$	30.29		(313	)
Exercised		0		$	0.00		0
Expired		(337,341	)	$	73.04		(24,638	)

Outstanding at end of period		1,153,273		$	76.92	$	88,712		2.2 years	$	0

Exercisable at end of period		848,098		$	93.33	$	79,153		1.8 years	$	0

(1)

The aggregate intrinsic value of stock options is calculated by identifying those stock options that had a lower exercise price than the closing market price of our common stock on December 31, 2014 and multiplying the difference between the closing market price of our common stock and the exercise price of each of those stock options by the number of shares subject to those stock options that were outstanding or exercisable, as applicable. Since the closing market price of our common stock on December 31, 2014 was lower than the exercise price of all outstanding stock options and exercisable stock options, the aggregate intrinsic value of the stock options was zero.

The following table sets forth information regarding the stock options granted and exercised in the periods indicated:


	Year Ended December 31,
	2014		2013		2012
Shares subject to stock options granted		168,500		156,500		156,500
Weighted average grant date fair value	$	12.62	$	9.27	$	31.36
Shares subject to stock options exercised		0		0		202,820
Intrinsic value of stock options exercised	$	0	$	0	$	4,802
Proceeds received from stock options exercised	$	0	$	0	$	8,345
Tax benefits realized from stock options exercised	$	0	$	0	$	1,602

The intrinsic value of a stock option is the difference between the fair market value of the stock and the option exercise price.

The fair value of each stock option grant was estimated on the date of grant using the following assumptions:


	Year Ended December 31,
	2014			2013			2012
Risk-free interest rates		1.3	%		0.7	%		0.7	%
Expected lives (in years)		4.7			4.6			4.5
Volatility		55	%		60	%		51	%
Dividend yield		None			None			None

Restricted Stock Units. Under the Amended 2006 Plan and Original 2006 Plan, RSUs awarded are subject to a restriction period of at least: (a) for awards made prior to November 24, 2010, three years in the case of a time-based period of restriction and one year in the case of a performance-based period of restriction; and (b) for awards made after November 24, 2010, one year, unless the Compensation Committee determines otherwise. All RSUs awarded under the Amended 2006 Plan and Original 2006 Plan that were not vested as of December 31, 2014 have a time-based restriction period that ranges from ending on the first to the third anniversary of the date of grant.

The following table sets forth the number of RSUs that were granted, forfeited and vested in the period indicated:


	Year Ended December 31, 2014
	# of RSUs			Weighted Average Grant Date Fair Value
Unvested at beginning of period		737,844		$	39.96
Granted		402,890		$	21.46
Forfeited		(188,887	)	$	30.09
Vested		(120,540	)	$	61.08

Unvested at end of period		831,307		$	30.17

The total fair market value of the RSUs that vested and were settled in shares of our common stock was $2,512 in the year ended December 31, 2014, $1,241 in the year ended December 31, 2013 and $4,568 in the year ended December 31, 2012. Also, in the year ended December 31, 2012, 48,935 RSUs vested and were settled in cash for $3,073.