Note E – Stock Incentive Plans

On April 5, 2013, the shareholders approved the 2013 Stock Incentive Plan, which was previously adopted by the Board of Directors on March 1, 2013, subject to shareholder approval. The aggregate number of shares of common stock that are subject to awards under the 2013 Stock Incentive Plan, subject to adjustment upon a change in capitalization, is 4.0 million. On June 20, 2006, the shareholders approved the 2006 Stock Incentive Plan and, as amended, the aggregate number of shares of common stock that are subject to awards is 7.9 million.

The 2013 Stock Incentive Plan and 2006 Stock Incentive Plan allow for the issuance of stock options, stock appreciation rights (“SARs”) and restricted stock, subject to share availability. Vesting of equity instruments is determined on a grant-by-grant basis. Options expire at the end of 10 years from the date of grant, and Kforce issues new shares upon exercise of options.

The 2013 Stock Incentive Plan terminates on April 5, 2023 and the 2006 Stock Incentive Plan terminates on April 28, 2016. The Incentive Stock Option Plan expired in 2005.

Stock Options

The following table presents stock option activity during the six months ended June 30, 2014 (in thousands, except per share amounts):


										Weighted		Total
				2006						Average		Intrinsic
	Incentive			Stock						Exercise		Value of
	Stock Option			Incentive						Price per		Options
	Plan			Plan			Total			Share		Exercised
Outstanding and Exercisable as of December 31, 2013		97			83			180		$	11.57
Exercised		(27	)		(33	)		(60	)	$	11.82	$	592
Forfeited/Cancelled		(1	)		—			(1	)	$	11.00

Outstanding and Exercisable as of June 30, 2014		69			50			119		$	11.46

No compensation expense was recorded during the six months ended June 30, 2014 or 2013 as a result of the grant date fair value having been fully amortized as of December 31, 2009. As of June 30, 2014, there was no unrecognized compensation cost related to non-vested options.

Restricted Stock

Restricted stock grants made to Kforce’s executives and management are generally based on the extent by which annual long-term incentive performance goals, which are established by Kforce’s Compensation Committee during the first quarter of the year of performance, have been met, as approved by the Compensation Committee. Restricted stock granted during the six months ended June 30, 2014 will vest over a period of two to ten years, with equal vesting annually.

Restricted stock contain voting rights and are included in the number of shares of common stock issued and outstanding. Restricted stock contain the right to dividends in the form of additional shares of restricted stock at the same rate as the cash dividend on common stock and containing the same vesting provisions as the underlying award. The following table presents the activity for the six months ended June 30, 2014 (in thousands, except per share amounts):


	Number of			Weighted Average		Total Intrinsic
	Restricted			Grant Date		Value of Restricted
	Stock			Fair Value		Stock Vested
Outstanding as of December 31, 2013		811		$	16.89
Granted		226		$	20.48
Forfeited/Cancelled		(14	)	$	18.01
Vested		(64	)	$	14.64	$	1,303

Outstanding as of June 30, 2014		959		$	18.02

During the three months ended December 31, 2013, Kforce granted certain restricted stock awards containing time-based vesting terms of ten years, with an equal number of shares vesting in each of years six through ten, as well as a performance-acceleration feature upon which vesting would accelerate if Kforce’s closing stock price exceeded the stock price at the date of grant by a pre-established percentage for a period of 10 trading days. During the three months ended March 31, 2014, the Firm modified all awards containing a performance-acceleration feature that were granted during the three months ended December 31, 2013, as follows: (i) eliminated the performance-acceleration feature and (ii) reduced the time-based vesting term to five years, with equal vesting annually. The total number of restricted shares impacted by this modification was 268 thousand, excluding already forfeited shares, and the number of employees impacted was 87. The total incremental compensation cost resulting from the modification was $109 thousand, which will be amortized on a straight-line basis over the requisite service period of the modified awards.

The fair market value of restricted stock is determined based on the closing stock price of Kforce’s common stock at the date of grant, and is amortized on a straight-line basis over the requisite service period. During the three months ended June 30, 2014 and 2013, Kforce recognized total compensation expense related to restricted stock of $605 thousand and $326 thousand, respectively. During the six months ended June 30, 2014 and 2013, Kforce recognized total compensation expense related to restricted stock of $1,404 thousand and $601 thousand, respectively. As of June 30, 2014, total unrecognized compensation expense related to restricted stock was $9.6 million, which will be recognized over a weighted average remaining period of 5.0 years.