11.

Stock-Based Compensation Plans

Employee Stock Purchase Plan

Under the Company’s 1999 Employee Stock Purchase Plan (the “ESPP”), a total of 4,500,000 shares of the Company’s common stock have been reserved for issuance to eligible employees. Participating employees are permitted to designate up to the lesser of $25,000, or 10% of their annual base compensation, for the purchase of common stock under the ESPP. Purchases under the ESPP are made one calendar month after the end of each fiscal quarter. The price for shares of common stock purchased under the ESPP is 85% of the stock’s fair market value on the last business day of the three-month participation period. Shares issued under the ESPP during the years ended December 31, 2015, 2014 and 2013, totaled 162,058, 154,223, and 128,568, respectively.

Additionally, the discount offered pursuant to the Company’s ESPP discussed above is 15%, which exceeds the 5% non-compensatory guideline in ASC 718 and exceeds the Company’s estimated cost of raising capital. Consequently, the entire 15% discount to employees is deemed to be compensatory for purposes of calculating expense using a fair value method. Compensation costs related to the ESPP for the years ended December 31, 2015, 2014 and 2013 was approximately $0.5 million, $0.5 million, and $0.3 million, respectively.

On July 24, 2007, the Company’s stockholders approved a proposal to amend the ESPP to extend the term of the ESPP by ten years to April 30, 2018. The term of the amended ESPP commenced May 1, 2008 and continues until April 30, 2018 subject to earlier termination by the Company’s Board of Directors.

Stock Incentive Plans – Active Plans

The Company has a 2005 Equity and Performance Incentive Plan, as amended (the “2005 Incentive Plan”), under which shares of the Company’s common stock have been reserved for issuance to eligible employees or non-employee directors of the Company. The 2005 Incentive Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, performance awards and other awards. The maximum number of shares of the Company’s common stock that may be issued or transferred in connection with awards granted under the 2005 Incentive Plan is the sum of (i) 9,000,000 shares and (ii) any shares represented by outstanding options that had been granted under designated terminated stock option plans that are subsequently forfeited, expire or are canceled without delivery of the Company’s common stock.

On July 24, 2007, the stockholders of the Company approved the First Amendment to the 2005 Incentive Plan which increased the number of shares authorized for issuance under the plan from 9,000,000 to 15,000,000 and contained certain other amendments, including an amendment to provide that the exercise price for any options granted under the 2005 Incentive Plan, as amended, may not be less than the market value per share of common stock on the date of grant. On June 14, 2012, the stockholders of the Company approved the Second Amendment to the 2005 Incentive Plan which increased the number of shares authorized for issuance under the plan from 15,000,000 to 23,250,000.

Stock options granted pursuant to the 2005 Incentive Plan are granted at an exercise price not less than the market value per share of the Company’s common stock on the date of the grant. Prior to the adoption of the First Amendment to the 2005 Incentive Plan, stock options granted under the 2005 Incentive Plan were granted with an exercise price not less than the market value per share of common stock on the date immediately preceding the date of grant. Under the 2005 Incentive Plan, the term of the outstanding options may not exceed ten years. Vesting of options is determined by the Compensation Committee of the Board of Directors, the administrator of the 2005 Incentive Plan, and can vary based upon the individual award agreements.

Supplemental options granted pursuant to the 2005 Incentive Plan are granted at an exercise price not less than the market value per share of the Company’s common stock on the date of the grant. These options vest, if at all, based upon (i) tranche one - any time after the third anniversary date if the stock has traded at 133% of the exercise price for at least 20 consecutive trading days, (ii) tranche two - any time after the fourth anniversary date if the stock has traded at 167% of the exercise price for at least 20 consecutive trading days, and (iii) tranche three - any time after the fifth anniversary date if the stock has traded at 200% of the exercise price for at least 20 consecutive trading days. The employees must also remain employed with the Company as of the anniversary date in order for the options to vest. The exercise price of the supplemental stock options is the closing market price on the date the awards were granted.

Performance awards granted pursuant to the 2005 Incentive Plan become payable upon the achievement of specified management objectives. Each performance award specifies: (i) the number of performance shares or units granted, (ii) the period of time established to achieve the management objectives, which may not be less than one year from the grant date, (iii) the management objectives and a minimum acceptable level of achievement as well as a formula for determining the number of performance shares or units earned if performance is at or above the minimum level but short of full achievement of the management objectives, and (iv) any other terms deemed appropriate.

Restricted stock awards granted pursuant to the 2005 Incentive Plan have requisite service periods of three and four years and vest in increments of 33% and 25%, respectively, on the anniversary of the grant date. Under each arrangement, stock is issued without direct cost to the employee.

In relation to the acquisition of S1 Corporation in 2012, the Company amended the S1 Corporation 2003 Stock Incentive Plan, as previously amended and restated (the “S1 2003 Incentive Plan”). RSAs were granted to S1 employees by S1 Corporation prior to the acquisition by the Company in accordance with the terms of the Transaction Agreement (“Transaction RSAs”) under the S1 2003 Incentive Plan. All of these awards are fully vested as of December 31, 2015 and no further grants will be made under the S1 2003 Incentive Plan.

Stock Incentive Plans – Terminated Plans with Options Outstanding

Upon adoption of the 2005 Incentive Plan in March 2005, the Board terminated the following stock option plans of the Company: (i) the 2002 Non-Employee Director Stock Option Plan, as amended, (ii) the MDL Amended and Restated Employee Share Option Plan, as amended (iii) the 2000 Non-Employee Director Stock Option Plan, as amended (iv) the 1997 Management Stock Option Plan, as amended (v) the 1996 Stock Option Plan, as amended; and (vi) the 1994 Stock Option Plan, as amended. Termination of these stock option plans did not affect any options outstanding under these plans immediately prior to termination thereof.

The Company had a 2002 Non-Employee Director Stock Option Plan that was terminated in March 2005 whereby 750,000 shares of the Company’s common stock had been reserved for issuance to eligible non-employee directors of the Company. The term of the outstanding options is ten years. All outstanding options under this plan are fully vested.

The Company had a 1999 Stock Option Plan, as amended, that expired in February 2009 whereby 12,000,000 shares of the Company’s common stock had been reserved for issuance to eligible employees of the Company and its subsidiaries. The term of the outstanding options is 10 years. The options generally vest annually over a period of three or four years. All outstanding options under this plan are fully vested.

A summary of stock options issued under the various Stock Incentive Plans previously described and changes is as follows:


	Number of Shares			Weighted- Average Exercise Price ($)		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value of In-the-Money Options ($)
Outstanding, December 31, 2012		8,905,746		$	9.05
Granted		1,208,019			19.30
Exercised		(2,478,183	)		7.81
Forfeited		(225,474	)		12.79
Expired		(1,287	)		9.65

Outstanding, December 31, 2013		7,408,821			11.02
Granted		27,132			20.13
Exercised		(2,036,558	)		8.08
Forfeited		(116,702	)		17.80

Outstanding, December 31, 2014		5,282,693			12.06
Granted		2,055,514			19.12
Exercised		(1,144,273	)		10.62
Forfeited		(394,265	)		19.06
Expired		(593	)		20.51

Outstanding, December 31, 2015		5,799,076		$	14.37		6.27	$	40,786,575



Exercisable, December 31, 2015		3,744,383		$	11.67		4.82	$	36,424,252

At December 31, 2015, we expect that 93.0% of options granted will vest over the vesting period.

The weighted-average grant date fair value of stock options granted during the years ended December 31, 2015, 2014, and 2013 was $6.49, $9.02, and $8.72, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2015, 2014, and 2013 was $12.4 million, $22.8 million, and $25.5 million, respectively.

The fair value of options granted in the respective fiscal years was estimated on the date of grant using the Black-Scholes option-pricing model, acceptable under ASC 718, with the following weighted-average assumptions:


	Years Ended December 31,
	2015			2014			2013
Expected life (years)		5.9			5.9			6.2
Risk-free interest rate		1.4	%		1.8	%		1.6	%
Expected volatility		32.1	%		45.2	%		46.0	%
Expected dividend yield		—			—			—

Expected volatilities are based on the Company’s historical common stock volatility derived from historical stock price data for historic periods commensurate with the options’ expected life. The expected life of options granted represents the period of time that options granted are expected to be outstanding, based primarily on historical employee option exercise behavior. The risk-free interest rate is based on the implied yield currently available on United States Treasury zero coupon issues with a term equal to the expected life at the date of grant of the options. The expected dividend yield is zero as the Company has historically paid no dividends and does not anticipate dividends to be paid in the future.

During the year ended December 31, 2015, the Company granted supplemental stock options with three tranches at a grant date fair value of $8.01, $7.56, and $7.00, respectively, per share that vest, if at all, based upon (i) tranche one - any time after the third anniversary date if the stock has traded at 133% of the exercise price for at least 20 consecutive trading days, (ii) tranche two - any time after the fourth anniversary date if the stock has traded at 167% of the exercise price for at least 20 consecutive trading days, and (iii) tranche three - any time after the fifth anniversary date if the stock has traded at 200% of the exercise price for at least 20 consecutive trading days. The employees must also remain employed with the Company as of the anniversary date in order for the options to vest. The exercise price of the supplemental stock options is the closing market price on the date the awards were granted. In order to determine the grant date fair value of the supplemental stock options, a Monte Carlo simulation model was used. With respect to options granted that vest based on the achievement of certain market conditions, the grant date fair value of such options was estimated using the following weighted-average assumptions:


	Year Ended December 31, 2015
Expected life (years)		7.5
Risk-free interest rate		1.7	%
Expected volatility		41.9	%
Expected dividend yield		—

Stock Incentive Plan – ORCC Corporation Stock Incentive Plan, as amended and restated

In relation to the acquisition of ORCC discussed in Note 2, the Company amended the ORCC Stock Incentive Plan, as previously amended and restated (the “ORCC Incentive Plan”). Stock options were granted to ORCC employees by ORCC prior to acquisition by the Company under the ORCC Incentive Plan. Outstanding ORCC options were converted into ACI options in accordance with the terms of the Transaction Agreement. These are the only equity awards currently outstanding under the ORCC Incentive Plan and no further grants will be made.

A summary of transaction stock options issued pursuant to the Company’s stock incentive plans is as follows:


	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value of In-the-Money Options
Outstanding as of December 31, 2012		—		$	—
Transaction stock options converted upon acquisition of ORCC		112,404			30.64
Exercised		(15,501	)		13.92
Cancelled		(34,458	)		30.21

Outstanding as of December 31, 2013		62,445			35.03
Exercised		(909	)		13.92
Cancelled		(15,024	)		31.03

Outstanding as of December 31, 2014		46,512			36.73
Exercised		(1,926	)		13.92
Cancelled		(23,550	)		44.83

Outstanding as of December 31, 2015		21,036		$	29.76		1.68	$	37,587


Exercisable as of December 31, 2015		21,036		$	29.76		1.68	$	37,587

Long-term Incentive Program Performance Share Awards

During the years ended December 31, 2015, 2014 and 2013, pursuant to the Company’s 2005 Incentive Plan, the Company granted LTIP Performance Shares. These LTIP Performance Shares are earned, if at all, based upon the achievement, over a specified period that must not be less than one year and is typically a three-year performance period, of performance goals related to (i) the compound annual growth over the performance period in the sales for the Company as determined by the Company, and (ii) the cumulative operating income over the performance period as determined by the Company. In no event will any of the LTIP Performance Shares become earned if the Company’s sales growth or cumulative operating income is below a predetermined minimum threshold level at the conclusion of the performance period. Assuming achievement of the predetermined sales growth and cumulative operating income threshold levels, up to 200% of the LTIP Performance Shares may be earned upon achievement of performance goals equal to or exceeding the maximum target levels for the performance goals over the performance period. Management must evaluate, on a quarterly basis, the probability that the threshold performance goals will be achieved, if at all, and the anticipated level of attainment in order to determine the amount of compensation costs to record in the consolidated financial statements.

During the fourth quarter of the year ended December 31, 2013, the Company revised the expected attainment for the awards granted in fiscal 2010 from 175% to 130% due to changes in actual sales and operating income. The awards granted in fiscal 2010 vested during the first quarter of the year ended December 31, 2014 at a final attainment rate of 136%. During the fourth quarter of the year ended December 31, 2014, the Company revised the expected attainment for the awards granted in fiscal years 2012 and 2013 from 100% to 0% and 75%, respectively, due to changes in forecasted sales and operating income. During the first quarter of the year ended December 31, 2015, the Company revised the expected attainment rate for the awards granted in fiscal 2011 from 100% to 91% due to changes in actual sales and operating income. During the third quarter of the year ended December 31, 2015, the Company revised the expected attainment rate for the awards granted in fiscal 2013 from 75% to 0% due to changes in forecasted sales and operating income. The expected attainment rate for the 2012 and 2015 grants remain at 0% and 100%, respectively.

At December 31, 2015, the LTIPs granted in 2012 were earned by the employees. As the expected attainment rate is 0% for the LTIPs granted in 2012, no shares are expected to be issued in the first quarter of 2016.

A summary of the nonvested LTIP Performance Shares is as follows:


Nonvested LTIP Performance Shares	Number of Shares at Expected Attainment			Weighted- Average Grant Date Fair Value
Nonvested at December 31, 2012		3,304,452		$	9.38
Granted		798,306			20.30
Vested		(982,728	)		5.61
Forfeited		(188,511	)		12.33
Change in expected attainment for 2010 grants		(212,943	)		8.88

Nonvested at December 31, 2013		2,718,576			13.78
Granted		19,065			20.13
Vested		(635,643	)		8.88
Forfeited		(111,599	)		16.43
Change in expected attainment for 2012 and 2013 grants		(844,483	)		15.86

Nonvested at December 31, 2014		1,145,916			14.84
Granted		1,025,863			19.12
Vested		(548,671	)		9.75
Forfeited		(205,510	)		19.39
Change in expected attainment for 2011 and 2013 grants		(528,303	)		19.44

Nonvested at December 31, 2015		889,295		$	19.13

During the years ended December 31, 2015, 2014 and 2013 the Company had 548,671, 635,643 and 982,728 LTIP shares vest, respectively. The Company withheld 196,169, 228,279, and 338,262 of those shares to pay the employees’ portion of the minimum payroll withholding taxes for the years ended December 31, 2015, 2014, and 2013, respectively.

Restricted Share Awards

During the years ended December 31, 2015, 2014, and 2013, pursuant to the Company’s 2005 Incentive Plan, the Company granted restricted share awards (“RSAs”). The awards have requisite service periods of three years and vest in increments of 33% on the anniversary of the grant dates. Under each arrangement, stock is issued without direct cost to the employee. The Company estimates the fair value of the RSAs based upon the market price of the Company’s stock at the date of grant. The RSA grants provide for the payment of dividends on the Company’s common stock, if any, to the participant during the requisite service period (vesting period) and the participant has voting rights for each share of common stock. The Company recognizes compensation expense for RSAs on a straight-line basis over the requisite service period.

A summary of nonvested RSAs are as follows:


Nonvested Restricted Share Awards	Restricted Share Awards			Grant Date Fair Value
Nonvested at December 31, 2012		207,714		$	13.67
Granted		25,989			16.10
Vested		(88,638	)		12.35

Nonvested at December 31, 2013		145,065			14.91
Granted		106,275			18.57
Vested		(66,670	)		14.59
Forfeited		(1,461	)		20.51

Nonvested at December 31, 2014		183,209			17.11
Granted		125,026			23.82
Vested		(158,973	)		17.21

Nonvested at December 31, 2015		149,262		$	22.62

During the years ended December 31, 2015, 2014 and 2013, the Company had 158,973, 66,670, and 88,638 RSA shares vested, respectively. The Company withheld 25,235, 26,461, and 31,746 of those respective shares to pay the employees’ portion of the minimum payroll withholding taxes.

Under the terms of the Transaction Agreement with S1, upon the acquisition, the S1 Transaction RSAs were converted to RSAs of the Company’s stock. These awards have requisite service periods of four years and vest in increments of 25% on the anniversary of the original grant date of November 9, 2011. If an employee was terminated without cause within 12 months of the acquisition date, the RSAs 100% vested. Stock is issued without direct cost to the employee. The RSA grants provide for the payment of dividends on the Company’s common stock, if any, to the participant during the requisite service period (vesting period) and the participant has voting rights for each share of common stock. The conversion of the Transaction RSAs was treated as a modification and as such, they were valued immediately prior to and after modification. The Company recognizes compensation expense for RSAs on a straight-line basis over the requisite service period. The incremental fair value as measure upon modification will be recognized on a straight-line basis from modification date through the end of the requisite service period.

A summary of nonvested Transaction RSAs issued under the S1 2003 Stock Incentive Plan as of December 31, 2015 and changes during the period are as follows:


Nonvested Transaction Restricted Share Awards	Number of Restricted Share Awards			Weighted-Average Grant Date Fair Value
Nonvested as of December 31, 2012		150,732		$	11.80
Vested		(35,598	)		11.80
Forfeited		(57,582	)		11.80

Nonvested as of December 31, 2013		57,552			11.80
Vested		(19,822	)		11.80
Forfeited		(20,165	)		11.80

Nonvested as of December 31, 2014		17,565			11.80
Vested		(13,201	)		11.80
Forfeited		(4,364	)		11.80

Nonvested as of December 31, 2015		—		$	—

During the years ended December 31, 2015, 2014 and 2013, 13,201, 19,822, and 35,598 shares of the Transaction RSAs vested, respectively. The Company withheld 3,750, 5,980, and 11,307 of those respective shares to pay the employees’ portion of the minimum payroll withholding taxes.

Performance-Based Restricted Share Awards

During the year ended December 31, 2015, pursuant to the Company’s 2005 Incentive Plan, the Company granted Performance-Based Restricted Share Awards (“PBRSAs”). The PBRSA grants provide for the payment of dividends on the Company’s common stock, if any, to the participant during the requisite service period (vesting period) and the participant has voting rights for each share of common stock. These PBRSA awards are earned, if at all, based upon the achievement of performance goals over a specific period (the “Performance Period”) and completion of the service period. The PBRSAs granted on June 9, 2015 have a graded-vesting period of three years (33% vest each year) and are subject to performance targets based on the Company’s earnings before income tax, depreciation, and amortization (“EBITDA”). The first 33% of the PBRSAs issued vest subject to meeting the EBITDA target based for the year ending December 31, 2015. The remaining 66% of the PBRSAs issued, vest 33% at the end of year two and 33% at the end of year three, subject to meeting the EBITDA target for the year ending December 31, 2016. The PBRSAs granted on September 15, 2015 have a vesting period of 1.3 years and are subject to performance targets based on the Company’s EBITDA for the year ending December 31, 2016. In no event will any of the PBRSA shares become earned if the Company’s EBITDA is below a predetermined minimum threshold level at the conclusion of the Performance Period. Assuming achievement of the predetermined EBITDA threshold level, up to 150% of the PBRSA shares may be earned upon achievement of performance goals equal to or exceeding the maximum target levels for the performance goals over the Performance Period. Management will evaluate, on a quarterly basis, the probability that the threshold performance goals will be achieved, if at all, and the anticipated level of attainment in order to determine the amount of compensation costs to record in the condensed consolidated financial statements. Through December 31, 2015, the Company has accrued compensation costs assuming an attainment level of 100% for all PBRSA grants. The Company recognizes compensation expense for PBRSAs on a straight-line basis over the requisite service periods.

A summary of nonvested PBRSAs as of December 31, 2015 and changes during the period are as follows:


Nonvested Performance-Based Restricted Share Awards	Number of Performance-Based Restricted Share Awards			Weighted-Average Grant Date Fair Value
Nonvested as of December 31, 2014		—		$	—
Granted		978,365			23.45
Forfeited		(39,502	)		24.24

Nonvested as of December 31, 2015		938,863		$	23.42

PAY.ON Restricted Share Awards

Under the terms of the PAY.ON acquisition agreement, the Company issued PAY.ON RSAs to two key employees. The awards have requisite service periods of two years and vest in increments of 25% every six months from the date of the acquisition. The PAY.ON RSA grants provide for the payment of dividends on the Company’s common stock, if any, to the participant during the requisite service period (vesting period) and the participant has voting rights for each share of common stock. The Company recognizes compensation expense for the PAY.ON RSAs on a straight-line basis over the requisite service period.

A summary of nonvested PAY.ON RSAs are as follows:


Nonvested PAY.ON RSAs	Number of PAY.ON RSAs		Grant Date Fair Value
Nonvested at December 31, 2014		—	$	—
Granted		476,750		23.60

Nonvested at December 31, 2015		476,750	$	23.60

As of December 31, 2015, there were unrecognized compensation costs of $9.6 million related to nonvested stock options, $1.8 million related to the nonvested RSAs, $11.1 million related to the LTIP performance shares, and $14.4 million related to nonvested PBRSAs, which the Company expects to recognize over weighted-average periods of 1.9 years, 1.2 years, 2.3 years, and 1.4 years, respectively.

The Company recorded stock-based compensation expenses recognized under ASC 718 during the years ended December 31, 2015, 2014 and 2013 related to stock options, LTIP Performance Shares, RSAs, PBRSAs, and the ESPP of $18.4 million, $11.0 million, and $13.6 million, respectively, with corresponding tax benefits of $6.9 million, $4.2 million, and $5.2 million respectively. Tax benefits in excess of the option’s grant date fair value are classified as financing cash flows. Estimated forfeiture rates, stratified by employee classification, have been included as part of the Company’s calculations of compensation costs. The Company recognizes compensation costs for stock option awards which vest with the passage of time with only service conditions on a straight-line basis over the requisite service period.

Cash received from option exercises for the year ended December 31, 2015, 2014, and 2013 was $12.2 million, $16.5 million, and $19.6 million, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $4.6 million, $8.6 million, and $9.7 million, for the year ended December 31, 2015, 2014, and 2013, respectively.