STOCK-BASED COMPENSATION

2008 Equity Incentive Plan

Our 2008 Equity Incentive Plan (the "Plan") was amended and restated effective May 22, 2013 upon approval by our shareholders at our annual shareholders meeting. As amended, the Plan authorizes us to issue up to 3.5 million shares of common stock, along with non-qualified stock options, stock appreciation rights, restricted stock and performance units to our officers, key employees, non-employee directors and consultants. At December 31, 2015, there were 1.3 million shares available for future grants under this plan. No more than 600,000 shares may be used under the plan as “full value” awards, which include restricted stock and performance stock units. It is our policy to issue shares from authorized but not issued shares upon the exercise of stock options. Options are granted at not less than fair market value on the date of grant and expire no later than ten years after the date of grant. Options and restricted shares granted under this plan generally require no less than a three year ratable vesting period.

During 2015, no stock options were granted, 420,642 stock options were exercised, 117,269 stock options were cancelled and 905,500 stock options expired. During 2014, no stock options were granted, 453,745 stock options were exercised, 72,167 stock options were cancelled and 121,250 stock options expired.

Restricted stock awards, or “full value” awards, generally vest ratably over no less than a three year period. Shares of restricted stock granted under the Plan are considered issued and outstanding at the date of grant, have the same dividend and voting rights as other outstanding common stock, are subject to forfeiture if employment terminates prior to vesting, and are expensed ratably over the vesting period. Dividends paid on the restricted shares granted under the Plan are non-forfeitable if the restricted shares do not ultimately vest.

During 2015, we granted 23,814 restricted shares to our Board of Directors vesting May 5, 2016. The fair value of the issued restricted stock on the date of grant was $18.31. During the first quarter of 2015, the company implemented a long term incentive program for the benefit of certain members of company management. The program was designed to strengthen employee retention and to provide a more structured incentive program to stimulate improvement in future company results. Per the terms of the program, participants were granted time value restricted stock units (“RSUs”), vesting ratably over a three year time period, and performance restricted stock units (“PSUs”), with a three year cliff vesting. Upon vesting, each restricted stock award is exchangeable for one share of the company’s common stock, with accrued dividends. The PSUs are categorized further into three individual categories whose vesting is contingent upon the achievement of certain targets as follows:


•	40% of the PSUs vest upon certain Return on Capital targets


•	40% of the PSUs vest upon certain EBITDA margin targets


•	20% of the PSUs vest upon certain market based Shareholder Return targets.

In the aggregate the company granted, net of forfeitures, a total of 190,015 RSUs and PSUs in 2015, net of forfeitures, comprising:


•	53,323 time value based RSUs with a grant date fair value of $18.78 per unit


•	109,354 PSUs with an initial grant date fair value of $18.78 per unit


•	27,338 market based PSUs with a grant date fair value of $24.81 per unit.

During 2014, we granted 225,205 shares of restricted stock, with original vesting periods of one to three years. The fair values of each issued restricted share on the applicable date of grant averaged $19.35 for 2014. Included in the restricted stock granted, in 2014, were 35,081 restricted shares in connection with Mr. Steven J. Borick's, our former company President and Chief Executive Officer's, separation agreement (see Note 15 - Commitments and Contingencies). These shares fully vested on the grant date (March 31, 2014) and the cost was recognized from the date of the separation agreement (October 14, 2013) through March 31, 2014, the separation date. The shares issued also were net of an amount equal to required tax withholdings. The cash equivalent of the withheld shares was remitted by the company to the tax authorities.

Other Awards

During 2014, we granted 132,455 restricted shares, including 50,000 shares vesting April 30, 2017, and 82,455 shares vesting on December 31, 2016. The fair value of each of these restricted shares was $19.44. These grants were made outside of the Plan as inducement grants in connection with the appointment of our new CEO and company President (see Note 15 - Commitments and Contingencies).

We received cash proceeds of $7.3 million, $7.4 million and $2.9 million from stock options exercised in 2015, 2014 and 2013, respectively. The total intrinsic value of options exercised was $0.8 million and $1.5 million, during the years ended December 31, 2015 and 2014, respectively. Upon the exercise of stock options and the issuance of restricted stock awards, it is our policy to only issue shares from authorized common stock. At December 31, 2015 there were 1.3 million shares available for future grants under this plan.

We have elected to adopt the alternative transition method for calculating the initial pool of excess tax benefits and to determine the subsequent impact of the tax effects of employee stock-based compensation awards that are outstanding on shareholders' equity and the consolidated statements of cash flows.

Stock option activity in 2015 and 2014:



	Outstanding		Weighted Average Exercise Price		Remaining Contractual Life in Years	Aggregate Intrinsic Value
Balance at December 31, 2013	2,466,606		$	20.31
Granted	—		$	—
Exercised	(453,745	)	$	16.36
Canceled	(72,167	)	$	22.37
Expired	(121,250	)	$	34.18
Balance at December 31, 2014	1,819,444		$	20.28	1.9	$	2,101,753
Granted	—		—
Exercised	(420,642	)	$	17.29
Canceled	(117,269	)	$	21.80
Expired	(905,500	)	$	22.05
Balance at December 31, 2015	376,033		$	18.89

Options vested or expected to vest at December 31, 2015	376,033		$	18.89	3.6	$	452,128

Exercisable at December 31, 2015	376,033		$	18.89	3.6	$	452,128

The aggregate intrinsic value represents the total pretax difference between the closing stock price on the last trading day of the reporting period and the option exercise price, multiplied by the number of in-the-money options. This is the amount that would have been received by the option holders had they exercised and sold their options on that day. This amount varies based on changes in the fair market value of our common stock. The closing price of our common stock on the last trading day of our fiscal year was $18.87.

Stock options outstanding at December 31, 2015 and 2014:



Range of Exercise Prices					Options Outstanding at 12/31/2015	Weighted Average Remaining Contractual Life (in Years)	Weighted Average Exercise Price		Options Exercisable at 12/31/2015	Weighted Average Exercise Price

$	15.17	—	$	16.54	84,250	4.0	$	15.74	84,250	$	15.74
$	16.55	—	$	17.63	89,833	3.6	$	17.23	89,833	$	17.23
$	17.64	—	$	20.20	61,500	3.1	$	18.21	61,500	$	18.21
$	20.21	—	$	22.17	79,250	2.4	$	21.84	79,250	$	21.84
$	22.18	—	$	22.57	61,200	5.4	$	22.55	61,200	$	22.55
					376,033	3.6	$	18.89	376,033	$	18.89



Range of Exercise Prices					Options Outstanding at 12/31/2014	Weighted Average Remaining Contractual Life (in Years)	Weighted Average Exercise Price		Options Exercisable at 12/31/2014	Weighted Average Exercise Price

$	15.17	—	$	17.63	436,600	3.8	$	16.72	407,597	$	16.71
$	17.64	—	$	19.36	397,167	1.3	$	18.43	395,500	$	18.43
$	19.37	—	$	21.78	240,000	0.6	$	20.63	240,000	$	20.63
$	21.79	—	$	22.54	360,377	1.8	$	21.91	360,377	$	21.91
$	22.55	—	$	25.00	385,300	1.5	$	24.48	385,300	$	24.48
					1,819,444	1.9	$	20.28	1,788,774	$	20.34

Restricted stock activity in 2015 and 2014:



	Number of Awards		Weighted Average Grant Date Fair Value		Weighted Average Remaining Amortization Period (in Years)
Balance at December 31, 2013	124,163		$	17.70
Granted	225,205		$	19.35
Vested	(82,199	)	$	17.88
Canceled	(14,693	)	$	18.18
Balance at December 31, 2014	252,476		$	18.93	2.1
Granted	23,814		$	18.31
Vested	(65,293	)	$	18.61
Canceled	(18,704	)	$	18.56
Balance at December 31, 2015	192,293		$	19.20	1.7

Stock-based compensation expense related to our equity incentive plans in accordance with U.S. GAAP was allocated as follows:



Year Ended December 31,	2015			2014			2013
(Thousands of dollars)
Cost of sales	$	370		$	113		$	214
Selling, general and administrative expenses	2,437			2,202			2,471
Stock-based compensation expense before income taxes	2,807			2,315			2,685
Income tax benefit	(1,044		)	(740		)	(762		)
Total stock-based compensation expense after income taxes	$	1,763		$	1,575		$	1,923

The 2013 compensation expense includes $0.7 million of costs primarily for accrued and accelerated share-based payment costs associated with the company CEO's Separation Agreement, see Note 15 - Commitments and Contingent Liabilities. There were no significant capitalized stock-based compensation costs at December 31, 2015 or 2014. As of December 31, 2015 there was $3.8 million of unrecognized stock-based compensation expense expected to be recognized related to unvested stock-based awards. That cost is expected to be recognized over a weighted-average period of 1.7 years.

The fair value of each option grant was estimated as of the date of grant using the Black-Scholes option-pricing model with the following assumptions:



Year Ended December 31,	2012
Expected dividend yield (a)	3.7%
Expected stock price volatility (b)	41.2%
Risk-free interest rate (c)	1.4%
Expected option lives (d)	6.9 years
Weighted average grant date fair value of options granted during the period	$5.10


(a)	This assumed that cash dividends of $0.16 per share would be paid each quarter on our common stock.


(b)	Expected volatility is based on the historical volatility of our stock price, over the expected term of the option.


(c)	The risk-free rate is based upon the rate on a U.S. Treasury note for the period representing the expected term of the option.


(d)	The expected term of the option is based on historical employee exercise behavior, a contractual life of ten years and employees' post-vesting employment termination behavior.