STOCK-BASED COMPENSATION

Equity Compensation Plans

The Company maintains the Hudson Global, Inc. 2009 Incentive Stock and Awards Plan (the “ISAP”) pursuant to which it can issue equity-based compensation incentives to eligible participants. The ISAP permits the granting of stock options, restricted stock, and restricted stock units as well as other types of equity-based awards. The Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) will establish such conditions as it deems appropriate on the granting or vesting of stock options or restricted stock. While the Company historically granted both stock options and restricted stock to its employees, since 2008 the Company has primarily granted restricted stock to its employees.

The Compensation Committee administers the ISAP and may designate any of the following as a participant under the ISAP: any officer or other employee of the Company or its affiliates or individuals engaged to become an officer or employee, consultants or other independent contractors who provide services to the Company or its affiliates and non-employee directors of the Company. As of December 31, 2013, there were 2,135,388 shares of the Company’s common stock available for future issuance.

The Company also maintains the Director Deferred Share Plan (the “Director Plan”) pursuant to which it can issue restricted stock units to its non-employee directors. A restricted stock unit is equivalent to one share of the Company’s common stock and is payable only in common stock issued under the ISAP upon a director ceasing service as a member of the Board of Directors of the Company.

All share issuances related to stock compensation plans are issued from unissued shares of stockholder approved compensation plans.

A summary of the quantity and vesting conditions for restricted stock awards granted to its employees under ISAP for the year ended December 31, 2013 was as follows:



Vesting conditions	Number of Shares of Restricted Stock Granted	Number of Restricted Stock Units Granted	Total
Performance and service conditions (1) (2)	540,721	65,200	605,921
Vest 50% on each of the second and third anniversaries of the grant date with service conditions only	30,000	—	30,000
Immediately vested	1,100	2,820	3,920
Vest 100% on the second anniversary of the grant date with service conditions only	160,000	—	160,000
Vest 100% on the third anniversary of the grant date with service conditions only	120,000	—	120,000
Vest one-third on each of the first three anniversaries of the grant date with service conditions only	31,500	5,640	37,140
Total shares of stock award granted	883,321	73,660	956,981


(1)	The performance conditions with respect to restricted stock may be satisfied as follows:


(a)	50% of the shares of restricted stock may be earned on the basis of performance as measured by a “Take-out Ratio,” defined as the percentage of the direct, front line costs incurred for the year ended December 31, 2013 divided by the gross margin for the year ended December 31, 2013;


(b)	25% of the shares of restricted stock may be earned on the basis of performance as measured by an employee engagement score for the year ended December 31, 2013 based on an employee survey conducted by a global human resources consulting firm; and


(c)	25% of the shares of restricted stock may be earned on the basis of performance as measured by “Cash Efficiency,” defined as (1) cash flow from operations for the year ended December 31, 2013 divided by (2) gross margin minus selling, general and administrative expenses for the year ended December 31, 2013.


(2)	To the extent shares are earned on the basis of performance, such shares will vest on the basis of service as follows:


(a)	33% of the shares vest on the later of the first anniversary of the grant date or the determination that the performance conditions have been satisfied;


(b)	33% of the shares vest on the second anniversary of the grant date; and


(c)	34% of the shares vest on the third anniversary of the grant date; provided that, in each case, the named executive officer remains employed by the Company from the grant date through the applicable service vesting date.

During the year ended December 31, 2013, the Company also granted 102,200 restricted stock units to its non-employee directors pursuant to the Director Plan.

For the years ended December 31, 2013, 2012 and 2011, the Company’s stock-based compensation expense related to stock options, restricted stock and restricted stock units, which are included under the caption “Salaries and related” in the accompanying Consolidated Statements of Operations, were as follows:



	For The Year Ended December 31,
	2013		2012		2011
Stock options	$	354	$	704	$	515
Restricted stock	1,274		1,275		2,411
Restricted stock units	462		595		295
Total	$	2,090	$	2,574	$	3,221
Tax benefits recognized in jurisdictions where the Company has taxable income	$	130	$	105	$	279

As of December 31, 2013 and 2012, unrecognized compensation expense and weighted average period over which the compensation expense is expected to be recognized relating to the unvested portion of the Company's stock options, restricted stock, and restricted stock unit awards, in each case, based on the Company's historical valuation treatment, were as follows:



	As of December 31,
	2013			2012
	Unrecognized Expense		Weighted Average Period in Years	Unrecognized Expense		Weighted Average Period in Years
Stock options	$	85	0.36	$	445	1.08
Restricted stock	$	1,527	1.76	$	1,806	1.38
Restricted stock units	$	162	1.36	$	182	1.52

Stock Options

Stock options granted by the Company generally expire ten years after the date of grant and have an exercise price of at least 100% of the fair market value of the underlying share of common stock on the date of grant and generally vest ratably over a four-year period.

The following were the weighted average assumptions used to determine the fair value of stock options granted by the Company and the details of option activity as of and for the respective periods:



		For The Year Ended December 31,
		2013	2012	2011
	Volatility	(a)	(a)	75.1		%
	Risk free interest rate	(a)	(a)	2.3		%
	Dividends	(a)	(a)	—		%
	Expected life (years)	(a)	(a)	6.25
	Weighted average fair value of options granted during the period	(a)	(a)	$	3.50

(a)	Stock option assumptions are not provided above because there were no options granted during the years ended December 31, 2013 and 2012.

Changes in the Company’s stock options for the years ended December 31, 2013, 2012 and 2011 were as follows:



	For The Year Ended December 31,
	2013				2012				2011
	Number of Options		Weighted Average Exercise Price per Share		Number of Options		Weighted Average Exercise Price per Share		Number of Options		Weighted Average Exercise Price per Share
Options outstanding at January 1,	1,238,650		$	11.21	1,396,350		$	11.36	1,548,300		$	12.64
Granted	—		—		—		—		400,000		5.18
Expired	(438,300	)	14.99		(157,700	)	12.55		(551,950	)	10.47
Options outstanding at December 31,	800,350		$	9.15	1,238,650		$	11.21	1,396,350		$	11.36
Options exercisable at December 31,	600,350		$	10.47	838,650		$	13.96	938,850		$	12.71

The cash proceeds from the exercise of stock options, associated income tax benefits, and total intrinsic value for stock options exercised based on the closing price of the Company's common stock were nil for the years ended December 31, 2013, 2012 and 2011.

The weighted average remaining contractual term and the aggregated intrinsic value for stock options outstanding and exercisable as of December 31, 2013 and 2012 were as follows:



	As of December 31,
	2013			2012
	Remaining Contractual Term in Years	Aggregated Intrinsic Value		Remaining Contractual Term in Years	Aggregated Intrinsic Value
Stock options outstanding	4.89	$	—	4.4	$	—
Stock options exercisable	4.07	$	—	2.5	$	—

Restricted Stock

Changes in the Company’s restricted stock for the years ended December 31, 2013, 2012 and 2011 were as follows:



	For The Year Ended December 31,
	2013				2012				2011
	Number of Shares of Restricted Stock		Weighted Average Grant Date Fair Value		Number of Shares of Restricted Stock		Weighted Average Grant Date Fair Value		Number of Shares of Restricted Stock		Weighted Average Grant Date Fair Value
Unvested restricted stock at January 1,	1,028,916		$	4.87	1,166,082		$	5.12	953,037		$	3.64
Granted	883,321		2.44		638,230		4.59		743,625		6.22
Vested	(406,158	)	5.09		(461,200	)	4.86		(295,065	)	4.09
Forfeited	(508,277	)	4.16		(314,196	)	5.26		(235,515	)	3.86
Unvested restricted stock at December 31,	997,802		$	3.00	1,028,916		$	4.87	1,166,082		$	5.12

The total fair value of restricted stock vested during the years ended December 31, 2013, 2012 and 2011 were as follows:



	For The Year Ended December 31,
	2013		2012		2011
Fair value of restricted stock vested	$	1,596	$	2,239	$	1,207

Restricted Stock Units

Changes in the Company’s restricted stock units arising from grants to certain employees and non-employees directors for the years ended December 31, 2013, 2012 and 2011 were as follows:



	For The Year Ended December 31,
	2013				2012				2011
	Number of Shares of Restricted Stock Unit		Weighted Average Grant-Date Fair Value		Number of Shares of Restricted Stock Unit		Weighted Average Grant-Date Fair Value		Number of Shares of Restricted Stock Unit		Weighted Average Grant-Date Fair Value
Unvested restricted stock units at January 1,	100,000		$	5.18	100,000		$	5.18	—		$	—
Granted	175,860		2.90		76,023		5.13		127,376		5.37
Vested	(154,991	)	3.81		(76,023	)	5.13		(27,376	)	6.05
Forfeited	(5,000	)	2.42		—		—		—		—
Unvested restricted stock units at December 31,	115,869		$	3.65	100,000		$	5.18	100,000		$	5.18

The total fair value of restricted stock units vested during the years ended December 31, 2013, 2012 and 2011 were as follows:



	For The Year Ended December 31,
	2013		2012		2011
Fair value of restricted stock units vested	$	461	$	390	$	166

Defined Contribution Plan and Employer-matching contributions

The Company maintains the Hudson Global, Inc. 401(k) Savings Plan (the “401(k) plan”). The 401(k) plan allows eligible employees to contribute up to 15% of their earnings to the 401(k) plan. The Company has the discretion to match employees’ contributions up to 3% of the employees' earnings through a contribution of the Company’s common stock. Vesting of the Company’s contribution occurs over a five-year period. For the years ended December 31, 2013, 2012 and 2011, the Company’s expenses and contributions to satisfy the prior years’ employer-matching liability for the 401(k) plan were as follows:



	For The Year Ended December 31,
($ in thousands, except otherwise stated)	2013		2012		2011
Expense recognized for the 401(k) plan	$	483	$	635	$	686
Contributions to satisfy prior years' employer-matching liability
Number of shares of the Company's common stock issued (in thousands)	—		124		92
Market value per share of the Company's common stock on contribution date (in dollars)	$	—	$	5.35	$	6.55
Non-cash contribution made for employer matching liability	$	—	$	666	$	602
Additional cash contribution made for employer-matching liability	651		—		—
Total contribution made for employer-matching liability	$	651	$	666	$	602