STOCK-BASED COMPENSATION

Equity Compensation Plans

The Company maintains the Hudson Global, Inc. 2009 Incentive Stock and Awards Plan, as amended and restated on May 24, 2016 (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, restricted stock, restricted stock units and other types of equity-based awards. As determined by the Compensation Committee, equity awards may also be subject to immediate vesting upon the occurrence of certain events following a change in control of the Company. The Company primarily grants restricted stock and restricted stock units to its employees. A restricted stock unit is equivalent to one share of the Company’s common stock and is payable only in common stock of the Company issued under the ISAP.

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. On May 24, 2016, the Company's stockholders approved an amendment and restatement of the ISAP to, among other things, increase the number of shares of the Company's common stock that are reserved for issuance by 2,400,000 shares. As of December 31, 2016, there were 2,834,298 shares of the Company’s common stock available for future issuance.

All share issuances related to stock compensation plans are issued from the aforementioned stock available for future issuance under stockholder approved compensation plans.

The Company’s stock plan agreements provided that a change in control of the Company will occur if, among other things, individuals who were directors as of the date of the agreement and any new director whose appointment or election was approved or recommended by a vote of at least two-thirds of the directors then in office who were either directors on the date of the agreement or whose appointment or election was previously so approved or recommended (each, a “continuing director”) cease to constitute a majority of the Company’s directors. A change in control occurred as of the Company's 2015 annual meeting of stockholders on June 15, 2015 under these agreements because continuing directors ceased to constitute a majority of the Company's directors. As a result, certain equity awards vested resulting in an accelerated stock-based compensation expense of $2,541 for the year ended December 31, 2015.

A summary of the quantity and vesting conditions for stock-based units granted to the Company's employees for the year ended December 31, 2016 was as follows:



Vesting conditions		Number of Restricted Stock Units Granted
Performance and service conditions (1) (2)		500,000


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


(a)	For employees from the Americas, Asia Pacific and Europe 80% of the restricted stock units may be earned on the basis of performance as measured by "regional adjusted EBITDA," and 20% of the restricted stock units may be earned on the basis of performance as measured by "group adjusted EBITDA"; and


(b)	For employees from the Corporate office 100% of the restricted stock units may be earned on the basis of performance as measured by "group adjusted EBITDA."


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


(a)	33% of the restricted stock units will vest on the first anniversary of the grant date;


(b)	33% of the restricted stock units will vest on the second anniversary of the grant date; and


(c)	34% of the restricted stock units will vest on the third anniversary of the grant date; provided that, in each case, the employee remains employed by the Company from the grant date through the applicable service vesting date.

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. The restricted stock units vest immediately upon grant and are credited to each of the non-employee director's retirement accounts under the Director Plan. Restricted stock units issued under the Director Plan contain the right to a dividend equivalent award in the form of additional restricted stock units. The dividend equivalent award is calculated using the same rate as the cash dividend paid on a share of the Company's common stock, and then divided by the closing price of the Company’s common stock on the date the dividend is paid to determine the number of additional restricted stock units to grant. Dividend equivalent awards have the same vesting terms as the underlying awards. During the year ended December 31, 2016, the Company granted 263,477 restricted stock units to its non-employee directors pursuant to the Director Plan. As of December 31, 2016, non-employee directors held 459,656 deferred restricted stock units.

For the years ended December 31, 2016, 2015 and 2014, the Company’s stock-based compensation expense related to stock options, restricted stock and restricted stock units, which are included in the accompanying Consolidated Statements of Operations, were as follows:



	For The Year Ended December 31,
	2016		2015		2014
Stock options	$	17	$	23	$	85
Restricted stock	678		3,188		798
Restricted stock units	754		1,020		442
Total	$	1,449	$	4,231	$	1,325
Tax benefits recognized in jurisdictions where the Company has taxable income	$	90	$	362	$	98

As of December 31, 2016 and 2015, 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,
	2016			2015
	Unrecognized Expense		Weighted Average Period in Years	Unrecognized Expense		Weighted Average Period in Years
Stock options	$	—	0.00	$	17	0.85
Restricted stock	$	—	0.00	$	701	0.75
Restricted stock units	$	195	1.55	$	—	0.00

Stock Options

Stock options granted by the Company generally expire between five and 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:



	As of December 31,
	2016	2015	2014
Volatility	(a)	48.9%	(a)
Risk free interest rate	(a)	1.1%	(a)
Dividends	(a)	—	(a)
Expected life (years)	(a)	2.75	(a)
Weighted average fair value of options granted during the period	(a)	$0.81	(a)


(a)	Stock option assumptions are not provided above because there were no options granted during the years ended December 31, 2016 and 2014.

Changes in the Company’s stock options for the years ended December 31, 2016, 2015 and 2014 were as follows:



	For The Year Ended December 31,
	2016				2015				2014
	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,	206,000		$	8.13	756,800		$	8.78	800,350		$	9.15
Granted	—		—		50,000		2.49		—		—
Forfeited	—		—		(485,000	)	7.32		—		—
Expired	(82,500	)	11.09		(115,800	)	13.35		(43,550	)	15.50
Options outstanding at December 31,	123,500		$	6.16	206,000		$	8.13	756,800		$	8.78
Options exercisable at December 31,	123,500		$	6.16	181,000		$	8.91	756,800		$	8.78

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, 2016, 2015 and 2014.

The weighted average remaining contractual term and the aggregated intrinsic value for stock options outstanding and exercisable as of December 31, 2016 and 2015 were as follows:



	As of December 31,
	2016			2015
	Remaining Contractual Term in Years	Aggregated Intrinsic Value		Remaining Contractual Term in Years	Aggregated Intrinsic Value
Stock options outstanding	2.35	$	—	2.22	$	22
Stock options exercisable	2.35	$	—	1.86	$	11

Restricted Stock

Changes in the Company’s restricted stock for the years ended December 31, 2016, 2015 and 2014 were as follows:



	For The Year Ended December 31,
	2016				2015				2014
	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,	680,000		$	1.60	803,999		$	3.00	997,802		$	3.00
Granted	—		—		1,270,500		2.17		482,900		3.22
Vested	(330,000	)	2.45		(1,204,798	)	2.90		(182,251	)	5.21
Forfeited	(350,000	)	0.85		(189,701	)	3.14		(494,452	)	2.39
Unvested restricted stock at December 31,	—		$	—	680,000		$	1.60	803,999		$	3.00

The total fair value of restricted stock vested during the years ended December 31, 2016, 2015 and 2014 were as follows:



	For The Year Ended December 31,
	2016		2015		2014
Fair value of restricted stock vested	$	553	$	2,675	$	669

Restricted Stock Units

Changes in the Company’s restricted stock units arising from grants to certain employees and non-employee directors for the years ended December 31, 2016, 2015 and 2014 were as follows:



	For The Year Ended December 31,
	2016				2015				2014
	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,	—		$	—	119,940		$	3.57	115,869		$	3.65
Granted	763,477		2.56		372,739		2.47		175,759		3.40
Vested	(263,477	)	2.12		(450,179	)	2.70		(122,522	)	3.86
Forfeited	(20,000	)	2.79		(42,500	)	3.21		(49,166	)	2.42
Unvested restricted stock units at December 31,	480,000		$	2.79	—		$	—	119,940		$	3.57

The total fair value of restricted stock units vested during the years ended December 31, 2016, 2015 and 2014 were as follows:



	For The Year Ended December 31,
	2016		2015		2014
Fair value of restricted stock units vested	$	558	$	1,022	$	436

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 or cash. Vesting of the Company’s contribution occurs over a five-year period. For the years ended December 31, 2016, 2015 and 2014, 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)	2016		2015		2014
Expense recognized for the 401(k) plan	$	155	$	193	$	385
Contributions to satisfy prior years' employer-matching liability
Number of shares of the Company's common stock issued (in thousands)	—		116		118
Market value per share of the Company's common stock on contribution date (in dollars)	$	—	$	2.71	$	3.65
Non-cash contribution made for employer matching liability	$	—	$	314	$	430
Additional cash contribution made for employer-matching liability	162		—		—
Total contribution made for employer-matching liability	$	162	$	314	$	430