10. STOCK-BASED COMPENSATION

Stock-based compensation expense is recognized on a straight-line basis over the applicable vesting period. During the three months ended June 30, 2014 and 2013, we recorded $3.8 million and $4.0 million, respectively, of stock-based compensation expense, of which $0.1 million and $0.0 million, respectively, related to the implementation of our ERP system, was capitalized to intangible assets on the condensed consolidated balance sheets. During the six months ended June 30, 2014 and 2013, $8.5 million and $7.5 million, respectively, of stock-based compensation expense was recorded, of which $0.2 million and $0.0 million, respectively, related to the implementation of our ERP system, was capitalized to intangible assets on the condensed consolidated balance sheets.

Stock Options

Options granted generally vest over four years with the first year vesting on a cliff basis followed by monthly vesting for the remaining three years.

The following table summarizes the stock option activity for the three and six months ended June 30, 2014 and 2013:


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Options	Options		Weighted Average Exercise Price	Options		Weighted Average Exercise Price	Options		Weighted Average Exercise Price	Options		Weighted Average Exercise Price
Outstanding at March 31, 2014 and 2013, respectively, and December 31, 2013 and 2012, respectively	2,020,308	$	13.51	2,540,677	$	13.24	2,105,152	$	13.34	2,621,686	$	13.03
Granted	10,000		15.04	77,500		16.52	34,000		15.24	157,000		15.90
Exercised	(117,502)		3.54	(106,781)		7.82	(191,059)		4.89	(204,090)		7.05
Forfeited or expired	(37,326)		20.44	(141,311)		16.00	(72,613)		19.29	(204,511)		16.81
Outstanding at June 30	1,875,480	$	14.01	2,370,085	$	13.42	1,875,480	$	14.01	2,370,085	$	13.42

Restricted Stock Awards and Units

From time to time, we grant restricted stock awards (“RSA”) and restricted stock units (“RSU”) to our employees. RSAs and RSUs generally vest over three or four years depending on the terms of the grant. Unvested RSAs have the same rights as those of common shares including voting rights and non-forfeitable dividend rights. However, ownership of unvested RSAs cannot be transferred until they are vested. An unvested RSU is a contractual right to receive a share of common stock only upon its vesting. RSUs have dividend equivalent rights which accrue over the term of the award and are paid if and when the RSUs vest, but they have no voting rights.

We typically grant time-based RSUs and performance-based RSUs. Time-based RSUs are typically granted on an annual basis to certain non-executive employees and vest in three annual installments on a straight-line basis beginning one year after the grant date. During the three months ended June 30, 2014 and 2013, the board of directors did not approve the grant of a material amount of time-based RSUs to non-executives. During the six months ended June 30, 2014 and 2013, the board of directors approved 0.3 million grants of time-based RSUs to non-executives.

Performance-based RSUs are typically granted on an annual basis to executives and consist of a time-based and performance-based component. During the three months ended June 30, 2014 and 2013, the board of directors did not approve any grants of RSUs to executives as part of a performance incentive program. During the six months ended June 30, 2014 and 2013, the board of directors approved the grant of an aggregate of 1.0 million and 0.7 million, respectively, of RSUs to executives as part of a performance incentive program.

During the three months ended June 30, 2014 and 2013, we recorded $2.8 million and $3.0 million, respectively, of stock-based compensation expense related to RSUs. During the six months ended June 30, 2014 and 2013, we recorded $6.5 million and $6.0 million, respectively, of stock-based compensation expense related to RSUs. The following represents the vesting schedule of performance-based RSUs granted in 2014:

Time Vested RSUs

(50% of Award)

Performance Vested RSUs (50% of Award)

Vest in 3 annual installments beginning one year after the date of grant

Performance Goals (weighted equally)

Potential Award

Further Time Vesting

Achievement of at least 70% of a one-year cumulative earnings per share performance goal.

Achievement of at least 90% of 2014 revenue target.

Executive may earn from 50% to 200% of the target number of RSUs based on the level of achievement of the performance goal.

Earned RSUs vest 50% upon satisfaction of performance goal and 50% one year later.

The following table summarizes the RSA activity for the three and six months ended June 30, 2014 and 2013:


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Restricted Stock Awards	Shares		Weighted Average Grant Date Fair Value	Shares		Weighted Average Grant Date Fair Value	Shares		Weighted Average Grant Date Fair Value	Shares		Weighted Average Grant Date Fair Value
Outstanding at March 31, 2014 and 2013, respectively, and December 31, 2013 and 2012, respectively	58,037	$	14.89	327,503	$	13.22	210,490	$	13.43	355,509	$	13.37
Granted	9,973		15.04	21,590		16.56	9,973		15.04	21,590		16.56
Vested (1)	(48,037)		14.50	(61,006)		12.68	(63,435)		15.03	(78,212)		14.57
Forfeited or expired	(5,000)		16.75	-		-	(142,055)		12.60	(10,800)		12.51
Outstanding at June 30	14,973	$	15.61	288,087	$	13.32	14,973	$	15.61	288,087	$	13.32

(1)The RSAs vested during the three and six months ended June 30, 2014 and 2013 consisted entirely of time-based awards.

The following table summarizes the RSU activity for the three and six months ended June 30, 2014 and 2013:


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Restricted Stock Units	Units		Weighted Average Grant Date Fair Value	Units		Weighted Average Grant Date Fair Value	Units		Weighted Average Grant Date Fair Value	Units		Weighted Average Grant Date Fair Value
Outstanding at March 31, 2014 and 2013, respectively, and December 31, 2013 and 2012, respectively	2,613,554	$	16.17	2,449,544	$	17.06	1,965,667	$	16.50	1,414,661	$	20.61
Granted	272,516		15.27	157,097		15.88	1,621,493		16.24	1,563,114		15.04
Vested (1)	(79,325)		21.46	(92,297)		25.35	(487,889)		17.80	(286,984)		22.53
Forfeited or expired	(429,524)		15.90	(58,330)		16.89	(722,050)		16.89	(234,777)		22.27
Outstanding at June 30	2,377,221	$	15.93	2,456,014	$	16.72	2,377,221	$	15.93	2,456,014	$	16.72

⁽¹⁾

The RSUs vested during the three months ended June 30, 2014 and 2013 consisted entirely of time-based awards. The RSUs vested during the six months ended June 30, 2014 consisted of 456,943 of time-based awards and 30,946 of performance-based awards. The RSUs vested during the six months ended June 30, 2013 consisted of 234,696 of time-based awards and 52,288 of performance-based awards.

Appointment of President

On May 13, 2014, the board of directors appointed Andrew Rees as President of the Company, effective June 9, 2014. Upon the commencement of his employment, Mr. Rees was granted a market-based RSU with a maximum value of $3.5 million, which shall vest based on the achievement of certain share price levels on or before the fourth anniversary of his start date, subject to continued employment with the Company. This grant represents the right to receive 0.2 million shares of the Company’s common stock based on the 30-day volume-weighted average price of $15.02 per share immediately prior to his appointment. Based on a Monte-Carlo valuation model, the fair value of the RSU was determined to be $2.3 million, or 65.7% of the grant price, which will be expensed on a straight-line basis over a derived service period of 1.788 years.