10.

STOCK BASED COMPENSATION AND EMPLOYEE BENEFIT PLANS

Prior Plans

Prior to the RTO, see Note 9, the Company had four equity incentive plans. The 2008 Equity Incentive Plan (the “2008 Plan”) which had all outstanding options converted on a value-for-value basis to options in the Northern Power Systems Corp. 2014 Stock Option and Incentive Plan (“2014 NPS Corp Plan”) in April 2014. The Company had also adopted the Northern Power Systems, Inc. 2011 Stock Option and Grant Plan (the “Northern 2011 Plan”) and Utility Scale adopted the Northern Power Systems Utility Scale, Inc. 2011 Stock Option and Grant Plan (the “Utility Scale 2011 Plan,” and together with the Northern 2011 Plan, the “Subsidiary Plans”). In November 2013, WPHI adopted the Wind Power Holdings, Inc. 2013 Stock Option and Grant Plan (the “2013 WPHI Plan”). This plan provided for the grant of incentive stock options, non-statutory stock options, and other types of stock awards to employees, consultants and directors of the Company. Effective on January 1, 2014, options in the Subsidiary Plans of 238,887 automatically converted to options in the 2013 WPHI Plan on a value-for-value basis. As discussed, in January 2014 the remaining outstanding options of 1,938,094 and 2,088,842 from the two Subsidiary Plans were converted to options in the 2013 WPHI Plan.

Immediately prior to the conversion described below, the Company had reserved 2,568,089 shares of common stock collectively in the 2008 Equity Incentive Plan and the 2013 WPHI Plan for both future exercise of outstanding stock options and shares available for future option grants. As described below in April 2014 outstanding options of 1,830,012 were converted on a value-for-value basis to options in the 2014 NPS Corp Plan.

2014 Northern Power Systems Corp. Stock Option and Incentive Plan — In April 2014 and as a result of the reverse takeover transaction, the Company adopted the 2014 NPS Corp Plan, which reserved 4,000,000 shares of the Company’s voting common shares for both future exercise of outstanding stock options and shares available for future outstanding grants. All options in the 2013 WPHI Plan and the 2008 Equity Incentive Plan were converted on a value-for-value basis to options in the 2014 NPS Corp Plan. All other relevant terms and conditions remained the same. At such time the Company considered the modification of such awards in accordance with ASC 718 and concluded that such transaction did not result in additional compensation expense. The Company is accounting for grants under the 2014 NPS Corp Plan as equity awards.

A summary of the stock option activity under the 2014 NPS Corp Plan for the three months ended March 31, 2015, is as follows:


	Shares			Weighted- Average Exercise Price		Average Remaining Weighted-Average Contractual Term (in Years)	Aggregate Intrinsic Value

Outstanding — December 31, 2014		2,403,347		$	2.20	5.97 years	$	2,151
Granted		14,000		$	1.84
Exercised		(1,596	)	$	1.59
Canceled		(7,490	)	$	2.15

Outstanding — March 31, 2015		2,408,261		$	2.20	5.62 years	$	—


Exercisable — March 31, 2015		1,123,569		$	2.18	5.14 years	$	—


Shares vested and expected to vest March 31, 2015		2,263,801		$	2.19	5.59 years	$	—

As of March 31, 2015, 1,591,739 options were available for grant under the 2014 NPS Corp Plan.

The aggregate intrinsic value in the table above represents the difference between the fair value of common shares and the exercise price of outstanding, in-the-money, stock options.

The weighted-average grant-date fair value of options granted under the 2014 NPS Corp Plan during the three months ended March 31, 2015 was $1.09 per share. At March 31, 2015, unrecognized stock-based compensation expense related to non-vested stock options is $1,602 which is expected to be recognized over the weighted-average remaining vesting period of 2.1 years.

The Company estimated the grant-date fair values of stock options granted in the three months ended March 31, 2015, using the Black-Scholes option pricing model and the following assumptions:


		March 31, 2015
Expected volatility		76.0%
Risk-free interest rate		1.09% - 1.3%
Expected life (years)		4.5
Dividend yield		0.0%

The Company recognizes stock-based compensation expense net of estimated forfeitures on a straight-line basis over the requisite service period. The forfeiture rate was 10% for the three months ended March 31, 2015 and 2014. Stock-based compensation expense, a non-cash expense, is included in each respective expense category as follows, for the three months ended March 31, 2015 and 2014:


	Three months ended March 31
	2015		2014

Cost of revenue	$	9	$	25
Sales and marketing		16		10
Research and development		5		8
General and administrative		148		105

Total stock-based compensation expense	$	178	$	148

Mira III Stock Option Awards — The former officers and directors of Mira III have 35,938 stock options fully vested as of April 16, 2014 which provide the option to purchase shares of the Company’s common shares at an exercise price of CDN$3.48 per share during a one year period ending on April 16, 2015. A placement agent from a previous offering had also been granted options to purchase 7,187 Mira III common shares which were exercised in April 2014 at an exercise price of CDN$3.48 per share. A summary of the former officers and directors of Mira III option activity for March 31, 2015 is as follows:


	Shares		Weighted- Average Exercise Price (CDN)		Average Remaining Weighted-Average Contractual Term (in Years)	Aggregate Intrinsic Value (USD)

Outstanding — December 31, 2014		35,938	$	3.48	.3 Years		—
Granted		—
Exercised		—
Canceled		—


Outstanding — March 31, 2015		35,938	$	3.48	.1 Years	$	—


Exercisable — March 31, 2015		35,938	$	3.48	.1 Years	$	—


Shares vested and expected to vest March 31, 2015		35,938	$	3.48	.1 Years	$	—

As of March 31, 2015 there were no options available for grant under this plan.