NOTE 16—SHARE-BASED PAYMENTS

Incentive Plans

At the 2015 Annual Meeting of Stockholders, our stockholders approved the Signature Group Holdings, Inc. 2015 Equity Award Plan, and following our corporate name change, the Amended and Restated Real Industry, Inc. 2015 Equity Award Plan (the “2015 Equity Plan”), which provides for the grant of restricted common stock, common stock options, performance shares, stock appreciation rights, and restricted stock units to employees, nonexecutive directors and consultants. The 2015 Equity Plan replaces the Amended and Restated 2006 Signature Group Holdings, Inc. Performance Incentive Plan (the “Incentive Plan”). Including the carryover shares from the Incentive Plan, the Board is authorized to issue up to 1.9 million shares of common stock, or its equivalent, under the 2015 Equity Plan. The terms and conditions of awards outstanding under the Incentive Plan are not affected by the termination of the Incentive Plan, as their terms survive any termination. As of December 31, 2015 and 2014, there were no stock appreciation rights or restricted stock units outstanding. As of December 31, 2014, under the Incentive Plan, there were approximately 0.5 million shares available for grant. As of December 31, 2015, there are 259,323 shares of unvested restricted common stock, 775,650 fully vested and exercisable common stock options, and 260,000 unvested performance shares outstanding under the Incentive Plan and 2015 Equity Plan. As of December 31, 2015, under the 2015 Equity Plan, there were approximately 1.7 million shares available for grant.

Director Compensation Program

The Director Compensation Program provides for annual grants of restricted shares of the Company’s common stock on the first business day of each calendar year to each nonexecutive Board member, under both the 2015 Equity Plan and the Incentive Plan. Through the year ended December 31, 2015, these grants had a grant date fair value of $75,000 per nonexecutive director, and vested on January 1 of the following year. Beginning January 1, 2016, these grants will have a grant date fair value of $85,000. Compensation to nonexecutive directors joining the Company after January 1 is prorated for the time of service and those awards also vest on January 1 of the following year.

Restricted common stock

Restricted common stock awards are granted with various vesting schedules ranging from immediately to five years. Grants that vest immediately have restrictions on transfer of the common stock for approximately one year. The following table provides activity of restricted common stock for the years ended December 31, 2015, 2014 and 2013:

	Shares			Weighted Average Grant Date Fair Value Per Share
Balance, December 31, 2012		357,522		$	4.32
Restricted common stock vested		(356,886	)		4.61
Restricted common stock granted		139,005			5.70
Balance, December 31, 2013		139,641			4.94
Restricted common stock vested		(98,530	)		5.76
Restricted common stock granted		73,394			9.89
Balance, December 31, 2014		114,505			4.94
Restricted common stock vested		(96,172	)		6.92
Restricted common stock granted		255,151			6.89
Restricted common stock forfeited		(14,161	)		8.08
Balance, December 31, 2015		259,323		$	7.05

Share-based compensation related to restricted common stock awards was $0.8 million, $0.7 million and $1.2 million for the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015, the aggregate unamortized value of share-based restricted common stock awards was $1.1 million, and will be recognized over a weighted average period of 2.1 years from December 31, 2015.

During the years ended December 31, 2015, 2014 and 2013, employees were granted 32,412, 17,986 and 10,871 shares of restricted common stock, respectively; executive officers were granted 172,529, 27,500 and 25,000 shares of restricted common stock, respectively; and directors were granted 50,210, 27,908, and 103,134 shares of restricted common stock, respectively.

Common stock options

The Company issued common stock options to employees under the Incentive Plan, with various vesting schedules ranging from immediately to four years. The fair value of each common stock option award is estimated on the grant date using either a Black-Scholes option pricing model for service-based awards or a trinomial lattice option pricing model for market-based awards. Expected volatilities were based on historical volatility of the Company’s common stock. The common stock option awards expire eight to ten years following the grant date and the expected lives are based on the simplified method as the Company does not have sufficient common stock option exercise experience to support a reasonable estimate of expected term. The risk-free rate is the yield available on U.S. Treasury zero-coupon issues with remaining maturities approximating the expected term at the grant date. There were no common stock option awards granted in the years ended December 31, 2015 and 2014. The following table provides assumptions used in determining the fair value of common stock option grants for the year ended December 31, 2013:

	Year Ended December 31,
(Weighted averages)	2013
Expected volatility		55.00	%
Risk-free interest rate		1.15	%
Expected term (in years)		5.60
Dividend yield		—	%
Grant date fair value per share	$	2.75

The following table presents activity of nonvested common stock options during the years ended December 31, 2015, 2014 and 2013:

	Options			Weighted Average Exercise Price Per Share
Balance, December 31, 2012		872,373		$	5.41
Common stock options granted		205,000			9.52
Common stock options vested		(383,208	)		5.47
Common stock options forfeited		(20,332	)		3.62
Balance, December 31, 2013		673,833			6.59
Common stock options vested		(592,433	)		6.29
Balance, December 31, 2014		81,400			7.62
Common stock options vested		(31,400	)		3.84
Common stock options forfeited		(50,000	)		10.00
Balance, December 31, 2015		—		$	—

The following table presents activity of exercisable common stock options during the years ended December 31, 2015, 2014 and 2013:

	Options			Weighted Average Exercise Price Per Share
Balance, December 31, 2012		181,327		$	5.21
Common stock options exercised		(20,668	)		3.00
Common stock options vested		383,208			5.47
Balance, December 31, 2013		543,867			5.76
Common stock options exercised		(150,000	)		5.72
Common stock options vested		592,433			6.29
Balance, December 31, 2014		986,300			6.08
Common stock options exercised		(242,050	)		5.16
Common stock options vested		31,400			3.84
Balance, December 31, 2015		775,650		$	6.28

The following table provides information pertaining to the intrinsic value of common stock options outstanding and exercisable as of December 31, 2015 and 2014:

	December 31,
(In millions)	2015		2014
Intrinsic value of common stock options outstanding	$	1.6	$	1.5
Intrinsic value of common stock options exercisable		1.6		1.4

The following table provides information presents the intrinsic value of common stock options exercised and the fair value of common stock options that vested during the years ended December 31, 2015, 2014 and 2013:

	Year Ended December 31,
(In millions)	2015		2014		2013
Intrinsic value of common stock options exercised ⁽¹⁾	$	0.6	$	0.4	$	0.1
Fair value of common stock options vested⁽²⁾		0.1		1.2		0.8

⁽¹⁾

The intrinsic value of common stock options exercised is the difference between the fair value of the Company’s common stock on the exercise date and the exercise price.

⁽²⁾

The fair value of common stock options vested is based on the grant date fair value.

Share-based compensation related to common stock option awards was $0.1 million, $0.6 million and $0.9 million for the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015, there was no unamortized share-based expense related to common stock options, and the weighted average remaining contractual life for common stock options outstanding and exercisable as of December 31, 2015 was 5.4 years.

Performance Shares

The Company issues performance share awards as part of long-term incentive compensation to certain employees under the 2015 Plan. The fair value of each performance share award is estimated on the grant date using a Monte Carlo simulation. The awards have a three-year cliff vesting, and the percentage of the award that vests is based upon the market appreciation of the Company’s common stock. Upon vesting, the performance shares are issued in the form of unrestricted common stock. The following table provides assumptions used in determining the fair value of performance share awards granted during the year ended December 31, 2015:

	Year Ended December 31,
(Weighted averages)	2015
Grant date fair value	$	7.53
Grant date closing stock price	$	11.05
Volatility		48.90	%
Risk-free rate		0.84	%
Dividend yield		—	%
Probability of death or disability		5.00	%

The following table presents activity of outstanding performance share awards during the year ended December 31, 2015:

	Performance Shares		Grant Date Fair Value per Share
Balance, December 31, 2014		—	$	—
Performance shares awarded		260,000		7.53
Balance, December 31, 2015		260,000	$	7.53

Share-based compensation related to performance share awards was $0.4 million for the year ended December 31, 2015. As of December 31, 2015 and 2014, the aggregate unamortized value of share-based performance share awards was $1.6 million. The unamortized value of share-based performance awards will be recognized over a weighted average period of 2.0 years from December 31, 2015.