STOCK-BASED COMPENSATION

For restricted stock awards, we had:



	2015 ⁽¹⁾		2014		2013
	(In millions)
Recognized stock compensation expense	$	15.3	$	17.4	$	16.1
Capitalized stock compensation cost for our oil and natural gas properties	3.5		3.7		3.5
Tax benefit on stock based compensation	5.8		6.7		6.2

_________________________


(1)	Recognized stock compensation was reduced by $3.2 million, capitalized stock compensation cost for our oil and natural gas properties was reduced by $0.2 million, and the tax benefit was reduced by $1.2 million for lower expected payouts related to the performance shares.

The remaining unrecognized compensation cost related to unvested awards at December 31, 2015 is approximately $13.8 million of which $2.4 million is anticipated to be capitalized. The weighted average period of time over which this cost will be recognized is 0.7 of a year.

The Second Amended and Restated Unit Corporation Stock and Incentive Compensation Plan effective May 6, 2015 (the amended plan) allows us to grant stock-based and cash-based compensation to our employees (including employees of subsidiaries) as well as to non-employee directors. A total of 4,500,000 shares of the company's common stock is authorized for issuance to eligible participants under the amended plan with 2.0 million shares being the maximum number of shares that can be issued as “incentive stock options.” Awards under this plan may be granted in any one or a combination of the following:


•	incentive stock options under Section 422 of the Internal Revenue Code;


•	non-qualified stock options;


•	performance shares;


•	performance units;


•	restricted stock;


•	restricted stock units;


•	stock appreciation rights;


•	cash based awards; and


•	other stock-based awards.

This plan also contains various limits as to the amount of awards that can be given to an employee in any fiscal year. All awards are generally subject to the minimum vesting periods, as determined by our Compensation Committee and included in the award agreement.

Expected volatilities are based on the historical volatility of our stock. We use historical data to estimate option exercise and termination rates within the model and aggregate groups that have similar historical exercise behavior for valuation purposes. To date, we have not paid dividends on our stock. The risk free interest rate is computed from the United States Treasury Strips rate using the term over which it is anticipated the grant will be exercised.

SARs

Activity pertaining to SARs granted under the amended plan is as follows:



	Number of Shares		Weighted Average Price
Outstanding at January 1, 2013	145,901		$	46.59
Granted	—		—
Exercised	—		—
Forfeited	—		—
Outstanding at December 31, 2013	145,901		46.59
Granted	—		—
Exercised	(14,131	)	46.50
Forfeited	—		—
Outstanding at December 31, 2014	131,770		46.60
Granted	—		—
Exercised	—		—
Forfeited	—		—
Outstanding at December 31, 2015	131,770		$	46.60

There were no SARs granted or vested during 2015, 2014, or 2013.



	Outstanding and Exercisable SARs at December 31, 2015
Exercise Prices	Number of Shares	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price
$44.31	91,255	2.0 years	$44.31
$51.76	40,515	0.9 years	$51.76

There were no SARs exercised in 2015. The SARs expire after 10 years from the date of the grant. There was no aggregate intrinsic value on the 131,770 shares outstanding at December 31, 2015. The remaining weighted average contractual term is 1.6 years.

Restricted Stock

Activity pertaining to restricted stock awards granted under the amended plan is as follows:



Employees	Number of Time Vested Shares		Number of Performance Vested Shares		Total Number of Shares		Weighted Average Price
Nonvested at January 1, 2013	523,024		66,503		589,527		$	48.11
Granted	396,144		57,405		453,549		48.20
Vested	(248,003	)	—		(248,003	)	46.46
Forfeited	(18,330	)	—		(18,330	)	47.85
Nonvested at December 31, 2013	652,835		123,908		776,743		48.70
Granted	383,448		71,674		455,122		53.72
Vested	(291,712	)	(13,092	)	(304,804	)	49.68
Forfeited	(19,805	)	(6,970	)	(26,775	)	51.92
Nonvested at December 31, 2014	724,766		175,520		900,286		50.81
Granted	576,361		148,081		724,442		34.06
Vested	(343,657	)	(39,245	)	(382,902	)	49.69
Forfeited	(20,808	)	(7,196	)	(28,004	)	45.33
Nonvested at December 31, 2015	936,662		277,160		1,213,822		$	41.29



Non-Employee Directors	Number of Shares		Weighted Average Price
Nonvested at January 1, 2013	24,606		$	40.23
Granted	21,128		41.65
Vested	(10,030	)	40.23
Forfeited	—		—
Nonvested at December 31, 2013	35,704		$	41.07
Granted	13,768		63.91
Vested	(14,336	)	40.93
Forfeited	—		—
Nonvested at December 31, 2014	35,136		$	50.08
Granted	25,848		34.04
Vested	(18,920	)	46.51
Forfeited	—		—
Nonvested at December 31, 2015	42,064		$	41.83

The time vested restricted stock awards granted are being recognized over a three year vesting period. The performance vested restricted stock awards, granted to certain executive officers, will cliff vest three years from the grant date based on the company's achievement of certain stock performance measures at the end of the term and will range from 0% to 150% of the restricted shares granted as performance shares. Based on a probability assessment of the selected performance criteria at December 31, 2015, the participants are estimated to receive 2% of the 2015, 57% of the 2014, and 10% of the 2013 performance based shares.

The fair value of the restricted stock granted in 2015, 2014, and 2013 at the grant date was $24.5 million, $24.1 million, and $21.3 million, respectively. The aggregate intrinsic value of the 401,822 shares of restricted stock that vested in 2015 on their vesting date was $11.2 million. The aggregate intrinsic value of the 1,255,886 shares of restricted stock outstanding subject to vesting at December 31, 2015 was $15.3 million with a weighted average remaining life of 0.7 of a year.

Employee Stock Option Plan

The Stock Option Plan, provided the granting of options for up to 2,700,000 shares of common stock to officers and employees. The option plan permitted the issuance of qualified or nonqualified stock options. Options granted typically became exercisable at the rate of 20% per year one year after being granted and expire after 10 years from the original grant date. The exercise price for options granted under this plan was the fair market value of the common stock on the date of the grant. In 2006, as a result of the approval of the adoption of the Unit Corporation Stock and Incentive Compensation Plan, no further awards were made under this plan. During 2015, the remaining options expired.

Activity pertaining to the Stock Option Plan is as follows:



	Number of Shares		Weighted Average Exercise Price
Outstanding at January 1, 2013	118,030		$	33.03
Granted	—		—
Exercised	(48,110	)	26.09
Forfeited	(1,000	)	37.83
Outstanding at December 31, 2013	68,920		37.81
Granted	—		—
Exercised	(21,490	)	37.83
Forfeited	(37,930	)	37.83
Outstanding at December 31, 2014	9,500		37.69
Granted	—		—
Exercised	—		—
Forfeited	(9,500	)	37.69
Outstanding at December 31, 2015	—		$	—

There were no shares that vested in 2015, 2014, or 2013. There were no options exercised in 2015 and no options outstanding or exercisable in this plan at December 31, 2015.

Non-Employee Directors' Stock Option Plan

Under the Unit Corporation 2000 Non-Employee Directors’ Stock Option Plan, on the first business day following each annual meeting of shareholders, each person who was then a member of our Board of Directors and who was not then an employee of the company or any of its subsidiaries was granted an option to purchase 3,500 shares of common stock. The option price for each stock option was the fair market value of the common stock on the date the stock options were granted. The term of each option is 10 years and cannot be increased and no stock options were to be exercised during the first six months of its term except in case of death. On May 2, 2012, our stockholders approved the amended plan which succeeds this plan, and no further awards were made under the non-employee director option plan.

Activity pertaining to the Directors’ Plan is as follows:



	Number of Shares		Weighted Average Exercise Price
Outstanding at January 1, 2013	192,500		$	49.39
Granted	—		—
Exercised	(17,500	)	32.53
Forfeited	(3,500	)	20.46
Outstanding at December 31, 2013	171,500		51.70
Granted	—		—
Exercised	(21,000	)	33.94
Forfeited	—		—
Outstanding at December 31, 2014	150,500		54.18
Granted	—		—
Exercised	—		—
Forfeited	(21,000	)	54.35
Outstanding at December 31, 2015	129,500		$	54.15

There were no options exercised in 2015.



	Outstanding and Exercisable Options at December 31, 2015
Weighted Average Exercise Price	Number of Shares	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price
$31.30 - $41.21	38,500	3.9 years	$	37.58
$53.81 - $73.26	91,000	2.6 years	$	61.16

There was no aggregate intrinsic value of the shares outstanding subject to options at December 31, 2015. The remaining weighted average remaining contractual term is 3.0 years.