Stock-Based Compensation and Option Plans

Stock Options

The Company currently utilizes a standard option pricing model (Black-Scholes) to measure the fair value of stock options granted to employees and directors. The fair value for these options was estimated at the date of grant using the following weighted average assumptions for 2012, 2013 and 2014:



	2012			2013			2014
Weighted average value per option granted during the period	$	2.17		$	1.73		$	2.44
Assumptions: (1)(2)
Expected dividend yield	—		%	—		%	—		%
Volatility	81.4		%	81.2		%	80.7		%
Risk free interest rate	1.19		%	1.24		%	2.05		%
Expected life (years)	6.7			6.5			6.6
Fair value of options granted (in thousands)	$	1,324		$	1,444		$	2,666

(1) The estimated future forfeiture rate is based on the Company’s historical forfeiture rate.

(2) The Company does not pay dividends on its common stock.

The Company grants options to its officers, directors, and other employees under various stock option and incentive plans.

The Company’s 2005 Employee Long-Term Equity Incentive Plan has authorized the grant of up to 5.2 million awards to management and employees, including options. Options have a term not to exceed 10 years. Options issued under this plan vest according to a vesting schedule as determined by the compensation committee of the Company’s board of directors. Vesting may occur upon (1) the attainment of one or more performance goals or targets established by the committee, (2) the optionee’s continued employment or service for a specified period of time, (3) the occurrence of any event or the satisfaction of any other condition specified by the committee, or (4) a combination of any of the foregoing.

The following table is a summary of the Company’s stock option activity for the three years ended December 31:



	Options (000s)		Weighted average exercise price		Weighted average remaining life	Intrinsic value per share
Options outstanding December 31, 2011	4,756		$	2.61

Granted	610		3.01
Exercised	(391	)	1.11
Forfeited/Expired	(214	)	2.80
Options outstanding December 31, 2012	4,761		$	2.77

Granted	836		2.43
Exercised	(166	)	1.18
Forfeited/Expired	(31	)	2.58
Options outstanding December 31, 2013	5,400		$	2.77

Granted	1,091		$	3.38
Exercised	(410	)	2.71
Forfeited/Expired	(196	)	3.08
Options outstanding December 31, 2014	5,885		$	2.88	5.9	$	2.06
Exercisable at end of year	4,112				4.7	$	2.02

Other information pertaining to the Company’s stock option activity for the three years ended December 31:



	2012		2013		2014
Weighted average grant date fair value of stock options granted (per share)	$	2.17	$	1.73	$	2.44
Total fair value of options vested (000’s)	$	1,497	$	1,670	$	1,718
Total intrinsic value of options exercised (000’s)	$	414	$	275	$	932

As of December 31, 2014, the total compensation cost related to non-vested awards not yet recognized was approximately $2.6 million, which will be recognized in 2014 through 2017. For the years ended December 31, 2012, 2013 and 2014, we recognized $1.6 million, $1.7 million and $1.8 million respectively, in stock-based compensation expense relating to options.

The following table represents the range of stock option prices and the weighted average remaining life of outstanding options as of December 31, 2014:



	Options outstanding				Exercisable
	Number outstanding	Weighted average remaining life	Weighted average exercise price		Number exercisable	Weighted average remaining life	Weighted average exercise price
0.99 - 1.99	1,679,079	4.92	$	1.49	1,579,079	4.74	$	1.45
2.00 - 2.99	1,414,200	6.80	$	2.34	940,077	6.00	$	2.31
3.00 - 3.99	1,509,441	7.81	$	3.36	437,322	5.22	$	3.63
4.00 - 4.99	1,109,750	3.55	$	4.58	987,375	3.14	$	4.57
5.00 - 5.99	100,000	9.35	$	5.39	96,000	9.35	$	5.38
6.00 - 6.28	73,000	1.26	$	6.05	72,000	1.15	$	6.05
	5,885,470				4,111,853

Restricted Stock Awards

Restricted stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the awardee terminates employment with the Company prior to the lapse of the restrictions. The value of such stock is determined using the market price on the grant date. Compensation expense is recorded over the applicable restricted stock vesting periods. As of December 31, 2014, the total compensation cost related to non-vested awards not yet recognized was approximately $4.7 million, which will be recognized in 2015 through 2018. For the years ended December 31, 2012, 2013 and 2014, we recognized $0.5 million, $0.4 million and $0.9 million, respectively, in stock-based compensation expense related to restricted stock awards.

The following table is a summary of the Company’s restricted stock activity for the three years ended December 31:



	Number of Shares		Weighted average grant date fair value
Unvested December 31, 2011	629,771		$	3.03
Granted	89,860		2.12
Vested/Released	(229,172	)	2.57
Forfeited	(8,434	)	2.42
Unvested December 31, 2012	482,025		$	3.09
Granted	48,222		2.69
Vested/Released	(169,700	)	2.66
Forfeited	(5,307	)	3.08
Unvested December 31, 2013	355,240		$	3.24
Granted	1,582,000		3.49
Vested/Released	(121,622	)	3.64
Forfeited	(39,528	)	3.44
Unvested December 31, 2014	1,776,090		$	3.43

Director Stock Awards

Shares Reserved and Awards. The 2005 Directors Plan (as amended) reserves 1.5 million shares of Abraxas common stock, subject to adjustment following certain events. The 2005 Directors Plan provides that each year, at the first regular meeting of the board of directors immediately following Abraxas’ annual stockholder’s meeting, each non-employee director shall be granted or issued awards of 12,000 shares of Abraxas common stock, for participation in board and committee meetings during the previous calendar year. In March 2015 the director share awards were increased to 25,000 shares. The maximum annual award for any one person is 100,000 shares of Abraxas common stock or options for common stock. If options, as opposed to shares, are awarded, the exercise price shall be no less than 100% of the fair market value on the date of the award while the option terms and vesting schedules are at the discretion of the committee. In addition to the 12,000 shares or options, between April 2011 and April 2012, directors were compensated for their annual retainer fee of $27,500 in cash. In April 2012 the retainer fee was increased to $40,000 and remained at $40,000 through 2014.

At December 31, 2014, the Company had approximately 7.3 million shares reserved for future issuance for conversion of its stock options, and incentive plans for the Company’s directors, employees and consultants.