Stock-Based Compensation

In May of 2010, the Company adopted the WEX Inc. 2010 Equity Incentive Plan (the “Plan”). This Plan replaced the Company’s 2005 Equity and Incentive Plan. The Plan, which is stockholder-approved, permits the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based or cash-based awards to non-employee directors, officers, employees, advisors or consultants for up to 3,800 shares of common stock. The Company believes that such awards increase efforts on behalf of the Company and promote the success of the Company’s business. On December 31, 2014, the Company had four stock-based compensation programs, which are described below. The compensation cost that has been charged against income for these programs totals $13,790 for 2014, $9,429 for 2013, and $11,016 for 2012.

Restricted Stock Units

The Company awards restricted stock units (“RSU”) to non-employee directors and certain employees periodically under the Plan. An RSU is a right granted to receive stock at the end of a specified period. RSU awards generally vest evenly over a period of three or four years. The awards provide for accelerated vesting if there is a change of control (as defined in the Plan). The fair value of each RSU award is based on the closing market price of the Company’s stock on the day of grant as reported by the New York Stock Exchange (“NYSE”).

A summary of the status of the Company’s RSUs as of December 31, 2014, and changes during the year then ended is presented below:



	Units		Weighted- Average per share Grant- Date Fair Value
Restricted Stock Units
Balance at January 1, 2014	177		$	67.28
Granted	85		$	86.59
Vested – shares issued	(82	)	$	67.58
Vested – shares deferred ^(a)	(1	)	$	90.75
Forfeited	(27	)	$	76.86
Withheld for taxes^(b)	(47	)	$	64.85
Balance at December 31, 2014	105		$	82.45


^(a)	The Company issued fully vested and non-forfeitable restricted stock units to certain non-employee directors and certain employees that are payable in shares of the Company’s common stock at a later date as specified by the award (deferred stock units or “DSUs”).


^(b)	The Company has elected to pay cash equal to the minimum amount required to be withheld for income tax purposes instead of issuing the shares of common stock. The cash is remitted to the appropriate taxing authority.

As of December 31, 2014, there was $4,068 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted as RSUs. That cost is expected to be recognized over a weighted-average period of 1.2 years. The total grant-date fair value of shares granted was $7,376 during 2014, $9,757 during 2013, and $7,830 during 2012. The total fair value of shares vested was $8,545 during 2014, $5,259 during 2013, and $6,347 during 2012.

Deferred Stock Units

Under the Plan, the Company also grants deferred stock units (“DSU”) to non-employee directors. A DSU is a fully vested right to receive stock at a certain point in time in the future. DSUs do not require any future service or performance obligations to be met. DSUs may be granted immediately or may initially be granted as RSUs which become DSUs once a previously determined service obligation has been met. The fair value of each granted DSU award is based on the closing market price of the Company’s stock on the grant date as reported by the NYSE.

A summary of the status of the Company’s DSUs as of December 31, 2014, and changes during the year is presented below:



	Units	Weighted- Average per share Grant-Date Fair Value
Deferred Stock Units
Balance at January 1, 2014	93	$	26.35
Awards	1	$	99.64
Converted from RSUs	1	$	90.75
Balance at December 31, 2014	95	$	27.79

There is no unrecognized compensation cost related to awards granted as, or converted to, DSUs. The Company has determined that the award was earned when granted and it is expensed at that time. The total fair value of shares granted and vested was $189 during 2014, $137 during 2013, and $150 during 2012.

Performance Based Restricted Stock Units

The Company also awards performance based restricted stock units (“PBRSUs”) to employees periodically under the Plan. A PBRSU is a right granted to receive stock at the end of a specified period. In a PBRSU, the number of shares earned varies based upon meeting certain performance goals, including revenue and earnings in excess of targets. PBRSU awards generally have performance goals tracking a one to four year period, depending on the nature of the performance goal. The fair value of each PBRSU award is based on the closing market price of the Company’s stock on the grant date as reported by the NYSE.

A summary of the status of certain of the Company’s PBRSUs at threshold and target performance as of December 31, 2014, and changes during the year then ended is presented below:



	Units at Threshold		Units at Target		Units at Maximum		Weighted- Average per share Grant-Date Fair Value
Performance Based Restricted Stock Units
Balance at January 1, 2014	16		67		131		$	77.94
Granted	64		209		402		$	92.21
Forfeited	(6	)	(25	)	(50	)	$	89.80
Canceled / Converted to RSUs	(16	)	(65	)	(128	)	$	78.45
Balance at December 31, 2014	58		186		355		$	92.39

The range of unrecognized compensation cost related to the PBRSU awards is from $3,886 at threshold (below targeted performance), $11,058 at target and up to $20,910 at maximum (above targeted performance), as of December 31, 2014, depending on whether certain performance conditions are met. That cost is expected to be recognized over a weighted-average period of 1.9 years The total grant-date fair value of shares granted at target was $19,239 during 2014, $5,356 during 2013, and $4,308 during 2012. The total grant-date fair value of shares converted to RSUs and subsequently vested was $2,474 during 2014, $9,075 during 2013, and $1,382 during 2012.

Stock Options

The fair value of each option award is estimated on the grant date using the following assumptions and a Black-Scholes-Merton option-pricing model. The expected term assumption as it relates to the valuation of the options represents the period of time that options granted are expected to be outstanding. The Company also estimates expected volatilities that are based on implied volatilities from traded options on the Company’s stock, historical volatility of the Company’s stock, and other factors. The option-pricing model includes a risk-free interest rate for the period matching the expected term of the option and is based on the U.S. Treasury yield curve in effect at the time of the grant. The dividend yield used in the option-pricing model is the calculated yield on the Company’s stock at the time of the grant.

The stock options granted under the plan related to the Company’s employees consisted of:



	Shares		Weighted- Average per share Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Stock Options
Outstanding at January 1, 2014	49		$	13.59
Granted	—		—
Exercised	(18	)	$	13.58
Forfeited or expired	—		—
Outstanding at December 31, 2014	31		$	13.59	2.17	$	2,651
Exercisable on December 31, 2014	31		$	13.59	2.17	$	2,651
Vested and expected to vest at December 31, 2014	31		$	13.59	2.17	$	2,651

The total intrinsic value of options exercised during the years ended December 31, 2014, 2013 and 2012 was $1,543, $3,632 and $10,555, respectively. No options have been granted since March of 2010.