STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION

On November 26, 2013 a special meeting of the stockholders was held and a proposal to approve an amendment to Darling's restated certificate of incorporation, as amended, to increase the total number of authorized shares of common stock, par value $0.01, from 150,000,000 to 250,000,000 was approved.

On December 18, 2013, the Company offered and closed on the sale of 46,000,000 shares of its common stock at a price to the public of $19.00 per share, pursuant to an underwriting agreement dated December 12, 2013. The Company used the net proceeds of approximately $840.5 million to pay for a portion of the VION Acquisition, which closed on January 7, 2014.

On May 8, 2012, the shareholders approved the Company's 2012 Omnibus Incentive Plan (the "2012 Omnibus Plan"). The 2012 Omnibus Plan replaced the Company's 2004 Omnibus Incentive Plan (the "2004 Omnibus Plan") for future grants. Under the 2012 Omnibus Plan, the Company is allowed to grant stock options, stock appreciation rights, non-vested and restricted stock (including performance stock), restricted stock units (including performance units), other stock-based awards, non-employee director awards, dividend equivalents and cash-based awards. There are up to 11,066,544 common shares available under the 2012 Omnibus Plan which may be granted to participants in any plan year (as such term is defined in the 2012 Omnibus Plan). Some of those shares are subject to outstanding awards as detailed in the tables below. To the extent these outstanding awards are forfeited or expire without exercise, the shares will be returned to and available for future grants under the 2012 Omnibus Plan. The 2012 Omnibus Plan’s purpose is to attract, retain and motivate employees, directors and third party service providers of the Company and to encourage them to have a financial interest in the Company. The 2012 Omnibus Plan is administered by the Compensation Committee (the "Committee") of the Board of Directors. The Committee has the authority to select plan participants, grant awards, and determine the terms and conditions of such awards as provided in the 2012 Omnibus Plan. The Committee has adopted an executive compensation program that includes a long-term incentive component (the "LTIP") for the Company's key employees, as a subplan under the terms of the 2012 Omnibus Plan. The principal purpose of the LTIP is to encourage the Company's executives to enhance the value of the Company and, hence, the price of the Company’s stock and the stockholders' return. In addition, the LTIP is designed to create retention incentives for the individual and to provide an opportunity for increased equity ownership by executives. The Committee awarded dollar value performance based restricted stock and stock option opportunities under the LTIP in each of fiscal 2014, 2013 and 2012 to certain of the Company's key employees, including the Chief Executive Officer and other executive officers. The restricted stock and stock options underlying the LTIP are issued only if a predetermined financial objective is met by the Company. The Company met the financial objective for fiscal 2013 and fiscal 2012 and those shares and options were issued in accordance with the terms of the LTIP. See "Fiscal 2012 Long-Term Incentive Opportunity Awards" below for a discussion of the fiscal 2014 LTIP award opportunities. The Company’s stock options granted under the 2012 Omnibus Plan generally terminate 10 years after date of grant. At January 3, 2015, the number of common shares available for issuance under the 2012 Omnibus Plan was 8,829,322.

The following is a summary of stock-based compensation granted during the years ended January 3, 2015, December 28, 2013 and December 29, 2012.

Nonqualified Stock Options. On March 6, 2012, the Company's board of directors granted 135,733 nonqualified stock options in the aggregate under the Company's LTIP to certain of the Company's employees. The exercise price for the March 6, 2012 stock options was $16.98 per share (fair market value at the close of the trading day immediately preceding the grant date). All of these awards vest 25 percent upon grant and 25 percent on each of the first three anniversary dates of the grant thereafter. On March 5, 2013, the Company's board of directors granted 195,634 nonqualified stock options in the aggregate under the Company's LTIP to certain of the Company's employees. The exercise price for the March 5, 2013 stock options was $16.53 per share (fair market value at the close of the trading day immediately preceding the grant date). All of these awards vest 25 percent upon grant and 25 percent on each of the first three anniversary dates of the grant thereafter. On March 4, 2014, the Company's board of directors granted 163,078 nonqualified stock options in the aggregate under the Company’s LTIP to certain of the Company’s employees. The exercise price for the March 4, 2014 stock options was $19.94 per share (fair market value at the close of the trading day immediately preceding the grant date). All of these awards vest 25 percent upon grant and 25 percent on each of the first three anniversary dates of the grant thereafter.

Incentive Stock Options. For fiscal 2014, 2013 and 2012 none of the options issued were incentive stock options.

A summary of all stock option activity as of January 3, 2015 and changes during the year ended is presented below.



	Number of shares		Weighted-avg. exercise price per share		Weighted-avg. remaining contractual life
Options outstanding at December 28, 2013	906,251		$	9.97
Granted	163,078		19.94
Exercised	(343,550	)	6.18
Forfeited	(29,603	)	16.89
Expired	—		—
Options outstanding at January 3, 2015	696,176		$	13.88	6.2 years
Options exercisable at January 3, 2015	528,009		$	12.50	5.5 years

The fair value of each stock option grant under the Company's stock option plan was estimated on the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions and results for fiscal 2014, 2013 and 2012.



Weighted Average	2014	2013	2012
Expected dividend yield	0.0%	0.0%	0.0%
Risk-free interest rate	1.77%	1.01%	1.14%
Expected term	5.75 years	5.75 years	5.75 years
Expected volatility	43.7%	59.8%	62.0%
Fair value of options granted	$8.93	$9.04	$9.16

The expected lives for options granted during fiscal 2014, 2013 and 2012 were computed using the simplified method.

At January 3, 2015, $15.9 million of total future equity-based compensation expense (determined using the Black-Scholes option pricing model and Monte Carlo model for non-vested stock grants with performance based incentives) related to outstanding non-vested options and stock awards is expected to be recognized over a weighted average period of 1.8 years.

For the year ended January 3, 2015, the amount of cash received from the exercise of options was approximately $0.4 million and the related tax benefits were approximately $2.4 million. For the year ended December 28, 2013 and December 29, 2012, the amount of cash received from the exercise of options was insignificant and approximately $0.1 million, respectively, and the related tax benefits were approximately $0.7 million and $2.7 million, respectively. The total intrinsic value of options exercised for the years ended January 3, 2015, December 28, 2013 and December 29, 2012 was approximately $4.5 million, $0.2 million and $3.3 million, respectively. The fair value of shares vested for the years ended January 3, 2015, December 28, 2013 and December 29, 2012 was approximately $19.6 million, $8.2 million and $8.1 million, respectively. At January 3, 2015, the aggregate intrinsic value of options outstanding was approximately $3.3 million and the aggregate intrinsic value of options exercisable was approximately $3.1 million.

Non-Vested Stock, Restricted Stock Unit and Performance Share Unit Awards. On March 6, 2012, the Company's board of directors granted 375,041 shares of stock under the 2004 Omnibus Plan, 300,041 shares of which were under the Company's LTIP and 75,000 shares of which were granted as discretionary grants to other employees not part of the Company's LTIP. At the March 6, 2012 grant date 93,761 shares vested immediately and the remaining stock awards vest over the next three anniversary dates of the grants in equal installments. On May 8, 2012, the Company's board of directors granted 5,000 shares of stock under the 2004 Omnibus Plan to a newly employed officer of the Company. At the May 8, 2012 grant date 1,250 shares vested immediately and the remaining shares vest over the next three anniversary dates of the grant in equal installments. On September 1, 2012, the Company's board of directors granted 50,000 shares of stock under the 2012 Omnibus Plan to the Company's new Chief Financial Officer. At the September 1, 2012 grant date 25,000 shares vested immediately and the remaining shares vest over the next three anniversary dates of the grant in equal installments. On March 5, 2013, the Company's board of directors granted 495,575 shares of stock under the 2012 Omnibus Plan, 449,575 shares of which were under the Company's LTIP and 46,000 shares of which were granted as a discretionary grants to other employees not part of the Company's LTIP. At the March 5, 2013 grant date 123,894 shares vested immediately and the remaining stock awards vest over the next three anniversary dates of the grants in equal installments. On August 5, 2013 the Company's board of directors granted 24,000 shares to one of the Company's officers. At the August 5, 2013 grant date 8,000 shares vested immediately and the remaining shares vest over the next two anniversary dates of the grant in equal installments provided that certain performance measures are achieved. On March 4, 2014, the Company's board of directors granted 424,158 shares of stock under the 2012 Omnibus Plan, 377,658 shares of which were under the Company's LTIP and 46,500 shares of which were granted as a discretionary grants to other employees not part of the Company's LTIP. At the March 4, 2014 grant date 106,042 shares vested immediately and the remaining stock awards vest over the next three anniversary dates of the grants in equal installments. On May 6, 2014, the Company's board of directors granted 3,000 shares of stock under the 2012 Omnibus Plan to a newly employed officer of the Company. At the May 6, 2014 grant date 750 shares vested immediately and the remaining shares vest over the next three anniversary dates of the grant in equal installments. On June 4, 2014, the Company's board of directors granted 7,500 shares of stock under the 2012 Omnibus Plan to a newly hired key employee of the Company. At the June 4, 2014 grant date 1,875 shares vested immediately and the remaining shares vest over the next three anniversary dates of the grant in equal installments. On September 8, 2014, the Company's board of directors granted 4,000 shares of stock under the 2012 Omnibus Plan to a key employee of the Company. At the September 8, 2014 grant date 1,000 shares vested immediately and the remaining shares vest over the next three anniversary dates of the grant in equal installments.

On June 3, 2014, the Company granted 5,500 non-vested restricted stock units under the Company's 2012 Omnibus Plan to key foreign-based employees of the Company with each restricted stock unit equivalent to one share of common stock. At the June 3, 2014 grant date, 1,375 of the restricted stock units vested immediately and stock was issued, with the remaining restricted stock units vesting over the next three years in equal installments on March 4 of fiscal years 2015, 2016 and 2017, respectively. On June 19, 2014, the Company granted 17,500 non-vested restricted stock units under the Company's 2012 Omnibus Plan to key foreign-based employees of the Company, with each restricted stock unit equivalent to one share of common stock. At the June 19, 2014 grant date, 4,375 of the restricted stock units vested immediately and stock was issued, with the remaining restricted stock units vesting over the next three years in equal installments on March 4 of 2015, 2016 and 2017, respectively.

In connection with the closing of the VION Acquisition, in January 2014, the Company made awards of Performance Share Units (PSUs) and common stock under the Company’s 2012 Omnibus Incentive Plan to certain of the Company’s executives selected by the Committee. The awards covered an aggregate of 975,000 shares of the Company’s common stock. For North American-based executives, each award was in the form of PSUs for a specified number of shares of common stock of the Company. For European-based executives, each award was in the form of a combination of fully vested shares (representing 25% of the total award given to the European-based executives), and PSUs for a specified number of shares common stock of the Company (representing the other 75% of the award). On January 7, 2014, the Company issued 118,750 fully vested shares that were granted to the European-based executives. Performance Units will vest in three equal installments on the first, second and third anniversaries of the closing of the VION Acquisition based on attainment of specified levels of adjusted EBITDA for the Company and/or Darling Ingredients International for fiscal years 2014, 2015 and 2016, respectively. If the target level of adjusted EBITDA for the fiscal year for both the Company and/or Darling Ingredients International is not achieved (subject to a near miss provision contained in the award agreements that provides for a portion of the shares to be paid out under certain circumstances), the installment for the related vesting date will be forfeited. Generally, an award recipient must remain employed with the Company and its subsidiaries through each vesting date to become vested in the award on that vesting date, subject to the performance requirements described above. If an award recipient terminates employment before a vesting date for any reason other than death or disability, any unvested portion of the award will be forfeited. In case of termination of employment due to death or disability, a prorated portion (based upon the award recipient’s actual period of service prior to the vesting date) of the award will vest on each vesting date based on actual performance results.

On November 11, 2010, the Committee approved a 2010 Special Incentive Program (the "2010 Special Incentive Program") for certain key employees of the Company pursuant to the Company's 2004 Omnibus Plan, conditioned upon the closing of the Griffin merger. Under the 2010 Special Incentive Program, certain key employees (the "Participating Employees") upon successful completion of the Griffin merger became eligible to receive a total of 640,000. As of January 3, 2015 all shares granted have been issued except for 6,667 shares that have been forfeited.

A summary of the Company’s non-vested stock, restricted stock unit and performance share unit awards as of January 3, 2015, and changes during the year ended is as follows:



	Non-Vested Shares		Weighted Average Grant Date Fair Value
Stock awards outstanding December 28, 2013	821,207		$	14.93
Shares granted	1,436,658		20.73
Shares vested	(861,772	)	16.43
Shares forfeited	(138,920	)	19.90
Stock awards outstanding January 3, 2015	1,257,173		$	19.98

Nonemployee Director Restricted Stock and Restricted Stock Unit Awards. On February 24, 2011, the Company's Board of Directors approved an Amended and Restated Non-Employee Director Restricted Stock Award Plan (the "Director Restricted Stock Plan") pursuant to and in accordance with the 2004 Omnibus Plan in order to attract and retain highly qualified persons to serve as non-employee directors and to more closely align such directors' interests with the interests of the stockholders of the Company by providing a portion of their compensation in the form of Company common stock. Under the Director Restricted Stock Plan, $60,000 in restricted Company common stock was awarded to each non-employee director on the fourth business day after the Company released its earnings for its prior completed fiscal year (the "Date of Award"). The amount of restricted stock to be issued was calculated using the closing price of the Company’s common stock on the third business day after the Company released its earnings. The restricted stock was subject to a right of repurchase at $0.01 per share upon termination of the holder as a member of the Company's board of directors for cause and was not transferable. These restrictions lapse with respect to 100% of the restricted stock upon the earliest to occur of (i) ten years after the date of award, (ii) a Change of Control (as defined in the 2004 Omnibus Plan), and (iii) termination of the non-employee director's service with the Company, other than for "cause" (as defined in the Director Restricted Stock Plan). On March 5, 2013, the Company issued 21,780 shares of restricted stock in the aggregate to its non-employee directors under the Director Restricted Stock Plan. On March 6, 2012, the Company issued 21,204 shares of restricted stock in the aggregate to its non-employee directors under the Director Restricted Stock Plan.

Beginning in fiscal 2014, the Board discontinued grants to non-employee directors under the Director Restricted Stock Plan described above, and in lieu thereof, as an additional element of annual non-employee director compensation, pursuant to the 2012 Omnibus Plan, each non-employee director now receives $90,000 of restricted stock units immediately following the Company’s annual meeting of stockholders at which such directors are elected. The number of restricted stock units to be issued is calculated using the closing price of the Company’s stock on the date of its annual meeting. The award vests (and is no longer subject to forfeiture) on the first to occur of (i) the first anniversary of the grant date, (ii) the date of the annual shareholders meeting next following the grant date, (iii) the grantee’s separation from service as a result of death or disability, or (iv) a change of control. The award will become "payable" in shares of the Company’s stock in a single lump sum payment as soon as possible following a grantee’s separation from service, subject to a grantee’s right to elect a deferral under certain circumstances. If a grantee ceases to be a director for any reason other than death or disability prior to vesting, the grantee will receive a prorated amount of the award up to the date of separation. Accordingly, under this program, on May 6, 2014 the Company granted 22,680 restricted stock units in the aggregate to its non-employee directors, and on September 25, 2014 the Company issued 2,998 restricted stock units, representing a prorated amount of the annual grant, to a newly appointed director.

A summary of the Company’s non-employee director restricted stock awards as of January 3, 2015, and changes during the year ended is as follows:



	Restricted Shares	Weighted Average Grant Date Fair Value
Stock awards outstanding December 28, 2013	130,238	$	10.75
Restricted shares granted	25,678	19.67
Restricted shares where the restriction lapsed	—	—
Restricted shares forfeited	—	—
Stock awards outstanding January 3, 2015	155,916	$	12.22

Fiscal 2014 Long-Term Incentive Opportunity Awards. The Committee awarded dollar value performance based restricted stock and stock option opportunities under the LTIP for fiscal 2014 to certain of the Company's key employees, including the Chief Executive Officer, the Chief Operating Officer and certain of its Executive Vice Presidents (the "2014 Restricted Stock and Option Awards"). The restricted stock and stock options underlying the 2014 Restricted Stock and Option Awards are issued only if a predetermined financial objective is met by the Company. The Company met the financial objective for fiscal 2014. Accordingly, in accordance with the terms of the 2014 Restricted Stock and Option Awards, it is anticipated that the earned amount of restricted stock and stock options will be granted and issued to the recipients on the fourth business day after the Company releases its annual financial results for fiscal 2014. The amount of restricted stock and stock options to be issued to the Company's senior management was predetermined using a discounted per share price. The "Discounted Per Share Price" is derived by discounting the closing market price of the Company's common stock as of the last trading day of the immediately preceding fiscal year to account for forfeiture of the restricted stock based on, among other things, the probability of the failure of the restricted stock to be granted and the failure of the Company to meet the required performance measures. The stock options will have an exercise price equal to the fair market value of the Company's common stock on the third business day after the Company releases its annual financial results.

The above 2014 Restricted Stock and Option Awards were deemed equity classified in fiscal 2014 as the shares are known, but have not yet been granted. In addition, a portion of the fiscal 2014 LTIP stock awards are treated as a liability until the grant date when the number of shares to be issued is known, and then it becomes equity classified. At January 3, 2015, the Company recorded a liability of approximately $0.4 million on the balance sheet for the long-term incentive opportunities.