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Stock Option and Purchase Plans

The Company’s stock compensation program provides for the grant of restricted stock (including performance-based restricted stock), unrestricted stock, stock options and stock appreciation rights. A total of 3,655,088 shares of common stock were registered for issuance under the 2010 Omnibus Plan. On May 19, 2015, the 2010 Sypris Omnibus Plan was replaced with the 2015 Sypris Omnibus Plan. A total of 3,476,021 shares were registered for issuance under the 2015 Omnibus Plan. Additionally, awards under the 2010 Omnibus Plan that are cancelled without having been fully exercised or vested are available again for new awards under the 2015 Omnibus Plan. The aggregate number of shares available for future grant as of December 31, 2015 and 2014 was 3,476,021 and 1,052,021, respectively.

The 2010 Omnibus Plan provides for restrictions which lapse after three years. During the restricted period, which is commensurate with each vesting period, the recipient has the right to receive dividends and voting rights for the shares. Generally, if a recipient leaves the Company before the end of the restricted period or if performance requirements, if any, are not met, the shares will be forfeited. During 2015, the Company modified the restriction on certain restricted stock grants to increase the restriction period by one year. The modification did not have a material effect on the financial statements.

The Company has certain stock compensation plans under which options to purchase common stock may be granted to officers, key employees and non-employee directors. Options may be granted at not less than the market price on the date of grant. Stock option grants under the 2010 Omnibus Plan include a five year life along with vesting after three years of service.

Compensation expense is measured based on the fair value at the date of grant and is recognized on a straight-line basis over the vesting period. Fair value for restricted shares is equal to the stock price on the date of grant, while the fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing method. The Company uses historical Company and industry data to estimate the expected price volatility, the expected option life, the expected forfeiture rate and the expected dividend yield. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option.

The following weighted average assumptions were used to estimate the fair value of options granted using the Black-Scholes option-pricing model:

	Year ended December 31,
	2015			2014
Expected life (years)		4.0			4.0
Expected volatility		50.2	%		53.3	%
Risk-free interest rates		1.32	%		1.73	%
Expected dividend yield		0.0	%		2.67	%

A summary of the restricted stock activity is as follows:

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Nonvested shares at January 1, 2015		888,901		$	3.60
Granted		287,500			2.05
Vested		(86,701	)		3.60
Forfeited		(15,000	)		2.75
Nonvested shares at December 31, 2015		1,074,700		$	3.19

The total fair value of shares vested during 2015 and 2014 was $230,000 and $773,000, respectively. In conjunction with the vesting of restricted shares and payment of taxes thereon, the Company received into treasury 28,999 and 98,251 restricted shares, respectively, at an average price of $2.65 and $2.81 per share, respectively, the closing market price on the date the restricted stock vested. Such repurchased shares were immediately cancelled.

The following table summarizes option activity for the year ended December 31, 2015:

	Number of Shares			Weighted- average Exercise Price Per Share		Weighted- average Remaining Term		Aggregate Intrinsic Value
Outstanding at January 1, 2015		1,056,000		$	3.72
Granted		260,500			2.05
Exercised		0			0
Forfeited		(62,000	)		3.09
Expired		(32,500	)		4.27
Outstanding at December 31, 2015		1,222,000		$	3.38		2.33	$	0
Exercisable at December 31, 2015		473,500		$	4.09		0.79	$	0

The weighted average grant date fair value based on the Black-Scholes option pricing model for options granted in the years ended December 31, 2015 and 2014 was $0.82 and $0.99 per share, respectively. There were no options exercised in 2015 and 201,589 options exercised in 2014. The total intrinsic value of options exercised was $417,000 during the year ended December 31, 2014.

As of December 31, 2015, there was $1,037,000 of total unrecognized compensation cost, after estimated forfeitures, related to unvested share-based compensation granted under the plans. That cost is expected to be recognized over a weighted-average period of 0.9 years. The total fair value of option shares vested during the years ended December 31, 2015 and 2014 was not material.