Note 12—Stock-Based Compensation

On January 8, 2018, the Company engaged Hunt through the execution of a management agreement with the External Manager (the “Management Agreement”) to externally manage the Company’s operations. All employees of the Company were hired by the External Manager. The Company has stock-based compensation plans (“Plans”) for Non-employee Directors (“Non-employee Directors’ Stock-Based Compensation Plans”) and stock-based incentive compensation plans (“Employees’ Stock-Based Compensation Plans”).

The following table provides information related to total compensation expense that was recorded for these Plans:


	For the three months ended
	March 31,
(in thousands)	2019		2018
Employees’ Stock-Based Compensation Plans	$	─	$	1,192
Non-employee Directors’ Stock-Based Compensation Plans		164		164
Total	$	164	$	1,356

Employees’ Stock-Based Compensation Plans

At March 31, 2019, there were 571,066 share awards available to be issued under Employees’ Stock-Based Compensation Plans. While each existing Employees’ Stock-Based Compensation Plan has been approved by the Company’s Board of Directors, not all of the Plans have been approved by the Company’s shareholders. The Plans that have not been approved by the Company’s shareholders are currently restricted to the issuance of only stock options. As a result, of the 571,066 shares available under the plans, 73,556 are available to be issued in the form of either stock options or shares, while the remaining 497,510 shares available for issuance must be issued in the form of stock options.

Employee Common Stock Options;

The Company measures the fair value of unvested options with time-based vesting and all vested options (both time-based and performance based) using a lattice model for purposes of recognizing compensation expense. Because options granted with stock price targets contain a “market condition” under FASB’s Accounting Standards Codification Topic 718, a Monte Carlo simulation is used to simulate future stock price movements for the Company.

The following table provides information related to option activity under the Employees’ Stock-Based Compensation Plans:

Weighted-average

Remaining

Weighted-average

Contractual

Aggregate

Number of

Exercise Price

Life per option

Intrinsic

Period End

(in thousands, except per option data)

Options

per Option

(in years)

Value (1)

Liability (2)

Outstanding at January 1, 2018

410

1.56

3.4

9,322

9,342

Exercised in 2018 (3)

(410)

1.56

Outstanding at December 31, 2018 and March 31, 2019

─

⁽¹⁾

Intrinsic value is based on outstanding options.

⁽²⁾

Only options that were amortized based on a vesting schedule have a liability balance. There were 410,000 options at January 1, 2018, that fit this profile.

⁽³⁾

When exercised, stock options were net share settled. For the year ended December 31, 2018, 410,000 stock options were exercised, which resulted in a $9.3 million reduction to the Company’s reported “Other liabilities” within its Consolidated Balance Sheets at December 31, 2018. Of the 410,000 stock options that were exercised, the Company issued 220,279 common shares for the year ended December 31, 2018, and 189,721 stock options were tendered to the Company by their holders for the payment of related withholding taxes and exercise price.

Non-Employee Directors’ Stock-Based Compensation Plans

The Non-employee Directors’ Stock-based Compensation Plans authorize a total of 1,130,000 shares for issuance, of which 390,956 were available to be issued at March 31, 2019. The Non-employee Directors’ Stock-based Compensation Plans provide for grants of non-qualified common stock options, common shares, restricted shares and deferred shares.

The Non-employee Directors’ Stock-based Compensation Plans provide for directors to be paid $120,000 per year for their services. In addition, the Chairman receives an additional $20,000 per year, the Audit Committee Chair receives an additional $15,000 per year and the other committee chairs receive an additional $10,000 per year. Under this plan, 50% of such compensation is paid in cash and the remaining sum through common share-based grants.

The table below summarizes non-employee director compensation, including cash, vested options and common and deferred shares, for services rendered for the three months ended March 31, 2019 and March 31, 2018. The directors are fully vested in the deferred shares at the grant date.

Common

Deferred

Weighted-average

Grant Date

Options

Directors' Fees

Cash

Granted

Share Price

Vested

Expense

March 31, 2019

81,875

560

2,060

31.26

─

163,750

March 31, 2018

81,875

─

2,981

27.47

─

163,750