Stock-Based Compensation

12 Months Ended

Dec. 31, 2016

On May 26, 2016, the Company's stockholders approved the adoption of the Company's 2016 Equity Incentive Award Plan ("2016 Plan"). The 2016 Plan provides equity-based compensation through the grant of cash-based awards, nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other stock-based awards. The 2016 Plan replaces the Company's 2007 Incentive Stock Plan ("2007 Plan"), and no further awards will be granted under the 2007 Plan. The 2016 Plan allows for issuance of up to 1,626,855 shares of common stock. No shares have been issued under the 2016 Plan as of December 31, 2016.

Restricted Stock

Restricted stock grants made to employees are in lieu of a long-term incentive plan component in the Company's bonus plan for those individuals who receive shares of restricted stock. Compensation expense is measured based on the fair value of the stock-based awards on the grant date, as measured by the NASDAQ closing price for the Company's common stock. Compensation expense is recognized in the consolidated statements of operations on a straight-line basis over the requisite service period, which is the vesting period. Restricted stock grants made to employees and service providers vest in approximately equal annual installments over a three-year period from the grant date. Restricted stock grants to the Company's non-employee directors vest one year from the grant date. The Company allows certain grantees to forego the issuance of shares to meet applicable income tax withholding due as a result of the vesting of restricted stock. Such shares are returned to the unissued shares of the Company's common stock.

Restricted stock activity was as follows for the year end December 31, 2016:



	Employees and
(shares)	Service Providers		Directors	Total
Balance, January 1, 2016	575,131		825,275	1,400,406
Granted	60,670		12,272	72,942
Forfeited	(8,883	)	—	(8,883	)
Reduced for income tax obligations	(16,320	)	—	(16,320	)
Balance, December 31, 2016	610,598		837,547	1,448,145

Vested at December 31, 2016	533,874		825,275	1,359,149
Non-vested at December 31, 2016	76,724		12,272	88,996

The Company recognized compensation expense related to restricted shares of $1.5 million, $3.4 million and $5.1 million for the years ended December 31, 2016, 2015 and 2014, respectively. Unearned compensation expense related to restricted shares at December 31, 2016 is $1.0 million, which is net of an estimated 5% forfeiture rate for employees and service providers. This amount will be recognized over the remaining vesting period of the restricted shares.

Stock Options

In July 2007, stock options were granted to certain employees and directors under the 2007 Plan. The 2007 Plan permitted options to be granted up to a maximum contractual term of 10 years. The Company recorded no compensation expense related to its stock options in 2016, 2015 or 2014 since the options were fully vested, and no options were exercised during those periods. As of December 31, 2015, 13,000 stock options to purchase HNH shares at an exercise price of $90.00 per share were outstanding under the 2007 Plan. No stock options remain outstanding at December 31, 2016.