SHARE-BASED COMPENSATION

The Company has a stock incentive plan for directors, employees and consultants that is administered by the Compensation Committee of the Board of Directors. The Company’s shares authorized for issuance pursuant to the stock incentive plan include 5,000,000 (December 31, 2016: 3,500,000) Class A ordinary shares. On April 26, 2017, the Company’s shareholders approved an amendment to the stock incentive plan to increase the number of Class A ordinary shares available for issuance. As of September 30, 2017, 1,281,946 (December 31, 2016: 424,787) Class A ordinary shares remained available for future issuance under the Company’s stock incentive plan.

Employee and Director Restricted Shares

As part of its stock incentive plan, the Company issues restricted shares for which the fair value is equal to the price of the Company’s Class A ordinary shares on the grant date. Compensation based on the grant date fair market value of the shares is expensed on a straight line basis over the applicable vesting period, net of any estimated forfeitures.

For the nine months ended September 30, 2017, 113,955 (2016: 153,648) restricted Class A ordinary shares were issued to employees pursuant to the Company’s stock incentive plan. These shares contain certain restrictions relating to, among other things, vesting, forfeiture in the event of termination of employment and transferability. Each of these restricted shares cliff vest after three years from the date of issuance, subject to the grantee’s continued service with the Company. During the vesting period, the holder of the restricted shares retains voting rights and is entitled to any dividends declared by the Company.

For the nine months ended September 30, 2017, the Company also issued to non-employee directors an aggregate of 41,396 (2016: 39,288) restricted Class A ordinary shares as part of their remuneration for services to the Company. Each of these restricted shares issued to non-employee directors contains similar restrictions to those issued to employees and will vest on the earlier of the first anniversary of the date of the share issuance or the Company’s next annual general meeting, subject to the grantee’s continued service with the Company.

For the nine months ended September 30, 2017, 46,319 (2016: 11,897) restricted shares were forfeited. The restricted shares forfeited during the nine months ended September 30, 2017 related to the Company’s former Chief Executive Officer (the “former CEO”) who resigned from the Company prior to the expiration of the applicable vesting periods. For the nine months ended September 30, 2017, no stock compensation expense was reversed (2016: $0.05 million) since the stock compensation relating to the former CEO’s restricted shares was previously reversed during the fourth quarter of 2016, when it was deemed likely that these restricted shares would be forfeited.

The following table summarizes the activity for unvested outstanding restricted share awards during the nine months ended September 30, 2017:



	Number of non-vested restricted shares		Weighted average grant date fair value
Balance at December 31, 2016	365,432		$	26.76
Granted	155,351		21.58
Vested	(142,330	)	29.54
Forfeited	(46,319	)	24.61
Balance at September 30, 2017	332,134		$	23.45

Employee and Director Stock Options

On July 6, 2017, 480,000 Class A ordinary share purchase options were granted to the Company’s new Chief Executive Officer, pursuant to his employment contract. These options vest 16.7% each on the anniversary thereof in 2018, 2019, 2020, 2021, 2022 and 2023, and expire 10 years after the grant date. The grant date fair value of these options was $9.60 per share, based on the Black-Scholes option pricing model.

On August 1, 2017, 19,500 Class A ordinary share purchase options were granted to the Company’s former interim Chief Executive Officer, pursuant to his consulting agreement. These options vested 100% on the date of the grant. The grant date fair value of these options was $9.65 per share based on the Black-Scholes option pricing model.

For the nine months ended September 30, 2016, 57,386 Class A ordinary share purchase options were granted to the Company’s former CEO, pursuant to his employment contract. These options expire 10 years after the grant date and vested in full upon his departure on March 31, 2017. The grant date fair value of these options was $8.71 per share, based on the Black-Scholes option pricing model.

The estimate of expected volatility for options granted during 2016 and 2017 was based on the daily historical trading data of the Company’s Class A ordinary shares from the date that these shares commenced trading on May 24, 2007 to the grant date.

The Company uses the Black-Scholes option pricing model to determine the valuation of its options and has applied the assumptions set forth in the following table.



	2017		2016
Risk free rate	2.32	%	1.54	%
Estimated volatility	31	%	32	%
Expected term (in years)	10		10
Dividend yield	0.0	%	0.0	%
Forfeiture rate	0.0	%	0.0	%

For the nine months ended September 30, 2017, 50,000 (2016: 400,000) stock options were exercised by directors or employees resulting in 5,011 (2016: 148,802) Class A ordinary shares issued, net of shares surrendered as a result of the cashless exercise of stock options. When stock options are granted, the Company reduces the corresponding number from the shares authorized for issuance as part of the Company’s stock incentive plan.

For the nine months ended September 30, 2017, 71,335 stock options vested, relating to the resignation of the Company’s former CEO, which had a weighted average grant date fair value of $10.51 per share, pursuant to a deed of settlement and release. At September 30, 2017, there was no remaining compensation cost to be recognized in future periods relating to the former CEO’s stock options as the expense was recognized in full as of December 31, 2016 when it was deemed likely that the stock options would vest.

Employee and director stock option activity during the nine months ended September 30, 2017 was as follows:



	Number of options		Weighted average exercise price		Weighted average grant date fair value		Intrinsic value ($ in millions)		Weighted average remaining contractual term
Balance at December 31, 2016	543,377		$	25.40	$	10.17	$	0.5	4.7 years
Granted	522,250		21.25		9.63
Exercised	(50,000	)	19.60		10.18		0.1
Balance at September 30, 2017	1,015,627		$	23.55	$	9.89	$	0.4	7.1 years

Employee Restricted Stock Units

The Company issues restricted stock units (“RSUs”) to certain employees as part of the stock incentive plan. The grant date fair value of the RSUs is equal to the price of the Company’s Class A ordinary shares on the grant date. Compensation cost based on the grant date fair market value of the RSUs is expensed on a straight line basis over the vesting period.

For the nine months ended September 30, 2017, 11,559 (2016: 7,444) RSUs were issued to employees pursuant to the Company’s stock incentive plan. These shares contain certain restrictions relating to, among other things, vesting, forfeiture in the event of termination of employment and transferability. Each of these RSUs cliff vest after three years from the date of issuance, subject to the grantee’s continued service with the Company. On the vesting date, the Company converts each RSU into one Class A ordinary share and issues new Class A ordinary shares from the shares authorized for issuance as part of the Company’s stock incentive plan.

For the nine months ended September 30, 2017, no (2016: 11,881) RSUs were forfeited by employees, resulting in no reversal (2016: $0.2 million) of stock compensation expense.

Employee RSU activity during the nine months ended September 30, 2017 was as follows:



	Number of non-vested RSUs		Weighted average grant date fair value
Balance at December 31, 2016	15,934		$	27.52
Granted	11,559		21.65
Vested	(4,695	)	32.60
Balance at September 30, 2017	22,798		$	23.50

For the nine months ended September 30, 2017 and 2016, the general and administrative expenses included stock compensation expense (net of forfeitures) of $3.3 million and $3.1 million, respectively, for the expensing of the fair value of stock options, restricted stock and RSUs granted to employees and directors, net of forfeitures.