(11) Stock–Based Compensation Plan

2019 Incentive Plan

In June 2019, the Company’s stockholders approved the CAI International, Inc. 2019 Incentive Plan (2019 Plan), which replaces the CAI International, Inc. Amended and Restated 2007 Equity Incentive Plan (2007 Plan). No further awards will be made under the 2007 Plan. Under the 2019 Plan, a maximum of 2,577,075 share awards may be granted. Under the 2019 Plan, the Company may grant incentive and nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance awards and other stock or cash-based awards.

Stock Options

Stock options granted to employees have a vesting period of four years from the grant date, with 25% vesting after one year, and 1/48th vesting each month thereafter until fully vested. Stock options granted to independent directors vest in one year. All of the stock options have a contractual term of ten years.

The following table summarizes the Company’s stock option activities for the nine months ended September 30, 2019 and 2018:



		Nine Months Ended September 30,
	2019				2018
			Weighted				Weighted
			Average				Average
	Number of		Exercise		Number of		Exercise
	Shares		Price		Shares		Price
Options outstanding at January 1		850,167	$	16.46		859,560	$	16.44
Options exercised		(138,723)	$	13.95		(9,393)	$	14.76
Options forfeited		(3,000)	$	12.88		-	$	-
Options expired		(15,000)	$	25.53		-	$	-
Options outstanding at September 30		693,444	$	16.78		850,167	$	16.46
Options exercisable		591,842	$	17.42		625,263	$	17.54
Weighted average remaining term		5.7 years				6.0 years

The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2019 and 2018 was $1.4 million and $0.1 million, respectively. The aggregate intrinsic value of all options outstanding as of September 30, 2019 was $3.7 million based on the closing price of the Company’s common stock of $21.77 per share on September 30, 2019, the last trading day of the quarter.

The Company recognized stock-based compensation expense relating to stock options of $0.2 million for both the three months ended September 30, 2019 and 2018, and $0.6 million and $1.0 million for the nine months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, the remaining unamortized stock-based compensation cost relating to stock options granted to the Company’s employees and independent directors was approximately $0.7 million, which is to be recognized over the remaining weighted average vesting period of approximately 1.1 years.

The Company did not grant any stock options during the nine months ended September 30, 2019 and 2018.

Restricted Stock and Performance Stock

The Company grants restricted stock units and restricted stock awards from time to time to certain employees and independent directors pursuant to the 2019 Plan. Restricted stock granted to employees has a vesting period of four years; 25% vesting on each anniversary of the grant date. Restricted stock granted to independent directors vests in one year. The Company recognizes the compensation cost associated with restricted stock over the vesting period based on the closing price of the Company’s common stock on the date of grant.

The Company grants performance stock to certain executives and other key employees. The performance stock vests at the end of a 3-year performance cycle if certain financial performance targets are met. The Company recognizes compensation cost associated with the performance stock ratably over the 3-year term when it is considered probable that performance targets will be met. Compensation cost is based on the closing price of the Company’s common stock on the date of grant.

The following table summarizes the activity of restricted stock and performance stock under the 2019 Plan:



		Weighted
		Average
	Number of	Grant Date
	Shares	Fair Value
Outstanding at December 31, 2018	204,730	$	20.45
Granted	166,939	$	25.37
Vested	(81,259)	$	20.89
Forfeited	(8,674)	$	22.42
Outstanding at September 30, 2019	281,736	$	23.18

The Company recognized stock-based compensation expense relating to restricted stock and performance stock awards of $0.7 million and $0.5 million for the three months ended September 30, 2019 and 2018, respectively, and $1.8 million and $1.1 million for the nine months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, unamortized stock-based compensation expense relating to restricted stock and performance stock was $4.8 million, which will be recognized over the remaining average vesting period of 2.2 years.

Stock-based compensation expense is recorded as a component of administrative expenses in the Company’s consolidated statements of operations with a corresponding credit to additional paid-in capital in the Company’s consolidated balance sheets.

Employee Stock Purchase Plan

In June 2019, the Company’s stockholders approved the CAI International, Inc. 2019 Employee Stock Purchase Plan (ESPP). The ESPP provides a means by which eligible employees may be given an opportunity to purchase shares of the Company’s common stock at a discount using payroll deductions. The ESPP authorizes the issuance of up to 250,000 shares of the Company’s common stock. The ESPP has not yet been implemented and no shares were issued under the ESPP during the three months ended September 30, 2019.