EQUITY

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Equity Awards

The Verso Corporation Performance Incentive Plan, or the “2016 Incentive Plan,” became effective on July 15, 2016 and no stock awards were issued on that date. The maximum number of shares of Class A Common Stock authorized to be issued or transferred pursuant to awards under the 2016 Incentive Plan is 3.6 million. As of December 31, 2019, we had 3.1 million shares of common stock reserved for future issuance under the 2016 Incentive Plan. The Compensation Committee of the Board of Directors is the administrator of the 2016 Incentive Plan. Under the 2016 Incentive Plan, stock awards may be granted to employees, consultants and directors upon approval by the Board of Directors.

During 2019, Verso granted 0.2 million time-based restricted stock units and 0.2 million performance-based restricted stock units to its executives and certain senior managers. The performance awards granted in 2019 vest at December 31, 2021, subject to a comparison of annualized total shareholder return, or “TSR,” of Verso to a select group of peer companies over a 3-year period. The vesting criteria of the performance awards meet the definition of a market condition for accounting purposes. The full grant date value of the performance awards will be recognized over the remaining vesting period assuming that the employee is employed continuously to the vesting date. The number of shares which will ultimately vest at the vesting date ranges from 50% to 150% based on Verso stock performance relative to the peer group if Verso’s annualized TSR is at least 5% during the performance period. The compensation expense associated with these performance awards was determined using the Monte Carlo valuation methodology.

On April 5, 2019, Verso granted 68 thousand restricted stock units to its interim Chief Executive Officer of which 10% are time-based and 90% are performance-based. The performance-based restricted stock units meet the criteria of a performance condition for accounting purposes and vest upon a change in control. On November 11, 2019, the vesting condition of the performance-based award was modified to vest on the closing date (as defined in the Purchase Agreement) of the Pixelle Sale (see Note 19).

Verso recognized equity award expense of $1 million, $8 million and $12 million for the years ended December 31, 2017, 2018 and 2019, respectively. Equity award expense for the year ended December 31, 2019 included $3 million related to the accelerated vesting of 233 thousand performance-based restricted stock units and 108 thousand time-based restricted stock units, net of cancellation of 124 thousand time-based restricted stock units, pursuant to a separation agreement, dated April 11, 2019, entered into with Verso’s former Chief Executive Officer. As of December 31, 2019, there was approximately $6 million of unrecognized compensation cost related to the 1.2 million non-vested restricted stock units, which is expected to be recognized over the weighted average period of 1.8 years.

Time-based Restricted Stock Units

The following table summarizes activity for the time-based restricted stock units:



(In thousands, except per share amounts)	Restricted Stock Units Outstanding		Weighted Average Grant Date Fair Value per Share
Non-vested at December 31, 2016	160		$	11.18
Granted	528		6.41
Vested	(73	)	10.81
Forfeited	(32	)	11.50
Non-vested at December 31, 2017	583		6.89
Granted	204		17.75
Vested	(106	)	7.42
Forfeited	(3	)	14.08
Non-vested at December 31, 2018	678		10.04
Granted	192		20.57
Vested	(154	)	14.16
Forfeited	(137	)	13.81
Non-vested at December 31, 2019	579		$	11.55

Performance-based Restricted Stock Units

The following table summarizes activity for the performance-based restricted stock units:



	Restricted Stock Units Outstanding		Weighted Average Grant Date Fair Value per Share

(In thousands, except per share amounts)
Non-vested at December 31, 2017	—		$	—
Granted	640		22.25
Vested	—		—
Forfeited	(2	)	18.22
Non-vested at December 31, 2018	638		22.26
Granted	244		17.35
Vested	(233	)	20.92
Forfeited	(11	)	17.50
Non-vested at December 31, 2019	638		$	18.84

Warrants

On July 15, 2016, warrants to purchase up to an aggregate of 1.8 million shares of Class A Common Stock were issued to holders of first-lien secured debt at an exercise price of $27.86 per share and a seven year term. As of December 31, 2019, no warrants have been exercised.

Preferred Stock

On June 16, 2019, the Board of Directors authorized 100 thousand shares of preferred stock with a par value of $0.01 per share, designated as Series A Junior Participating Preferred Stock, or “Preferred Stock,” in conjunction with the adoption of the Rights Plan (defined below).

Stockholder Rights Plan

On June 16, 2019, the Board of Directors approved the adoption of a limited duration stockholder rights plan, or the “Rights Plan,” and declared a dividend payable to stockholders of record on June 27, 2019 of one right, or a “Right,” per each outstanding share of Verso’s Class A common stock to purchase one one-thousandth (subject to adjustment) of a share of Preferred Stock at a price of $75.00 per one one-thousandth of a share of Preferred Stock upon exercise of the Right (subject to adjustment). Unless and until a triggering event occurs and these Rights become exercisable, the Rights will trade with the shares of the Verso’s common stock.

The Rights will generally become exercisable only after (i) a public announcement that a person or group of related persons acquires beneficial ownership of 15% or more of Verso’s Class A common stock in a transaction not approved by the Board of Directors (such person or group of related persons, an “Acquiring Person”) or (ii) a person or group of related persons announces or commences a tender or exchange offer that would result in such person(s) becoming an Acquiring Person, unless such offer is a Qualifying Transaction (defined below). The Rights Plan expires on the earlier of (a) June 17, 2020, (b) the redemption or exchange of the Rights, (c) the determination by the Board of Directors to not pursue any strategic alternatives and (d) upon the approval by the Verso’s stockholders of any strategic transaction recommended by the Board of Directors. The Rights will not be issued if there is a “Qualifying Transaction” which satisfies the following criteria: (a) the offer is a fully financed, all-cash tender offer or an exchange offer offering shares of the offeror traded on a national securities exchange (or a combination thereof); (b) for any and all of Verso’s outstanding shares of Class A common stock; and (c) is made at the same per-share consideration for all such shares. Each holder of a Right (other than an Acquiring Person, whose Rights will become void and will not be exercisable) will have the right to receive for 50% of the market value (determined pursuant to the terms of the Rights Plan) a certain number of shares of Verso’s common stock, calculated in accordance with terms of the Rights Plan. In addition, if Verso is acquired in a merger or other business combination after an Acquiring Person acquires 15% or more of Verso’s common stock, each holder of the Right would thereafter have the right to receive for a purchase price equal to 50% of the then current market value a certain number of shares of common equity interest of the Acquiring Person that is a party to such transaction. The Acquiring Person would not be entitled to exercise these Rights.

On February 18, 2020, Verso’s Board of Directors terminated the limited duration stockholder rights plan.