EQUITY-BASED COMPENSATION

Our currently outstanding equity-based awards were issued under our Equity Plan which provides for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, and other equity-based awards or incentive awards.

Stock options granted may be either incentive stock options or non-qualified stock options. Vesting terms may vary with each grant, and stock option terms are generally five to ten years. We have outstanding equity-based awards in the form of stock options and restricted stock awards. All of our outstanding equity-based awards are classified as equity.

The Company's former Chief Financial Officer retired on March 31, 2018. In connection with his retirement, the Company recorded $1.0 million of additional stock-based compensation expense during the year ended December 31, 2018 related to the modification of certain stock award agreements.

Stock Options Granted Under Our Equity Plan

As of December 31, 2018, 2017 and 2016, we had 235,000 outstanding and exercisable stock options. At December 31, 2018, the stock options had a weighted average exercise price of $9.75 and a weighted average contractual term of 2.3 years.

All stock options outstanding at December 31, 2018 and 2017 vested in prior years. During the year ended December 31, 2016, the total fair value of stock options that vested was $0.3 million. The intrinsic value of options exercised during the year ended December 31, 2016 was $1.0 million. No stock options were exercised during the years ended December 31, 2018 and 2017.

At December 31, 2018, the exercise price of our outstanding and exercisable stock options exceeded the market price of our common stock, resulting in no intrinsic value. The intrinsic value of outstanding and exercisable options at December 31, 2017 was $1.3 million. At December 31, 2016, the intrinsic value of outstanding and exercisable options was $1.5 million.

Time-Based Restricted Stock Awards Made Pursuant to Our Equity Plan

The following table summarizes time-based restricted stock activity under our Equity Plan for 2018 and 2017:



	Number of Shares		Weighted Average Grant Date Fair Value per Share		Aggregate Current Value
					(in thousands)
Non-vested December 31, 2016	357,845		$	11.90
Granted	156,318		15.52
Vested	(120,366	)	11.29
Forfeited	(2,320	)	13.70
Non-vested December 31, 2017	391,477		13.52
Granted	185,930		13.15
Vested	(205,619	)	13.41
Forfeited	(1,636	)	12.84
Non-vested December 31, 2018	370,152		$	13.40	$	3,602

The awards granted to our non-executive employees generally vest over a four-year period based on continuous service (20% on the first, second and third anniversary of the grant date and 40% on the fourth anniversary of the grant date).

The awards granted to our executive officers generally vest over a three-year period based on continuous service (25% on the first and second anniversary of the grant date and 50% on the third anniversary of the grant date) or in certain circumstances upon a change in control.

The holders of these awards have the right to vote the related shares of common stock and receive all dividends declared and paid whether or not vested. The fair value of time-based restricted stock awards granted is calculated based on the market value of our common stock on the date of grant.

During the years ended December 31, 2018, 2017, and 2016, the total fair value of time-based restricted stock awards that vested was $2.8 million, $1.4 million and $0.9 million, respectively.

Performance-Based Restricted Stock Awards Made Pursuant to Our Equity Plan

The following table summarizes performance-based restricted stock activity under our Equity Plan for 2018 and 2017:



	Number of Shares		Weighted Average Grant Date Fair Value per Share		Aggregate Current Value
					(in thousands)
Non-vested December 31, 2016	449,027		$	14.90
Granted	210,361		17.13
Vested	(39,959	)	7.12
Non-vested December 31, 2017	619,429		16.16
Granted	397,808		15.69
Vested	(309,010	)	18.78
Non-vested December 31, 2018	708,227		$	14.75	$	6,891

Our performance-based restricted stock awards are market-based awards and are accounted for based on the fair value of our common stock on the grant date. The fair value of the performance-based restricted stock awards granted was estimated using a Monte Carlo simulation valuation model. These awards generally vest over a three-year period based on our percentile ranking within the SNL U.S. REIT Hotel Index at the end of the period or upon a change in control. The awards require continued service during the measurement period and are subject to the other conditions described in the Equity Plan or award document.

The number of shares the executive officers may earn under these awards range from zero shares to twice the number of shares granted based on our percentile ranking within the index at the end of the measurement period. In addition, a portion of the performance-based shares may be earned based on the Company's absolute total shareholder return calculated during the performance period. The performance shares vested during the year ended December 31, 2018 reflect twice the number of shares granted based on the financial results during the measurement period, which substantially exceeded the financial targets established on the grant date.

The holders of these grants have the right to vote the granted shares of common stock and any dividends declared will be accumulated and will be subject to the same vesting conditions as the awards. Further, if additional shares are earned based on our percentile ranking within the index, dividend payments will be issued as if the additional shares had been held throughout the measurement period.

The fair value of performance-based restricted stock awards granted was estimated using a Monte Carlo simulation valuation model and the following assumptions:



	2018			2017			2016
Expected dividend yield	5.33		%	4.14		%	4.01		%
Expected stock price volatility	25.7		%	24.8		%	24.2		%
Risk-free interest rate	2.41		%	1.59		%	1.037		%
Monte Carlo iterations	100,000			100,000			100,000
Weighted average estimated fair value of performance-based restricted stock awards	$	13.73		$	17.13		$	13.77

The expected dividend yield was calculated based on our annual expected dividend payments at the time of grant. The expected volatility was based on historical price changes of our common stock for a period comparable to the performance period. The risk-free interest rates were interpolated from the Federal Reserve Bond Equivalent Yield rates for “on-the-run” U.S. Treasury securities.

Director Stock Awards Made Pursuant to Our Equity Plan

During the years ended December 31, 2018 and 2017, we granted 34,130 and 28,426 shares of common stock, respectively, to our non-employee directors as a part of our director compensation program. These grants were made pursuant to our Equity Plan and were vested upon grant.

Our non-employee directors have the option to receive shares of our common stock in lieu of cash for their director fees. In 2018 and 2017, we issued 3,543 and 4,663 shares of common stock, respectively, for director fees. The fair value of director stock awards is calculated based on the market value of our common stock on the date of grant.

Equity-Based Compensation Expense

Equity-based compensation expense included in Corporate General and Administrative expense in the Consolidated Statements of Operations for the years ended December 31, 2018, 2017, and 2016 was as follows (in thousands):



	2018		2017		2016
Stock options	$	—	$	—	$	55
Time-based restricted stock	2,384		2,145		1,594
Performance-based restricted stock	3,727		3,183		2,107
Director stock	554		559		465
	$	6,665	$	5,887	$	4,221

We recognize equity-based compensation expense ratably over the vesting terms. The amount of expense may be subject to adjustment in future periods due to a change in the forfeiture assumptions.

Unrecognized equity-based compensation expense for all non-vested awards pursuant to our Equity Plan was $6.6 million at December 31, 2018 as follows (in thousands):



	Total		2019		2020		2021		2022
Time-based restricted stock	$	2,784	$	1,613	$	955	$	203	$	13
Performance-based restricted stock	3,793		2,320		1,287		186		—
	$	6,577	$	3,933	$	2,242	$	389	$	13