6. STOCK‑BASED COMPENSATION

Stock-Based Compensation Plans

In October 2018, our Board of Directors adopted the 2018 Equity Incentive Plan (the “2018 Plan”) and ceased granting awards under the 2012 Equity and Performance Incentive Plan (the “2012 Plan”). The 2018 Plan became effective with the completion of our IPO on October 24, 2018. Any remaining shares available for issuance under the 2012 Plan as of our IPO effectiveness date are not available for future issuance. However, shares subject to stock awards granted under the 2012 Plan (a) that expire or terminate without being exercised or (b) that are forfeited under an award, return to the 2018 Plan share reserve for future grant.

Subject to adjustments as described above, the 2018 Plan provides for up to 4.8 million shares of authorized stock to be awarded as stock options, appreciation rights, restricted stock, restricted stock units (“RSUs”), performance shares, performance units, cash incentive awards, and certain other awards based on or related to shares of our common stock. The 2012 Plan provided for up to 8.8 million shares of authorized stock to be awarded as either stock options or RSUs.

During the six months ended June 29, 2019, we granted 540,952 stock options and 294,735 RSUs to various employees. The stock options have a ten year term and each of the stock options and RSUs vest in accordance with the following schedule: (a) one-third will vest on the first anniversary of the grant date, and (b) an additional one-sixth will vest on the first four six-month anniversaries of the initial vesting date.

During the six months ended June 29, 2019, we granted 12,314 RSUs and 9,727 deferred stock units (“DSUs”) to our non-employee members of the Board of Directors. The RSUs and DSUs vest immediately prior to our next annual meeting of our stockholders, subject to the non-employee director’s continued service through the applicable vesting date. However, both awards of RSUs and DSUs are subject to accelerated vesting in the event the non-employee director dies or becomes disabled or in the event of a change in control.

We recognized non-cash stock-based compensation expense of $4.3 million and $4.1 million for the three months ended June 29, 2019 and June 30, 2018, respectively. For the six months ended June 29, 2019 and June 30, 2018, we recognized non-cash stock-based compensation expense of $8.3 million and $7.1 million, respectively.

As of June 29, 2019, total unrecognized non-cash stock-based compensation expense for unvested options was $8.8 million, which will be recognized over the next three years. As of June 29, 2019, total unrecognized non-cash stock-based compensation expense for unvested performance-based RSUs was $41.7 million. As of June 29, 2019, total unrecognized stock-based compensation expense for unvested RSUs and DSUs was $6.0 million and $0.2 million, respectively, which will be recognized over the next three years.

Pursuant to the performance-based RSU agreements that each grantee, including each named executive officer, entered into with us, the performance-based RSUs will become fully vested and nonforfeitable upon a transaction that results in Cortec Group Fund V, L.P. and its affiliates (collectively, “Cortec”), our majority stockholder, ceasing to own 35% or more of the voting power of the outstanding securities of our company, which we refer to as the Cortec Sale, and the achievement of certain EBITDA targets for calendar years 2018 and 2019, provided that if a Cortec Sale occurs prior to the date on which our Board of Directors certifies that the applicable EBITDA target has been achieved, all performance-based RSUs that have not already been forfeited will become nonforfeitable and shares of our common stock will be delivered to the applicable grantee within 30 days of the performance-based RSUs becoming nonforfeitable. Our Board of Directors has certified that the EBITDA target for calendar year 2018 was achieved. In order to receive their shares, the grantee must remain employed until the date of the Cortec Sale and must not have violated any of the terms of such grantee’s non-competition agreement or other restrictive covenant agreements with us. The performance-based RSUs are not transferable or assignable.

A summary of the balances of our stock-based compensation plans as of June 29, 2019, and changes during the six months ended June 29, 2019, is presented below (in thousands, except per share data):


				Performance-Based
	Stock Options			Restricted Stock Units			Restricted Stock Units			Deferred Stock Units
		Weighted			Weighted			Weighted			Weighted
	Number of	Average Exercise		Number of	Average Grant		Number of	Average Grant		Number of	Average Grant
	Options	Price		RSUs	Date Fair Value		RSUs	Date Fair Value		DSUs	Date Fair Value
Balance, December 29, 2018	2,889	$	6.56	1,411	$	31.74	7	$	17.00	13	$	17.00
Granted	541		22.84	—		—	307		23.02	10		24.80
Exercised/released	(624)		3.31	—		—	—		—	—		—
Forfeited/expired	(50)		19.58	(93)		31.74	(12)		22.84	—		—
Balance, June 29, 2019	2,756	$	10.26	1,318	$	31.74	302	$	22.89	23	$	20.34

Stock Options Fair Value

The exercise price of options granted under the 2012 Plan and 2018 Plan is equal to the estimated fair market value of our common stock at the date of grant. Before our IPO in October 2018, we estimated the fair value of our common stock based on the appraisals performed by an independent valuation specialist. Subsequent to our IPO, we began using the market closing price for our common stock as reported on the New York Stock Exchange.

We estimate the fair value of stock options on the date of grant using a Black‑Scholes option‑pricing valuation model, which uses the expected option term, stock price volatility, and the risk‑free interest rate. The expected option term assumption reflects the period for which we believe the option will remain outstanding. We elected to use the simplified method to determine the expected option term, which is the average of the option’s vesting and contractual term. Our computation of expected volatility is based on the historical volatility of selected comparable publicly-traded companies over a period equal to the expected term of the option. The risk‑free interest rate reflects the U.S. Treasury yield curve for a similar instrument with the same expected term in effect at the time of the grant.

The following assumptions were utilized to calculate the fair value of stock options granted during the six months ended June 29, 2019:


		Six Months Ended
		June 29,
		2019
Expected option term		6 years
Expected stock price volatility		27%
Risk-free interest rate		2.5%
Expected dividend yield		–%
Weighted average fair value at date of grant		$7.33