Stock-Based Compensation Plans

Plan Administration

The Company's Amended and Restated 2009 Equity Compensation Plan (“Equity Plan”) provides for the grant of nonqualified and incentive stock options, stock awards and stock units to officers and employees of the Company. The Equity Plan also provides for the grant of option rights and restricted stock to non-employee directors. As of December 31, 2017, the Company had approximately 140,000 shares of common stock still available under the Equity Plan with no participant allowed a grant of more than 40,000 shares of common stock in any calendar year. The Equity Plan is administered by the Compensation Committee of the Board of Directors, or its designee, which as administrator of the plan, has the authority to select plan participants, grant awards, and determine the terms and conditions of the awards.

The Company also has a Stock Performance Rights Plan (“SPR Plan”) that provides for the issuance of Stock Performance Rights (“SPRs”) that allow non-employee directors, officers and key employees to receive cash awards, subject to certain restrictions, equal to the appreciation of the Company's common stock. The SPR Plan is administered by the Compensation Committee of the Board of Directors.

Stock Performance Rights

SPRs entitle the recipient to receive a cash payment equal to the excess of the market value of the Company's common stock over the SPR exercise price when the SPRs are surrendered. Expense, equal to the fair market value of the SPR at the date of grant and remeasured each reporting period, is recorded ratably over the vesting period. Compensation expense or benefit is included in General and administrative expense. A majority of the outstanding SPRs have a seven to ten year life and vest over one to three years beginning on the first anniversary of the date of the grant.

On December 31, 2017, the SPRs outstanding were re-measured at fair value using the Black-Scholes valuation model. This model requires the input of subjective assumptions that may have a significant impact on the fair value estimate. The weighted-average estimated value of SPRs outstanding as of December 31, 2017 was $9.83 per SPR using the following assumptions:



Expected volatility	20.5% to 44.2%
Risk-free rate of return	1.2% to 2.2%
Expected term (in years)	0.1 to 4.5
Expected annual dividend	$0

The expected volatility was based on the historic volatility of the Company's stock price commensurate with the expected life of the SPR. The risk-free rate of return reflects the interest rate offered for zero coupon treasury bonds over the expected life of the SPR. The expected life represents the period of time that options granted are expected to be outstanding and was calculated using the simplified method allowed by the SEC due to insufficient historical data. The estimated annual dividend was based on the recent dividend payout trend.

Compensation expense of $1.2 million, $1.2 million and $0.9 million was recorded for the years ended December 31, 2017, 2016 and 2015, respectively. Cash in the amount of $0.3 million, $0.3 million and $1.0 million was paid out for SPR exercises in 2017, 2016 and 2015. A liability of $8.7 million reflecting the estimated fair value of future pay-outs has been included as a component of Accrued expenses on the consolidated balance sheets.

Activity related to the Company’s SPRs during the year ended December 31, 2017 was as follows:



	Number of SPRs		Weighted Average Exercise Price
Outstanding on December 31, 2016	946,701		$	19.60
Granted	78,948		25.12
Exercised	(34,095	)	12.99
Cancelled	(30,000	)	36.71
Outstanding on December 31, 2017	961,554		9.76

Exercisable on December 31, 2017	702,438		$	17.66

The SPRs outstanding had an intrinsic value of $6.3 million as of December 31, 2017. Unrecognized compensation cost related to non-vested SPRs was $1.7 million at December 31, 2017, which will be recognized over a weighted average period of 1.9 years. During the year ended December 31, 2017, 152,232 SPRs with a fair value of $0.8 million vested. At December 31, 2017, the weighted average remaining contractual term was 4.7 years for all outstanding SPRs and 4.4 years for all exercisable SPRs.

Restricted Stock Awards

Restricted stock awards ("RSAs") generally vest over a one to three year period beginning on the first anniversary of the date of the grant. Upon vesting, the vested restricted stock awards are exchanged for an equal number of the Company’s common stock. The participants have no voting or dividend rights with the restricted stock awards. The restricted stock awards are valued at the closing price of the common stock on the date of grant and the expense is recorded ratably over the vesting period.

Compensation expense of $0.9 million, $0.6 million and $0.6 million related to the RSAs was recorded in General and administrative expenses for 2017, 2016 and 2015, respectively. Activity related to the Company’s RSAs during the year ended December 31, 2017 was as follows:



	Restricted Stock Awards
Outstanding on December 31, 2016	31,897
Granted	104,920
Exchanged for shares	(31,897	)
Outstanding on December 31, 2017	104,920

As of December 31, 2017, there was $1.7 million of total unrecognized compensation cost related to RSAs that will be recognized over a weighted average period of 1.9 years. The awards granted in 2017 had a weighted average grant date fair value of $22.73 per share.

Market Stock Units

Market Stock Units ("MSUs") are exchangeable for between 0% to 150% of the Company's common shares at the end of the vesting period based on the trailing 60 day average closing price of the Company's common stock. The value of the MSUs was determined using a geometric brownian motion model that, based on certain variables, generates a large number of random trials simulating the price of the common stock over the measurement period. Expense of $0.9 million, $0.5 million and $0.5 million related to MSUs was recorded in the years ended December 31, 2017, 2016 and 2015, respectively. Activity related to the Company’s MSUs during the year ended December 31, 2017 was as follows:



	Number of Market Stock Units		Maximum Shares Potentially Issuable
Outstanding on December 31, 2016	149,532		224,298
Granted	98,243		147,365
Cancelled	(25,839	)	(38,759	)
Outstanding on December 31, 2017	221,936		332,904

Stock Options

Each stock option can be exchanged for one share of the Company’s common stock at the stated exercise price. Activity related to stock options during the year ended December 31, 2017 was as follows:



	Number of Stock Options		Weighted average exercise price
Outstanding on December 31, 2016	45,910		26.55
Granted	40,000		27.01
Exercised	(1,434	)	14.04
Outstanding on December 31, 2017	84,476		26.98

Expense related to stock options was $0.2 million in 2017 and unrecognized compensation at December 31, 2017 was $0.1 million.

Stock Awards

During 2017, 40,000 stock awards were exercised resulting in the issuance of 23,042 common shares. At December 31, 2017, no stock awards remained outstanding.