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, 2019, the Company had approximately 279,000 shares of common stock still available under the Equity Plan. Non-employee directors are limited to grants of no more than 20,000 shares of common stock in any calendar year and other than non-employee directors are limited to grants of no more than 125,000 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 is included in General and administrative expense. The outstanding SPRs were granted with approximately a seven year life and vest over one to three years beginning on the first anniversary of the date of the grant.

On December 31, 2019, 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, 2019 was $25.34 per SPR using the following assumptions:



Expected volatility	32.1% to 40.70%
Risk-free rate of return	1.6% to 1.7%
Expected term (in years)	0.5 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, which approximates our historical experience. The estimated annual dividend was based on the recent dividend payout trend.

Compensation expenses of $14.9 million and $4.8 million were recorded in General and administrative expenses for the years ended December 31, 2019 and 2018, respectively. Cash in the amount of $13.4 million and $0.1 million was paid out for SPR exercises in 2019 and 2018, respectively. A liability of $14.9 million reflecting the estimated fair value of future pay-outs has been included as a component of Accrued expenses and other liabilities on the consolidated balance sheets.

Activity related to the Company’s SPRs during the year ended December 31, 2019 was as follows:



	Number of SPRs		Weighted Average Exercise Price
Outstanding on December 31, 2018	958,521		$	19.75
Granted	26,825		30.78
Exercised	(379,567	)	9.65
Cancelled	(5,918	)	27.15
Outstanding on December 31, 2019	599,861		26.56

Exercisable on December 31, 2019	523,084		$	26.50

The SPRs outstanding had an intrinsic value of $15.3 million as of December 31, 2019. Unrecognized compensation cost related to non-vested SPRs was $1.0 million at December 31, 2019, which will be recognized over a weighted average period of 1.2 years. During the year ended December 31, 2019, 47,779 SPRs with a fair value of $1.4 million vested. At December 31, 2019, the weighted average remaining contractual term was 3.0 years for all outstanding SPRs and 2.5 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 expenses of $1.3 million and $1.4 million related to the RSAs were recorded in General and administrative expenses for 2019 and 2018, respectively. Activity related to the Company’s RSAs during the year ended December 31, 2019 was as follows:



	Restricted Stock Awards
Outstanding on December 31, 2018	119,256
Granted	26,826
Exchanged for common shares	(47,493	)
Forfeited	(7,680	)
Outstanding on December 31, 2019	90,909

As of December 31, 2019, there was $0.8 million of total unrecognized compensation cost related to RSAs that will be recognized over a weighted average period of 1.0 year. The awards granted in 2019 had a weighted average grant date fair value of $36.68 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. Expenses of $1.2 million related to MSUs were recorded in General and administrative expenses in both of the years ended December 31, 2019 and 2018. Activity related to the Company’s MSUs during the year ended December 31, 2019 was as follows:



	Number of Market Stock Units		Maximum Shares Potentially Issuable
Outstanding on December 31, 2018	193,135		279,542
Granted	41,855		62,784
Exchanged for stock	(89,179	)	(128,573	)
Cancelled	(6,168	)	(9,252	)
Maximum vs. earned ⁽¹⁾	—		(26,383	)
Outstanding on December 31, 2019	139,643		178,118


(1)	Difference between 150% of common stock that was potentially realizable for MSUs when originally granted and the actual amount of common stock that was earned on the vesting date.

Stock Options

Each stock option can be exchanged for one share of the Company’s common stock at the stated exercise price. Expense related to stock options was $0.1 million in both 2019 and 2018. Unrecognized compensation at December 31, 2019 was $0.1 million. Upon vesting, stock options are recognized as a component of equity. Activity related to stock options during the year ended December 31, 2019 was as follows:



	Number of Stock Options		Weighted average exercise price
Outstanding on December 31, 2018	83,471		27.14
Exercised	(2,372	)	14.04
Forfeited	(1,099	)	14.04
Outstanding on December 31, 2019	80,000		27.70