Note P — Share Based Compensation

On May 17, 2019, the shareholders approved the Hanger, Inc. 2019 Omnibus Incentive Plan (the “2019 Plan”). The 2019 Plan authorizes the issuance of (a) up to 2,025,000 shares of Common Stock, plus (b) 243,611 shares available for issuance under the Hanger, Inc. 2016 Omnibus Incentive Plan (the “2016 Plan”).

Upon approval of the 2019 Plan, the 2016 Plan was no longer available for future awards.

On May 19, 2017, the Board of Directors approved the Hanger, Inc. Special Equity Plan (the “Special Equity Plan”). The Special Equity Plan authorized up to 1.5 million shares of Common Stock and operates completely independent from our 2016 Omnibus Incentive Plan. All awards under the Special Equity Plan were made on May 19, 2017 which consisted of 0.8 million stock options and 0.3 million performance-based stock awards. No further grants of awards will be authorized or issued under the Special Equity Plan.

As of December 31, 2019, approximately 2.2 million shares were available for future issuance. The available shares consisted of (a) 2.0 million shares of common stock authorized for issuance under the amended 2019 Plan, plus (b) 0.2 million shares rolled forward from the 2016 Plan, plus (c) 0.1 million shares forfeited and added back to the pool, less (d) 0.1 million shares issued for awards. In 2019, shares issued under equity plans are issued from authorized and unissued shares.

For the years ended December 31, 2019, 2018, and 2017, we recognized a total of approximately $13.4 million, $13.1 million, and $12.9 million, respectively, of share based compensation expense for the 2010, 2016, and 2019 plans. Share based compensation expense, net of forfeitures, relates to restricted stock units, performance-based restricted stock units, and options.

Restricted Stock Units

The summary of restricted stock units, performance-based stock units, and weighted average grant date fair values are as follows:


	Employee Service-Based			Employee Performance-
	Awards			Based Awards			Director Awards
		Weighted			Weighted			Weighted
		Average			Average			Average
		Grant Date			Grant Date			Grant Date
	Units	Fair Value		Units	Fair Value		Units	Fair Value
Nonvested at December 31, 2017	1,183,039	$	14.30	702,391	$	19.40	98,406	$	12.66
Granted	569,571		15.70	165,853		15.76	61,376		18.25
Vested	(422,884)		16.07	(199,395)		22.16	(98,406)		12.66
Forfeited	(121,098)		13.02	(75,750)		18.06	—		—
Nonvested at December 31, 2018	1,208,628		14.47	593,099		17.63	61,376		18.25
Granted	467,896		19.14	147,983		19.16	55,752		20.09
Vested	(452,306)		14.48	(120,953)		18.40	(61,376)		18.25
Forfeited	(59,994)		14.94	(20,645)		18.32	—		—
Nonvested at December 31, 2019	1,164,224	$	16.32	599,484	$	17.82	55,752	$	20.10

During the years ended December 31, 2019, 2018, and 2017, approximately 0.6 million, 0.7 million, and 0.4 million of restricted common stock units with an intrinsic value of $12.3 million, $12.0 million, and $5.9 million, respectively, became fully vested. As of December 31, 2019, total unrecognized compensation expense related to unvested restricted stock units and unvested performance based restricted stock units for which we have concluded the performance condition was probable of achievement was approximately $32.7 million and the related weighted‑average period over which it is expected to be recognized is approximately 1.4 years. The aggregate granted units have vesting dates through June 2022. The 2019, 2018, and 2017 aggregate grants had total estimated grant date fair values of $12.9 million, $13.3 million, and $17.7 million, respectively.

A special equity grant of performance-based restricted stock units was granted on May 19, 2017 and vests 100% three years after the date of issuance, assuming the performance goal is achieved. The financial target for this grant is to achieve a compounded annual growth rate (“CAGR”) of our common stock price of 20% as of market close on May 18, 2020. This equates to a share price on that date of $22.07 compared to the closing price on the eve of grant of $12.77. The grant provides for the vesting of 50% of the original targeted shares if a CAGR of 10% (a stock price of $17.00) is achieved. The grant also provides for the vesting of up to 200% of the original targeted shares if a CAGR of 30% (a stock price of $28.06) or more is achieved. The percentage of vested shares will be interpolated on a linear basis between 50% and 200% for a CAGR between 10% and 30%. The stock price at time of award was $12.77, but given market condition performance criteria the Monte Carlo Simulation valuation was used to calculate a fair value of $19.29 per share. The key assumptions used were a volatility rate of 109.5%, a risk-free interest rate of 1.44%, and a performance period of 3 years.

The 2017 special equity grant was amended on November 13, 2019 by adjusting the calculation of the CAGR of our common stock price from the third anniversary of the grant date to the average closing price for the 25 trading days ending on and including the last day of the three year performance period (i.e., May 18, 2020.) This adjustment was considered a modification per ASC 718, Compensation - Stock Compensation, and therefore, any incremental fair value arising from the modification of an award with market conditions would be recognized over the remaining service period. The valuation concluded an additional $34.0 thousand in incremental fair value that will be expensed ratably over the remainder of the service period.

Options

The fair value of each employee stock option award was estimated on the date of grant of May 19, 2017 using the Black-Scholes option-pricing model and calculated a grant date fair value of $8.67 per option. The key assumptions used were an expected dividend yield of zero, an expected stock volatility of 92.48%, a risk-free interest rate of 1.68%, and an expected term of 4.38 years.

The summary of option activity and weighted average exercise prices are as follows:


						Weighted Average
						Remaining
		Weighted Average		Aggregate		Contractual Term
	Shares	Exercise Price		Intrinsic Value		(Years)
Outstanding at December 31, 2017	798,020	$	12.77	$	2,378,100
Granted	—		—
Terminated	(111,203)		12.77
Exercised	(4,948)		12.77
Outstanding at December 31, 2018	681,869		12.77		4,213,950		8.4
Granted	—		—
Terminated	(9,913)		12.77
Exercised	(148,851)		12.77
Outstanding at December 31, 2019	523,105	$	12.77	$	7,762,878		7.4

At December 31, 2019, 0.5 million options were outstanding but not yet exercisable with a weighted average exercise price of $12.77, average remaining contractual terms of 7.4 years and aggregate intrinsic values of approximately $7.8 million. As of December 31, 2019, there was unrecognized compensation cost related to stock option awards of $0.7 million. At December 31, 2018, 0.7 million options were outstanding but not yet exercisable with a weighted average exercise price of $12.77, average remaining contractual terms of 8.4 years and aggregate intrinsic values of approximately $4.2 million.