14. Equity

Stock Incentive Plans

Amended and Restated 2004 Stock Incentive Plan

In 2004, the Board of Directors adopted, and the Company’s shareholders approved the 2004 Stock Incentive Plan. In October 2011, the Board of Directors adopted, and the Company’s shareholders approved, the Amended and Restated 2004 Stock Incentive Plan (the “Amended and Restated Plan”) to update the 2004 Stock Incentive Plan with respect to certain provisions and changes in the tax code since its original adoption.

2016 Stock Incentive Plan

On October 5, 2016, the Board of Directors adopted the 2016 Stock Incentive Compensation Plan (the “2016 Stock Incentive Plan”) which was approved by the Company’s shareholders on November 7, 2016. Under the 2016 Stock Incentive Plan, 3,529,109 shares of common stock have been reserved for issuance in connection with grants of nonqualified stock options, incentive stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance-based compensation awards, other stock-based awards, dividend equivalents and cash-based awards. Effective October 29, 2018, the 2016 Stock Incentive Plan was amended to increase the reservation of the total shares available for issuance to 12,725,963 shares of common stock. The maximum number of shares with respect to which awards may be granted to any participant in any calendar year under the 2016 Stock Incentive Plan may not exceed 500,000 shares.

Management Incentive Plan

On October 29, 2018, the Company entered into a letter agreement with GSO (the “MIP Letter”). Under the MIP Letter, the Company agreed to create a new stock incentive compensation plan for the amount of 1,776,500 shares of common stock (the “MIP Plan”), which will be allocated by the Board in accordance with the Stockholder Agreement. The parties are in process of finalizing an amendment to the MIP Letter, pursuant to which the Company expects the shares to be allocated under its 2016 Stock Incentive Plan instead of a newly created plan and such grants would be subject to the same terms as the 2016 Stock Incentive Plan. Upon the forfeit of any awards granted at the direction of the Special Committee under the 2016 Stock Incentive Plan, the Company expects to issue the equivalent amount of shares of common stock to GSO for no additional consideration.

2016 Stock Incentive Plan

In 2018, the Company granted RSUs, performance stock units (“PSUs”) and stock options to its officers, non-employee directors and employees pursuant to the 2016 Stock Incentive Plan or as “inducement grants,” as permitted under NASDAQ rules. The RSUs, PSUs and stock options represent the right to receive one share of common stock for each unit on the vesting date provided that the individual meets the applicable vesting criteria. The exercise price of stock options granted under the 2016 Stock Incentive Plan are determined by the Compensation and Stock Option Committee (the “Compensation Committee”) of the Board of Directors or by any other committee designated by the Board of Directors, but may not be less than the fair market value of the Company’s shares of common stock on the date the option is granted. In general, unvested stock options are forfeited when a participant terminates employment or service with the Company or its affiliates.

Shares underlying awards that are forfeited, cancelled, terminated or expire unexercised, or settled in cash in lieu of issuance of shares, shall be available for issuance pursuant to future awards to the extent that such shares are forfeited, repurchased or not issued under any such award. Any shares tendered to pay the exercise price of an option or other purchase price of an award, or withholding tax obligations with respect to an award, shall be available for issuance pursuant to future awards. In addition, if any shares subject to an award are not delivered to a participant because (i) such shares are withheld to pay the exercise price or other purchase price of such award, or withholding tax obligations with respect to such award (or other award), or (ii) a payment upon exercise of an SAR is made in shares, the number of shares subject to the exercised or purchased portion of any such award that are not delivered to the participant shall be available for issuance pursuant to future awards.

As of December 31, 2018, shares reserved for future issuance under the incentive plans include: (i) 444 shares of common stock issuable upon exercise of stock options granted under the Amendedand Restated Plan; (ii) 2,364,393 shares of common stock issuable upon vesting of RSUs, PSUs and exercise of stock options granted under the 2016 Stock Incentive Plan, (ii) 5,200,000 shares of common stock issuable upon vesting of RSUs and PSUs granted pursuant to “inducement grants” to certain of our officers, and 8,435,562 shares of common stock available for future grant under the 2016 Stock Incentive Plan. As of December 31, 2018, the Company no longer granted shares under the Amended and Restated Plan.

Stock Options

The following table summarizes stock option activity by incentive plan for the years ended December 31, 2018 and December 31, 2017 (in actual amounts):


	Amended and	2016 Stock	Total Number
	Restated Plan	Incentive Plan	of Shares
Outstanding at January 1, 2017	444	150,000	150,444
Granted	—	—	—
Exercised	—	—	—
Forfeited / Expired	—	(79,723)	(79,723)
Outstanding at December 31, 2017	444	70,277	70,721

Outstanding at January 1, 2018	444	70,277	70,721
Granted	—	250,000	250,000
Exercised	—	—	—
Forfeited / Expired	—	—	—
Outstanding at December 31, 2018	444	320,277	320,721

The following table summarizes stock option activity for all incentive plans for the years ended December 31, 2018 and 2017 (in actual amounts):


		Weighted		Weighted Average	Aggregate
		Average		Remaining Contractual	Intrinsic
	Options	Exercise Price		Life (Years)	Value
Outstanding at January 1, 2018	70,721	$	4.07	4.55	$	—
Granted	250,000		4.22	2.81
Exercised	—		—
Expired	—		—
Forfeited	—		—
Outstanding at December 31, 2018	320,721	$	4.19	8.45	$	—
Exercisable at December 31, 2018	70,721	$	4.07	3.55	$	—

There were no options exercised during the years ended December 31, 2018 and 2017, respectively. The following table summarizes exercise prices for options exercisable as of December 31, 2018 (in actual amounts):


		Options Exercisable
Exercise Price		Number of Shares	Weighted-Average Remaining Contractual Life (Years)
$	4.02	70,277	5.4
$	11.40	444	6.0
		70,721

For all stock compensation awards that contain graded vesting with time‑based service conditions, the Company has elected to apply a straight‑line recognition method to account for these awards. Stock-based compensation expense related to stock options was immaterial during the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, there was $0.7 million of unrecognized compensation cost related to unvested stock options.

The stock option awards were measured at fair value on the grant date using the Black-Scholes option valuation model. Stock options granted to non-employees are revalued at each reporting period. The Company recognizes forfeitures as they occur. Shares of common stock will be issued when the options are exercised. The following table summarizes the assumptions used to estimate the fair value of stock options granted during the years ending December 31, 2018 and December 31, 2017:


	2018			2017
Stock Price on Grant Date	$	4.22		$	1.85
Expected Dividend Rate		0.00	%		0.00	%
Expected Volatility		60.00	%		60.00	%
Exercise Price	$	4.22		$	4.02
Risk Free Rate		3.08	%		1.75	%
Average expected stock option term (in years)		8.45			5.00

Restricted Stock Units

The following table summarizes RSU activity for the year ended December 31, 2018 (in actual amounts):


	Restricted Stock Units
	Number Of Units	Weighted Average Grant Date Fair Value
Outstanding at January 1, 2017	800,843	$	4.65
Granted	510,000		2.24
Vested	350,141		4.54
Forfeited	215,000		2.46
Outstanding at December 31, 2017	745,702		3.68

Outstanding at January 1, 2018	745,702	$	3.68
Granted	6,473,484		3.75
Vested	1,278,626		2.50
Forfeited	120,000		1.42
Outstanding at December 31, 2018	5,820,560	$	4.06

A total of $3.8 million and $2.3 million of stock-based compensation expense was recognized related to RSUs during the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, there was $21.8 million of total unrecognized compensation cost related to unvested RSUs. The unrecognized compensation cost is expected to be recognized over a weighted‑average of 2.8 years.

Performance Share Units

In Fiscal 2018, the Company granted 1,405,556 PSUs, which vest over three years if the performance targets set by the Compensation Committee are met. For certain PSUs, unvested PSUs in any completed year will be eligible for vesting in subsequent years if the subsequent year performance target is exceeded and the excess is sufficient to make up for the prior year shortfall. 308,122 PSUs were forfeited during the year ended December 31, 2018 and 1,405,556 unvested PSUs are outstanding as of December 31, 2018. 150,000 PSUs vested during the year ended December 31, 2018 and $633 thousand of stock compensation expense was recognized in connection with the vested shares during the year ended December 31, 2018. No PSUs were granted or vested during the year ended December 31, 2017.

Series A Preferred Stock

In connection with the acquisition of all of the outstanding equity interests of RG Parent LLC and its subsidiaries on January 28, 2016 (the “RG Merger”), the Company issued and sold to TCP Denim, LLC an aggregate of 50,000 shares of the Company’s Series A Convertible Preferred Stock, par value $0.10 per share (the “Series A Preferred Stock”) for an aggregate purchase price of $50.0 million in cash. The proceeds from the sale of Series A Preferred Stock were used to consummate the RG Merger in 2016.

Under the certificate of designation for the Series A Preferred Stock, each share of Series A Preferred Stock entitled the holder to receive cumulative dividends when, as and if declared by the Board of Directors or a duly authorized committee thereof, payable quarterly, at an annual rate of 10%, plus accumulated and accrued dividends thereon through such date. Additionally, if the Board of Directors declared or paid a dividend on the common stock, then each holder of the Series A Preferred Stock was entitled to receive a cash dividend on an as-converted basis. Each holder of the Series A Preferred Stock was entitled to vote on an as-converted basis and together with the holders of common stock as a single class, subject to certain limitations.

For so long as a to-be-determined percentage of the shares of the Series A Preferred Stock remained outstanding, the holders of the Series A Preferred Stock, exclusively and as a separate class, were entitled to elect three members of the Board of Directors, each of whom could only have been removed without cause by the affirmative vote of the holders of a majority of the shares of Series A Preferred Stock. The holders of the Series A Preferred Stock had separate class voting rights with respects to certain matters affecting their rights. Upon any liquidation event, holders of the Series A Preferred Stock were entitled to receive the greater of the liquidation preference and the amount that would be payable to the holders of the Series A Preferred Stock had such holders converted their shares of Series A Preferred Stock into shares of common stock immediately prior to such liquidation event. Each share of the Series A Preferred Stock was convertible at the option of the holder at any time and without the payment of additional consideration by the holder at an initial conversion price of $11.16.

On October 29, 2018, the 50,000 shares of the Company’s Series A Preferred Stock converted into 5,852,142 shares of common stock in accordance with the terms of the Series A Preferred Stock. The conversion was for no consideration.

Series A-1 Preferred Stock

On January 18, 2018, the SWIMS Convertible Note originally issued on July 18, 2016 to Tengram II, as amended, with a principal amount of $13.0 million, matured and automatically converted into newly issued shares of 10% Series A-1 Preferred Stock, $0.10 par value per share, at a conversion price of $3.00 per share. The outstanding balance of the SWIMS Convertible Note, together with any accrued and unpaid interest thereon, converted into 4,587,964 shares of Series A-1 Preferred Stock. The Series A-1 Preferred Stock was convertible on a one-to-one basis into shares of common stock. Each share of Series A-1 Preferred Stock entitled the holder to receive cumulative dividends when, as and if declared by the Board of Directors or a duly authorized committee thereof, payable quarterly, at an annual rate of 10%, plus accumulated and accrued dividends thereon through such date. Additionally, if the Board of Directors declared or paid a dividend on the common stock, then each holder of the Series A-1 Preferred Stock was entitled to receive a cash dividend on an as-converted basis. Each holder of the Series A-1 Preferred Stock was entitled to vote on an as-converted basis and together with the holders of common stock as a single class, subject to certain limitations. The Series A-1 Preferred Stock was senior to the common stock upon a liquidation.

On October 29, 2018, the 4,587,964 shares of the Company's Series A-1 Preferred Stock converted into 4,951,177 shares of common stock in accordance with the terms of the Series A-1 Preferred Stock. The conversion was for no consideration.

Warrants

The Company issued warrants in conjunction with the acquisition and financing of SWIMS that are currently exercisable and have been classified as equity.

In connection with the SWIMS acquisition, the Company issued to Tengram II a warrant for the purchase of 500,000 shares of common stock at an exercise price of $3.00 per share and has an estimated fair value of $465 thousand (the “SWIMS Warrant”). The Company determined the fair value of the warrant at the date of grant using the Black-Scholes option pricing model based on the market value of the underlying common stock, an exercise price of $3.00 per share, an expected life (term) of 5 years, a volatility rate of 50%, based upon the expected volatility in market traded stock over the same period as the remaining term of the warrants, zero dividends, and a risk free interest rate of 1.14%. In addition, a 20% discount for lack of marketability was applied based upon the Rule 144 six-month restriction period. The SWIMS Warrant expires on July 18, 2021.

Also in connection with the SWIMS acquisition, the Company issued to the shareholders of SWIMS (the “SWIMS Sellers”) warrants for the purchase of 150,000 shares of common stock with an exercise price of $5.47 per share that have an estimated fair value of $45 thousand. The Company determined the fair value of the warrants at the date of grant using the Black-Scholes option pricing model based on the market value of the underlying common stock, an exercise price of $5.47 per share, an expected life (term) of 3 years, a volatility rate of 45%, based upon the expected volatility in market traded stock over the same period as the remaining term of the warrants, zero dividends, and a risk free interest rate of 0.85%. In addition, a 10% discount for lack of marketability was applied based upon the Rule 144 six-month restriction period. The SWIMS Sellers warrants expire on July 18, 2019.

The Private Placement

On October 29, 2018, the Company completed a private placement of 10 million shares of common stock to certain members of management, affiliates of Ares and the GSO/BTO Affiliates at $8.00 per share for total consideration of $80.0 million. Additionally, in connection with an in consideration of the GSO/BTO Affiliates entering into the Second Lien Term Facility and providing loans to the Company thereunder, the Company issued to the GSO/BTO Affiliates 23,094,501 shares of common stock for no additional consideration.