Note 14 Stock-Based Compensation

Effective May 19, 2004, the Company adopted its 2004 Incentive Stock Plan, as further amended and restated on February 3, 2015 (the “2004 Stock Plan”), and its 2004 Restricted Stock Plan for Non-Employee Directors, as further amended and restated on April 1, 2013 (the “Director Plan”). On May 19, 2015, the Company’s stockholders approved the 2015 Incentive Plan of 3D Systems Corporation, as further amended and restated on May 16, 2017 (the “2015 Plan” and, together with the 2004 Stock Plan, the “Incentive Plans”).

The 2004 Stock Plan authorizes shares of restricted stock, restricted stock units (“RSU”), stock appreciation rights and the grant of options to purchase shares of the Company’s common stock. The 2004 Stock Plan also designates measures that may be used for performance awards. The Director Plan authorizes shares of restricted stock for non-employee directors of the Company. The 2015 Plan authorizes shares of restricted stock, RSUs, stock appreciation rights, cash incentive awards and the grant of options to purchase shares of the Company’s common stock. The 2015 Plan also designates measures that may be used for performance awards.

Generally, awards granted prior to November 13, 2015 become fully-vested on the three-year anniversary of the grant date and awards granted on or after November 13, 2015 vest one third each year over three years.

Stock-based compensation expense is included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). The following table details the components of stock-based compensation expense recognized in net earnings in each of the past three years:


	Year Ended December 31,
(in thousands)	2017		2016		2015
Restricted Stock	$	22,920	$	28,612	$	34,733
Stock Options		4,340		2,683		—
Total stock-based compensation expense	$	27,260	$	31,295	$	34,733

Restricted Stock

The Company determines the fair value of restricted stock and RSUs based on the closing price of its stock on the date of grant. The Company generally recognizes compensation expense related to restricted stock and RSUs on a straight-line basis over the period during which the restriction lapses. Forfeitures are recognized in the period in which they occur. A summary of restricted stock and RSU activity during 2017 follows:


(in thousands, except per share amounts)	Number of Shares/Units	Weighted Average Grant Date Fair Value
Outstanding at beginning of period — unvested	3,904	$	20.54
Granted	2,156		10.62
Cancelled	(420)		15.90
Vested	(1,379)		29.36
Outstanding at end of period — unvested	4,261	$	13.12

Included in the activity above are 393 shares of restricted stock that vest under specified market conditions, which were awarded to certain employees in 2017 and 2016. Each of these employees was generally awarded two equal tranches of market condition restricted stock that immediately vests when the Company’s common stock trades at either $30 or $40 per share for ninety consecutive calendar days.

At December 31, 2017, there was $2,931 of unrecognized pre-tax stock-based compensation expense related to non-vested restricted stock awards with market conditions, which the Company expects to recognize over a weighted-average period of 1.8 years.

At December 31, 2017, there was $33,202 of unrecognized pre-tax stock-based compensation expense related to all other non-vested restricted stock award shares and units, which the Company expects to recognize over a weighted-average period of 1.8 years.

Stock Options

During the year ended December 31, 2016, the Company awarded certain employees market condition stock options under the 2015 Plan, included in the activity above, that vest under specified market conditions. Each employee was generally awarded two equal tranches of market condition stock options that immediately vest when the Company’s common stock trades at either $30 or $40 per share for ninety consecutive calendar days.

The Company recognizes compensation expense related to stock options on a straight-line basis over the derived term of the awards. Forfeitures are recognized in the period in which they occur. The fair value of stock options with market conditions is estimated using a binomial lattice Monte Carlo simulation model. The weighted-average fair value and the assumptions used to measure fair value were as follows:


	Year Ended December 31,
	2017		2016		2015
Stock option assumptions:
Weighted-average fair value	$	—	$	7.80	$	—
Expected volatility		—		60.0%		—
Risk-free interest rate		—		0.76%-1.46		—
Expected dividend yield		—		0%		—
Derived term in years		—		3-4		—

Stock option activity for the year ended December 31, 2017 was as follows:


	Year Ended December 31, 2017
(in thousands, except per share amounts)	Number of Shares	Weighted Average Exercise		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Stock option activity:
Outstanding at beginning of period	2,260	$	13.92	—	—
Granted	—		—	—	—
Exercised	—		—	—	—
Forfeited and expired	(440)		13.26	—	—
Outstanding at end of period	1,820	$	14.08	8.50	—

In the table above, intrinsic value is calculated as the excess, if any, between the market price of the Company’s stock on the last trading day of the year and the exercise price of the options. Because the market price was lower than the exercise price, the intrinsic value is zero.

At December 31, 2017, there was $7,424 of unrecognized pre-tax stock-based compensation expense related to stock options, which the Company expects to recognize over a weighted-average period of 1.7 years.