that can be issued as options, stock appreciation rights, and other share-based awards. Shares of our common stock delivered upon exercise or vesting may consist of newly issued shares of our common stock or shares acquired in the open market.

Share-based compensation expense is recognized in the “Selling, general, and administrative expense” line in the Consolidated Statements of Operations and Comprehensive Income (Loss) except for $0.8 million and $0.4 million attributable to discontinued operations for the years ended December 31, 2020, and 2019, respectively. The following table lists the components of share-based compensation expense by type of award.


	Years Ended December 31,
	2021		2020		2019
Stock options	$	253	$	741	$	881
Restricted stock	2,166		3,473		1,897
Performance share units	1,420		755		1,155
Change in estimate of share-based award vesting (1)	(623)		(743)		(1,111)
Share-based compensation expense	$	3,216	$	4,226	$	2,822

Option awards were typically granted to key employees on an annual basis by the Compensation Committee of the Board of Directors. All options have an exercise price equal to the closing price of our stock on the date of grant. The term life of options is generally ten years with a vesting period of generally three years.

During the years ended 2020 and 2019, we granted options to purchase 159 thousand, and 210 thousand shares, respectively, to certain key employees. The weighted average grant-date fair value of the options granted during 2020 and 2019 was $4.76, and $2.77 per share, respectively. No options were granted in 2021. The fair value of our options cannot be determined by market value because they are not traded in an open market. Accordingly, we utilized the Black Scholes financial pricing model to estimate the fair value.


	2020		2019
Expected term	6 years		6 years
Average risk-free interest rate	1.42	%	2.47	%
Expected dividend yield	—	%	3.53	%
Expected volatility	52.80	%	49.53	%
Expected forfeiture rate	—	%	4.00	%

The expected term is derived from using the simplified method of determining stock option terms as described under the SAB Topic 14, Share-based payment. The simplified method was used because sufficient historical stock option exercise experience was not available, primarily due to the transformation of the management structure over the past several years.

The expected dividend yield is derived by a mathematical formula which uses the expected annual dividends over the expected term divided by the fair market value of our common stock at the grant date. The expected dividend yield for 2020 grants reflects no expected annual dividends over the expected term because we discontinued dividends in 2019.

The expected volatility rate is derived from our actual common stock historical volatility over the same time period as the expected term. The expected volatility rate is derived by a mathematical formula utilizing daily closing price data.

The expected forfeiture rate is determined from examining the historical pre-vesting forfeiture patterns of past option issuances to key employees. While the expected forfeiture rate is not an input of the Black Scholes financial pricing model for determining the fair value of the options, it is an important determinant of stock option compensation expense to be recorded.


	Number of Options (in thousands)	Weighted- Average Exercise Price (per share)		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding at January 1, 2021	871	$	12.41

Exercised	(6)	7.93			$	8
Forfeited	(22)	9.29
Expired	(222)	13.31
Outstanding at December 31, 2021	621	$	12.24	3.8 years	$	—	(1)
Exercisable at December 31, 2021	532	$	12.80	3.2 years	$	—	(1)

(1)The aggregate intrinsic value is the sum of intrinsic values for each exercisable individual option grant. The intrinsic value is the amount by which the closing market price of our stock at December 31, 2021, was greater than the exercise price of any individual option grant.

During the years ended December 31, 2021, 2020, and 2019, we granted 459 thousand, 460 thousand, and 339 thousand shares of restricted stock to non-executive directors, officers, and certain other key employees. The shares of restricted stock granted during the years ended December 31, 2021, 2020, and 2019, vest pro-rata generally over three years for officers and certain other key employees and over one year for non-executive directors and certain key employees. We determined the fair value of the shares awarded by using the closing price of our common stock as of the date of grant. The weighted average grant-date fair value of restricted stock granted in the years ended December 31, 2021, 2020, and 2019, was $6.84, $9.35, and $7.74 per share, respectively. The total grant-date fair value of restricted stock that vested in the years ended December 31, 2021, 2020, and 2019, was $2.8 million, $1.9 million, and $2.9 million, respectively.


	Nonvested Restricted Shares (in thousands)	Weighted Average Grant-Date Fair Value (per share)
Unvested at January 1, 2021	385	$	9.42
Granted	459	6.84
Vested	(303)	9.34
Forfeited	(72)	7.22
Unvested at December 31, 2021	469	$	7.28

Performance Share Units (“PSUs”) are a form of long-term incentive compensation awarded to executive officers and certain other key employees designed to directly align the interests of employees to the interests of our stockholders, and to create long-term stockholder value. PSUs granted in 2021 and 2020 were made pursuant to the NN, Inc. 2019 Omnibus Incentive Plan and a Performance Share Unit Agreement (the “2019 Omnibus Agreement”). PSUs granted in 2019 were made pursuant to the NN, Inc. 2016 Omnibus Incentive Plan and a Performance Share Unit Agreement (the “2016 Omnibus Agreement”). Some PSUs are based on total shareholder return (“TSR Awards”), and other PSUs are based on return on invested capital (“ROIC Awards”).

The TSR Awards vest, if at all, upon our achieving a specified relative total shareholder return, which will be measured against the total shareholder return of the S&P SmallCap 600 Index during specified performance periods as defined in the 2019 Omnibus Agreement and the 2016 Omnibus Agreement. The ROIC Awards will vest, if at all, upon our achieving a specified average return on invested capital during the performance periods. Each performance period generally begins on January 1 of the year of grant and ends 36 months later on December 31.

We recognize compensation expense over the performance period in which the performance and market conditions are measured. If the PSUs do not vest at the end of the performance periods, then the PSUs will expire automatically. Upon vesting, the PSUs will be settled by the issuance of shares of our common stock, subject to the award recipient’s continued

employment. The actual number of shares of common stock to be issued to each award recipient at the end of the performance periods will be interpolated between a threshold and maximum payout amount based on actual performance results. No dividends will be paid on outstanding PSUs during the performance period; however, dividend equivalents will be paid based on the number of shares of common stock that are ultimately earned at the end of the performance periods.

With respect to the TSR Awards, a participant will earn 50% of the target number of PSUs for “Threshold Performance,” 100% of the target number of PSUs for “Target Performance,” and 150% of the target number of PSUs for “Maximum Performance.” With respect to the ROIC Awards, a participant will earn 35% or 50% of the target number of PSUs for “Threshold Performance,” 100% of the target number of PSUs for “Target Performance,” and 150% of the target number of PSUs for “Maximum Performance.” For performance levels falling between the values shown below, the percentages will be determined by interpolation.

TSR Awards:

Threshold Performance
(50% of Shares)

Target Performance
(100% of Shares)

Maximum Performance
(150% of Shares)

2021 grants

th Percentile

2020 grants

th Percentile

2019 grants

th Percentile


ROIC Awards:	Threshold Performance (35% or 50% of Shares)(1)		Target Performance (100% of Shares)		Maximum Performance (150% of Shares)
2021 grants	6.3	%	7.0	%	8.6	%
2020 grants (2)	6.7	%	7.9	%	8.7	%
2019 grants	4.7	%	5.8	%	7.0	%

(2)The performance levels for 2020 grants were modified by the compensation committee of the board of directors in the first quarter of 2021 to adjust for the sale of the Life Sciences business and the ongoing effects of the COVID-19 pandemic. Threshold Performance was changed to 6.7% to earn 50% of Shares, Target Performance was changed to 7.9% to earn 100% of Shares, and Maximum Performance was changed to 8.7% to earn 150% of Shares.

We estimate the grant-date fair value of TSR Awards using the Monte Carlo simulation model, as the total shareholder return metric is considered a market condition under ASC Topic 718, Compensation – stock compensation. The grant-date fair value of ROIC Awards is based on the closing price of a share of our common stock on the date of grant.


	TSR Awards			ROIC Awards
Award Year	Shares (in thousands)	Grant-Date Fair Value (per share)		Shares (in thousands)	Grant-Date Fair Value (per share)
2021	142	$	8.58	172	$	7.20
2020	139	$	10.88	157	$	9.44
2019	136	$	9.28	174	$	7.93

We recognize expense for ROIC Awards based on the probable outcome of the associated performance condition. We generally recognize an expense for ROIC Awards based on the Target Performance threshold of 100% because, at the date of grant, the Target Performance is the probable level of performance achievement.


	Nonvested TSR Awards			Nonvested ROIC Awards
	Number of Shares (in thousands)	Weighted Average Grant-Date Fair Value		Number of Shares (in thousands)	Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2021	138	$	10.58	160	$	9.13
Granted	142	8.58		172	7.20
Forfeited	(61)	9.61		(71)	8.17
Expired	(25)	9.28		(33)	7.93
Nonvested at December 31, 2021	194	$	9.59	228	$	8.14

None of the PSUs that were granted in 2017, 2018, and 2019 vested in 2019, 2020, and 2021, respectively, because the actual performance achieved was below the “Threshold Performance” level as defined by the grant agreements.

During the year ended December 31, 2021, we recognized a decrease in share-based compensation expense of $0.6 million in the “Selling, general, and administrative expense” line in the Consolidated Statements of Operations and Comprehensive Income (Loss) to reverse cumulative expense for restricted stock and PSU awards that were forfeited upon termination of employment in excess of our estimated forfeiture rate and for ROIC Awards that were granted in 2020 and are now expected to achieve threshold performance rather than the target performance level.

During the year ended December 31, 2020, we recognized a decrease in share-based compensation expense in continuing operations of $0.3 million in the “Selling, general, and administrative expense” line of the Consolidated Statements of Operations and Comprehensive Income (Loss) to reverse cumulative expense for option, restricted stock, and PSU awards that were forfeited upon termination of employment and for ROIC Awards that were granted in 2019 and are not expected to achieve Threshold Performance. In 2020 we also recognized a decrease in share-based compensation expense of $0.5 million in the “Income (loss) from discontinued operations, net of tax” line in the Consolidated Statements of Operations and Comprehensive Income (Loss) to reverse cumulative expense for option, restricted stock, and PSU awards that were forfeited upon termination of employees related to the Life Sciences business.

During the year ended December 31, 2019, we recognized a decrease in share-based compensation expense in continuing operations of $1.1 million in the “Selling, general, and administrative expense” line in the Consolidated Statements of Operations and Comprehensive Income (Loss) to reverse cumulative expense for option, restricted stock, and PSU awards that were forfeited upon termination of employment.