STOCK-BASED COMPENSATION AND EMPLOYEE BENEFIT PLANS

BioScrip Equity Incentive Plans

Under the Company’s Amended and Restated 2008 Equity Incentive Plan (the “2008 Plan”), the Company may issue, among other things, incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock grants, restricted stock units, performance shares and performance units to key employees and directors. While stock appreciation rights are authorized under the 2008 Plan, they may also be issued outside of the plan. The 2008 Plan is administered by the Company’s Management Development and Compensation Committee (the “Compensation Committee”), a standing committee of the Board of Directors.

On November 30, 2016, at a special meeting, the stockholders approved an amendment to the 2008 Plan to (a) increase the number of shares of Common Stock in the aggregate that may be subject to awards by 5,250,000 shares, from 9,355,000 to 14,605,000 shares and (b) increase the annual grant caps under the Company’s 2008 Plan from 500,000 Options, 500,000 Stock Appreciation Rights and 350,000 Stock Grants and Restricted Stock Units to a cap of no more than a total of 3,000,000 Options, Stock Appreciation Rights, Stock Grants and Restricted Stock Units combined that are intended to comply with the requirements of Section 162(m) of the Code.

On May 3, 2018, at the annual meeting of stockholders, the Board of Directors and stockholders approved the 2018 Equity Incentive Plan (the “2018 Plan”) to replace the expiring 2008 Plan. The 2018 Plan contains terms and conditions substantially similar to the 2008 Plan. A total of 16,406,939 shares of Common Stock were initially authorized for issuance under the 2018 Plan, which included the shares that remained available under the 2008 Plan. The 2018 Plan will terminate ten years after its adoption, unless terminated earlier by the Board of directors. As of December 31, 2018, there were 12,987,351 shares of Common Stock available for future grant under the 2018 Plan.

Stock Options

Options granted under the 2008 Plan or the 2018 Plan: (a) typically vest over a three-year period and, in certain instances, fully vest upon a change in control of the Company, (b) have an exercise price that may not be less than 100% of its fair market value on the date of grant and (c) are exercisable for seven to ten years after the date of grant, subject to earlier termination in certain circumstances.

Option expense is amortized on a straight-line basis over the requisite service period. The Company recognized compensation expense related to stock options of $1.0 million, $1.0 million, and $3.4 million, in the years ended December 31, 2018, 2017 and 2016, respectively.

The weighted-average, grant-date fair value of options granted during the years ending December 31, 2018, 2017 and 2016 was $1.69, $1.22, and $0.72, respectively. The fair value of stock options granted was estimated on the date of grant using a Black-Scholes option-pricing model. The assumptions used to compute the fair value of options for the years ending December 31, 2018, 2017 and 2016 were:



	2018		2017		2016
Expected volatility	71.0	%	73.2	%	68.1	%
Risk-free interest rate	2.71	%	2.04	%	1.98	%
Expected life of options	6.0 years		5.7 years		4.8 years
Dividend rate	—		—		—

A summary of stock option activity for the 2008 Plan and the 2018 Plan through December 31, 2018 was as follows:



	Options		Weighted Average Exercise Price		Aggregate Intrinsic Value (thousands)		Weighted Average Remaining Contractual Life
Balance at December 31, 2017	4,398,200		$	3.98	$	2,639	5.5 years
Granted	1,047,642		$	2.61	$	990
Exercised	(427,977	)	$	2.14	$	382
Forfeited and expired	(1,320,140	)	$	4.78	$	904
Balance at December 31, 2018	3,697,725		$	3.52	$	3,974	5.9 years
Exercisable at December 31, 2018	2,132,090		$	4.46	$	1,875	4.1 years

Cash received from option exercises under share-based payment arrangements was $0.1 million, 0.4 million and nominal for the years ended December 31, 2018, 2017 and 2016, respectively.

The maximum term of stock options under these plans is ten years. Options outstanding as of December 31, 2018 expire on various dates ranging from February 2019 through November 2028. The following table outlines our outstanding and exercisable stock options as of December 31, 2018:



	Options Outstanding				Options Exercisable
Range of Option Exercise Price	Outstanding Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Options Exercisable	Weighted Average Exercise Price
$0.00 - $2.06	921,094	$	1.35	6.4 years	471,139	$	0.76
$2.06 - $4.13	1,812,798	$	2.50	7.2 years	697,118	$	1.90
$4.13 - $6.19	179,000	$	5.13	3.0 years	179,000	$	2.74
$6.19 - $8.25	633,333	$	7.16	2.8 years	633,333	$	4.15
$10.31 - $12.38	125,000	$	11.04	2.6 years	125,000	$	5.97
$12.38 - $14.44	21,500	$	14.06	4.3 years	21,500	$	7.30
$16.50 - $18.57	5,000	$	16.63	4.6 years	5,000	$	8.96
All options	3,697,725				2,132,090

As of December 31, 2018 there was $1.7 million of unrecognized compensation expense related to unvested option grants that is expected to be recognized over a weighted-average period of 2.1 years.

Restricted Stock

Restricted stock grants subject solely to an employee’s or director’s continued service with the Company generally will become fully vested within (a) one to three years from the date of grant to employees and, in certain instances, may fully vest upon a change in control of the Company, and (b) one year from the date of grant for directors. Stock grants subject to the achievement of performance conditions will not vest less than one year from the date of grant.

The Company recognized compensation expense related to restricted stock awards of $2.6 million, $1.1 million, and $0.5 million for the years ended December 31, 2018, 2017 and 2016, respectively.

A summary of restricted stock award activity through December 31, 2018 was as follows:



	Restricted Stock		Weighted Average Grant Date Fair Value
Balance at December 31, 2017	1,882,363		$	1.82
Granted	3,284,197		$	2.55
Awards Vested	(372,116	)	$	2.09
Canceled	(392,256	)	$	2.29
Balance at December 31, 2018	4,402,188		$	1.87

As of December 31, 2018, there was $3.5 million in unrecognized compensation expense related to unvested restricted stock awards that is expected to be recognized over a weighted-average period of 1.8 years. The total fair value of restricted stock awards vested during the years December 31, 2018, 2017 and 2016 was $0.4 million, $0.4 million, and $0.2 million, respectively.

Employee Stock Purchase Plan

The Company’s Employee Stock Purchase Plan (the “ESPP”) is administered by the Compensation Committee. The ESPP provides all eligible employees, as defined under the ESPP, the opportunity to purchase up to a maximum number of shares of Common Stock of the Company as determined by the Compensation Committee. Participants in the ESPP may acquire the Common Stock at a cost of 85% of the lower of the fair market value on the first or last day of the quarterly offering period.

On May 8, 2018, the Board of Directors and stockholders approved an amendment to the ESPP to increase the number of shares available for issuance from 750,000 shares to 2,250,000 shares. As of December 31, 2018, there were 1,379,943 remaining shares available for issuance. During the years ended December 31, 2018, 2017 and 2016, 173,519, 265,608 and 245,371 shares were purchased under this plan, respectively. The Company recognized $0.1 million of expense related to the ESPP during the years ended December 31, 2018, 2017 and 2016.

401(k) Plan

The Company maintains a deferred compensation plan under Section 401(k) of the Internal Revenue Code. Under the Plan, employees may elect to defer up to 100% of their salary, subject to Internal Revenue Service limits, and the Company may make a discretionary matching contribution. During the year ended December 31, 2018, management approved discretionary matching contributions totaling approximately $0.3 million effective July 1, 2018. The Company elected to forgo a matching contribution during the years ended December 31, 2017 and 2016.