Stock-Based Compensation

The Company has an incentive compensation plan (the “2012 Plan”), which authorizes the granting of a variety of different types of awards including, but not limited to, non-qualified stock options, incentive stock options, Stock Appreciation Rights (“SARs”), Restricted Stock Awards (“RSAs”), deferred stock and performance units to its executive officers, employees, consultants and Directors. The 2012 Plan is administered by the Compensation Committee of the Board.

Under the 2012 Plan, 830,925 shares were initially made available for awards, with 700,000 additional shares added to the 2012 Plan in 2013. Forfeited shares are added back to the pool of shares available for future awards.

As of December 31, 2018, the Company had 495,558 shares available for issuance of future awards.

SAR Award Agreements

SAR awards entitle the recipients to receive, upon exercise, a number of shares of Common Stock equal to (i) the number of shares for which the SAR is being exercised multiplied by the value of one share of Common Stock on the date of exercise (determined as provided in the SAR award agreement), less (ii) the number of shares for which the SAR is being exercised multiplied by the applicable exercise price, divided by (iii) the value of one share of Common Stock on the date of exercise (determined as provided in the SAR award agreement). The exercised SAR is to be settled only in whole shares of Common Stock, and the value of any fractional share of Common Stock is forfeited.

For all SAR award assumptions, the Company used rates on the grant date of zero-coupon government bonds with maturities over periods covering the term of the awards. The Company considered the historical volatility of its stock price over a term similar to the expected life of the awards in determining expected volatility. The expected term is the period that the awards granted are expected to remain outstanding. The Company has never declared or paid a cash dividend on its Common Stock and has no plans to pay cash dividends in the foreseeable future.

SAR Awards

In 2017, the Company granted 5,000 SAR awards. The assumptions used for valuing the 2017 SARs included the following:



Assumptions	2017 SARs
Market closing price of the Common Stock	$	7.37
Exercise price	$	7.37
Risk-free interest rate	2.1		%
Estimated price volatility	58.5		%
Expected term	6.00 years
Dividend yield	—		%

The resulting fair value was $4.10 per underlying share. The SAR awards vest ratably over 2 years, with half of the shares becoming exercisable on each of the first two anniversaries of the grant. In 2018 and 2017, the Company recognized an immaterial amount of compensation expense related to the 2017 SAR awards.

In 2018, the Company granted 60,000 SAR awards. The assumptions used for valuing the 2018 SARs included the following:



Assumptions	2018 SARs
Market closing price of the Common Stock	$	7.92
Exercise price	$	7.92
Risk-free interest rate	2.6		%
Estimated price volatility	78.5		%
Expected term	6.58 years
Dividend yield	—		%

The resulting fair value was $5.63 per underlying share. The SAR awards vest over 3.17 years. In 2018, the Company recognized $0.1 million of compensation expense related to the 2018 SAR awards.

SAR activity consisted of the following:



Number of Shares under SARs	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2016	152,600		$	16.55	9.02	$	—
Granted	5,000		7.37			—
Exercised	—		—			—
Forfeited	(67,130	)	23.16			—
Expired	(6,750	)	12.68			—
Outstanding at December 31, 2017	83,720		11.02		8.21	1
Exercisable at December 31, 2017	39,360		$	11.25	8.15	$	—



Number of Shares under SARs	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2017	83,720		$	11.02	8.21	$	1
Granted	60,000		7.92			—
Exercised	—		—			—
Forfeited	(1,000	)	11.25			—
Expired	(4,700	)	11.25			—
Outstanding at December 31, 2018	138,020		9.66		8.05	89
Exercisable at December 31, 2018	87,370		$	11.14	6.21	$	5

Restricted Stock Awards

RSA grants represent Common Stock issued subject to forfeiture or other restrictions that will lapse upon satisfaction of specified conditions. RSAs are valued based on the fair value of the Common stock at grant date, with compensation expense for recipients recognized over the vesting period based on the date of the award, primarily recognized in Selling, general and administrative expenses.

Restricted stock activity consisted of the following:



	Shares		Weighted-Average Grant Date Fair Value
December 31, 2016	104,340		$	41.61
Granted	437,472		8.13
Forfeited	(29,144	)	38.33
Vested	(16,395	)	44.19
December 31, 2017	496,273		$	12.20
Granted	50,000		10.92
Forfeited	(32,547	)	25.95
Vested	(254,440	)	10.14
Balance as of December 31, 2018	259,286		$	12.25

In 2018 and 2017, the Company recognized $2.5 million and $1.4 million, respectively, of compensation expense, net of forfeitures, in connection with the RSAs. The original grant date fair value of restricted stock that vested during 2018 and 2017 was $2.6 million and $0.7 million, respectively. Unrecognized compensation expense related to RSAs as of December 31, 2018 and 2017 was $1.7 million and $4.6 million, respectively. As of December 31, 2018, the weighted-average period over which the unrecognized compensation cost is expected to be recognized was approximately two years.

2017 Retention Program

The RSA information above includes retention awards granted in July 2017. As part of the Company’s efforts to retain certain employees, 379,472 RSAs with a total value of $2.9 million were granted along with $3.3 million of cash awards. Half of the shares granted vested in March 2018, and the second half vested in March 2019. Half of the cash awards were paid in quarterly installments commencing in July 2017, with the remaining half paid in 2019.

Other Equity Award

In 2012, the Company entered into an employment agreement that included an award of $0.5 million of restricted stock with a put option for the recipient to have the Company repurchase the related restricted stock for $2.0 million upon vesting at December 31, 2020. In the first quarter of 2017, the award was forfeited, and $1.0 million of previously recognized expense was reversed.