NOTE 8: Equity Compensation Plans

Long Term Incentive Plan

In May 2016, our shareholders approved and our board of directors adopted an amended and restated Long Term Incentive Plan, or the incentive plan, which provides for the grants of awards to our directors, officers and full-time employees, full-time employees of our former advisor and its affiliates, full-time employees of entities that provide services to our former advisor, directors of our former advisor or of entities that provide services to it, certain of our consultants and certain consultants to our former advisor and its affiliates or to entities that provide services to our former advisor. The incentive plan authorizes the grant of restricted or unrestricted shares of our common stock, non-qualified and incentive stock options, restricted stock units, stock appreciation rights, dividend equivalents and other stock- or cash-based awards. In conjunction with the amendment, the number of shares of common stock issuable under the incentive plan was increased to 4,300,000 shares and the term of the incentive plan was extended to May 12, 2026.

Under the incentive plan or predecessor incentive plans, we granted restricted shares and stock appreciation rights, or SARs, to employees of our former advisor. These awards generally vested over a three-year period. In addition, we granted unrestricted shares to our directors. These awards generally vested immediately.

A summary of the SARs activity of the incentive plan is presented below.

	2016					2015					2014
	SARs			Weighted Average Exercise Price		SARs			Weighted Average Exercise Price		SARs			Weighted Average Exercise Price
Outstanding, January 1,		351,000		$	9.13		72,000		$	8.20		-		$	-
Granted		—					300,000			9.35		80,000			8.20
Expired		(2,000	)		9.35		-			-		-			-
Exercised		(8,000	)		8.20		(2,000	)		8.20		-			-
Forfeited		(4,000	)		9.35		(19,000	)		9.11		(8,000	)		-
Outstanding, December 31,		337,000		$	9.15		351,000		$	9.13		72,000		$	8.20
SARs exercisable at December 31,		128,998					22,000					-

As of December 31, 2016, our closing common stock price was $8.92, which exceeds the exercise prices of some of the SARs. The total intrinsic value of SARs outstanding and exercisable at December 31, 2016 was $26.

The following table summarizes information about the SARs outstanding and exercisable as of December 31, 2016:

SARs Outstanding

SARs Exercisable

Exercise Price

Number

Outstanding

Weighted Average Remaining

Contractual

Life

Number

Exercisable

Weighted

Average

Remaining

Contractual

Life

$8.20 - 9.35

337,000

2.95

128,998

2.84

As of December 31, 2016, the unearned compensation cost relating to unvested SAR awards was $71.

Our assumptions used in computing the fair value of the SARs issued during the years ended December 31, 2015 and 2014, using the Black-Scholes Option Pricing Model, are summarized below. There were no SARs issued during the year ended December 31, 2016.

	As of December 31
	2015			2014
Stock Price	$	7.51		$	9.31
Strike Price	$ 8.20-9.35			$	8.20
Risk-free interest rate	1.1 - 1.2%				1.1	%
Dividend yield		9.6	%		7.7	%
Volatility		34	%		21	%
Expected term	1.7 - 2.5 years			2.5 years

A summary of the restricted common share awards as of December 31, 2016, 2015 and 2014 of the incentive plan is presented below.

	2016					2015					2014
	Number of Shares			Weighted Average Grant Date Fair Value Per Share		Number of Shares			Weighted Average Grant Date Fair Value Per Share		Number of Shares			Weighted Average Grant Date Fair Value Per Share
Balance, January 1,		117,000		$	9.13		36,000		$	8.20		-		$	-
Granted		228,000			6.33		112,000			9.30		49,000			8.34
Vested		(60,661	)		8.62		(24,000	)		8.55		(13,000	)		8.72
Forfeited		(3,334	)		7.47		(7,000	)		9.02		-			-
Balance, December 31,		281,005		$	6.99		117,000		$	9.13		36,000		$	8.20

As of December 31, 2016, the unearned compensation cost relating to unvested restricted common share awards was $1,508. The estimated fair value of restricted common share awards vested during 2016 and 2015 was $427 and $221, respectively.

For the years ended December 31, 2016, 2015 and 2014 we recognized $1,222, $495 and $206 of stock compensation expense, respectively.

On February 28, 2017, our compensation committee awarded 143,679 restricted stock awards, valued at $9.19 per share, or $1,320 in the aggregate. The restricted stock awards vest over a three-year period except for 6,585 awards that vested immediately. In addition, our compensation committee awarded performance share units, or PSUs, to Eligible Officers under a newly adopted 2017 Annual Equity Award Program pursuant to the incentive plan. The number of PSUs awarded will be based on attainment of certain performance criteria over a three-year period, with 226,469 PSUs granted for achieving the maximum performance criteria.