14 - STOCK-BASED COMPENSATION

2014 Management Incentive Plan

On the Effective Date, pursuant to the Chapter 11 Plan, the Company adopted the Genco Shipping & Trading Limited 2014 Management Incentive Plan (the “MIP”). An aggregate of 966,806 shares of Common Stock were available for award under the MIP. Awards under the MIP took the form of restricted stock grants and three tiers of MIP Warrants with staggered strike prices based on increasing equity values. The number of shares of common stock available under the Plan represented approximately 1.8% of the shares of post-emergence Common Stock outstanding as of the Effective Date on a fully-diluted basis. Awards under the MIP were available to eligible employees, non-employee directors and/or officers of the Company and its subsidiaries (collectively, “Eligible Individuals”). Under the MIP, a committee appointed by the Board from time to time (or, in the absence of such a committee, the Board) (in either case, the “Plan Committee”) may grant a variety of stock-based incentive awards, as the Plan Committee deems appropriate, to Eligible Individuals. The MIP Warrants are exercisable on a cashless basis and contain customary anti-dilution protection in the event of any stock split, reverse stock split, stock dividend, reclassification, dividend or other distributions (including, but not limited to, cash dividends), or business combination transaction.

On August 7, 2014, pursuant to the MIP, certain individuals were granted MIP Warrants whereby each warrant can be converted on a cashless basis for the amount in excess of the respective strike price. The MIP Warrants were issued in three tranches for 238,066, 246,701 and 370,979 shares and have exercise prices of $259.10 (the “$259.10 Warrants”), $287.30 (the “$287.30 Warrants”) and $341.90 (the “$341.90 Warrants”) per whole share, respectively. The fair value of each warrant upon emergence from bankruptcy was $7.22 for the $259.10 Warrants, $6.63 for the $287.30 Warrants and $5.63 for the $341.90 Warrants. The warrant values were based upon a calculation using the Black-Scholes-Merton option pricing formula. This model uses inputs such as the underlying price of the shares issued when the warrant is exercised, volatility, cost of capital interest rate and expected life of the instrument. The Company has determined that the warrants should be classified within Level 3 of the fair value hierarchy by evaluating each input for the Black-Scholes-Merton option pricing formula against the fair value hierarchy criteria and using the lowest level of input as the basis for the fair value classification. The Black-Scholes-Merton option pricing formula used a volatility of 43.91% (representing the six-year volatility of a peer group), a risk-free interest rate of 1.85% and a dividend rate of 0%. The aggregate fair value of these awards upon emergence from bankruptcy was $54,436. The warrants vested 33.33% on each of the first three anniversaries of the grant date, with accelerated vesting upon a change in control of the Company.

For the three and six months ended June 30, 2018 and 2017, the Company recognized amortization expense of the fair value of these warrants, which is included in General and administrative expenses, as follows:


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
General and administrative expenses	$	—	$	377	$	—	$	749

As of June 30, 2018, there was no unamortized stock-based compensation for the warrants and all warrants were vested.

The following table summarizes certain information about the warrants outstanding as of June 30, 2018:

Warrants Outstanding and Unvested,

Warrants Outstanding and Exercisable,

June 30, 2018

Weighted

Average

Weighted

Average

Weighted

Average

Exercise Price of

Average

Remaining

Average

Remaining

Outstanding

Number of

Exercise

Contractual

Number of

Exercise

Contractual

Warrants

Price

Life

Warrants

Price

Life

303.12

—

8,557,461

303.12

2.11

As of June 30, 2018 and December 31, 2017, a total of 8,557,461 of warrants were outstanding.

The nonvested stock awards granted under the MIP vested ratably on each of the three anniversaries of August 7, 2014. As of June 30, 2018, all stock awards granted under the MIP were vested.

There were no shares that vested under the MIP during the six months ended June 30, 2018 and 2017. The total fair value is calculated as the number of shares vested during the period multiplied by the fair value on the vesting date.

For the three and six months ended June 30, 2018 and 2017, the Company recognized nonvested stock amortization expense for the MIP restricted shares, which is included in General and administrative expenses, as follows:


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
General and administrative expenses	$	—	$	154	$	—	$	306

The Company amortized these grants over the applicable vesting periods, net of anticipated forfeitures. As of June 30, 2018, there was $0 of unrecognized compensation cost.

2015 Equity Incentive Plan

On June 26, 2015, the Company’s Board of Directors approved the 2015 Equity Incentive Plan for awards with respect to an aggregate of 400,000 shares of common stock (the “2015 Plan”). Under the 2015 Plan, the Company’s Board of Directors, the compensation committee, or another designated committee of the Board of Directors may grant a variety of stock-based incentive awards to the Company’s officers, directors, employees, and consultants. Awards may consist of stock options, stock appreciation rights, dividend equivalent rights, restricted (nonvested) stock, restricted stock units, and unrestricted stock. As of June 30, 2018, the Company has awarded restricted stock units, restricted stock and stock options under the 2015 Plan.

On March 23, 2017, the Board of Directors approved an amendment and restatement of the 2015 Plan. This amendment and restatement increases the number of shares available for awards under the plan from 400,000 to 2,750,000, subject to shareholder approval; sets the annual limit for awards to non-employee directors and other individuals as 500,000 and 1,000,000 shares, respectively; and modifies the change in control definition. The Company’s shareholder’s approved the increase in the number of shares at the Company’s 2017 Annual Meeting of Shareholders on May 17, 2017.

Stock Options

On March 23, 2017, the Company issued options to purchase 133,000 of the Company’s shares of common stock to John C. Wobensmith, Chief Executive Officer and President, with an exercise price of $11.13 per share. One third of the options become exercisable on each of the first three anniversaries of October 15, 2016, with accelerated vesting upon a change in control of the Company, and all unexercised options expire on the sixth anniversary of the grant date. The fair value of each option was estimated on the date of the grant using the Black-Scholes-Merton pricing formula, resulting in a value of $6.41 per share, or $853 in the aggregate. The assumptions used in the Black-Scholes-Merton option pricing formula are as follows: volatility of 79.80% (representing a blend of the Company’s historical volatility and a peer-based volatility estimate), a risk-free interest rate of 1.68%, a dividend yield of 0%, and expected life of 3.78 years (determined using the simplified method as outlined in Staff Accounting Bulletin 14 – Share-Based Payment (“SAB Topic 14”) due to lack of historical exercise data).

On February 27, 2018, the Company issued options to purchase 122,608 of the Company’s shares of common stock to certain individuals with an exercise price of $13.69 per share. One third of the options become exercisable on each of the first three anniversaries of February 27, 2018, with accelerated vesting that may occur following a change in control of the Company, and all unexercised options expire on the sixth anniversary of the grant date. The fair value of each option was estimated on the date of the grant using the Black-Scholes-Merton pricing formula, resulting in a value of $7.55 per share, or $926 in the aggregate. The assumptions used in the Black-Scholes-Merton option pricing formula are as follows: volatility of 71.94% (representing a blend of the Company’s historical volatility and a peer-based volatility estimate), a risk-free interest rate of 2.53%, a dividend yield of 0%, and expected life of 4.00 years (determined using the simplified method as outlined in SAB Topic 14 due to lack of historical exercise data).

For the three and six months ended June 30, 2018 and 2017, the Company recognized amortization expense of the fair value of these options, which is included in General and administrative expenses, as follows:


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
General and administrative expenses	$	214	$	198	$	337	$	218

Amortization of the unamortized stock-based compensation balance of $929 as of June 30, 2018 is expected to be expensed $394, $392, $127 and $16 during the remainder of 2018 and during the years ended December 31, 2019, 2020 and 2021, respectively. The following table summarizes the unvested option activity for the six months ended June 30, 2018:


		Weighted		Weighted
	Number of	Average Exercise		Average Fair
	Options	Price		Value
Outstanding at January 1, 2018 - Unvested	88,667	$	11.13	$	6.41
Granted	122,608		13.69		7.55
Exercisable	—		—		—
Exercised	—		—		—
Forfeited	—		—		—

Outstanding at June 30, 2018 - Unvested	211,275	$	12.62	$	7.07

The following table summarizes certain information about the options outstanding as of June 30, 2018:

Options Outstanding and Unvested,

Options Outstanding and Exercisable,

June 30, 2018

Weighted

Average

Weighted

Average

Weighted

Average

Exercise Price of

Average

Remaining

Average

Remaining

Outstanding

Number of

Exercise

Contractual

Number of

Exercise

Contractual

Options

Price

Life

Warrants

Price

Life

12.36

211,275

12.62

5.27

44,333

11.13

4.73

As of June 30, 2018 and December 31, 2017, a total of 255,608 and 133,000 stock options were outstanding, respectively.

Restricted Stock Units

The Company has issued restricted stock units (“RSUs”) under the 2015 Plan to certain members of the Board of Directors and certain executives and employees of the Company, which represent the right to receive a share of common stock, or in the sole discretion of the Company’s Compensation Committee, the value of a share of common stock on the date that the RSU vests. As of June 30, 2018 and December 31, 2017, 118,838 and 118,838 shares of the Company’s common stock were outstanding in respect of the RSUs, respectively. Such shares of common stock will only be issued in respect of vested RSUs issued to directors when the director’s service with the Company as a director terminates. Such shares of common stock will only be issued to executives and employees when their RSUs vest under the terms of their grant agreements and the amended 2015 Plan described above. On May 17, 2017, 18,234 shares of common stock were issued to Eugene Davis, the former Chairman of the Audit Committee, in respect of vested RSUs following his departure from the Board.

The RSUs that have been issued to certain members of the Board of Directors generally vest on the date of the annual shareholders meeting of the Company following the date of the grant. The RSUs that have been issued to other individuals vest ratably on each of the three anniversaries of the determined vesting date. The table below summarizes the Company’s unvested RSUs for the six months ended June 30, 2018:


		Weighted
	Number of	Average Grant
	RSUs	Date Price
Outstanding at January 1, 2018	220,129	$	11.01
Granted	51,704		14.84
Vested	(25,197)		10.12
Forfeited	—		—

Outstanding at June 30, 2018	246,636	$	11.91

The total fair value of the RSUs that vested during the six months ended June 30, 2018 and 2017 was $450 and $675, respectively. The total fair value is calculated as the number of shares vested during the period multiplied by the fair value on the vesting date.

The following table summarizes certain information of the RSUs unvested and vested as of June 30, 2018:


Unvested RSUs				Vested RSUs
June 30, 2018				June 30, 2018
			Weighted
	Weighted		Average		Weighted
	Average		Remaining		Average
Number of	Grant Date		Contractual	Number of	Grant Date
RSUs	Price		Life	RSUs	Price
246,636	$	11.91	1.48	196,769	$	11.23

The Company is amortizing these grants over the applicable vesting periods, net of anticipated forfeitures. As of June 30, 2018, unrecognized compensation cost of $1,376 related to RSUs will be recognized over a weighted-average period of 1.48 years.

For the three and six months ended June 30, 2018 and 2017, the Company recognized nonvested stock amortization expense for the RSUs, which is included in General and administrative expenses as follows:


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
General and administrative expenses	$	421	$	833	$	788	$	992

Restricted Stock

Under the 2015 Plan, grants of restricted common stock issued to executives ordinarily vest ratably on each of the three anniversaries of the determined vesting date. The table below summarizes the Company’s nonvested stock awards for the six months ended June 30, 2018 which were issued under the 2015 Plan:


		Weighted
	Number of	Average Grant
	Shares	Date Price
Outstanding at January 1, 2018	6,802	$	5.20
Granted	—		—
Vested	—		—
Forfeited	—		—

Outstanding at June 30, 2018	6,802	$	5.20

There were no shares that vested under the 2015 Plan during the six months ended June 30, 2018 and 2017. The total fair value is calculated as the number of shares vested during the period multiplied by the fair value on the vesting date.

For the three and six months ended June 30, 2018 and 2017, the Company recognized nonvested stock amortization expense for the 2015 Plan restricted shares, which is included in General and administrative expenses, as follows:


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
General and administrative expenses	$	3	$	8	$	6	$	16

The Company is amortizing these grants over the applicable vesting periods, net of anticipated forfeitures. As of June 30, 2018, unrecognized compensation cost of $5 related to nonvested stock will be recognized over a weighted-average period of 0.38 years.