11.  Share-Based Awards and Cash-Based Awards

Incentive Compensation Plan

The W&T Offshore, Inc. Amended and Restated Incentive Compensation Plan, and subsequent amendments, (the “Plan”) was approved by our shareholders.  The Plan covers the Company’s eligible employees and consultants and includes both cash and share-based compensation awards.  The Plan grants the Compensation Committee of the Board of Directors administrative authority over all participants, and grants the Chief Executive Officer (“CEO”) with authority over the administration of awards granted to participants that are not subject to section 16 of the Exchange Act (as applicable, the “Committee”).

Pursuant to the terms of the Plan, the Committee establishes the vesting or performance criteria applicable to the award and may use a single measure or combination of business measures as described in the Plan.  Also, individual goals may be established by the Committee.  Performance awards may be granted in the form of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), bonus stock, dividend equivalents, or other awards related to stock, and awards may be paid in cash, stock, or any combination of cash and stock, as determined by the Committee.  The performance awards granted under the Plan can be measured over a performance period of up to 10 years and annual incentive awards (a type of performance award) will generally be paid within 90 days following the applicable year end.    

Share-based Awards: Restricted Stock Units

During 2018, 2017 and 2016, the Company granted RSUs under the Plan to certain of its employees.  RSUs are a long-term compensation component and are granted to certain employees, and are subject to satisfaction of certain predetermined performance criteria and adjustments at the end of the applicable performance period based on the results achieved.  In addition to share-based awards, the Company may grant to its employees cash-based incentive awards under the Plan, which are both a short-term and long-term compensation components and are subject to satisfaction of certain predetermined performance criteria.

As of December 31, 2018, there were 11,852,592 shares of common stock available for issuance in satisfaction of awards under the Plan.  The shares available for issuance are reduced on a one-for-one basis when RSUs are settled in shares of common stock, net of withholding tax.  The Company has the option following vesting to settle RSUs in stock or cash, or a combination of stock and cash.  During 2018, shares of common stock were used to settle all vested RSUs.  During 2017, cash was used to settle vested RSUs related to the retirement of an executive officer and shares of common stock were used to settle all other vested RSUs.  The Company expects to settle RSUs that vest in the future using shares of common stock.  

RSUs currently outstanding relate to the 2018 and 2017 grants, which were subject to predetermined performance criteria applied against the applicable performance period.  These RSUs continue to be subject to employment-based criteria and vesting generally occurs in December of the second year after the grant.  See the table below for anticipated vesting by year.

We recognize compensation cost for share-based payments to employees over the period during which the recipient is required to provide service in exchange for the award.  Compensation cost is based on the fair value of the equity instrument on the date of grant.  The fair values for the RSUs granted during 2018, 2017 and 2016 were determined using the Company’s closing price on the grant date.  We are also required to estimate forfeitures, resulting in the recognition of compensation cost only for those awards that are expected to actually vest.

All RSUs awarded are subject to forfeiture until vested and cannot be sold, transferred or otherwise disposed of during the restricted period.

During 2018, RSUs granted were subject to adjustments based on achievement of a combination of performance criteria, which was comprised of: (i) net income before income tax expense, net interest expense, depreciation, depletion, amortization, accretion and certain other items (“Adjusted EBITDA”) for 2018 and (ii) Adjusted EBITDA as a percent of total revenue (“Adjusted EBITDA Margin”) for 2018.  Adjustments range from 0% to 100% based upon actual results compared against pre-defined performance levels.  For 2018, the Company achieved target for both Adjusted EBITDA and Adjusted EBITDA Margin.

During 2017, RSUs granted were subject to adjustments based on achievement of a combination of performance criteria, which was comprised of: (i) Adjusted EBITDA for 2017 and (ii) Adjusted EBITDA Margin for 2017.  Adjustments range from 0% to 100% based upon actual results compared against pre-defined performance levels.  For 2017, the Company achieved target for both Adjusted EBITDA and Adjusted EBITDA Margin.

During 2016, RSUs granted were subject to adjustments based on achievement of a combination of performance criteria, which was comprised of: (i) Adjusted EBITDA for 2016 and (ii) Adjusted EBITDA Margin for 2016.  Adjustments range from 0% to 100% based upon actual results compared against pre-defined performance levels.  For 2016, the Company was below target for Adjusted EBITDA and achieved target for Adjusted EBITDA Margin.

A summary of activity related to RSUs is as follows: