STOCK-BASED COMPENSATION

As of December 31, 2016, 1,934,735 shares were available for issuance under the Company’s 2015 Incentive Award Plan (the “Plan”).

Option grants are issued with an exercise price equal to the closing price of stock on the date of grant. Unless otherwise determined by the Compensation, Nominating and Governance Committee (“CNG Committee”) at the time of grant, options shall vest ratably over a four-year period beginning on the date of grant. Each option will be exercisable once it has vested. Options are exercisable at such times and subject to such terms as determined by the CNG Committee, but under no circumstances may be exercised if such exercise would cause a violation of the ownership limit in the Company’s charter. Options expire 10 years from the date of grant.

Also as defined under the terms of the Plan, restricted stock grants may be awarded. The stock grants are subject to a vesting period over which the restrictions are released and the stock certificates are given to the grantee. During the performance or vesting period, the grantee is not permitted to sell, transfer, pledge, encumber or assign shares of restricted stock granted under the Plan; however, the grantee has the ability to vote the shares and receive nonforfeitable dividends paid on shares. Unless otherwise determined by the CNG Committee at the time of grant, the forfeiture and transfer restrictions on the shares lapse over a four-year period beginning on the date of grant.

Option Grants

A summary of stock option activity is as follows:



Options	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value as of December 31, 2016
Outstanding at December 31, 2013	754,624		$	15.01
Granted	31,000		47.50
Exercised	(211,747	)	14.85
Forfeited	(5,150	)	28.28
Outstanding at December 31, 2014	568,727		$	16.62
Granted	89,575		69.93
Exercised	(79,974	)	18.79
Forfeited	(5,699	)	39.83
Outstanding at December 31, 2015	572,629		$	24.42
Granted	35,800		85.99
Exercised	(97,855	)	14.75
Forfeited	—		—
Outstanding at December 31, 2016	510,574		$	30.60	4.78	$	24,129
Vested and Expected to Vest	494,881		$	29.20	4.65	$	24,038
Ending Exercisable	384,810		$	17.82	3.62	$	22,865

The aggregate intrinsic value in the table above represents the total value (the difference between the Company’s closing stock price on the last trading day of 2016 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2016. The amount of aggregate intrinsic value will change based on the fair market value of the Company’s stock.

The weighted average fair value of stock options granted in 2016, 2015 and 2014, was $20.30, $16.89 and $12.03, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:



	For the Year Ended December 31,
	2016		2015		2014
Expected volatility	37.0	%	38.0	%	40.0	%
Dividend yield	3.6	%	3.6	%	3.8	%
Risk-free interest rate	1.3	%	1.5	%	1.5	%
Average expected term (years)	5		5		5

The Black-Scholes model incorporates assumptions to value stock-based awards. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant for the estimated life of the option. The Company uses actual historical data to calculate the expected price volatility, dividend yield and average expected term. The forfeiture rate, which is estimated at a weighted-average of 5.0% of unvested options outstanding as of December 31, 2016, is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimates.

A summary of stock options outstanding and exercisable as of December 31, 2016, is as follows:



	Options Outstanding				Options Exercisable
Exercise Price	Shares	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
$6.22 - $6.22	157,750	2.13	$	6.22	157,750	$	6.22
$11.59 - $11.59	28,080	3.13	11.59		28,080	11.59
$12.21 - $12.21	77,400	3.18	12.21		77,400	12.21
$19.6 - $28.11	59,660	4.78	24.23		59,660	24.23
$28.79 - $38.4	37,659	6.05	37.44		27,197	37.08
$47.5 - $47.5	24,650	7.14	47.50		12,328	47.50
$65.36 - $65.36	20,395	8.15	65.36		5,100	65.36
$65.45 - $65.45	19,180	8.14	65.45		4,795	65.45
$73.52 - $73.52	50,000	8.59	73.52		12,500	73.52
$85.99 - $85.99	35,800	9.15	85.99		—	—
$6.22 - $85.99	510,574	4.78	$	30.60	384,810	$	17.82

The Company recorded compensation expense relating to outstanding options of $729, $510 and $456 in general and administrative expense for the years ended December 31, 2016, 2015 and 2014, respectively. Total cash received for the years ended December 31, 2016, 2015 and 2014, related to option exercises was $1,444, $1,542 and $3,095, respectively. At December 31, 2016, there was $1,442 of total unrecognized compensation expense related to non-vested stock options under the Plan. That cost is expected to be recognized over a weighted-average period of 2.30 years. The valuation model applied in this calculation utilizes subjective assumptions that could potentially change over time, including the expected forfeiture rate. Therefore, the amount of unrecognized compensation expense at December 31, 2016, noted above does not necessarily represent the expense that will ultimately be realized by the Company in the statement of operations.

Common Stock Granted to Employees and Directors

The Company recorded $7,316, $5,545 and $4,528 of expense in general and administrative expense in its statement of operations related to outstanding shares of common stock granted to employees and directors for the years ended December 31, 2016, 2015 and 2014, respectively. The forfeiture rate, which is estimated at a weighted-average of 10.1% of unvested awards outstanding as of December 31, 2016, is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimates. At December 31, 2016 there was $14,141 of total unrecognized compensation expense related to non-vested restricted stock awards under the Plan. That cost is expected to be recognized over a weighted-average period of 2.37 years.

The fair value of common stock awards is determined based on the closing trading price of the Company’s common stock on the grant date.

A summary of the Company’s employee and director share grant activity is as follows:



Restricted Stock Grants	Shares		Weighted-Average Grant-Date Fair Value
Unreleased at December 31, 2013	395,360		$	26.96
Granted	117,370		49.25
Released	(197,386	)	23.07
Cancelled	(23,595	)	37.19
Unreleased at December 31, 2014	291,749		$	37.73
Granted	174,558		69.18
Released	(129,808	)	34.86
Cancelled	(18,090	)	44.54
Unreleased at December 31, 2015	318,409		$	55.75
Granted	119,931		87.61
Released	(128,808	)	50.05
Cancelled	(9,947	)	67.36
Unreleased at December 31, 2016	299,585		$	70.57