12. Equity Incentive Award Plan

Our Board of Directors adopted and, with the approval of our stockholders, amended the 2010 Equity Incentive Award Plan (as amended, the “2010 Plan”). The 2010 Plan is administered by the Compensation Committee of the Board of Directors. Awards issuable under the 2010 Plan include common stock, stock options, restricted stock, stock appreciation rights, dividend equivalents, Operating Partnership units and other incentive awards. We have reserved a total of 6,000,000 shares of our common stock for issuance pursuant to the 2010 Plan, which may be adjusted for changes in our capitalization and certain corporate transactions. To the extent that an award expires, terminates or lapses, or an award is settled in cash without the delivery of shares of common stock to the participant, then any unvested shares subject to the award will be available for future grant or sale under the 2010 Plan. Shares of restricted stock which are forfeited or repurchased by us pursuant to the 2010 Plan may again be awarded under the 2010 Plan. The payment of dividend equivalents in cash in conjunction with any outstanding awards will not be counted against the shares available for issuance under the 2010 Plan.

As of December 31, 2016, 3,109,189 shares of our common stock were available for issuance pursuant to the 2010 Plan.

Stock Options

Stock option awards are granted with an exercise price equal to the closing market price of the Company’s common stock on the date of grant. The fair value of each option granted under the 2010 Plan is estimated on the date of grant using the Black‑Scholes option‑pricing model. The fair values are amortized on a straight‑line basis over the vesting periods. Stock options have not been granted since the year ending December 31, 2013.

The following table sets forth stock option activity under the 2010 Plan for the years ended December 31, 2016, 2015, and 2014.


	Number of Shares Subject to Option	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Options outstanding, December 31, 2013	1,133,915	$	19.89	7.6 years	$14.0 million
Granted	—		—
Exercised	(307,022)		16.10		$5.6 million
Forfeited	(64,851)		25.83
Expired	(3,947)		15.80
Options outstanding, December 31, 2014	758,095	$	20.94	6.7 years	$13.7 million
Granted	—		—
Exercised	(410,322)		20.15		$12.0 million
Forfeited	(7,281)		27.53
Expired	(282)		15.23
Options outstanding, December 31, 2015	340,210	$	21.77	5.8 years	$11.9 million
Granted	—		—
Exercised	(74,660)		17.27		$3.8 million
Forfeited	—		—
Expired	—		—
Options outstanding, December 31, 2016	265,550	$	22.96	5.0 years	$15.0 million

Exercisable at December 31,
2014	474,132	$	18.78	6.4 years	$9.6 million
2015	234,943	$	18.47	5.4 years	$9.0 million
2016	249,227	$	22.29	4.9 years	$14.2 million

The following table sets forth the number of shares subject to options that are unvested as of December 31, 2016, 2015, and 2014, and the fair value of these options at the grant date:


	Number of Shares Subject to Option	Weighted Average Fair Value at Grant Date
Unvested balance, December 31, 2013	635,739	$	7.10
Granted	—		—
Forfeited	(64,851)		8.03
Vested	(286,924)		6.25
Unvested balance, December 31, 2014	283,964	$	7.75
Granted	—		—
Forfeited	(7,281)		8.48
Vested	(171,416)		6.86
Unvested balance, December 31, 2015	105,267	$	9.13
Granted	—		—
Forfeited	—		—
Vested	(88,944)		8.97
Unvested balance, December 31, 2016	16,323	$	9.99

As of December 31, 2016, total unearned compensation on options was less than $0.1 million, and the weighted-average vesting period was 0.2 years. As the Company has been a publicly traded company only since September 28, 2010, expected volatilities used in the Black-Scholes model are based on the historical volatility of a group of comparable REITs. We utilize the simplified method of estimating the term for options granted due to the lack of historical exercise data necessary to provide a reasonable basis upon which to estimate the term. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. No options were granted during the years ended 2016, 2015 or 2014.

Restricted Awards and Units

Restricted stock awards and restricted stock units, or RSUs, are granted with a fair value equal to the closing market price of the Company's common stock on the date of grant. The principal difference between restricted stock awards and RSUs is that RSUs are not shares of our common stock and do not have any of the rights or privileges thereof, including voting rights. On the applicable vesting date, the holder of an RSU becomes entitled to a share of common stock. The restricted stock awards and RSUs are amortized on a straight-line basis to expense over the vesting period.

The following table sets forth the number of unvested restricted stock awards and RSUs and the weighted-average fair value of these awards at the date of grant:


	Restricted Awards and Units	Weighted Average Fair Value at Grant Date
Unvested balance, December 31, 2013	495,151	$	25.08
Granted	216,175		31.51
Forfeited	(109,798)		27.64
Vested	(207,512)		22.79
Unvested balance, December 31, 2014	394,016	$	29.10
Granted	187,644		47.41
Forfeited	(34,788)		36.06
Vested	(169,260)		26.96
Unvested balance, December 31, 2015	377,612	$	38.51
Granted	182,628		66.69
Forfeited	(37,383)		53.87
Vested	(199,216)		36.57
Unvested balance, December 31, 2016	323,641	$	53.84

As of December 31, 2016, total unearned compensation on restricted awards was approximately $12.3 million, and the weighted-average vesting period was 2.5 years.

Performance Stock Awards

We grant long-term incentives to members of management in the form of performance-based restricted stock awards (“PSAs”) under the 2010 Plan. The number of PSAs earned is based on our achievement of relative total shareholder return (“TSR”) measured versus the MSCI US REIT Index over a three-year performance period and ranges between 0% and 150% of a target number of shares for PSAs granted in 2014 and between 25% and 175% of the target for PSAs granted in 2015 and 2016. The PSAs are earned as follows: (i) 20% of the PSAs are eligible to be earned upon TSR achievement in year one of the performance period, (ii) 20% of the PSAs are eligible to be earned upon TSR achievement in year two of the performance period, (iii) 20% of the PSAs are eligible to be earned upon TSR achievement in year three of the performance period, and (iv) 40% of the PSAs are eligible to be earned upon a cumulative TSR achievement over the three-year performance period. The PSAs are granted at the maximum percentage of target and are retired annually to the extent we do not achieve maximum relative TSR versus the MSCI US REIT Index. The PSAs have a service condition and will be released at the end of the three-year performance period, to the extent earned, provided that the holder continues to be employed by the Company at the end of the three-year performance period. The PSAs are amortized on a straight-line basis over the vesting period. Holders of the PSAs are entitled to dividends on the PSAs, which will be accrued and paid in cash at the end of the three-year performance period.

The following table sets forth the number of unvested PSAs and the weighted-average fair value of these awards at the date of grant:


				Weighted-
				Average Fair
	Performance-Based Restricted Stock Awards			Value at Grant
	Minimum	Maximum	Target	Date
Unvested balance, December 31, 2013	—	—	—	$	—
Granted	—	91,335	60,889		25.89
Performance adjustment	—	—	—		—
Forfeited	—	(5,484)	(3,656)		25.89
Vested	—	—	—		25.89
Unvested balance, December 31, 2014	—	85,851	57,233	$	25.89
Granted	11,222	78,553	44,886		61.22
Performance adjustment	9,981	(7,190)	(1,465)		—
Forfeited	(1,018)	(13,657)	(8,572)		43.38
Vested	(594)	(594)	(594)		25.89
Unvested balance, December 31, 2015	19,591	142,963	91,488	$	42.78
Granted	11,796	82,572	47,184		84.78
Performance adjustment	29,256	—	11,893		—
Forfeited	(13,474)	(55,916)	(34,695)		69.12
Vested	(1,894)	(1,894)	(1,894)		42.17
Unvested balance, December 31, 2016	45,275	167,725	113,976	$	54.24

As of December 31, 2016, total unearned compensation on PSAs was approximately $2.9 million, and the weighted-average vesting period was 2.0 years. The fair value of each PSA award is estimated on the date of grant using a Monte Carlo simulation. The simulation requires assumptions for expected volatility, risk-free rate of return, and dividend yield. The following table summarizes the assumptions used to value the PSAs granted during the years ended December 31, 2016, 2015 and 2014:


	2016		2015			2014
Expected term (in years)	2.83			2.83		2.83
Expected volatility	25.29	%		25.51	%	32.98	%
Expected annual dividend(1)	—			—		—
Risk-free rate	0.97	%		1.02	%	0.64	%
______________________
(1) The fair value of the PSAs assumes reinvestment of dividends.