Stock-Based Compensation Plans

Stock-based compensation expense was as follows:



For the periods ended December 31,	2015		2014		2013
Founders	$	5.2	$	5.4	$	5.3
2013 Grants	1.2		1.2		0.9
2014 Grants	3.0		3.7		—
2015 Grants	5.0		—		—
Total	$	14.4	$	10.3	$	6.2

In conjunction with the CyrusOne Inc. IPO, the board of directors of CyrusOne Inc. adopted the 2012 Long-Term Incentive Plan (LTIP). The LTIP is administered by the board of directors. Awards issuable under the LTIP include common stock, restricted stock, stock options and other incentive awards. CyrusOne Inc. has reserved a total of 4 million shares of CyrusOne Inc. common stock for issuance pursuant to the LTIP, which may be adjusted for changes in capitalization and certain corporate transactions. To the extent that an award, if forfeitable, expires, terminates or lapses, or an award is otherwise settled in cash without the delivery of shares of common stock to the participant, then any unpaid shares subject to the award will be available for future grant or issuance under the LTIP. 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 LTIP. The related stock compensation expense incurred by CyrusOne Inc. is allocated to the operating partnership. Shares available under the LTIP at December 31, 2015, were approximately 1.5 million. Shares vest according to each agreement and as long as the employee remains employed with the Company. The Company uses the Black-Scholes option-pricing model for time and performance-based options and a Monte Carlo simulation for market-based awards. Compensation expense is measured based on the estimated grant-date fair value. Expense for time-based grants is recognized under a straight-line method. For market-based grants, expense is recognized under a graded expense attribution method. For performance-based grants, expense is recognized under a graded expense attribution method if it is probable that the performance targets will be achieved.

Founders Grants

On January 24, 2013, the Company granted one million shares of time-based restricted stock, which had an aggregate value of $19.0 million on the grant date. Holders of the restricted stock have all of the rights and privileges of shareholders including but not limited to the right to vote, receive dividends and distributions upon liquidation of CyrusOne. These shares vest at the end of three years. As of December 31, 2015, unearned compensation representing the unvested portion of the Founders awards, net of forfeitures, totaled $0.3 million, and the weighted average vesting period was 0.1 years.

2013 Grants

On April 17, 2013, the Company issued performance and market-based awards under the LTIP in the form of stock options and restricted stock units. For these awards, vesting was tied 50% to the achievement of a non-GAAP performance measure (cumulative EBITDA targets, as defined in the agreement), over the 2013-2015 performance period, and 50% market-based performance measure (the total stockholder return (TSR), as defined in the agreement) at the end of the three-year period ending December 31, 2015. The portion of the awards tied to cumulative EBITDA was eligible to vest annually over a three-year period based on the Company attaining predetermined cumulative EBITDA targets. The cumulative EBITDA targets are based on the below scales. The scales are linear between each point and awards are interpolated between the points.

- Below 90% of performance target = 0%

- At 90% of performance target = 50%

- At 100% of performance target = 100%

- At or above 115% of performance target = up to 200%

The portion of the awards tied to TSR was eligible to vest at the end of three years if the TSR, during the three-year measurement period following the grant date, met or exceeded the return of the MSCI US REIT Index (Index) over the same period. The TSR targets are based on the below scales. The scales are linear between each point and awards are interpolated between the points.

- If CyrusOne's TSR is less than the return of the Index = 0%

- If CyrusOne's TSR is equal to or greater than the return of the Index = 100%; up to 200% if CyrusOne's TSR exceeds the return of the Index by 2%

- If CyrusOne's TSR exceeds the return of the Index, but is negative, any calculated vesting amount will be reduced by 50%

The stock option awards have a contractual life of 10 years from the award date and were granted with an exercise price equal to $23.58.

In addition, during the year ended December 31, 2013, the Company also granted from time-to-time a total of 4,361 additional time-based restricted shares which had an aggregate value of $0.1 million on the grant date. These shares cliff vested one year after the grant date or will vest three years after the grant date.

The holders of restricted stock shall have all of the rights and privileges of shareholders including the right to vote. Any dividends paid with respect to the shares shall be accrued by the Company and distributed on the vesting date provided that the applicable performance goal has been attained. As of December 31, 2015, unearned compensation representing the unvested portion of the awards granted during 2013 (excluding the Founders awards), net of forfeitures, totaled $0.1 million, with a weighted average vesting period of 0.3 years.

2014 Grants

On February 7, 2014, the Company issued performance and market-based awards under the LTIP in the form of restricted stock units. For these awards, vesting is tied 50% to the achievement of a non-GAAP performance measure (cumulative Adjusted EBITDA targets, as defined in the agreement) over the 2014-2016 performance period, and 50% to a market-based performance measure TSR, as defined in the agreement), as of the end of the three-year period ending December 31, 2016. The portion of the awards tied to cumulative Adjusted EBITDA vest annually over a three-year period based on the Company attaining predetermined cumulative Adjusted EBITDA targets and as long as the employee remains employed with the Company. The portion of the award tied to TSR will vest at the end of three years based on the cumulative TSR over a three-year performance period. The market and performance-based awards will vest based on the same scales as the awards granted during 2013.

In addition, during the year ended December 31, 2014, the Company also granted from time-to-time a total of 46,313 additional time-based restricted shares which had an aggregate value of $1.0 million on the grant date. These shares cliff vested either one year after the grant date or will vest three years after the grant date.

The holders of restricted stock have all of the rights and privileges of shareholders including the right to vote. Any dividends paid with respect to the shares shall be accrued by the Company and distributed on the vesting date provided that the applicable performance goal has been attained. As of December 31, 2015, unearned compensation representing the unvested portion of the awards granted during 2014, net of forfeitures, totaled $1.3 million, with a weighted average vesting period of 1.1 years.

2015 Grants

On February 10, 2015, the Company issued awards under the LTIP in the form of options and restricted stock. The stock options are time-based and vest annually on a pro-rata basis over three years. Twenty-five percent of the restricted stock awards are subject to time-based vesting and seventy-five percent of the restricted stock awards are equally split between performance-based and market-based vesting. The time-based restricted stock will vest pro-rata annually over three years. The performance and market-based restricted stock will vest annually based upon the achievement of certain criteria for each year of the three-year measurement period. The first two years are capped at 100% of the target with a cumulative true-up in year three. The fair values of these awards were determined using the Black-Scholes or Monte-Carlo model which use assumptions such as volatility, risk-free interest rate, and expected term of the awards.

In addition, during the year ended December 31, 2015, for various new employee hires, the following grants were made:

•8,157 shares of time-based restricted stock which cliff vest in three years from the date of each grant.

•29,424 shares of time-based restricted stock which vest annually from the date of each grant.

•12,719 time-based options which vest annually from the date of each grant.


•	11,711 shares of performance-based restricted stock, which vest annually based upon the achievement of certain criteria for each year of the three-year measurement period.


•	55,301 shares of performance-based (separate non-GAAP measure, as defined in the specific agreement) restricted stock, which cliff vests in three years from the date of grant.

For the year ended December 31, 2015, the unvested portion of the awards granted in 2015, net of forfeitures, totaled $5.6 million and the weighted average vesting period was 1.6 years.

The compensation expense for the year ended December 31, 2015 includes $2.4 million due to the acceleration of equity awards of two senior executives who left the Company.

Restricted Stock and Stock Option Activity

The following table summarizes the unvested restricted stock activity and the weighted average fair value of these shares at the date of grant for the year ended December 31, 2015:



For the year ended December 31,	2015
	Shares		Weighted Average Grant Date Fair Value
Non-vested at January 1	1,739,642		$	20.20
Granted	571,224		23.80
Vested	(458,606	)	20.90
Forfeited	(266,779	)	21.80
Non-vested at December 31	1,585,481		$	20.99

The non-vested shares were 1,739,642 and 1,126,669 at December 31, 2014 and 2013, respectively.

The following table summarizes the stock option activity for the year ended December 31, 2015:



For the year ended December 31,	2015
	Options		Weighted Average Exercise Price
Outstanding at January 1	166,872		$	23.58
Granted	223,186		28.44
Exercised	(2,525	)	23.58
Forfeited or expired	(53,554	)	25.98
Outstanding at December 31	333,979		26.44
Exercisable at December 31	78,806		25.75
Vested and expected to vest	78,806		$	25.75

The outstanding options were 166,872 and 168,963 at December 31, 2014 and 2013, respectively.

The aggregate intrinsic value of options outstanding and options exercisable is based on the Company's closing stock price on the last trading day of the fiscal year for in-the-money options. The aggregate intrinsic value represents the cumulative difference between the fair market value of the underlying common stock and the option exercise prices. The total intrinsic value of options exercised during fiscal year 2015 was immaterial. There were no options exercised during 2014 and 2013.

The aggregate intrinsic value of options outstanding at December 31, 2015 was $3.7 million. The aggregate intrinsic value of options exercisable at December 31, 2015 was $0.9 million.

Stock Option Assumptions

The following table summarizes the stock option assumptions for the years ended December 31, 2015, 2014, and 2013:



	Options Outstanding		Options Exercisable		Assumption Range
Exercise Prices	Number of Shares	Weighted Average Remaining Contractual Terms (Years)	Number of Shares	Weighted Average Remaining Contractual Terms (Years)	Risk-Free Interest Rate	Expected Annual Dividend Yield	Expected Terms in Years	Expected Volatility
2013
$23.58	168,963	9.3	—	0.0	0.92%	3.4%	6.0	35%
2014
$23.58	166,872	8.3	13,915	8.3	0.92%	3.4%	6.0	35%
2015
$23.58	142,556	7.3	43,460	7.3	0.92%	3.4%	6.0	35%
$28.42	178,704	9.1	35,346	9.1	1.6% - 1.75%	4.4%	5.5-6.5	32.5% - 37.5%
$30.74	12,719	9.6	—	0.0	1.6% - 1.75%	4.4%	5.5-6.5	32.5% - 37.5%