Share-Based and Long-Term Compensation Plans

The Company grants share-based awards under the Parkway Properties, Inc. and Parkway Properties LP 2015 Omnibus Equity Incentive Plan (the "2015 Equity Plan") that was approved by the stockholders of the Company on May 14, 2015. The 2015 Equity Plan, which amends and restates the Parkway Properties, Inc. and Parkway Properties LP 2013 Omnibus Equity Incentive Plan (the "2013 Equity Plan"), permits the grant of awards with respect to a number of shares of common stock equal to the sum of (1) 2,500,000 shares, plus (2) the number of shares available for future awards under the 2013 Equity Plan, plus (3) the number of shares related to awards outstanding under the 2013 Equity Plan that terminate by expiration or forfeiture, cancellation, or otherwise without the issuance of such shares of Common Stock.

The 2013 Equity Plan replaced the 2010 Omnibus Equity Incentive Plan (the "2010 Equity Plan"). Outstanding awards granted under the 2010 Equity Plan continue to be governed by the 2010 Equity Plan. All of the employees of the Company and the Operating Partnership, employees of certain subsidiaries of the Company, non-employee directors and any consultants or advisors to the Company and the Operating Partnership are eligible to participate in the 2015 Equity Plan.

The 2015 Equity Plan authorizes the following types of awards: (1) stock options, including nonstatutory stock options and incentive stock options ("ISOs"); (2) stock appreciation rights; (3) restricted shares; (4) RSUs; (5) LTIP units; (6) dividend equivalent rights; and (7) other forms of awards payable in or denominated by reference to shares of common stock. Full value awards, i.e., awards other than options and stock appreciation rights, vest over a period of three years or longer, except that any full value awards subject to performance-based vesting must become vested over a period of one year or longer. The Compensation Committee of the Board of Directors of the Company (the "Board") may waive vesting requirements upon a participant’s death, disability, retirement, or other specified termination of service or upon a change in control.

Through December 31, 2015, the Company had RSUs, LTIP units and stock options outstanding under the 2015 Equity Plan, each as described below. As of December 31, 2015, the Company had restricted shares outstanding under the 2010 Equity Plan, as described below.

Long-Term Equity Incentives

At December 31, 2015, a total of 1,293,750 shares underlying stock options had been granted to officers of the Company and remain outstanding under the 2013 Equity Plan, of which 862,500 shares remain unvested. The stock options are valued at $3.6 million, which equates to an average price per share of $4.18. Each stock option will vest in increments of 25% per year on each of the first, second, third and fourth anniversaries of the grant date, subject to the grantee's continued service. At December 31, 2015, a total of 386,748 time-vesting RSUs had been granted to officers of the Company and remain outstanding. The time-vesting RSUs are valued at $7.0 million, which equates to an average price per share of $18.09. A total of 299,312 time-vesting RSU awards will vest in increments of 25% per year on each of the first, second, third and fourth anniversaries of the grant date and 87,436 time-vesting RSU awards will vest in increments of 33% per year on each of the first, second and third anniversaries of the grant date, subject to the grantee's continued service.

At December 31, 2015, a total of 447,938 LTIP units had been granted to officers of the Company and remain outstanding under the 2013 Equity Plan. LTIP units are a form of limited partnership interest issued by the Operating Partnership, and will be considered earned if, and only to the extent to which applicable total shareholder return, ("TSR"), performance measures are achieved during the performance period. Grant date fair values of the LTIP units and performance-vesting RSUs are estimated using a Monte Carlo simulation model and the resulting expense is recorded regardless of whether the TSR performance measures are achieved if the required service is delivered. The grant date fair values are being amortized over expense over the period from the grant date to the date at which the awards, if any, would become vested. The LTIP units are valued at $3.8 million, which equates to an average price per share of $8.58. At December 31, 2015, a total of 215,527 performance-vesting RSUs had been granted to officers of the Company and remain outstanding under the 2013 Equity Plan. The performance-vesting RSUs are valued at approximately $1.7 million, which equates to an average price per share of $8.11. Grant date fair values of the performance-vesting RSUs units are estimated using a Monte Carlo simulation model and the resulting expense is recorded regardless of whether the TSR performance measures are achieved if the required service is delivered. Each LTIP unit and performance-vesting RSU will vest based on the attainment of total stockholder return targets during the applicable performance period, subject to the grantee's continued service.

At December 31, 2015, a total of 5,189 restricted shares granted to officers of the Company remain outstanding under the 2010 Equity Plan. The restricted shares vest ratably over four years from the date of grant, with the last restricted shares vesting in January 2016. The restricted shares are valued at $71,000, which equates to an average price per share of $13.65.

Total compensation expense related to restricted shares, deferred incentive share units, stock options, RSUs and LTIP units of $6.5 million, $8.2 million and $5.7 million, was recognized in general and administrative expenses on the Company's consolidated statements of operations and comprehensive income (loss) during the years ended December 31, 2015, 2014 and 2013, respectively. Total compensation expense related to non-vested awards not yet recognized was $5.5 million at December 31, 2015. The weighted average period over which this expense is expected to be recognized is approximately one year.



	Restricted Shares				Deferred Incentive Share Units				Stock Options				RSUs				LTIP Units
	# of Shares		Weighted Average Grant-Date Fair Value		# of Share Units		Weighted Average Grant-Date Fair Value		# of Options		Weighted Average Grant-Date Fair Value		# of Stock Units		Weighted Average Grant-Date Fair Value		# of LTIP Units	Weighted Average Grant-Date Fair Value
Balance at 12/31/14	13,769		$	14.61	6,855		$	16.63	1,293,750		$	4.17	504,534		$	16.03	300,636	$	9.26
Granted	—		—		—		—		—		—		267,596		13.50		147,302	7.18
Vested	(8,580	)	15.20		(6,130	)	17.08		(431,250	)	4.17		(145,854	)	18.45		—	—
Forfeited	—		—		(725	)	12.89		—		—		(24,001	)	10.96		—	—
Balance at 12/31/15	5,189		$	13.65	—		$	—	862,500		$	4.17	602,275		$	14.52	447,938	$	8.58

The following table presents the weighted-average assumptions used to estimate the fair values of the options granted in the periods presented:



	Year Ended
	December 31,
	2015	2014	2013
Risk-free interest rate	—	—	1.01%
Expected volatility	—	—	31.0%
Expected life (in years)	—	—	6
Dividend Yield	—	—	4%
Weighted-average estimated fair value of options granted during the year	—	—	$4.17

Defined Contribution Plan

The Company maintains a 401(k) plan for its employees. The Company makes matching contributions of 50% of the employee's contribution (limited to 10% of compensation as defined by the plan) and may also make annual discretionary contributions. The Company's total expense for this plan was $700,000, $621,000 and $601,000, for the years ended December 31, 2015, 2014 and 2013, respectively.