Share-Based Compensation

As of December 31, 2016, we have two share-based compensation plans approved by stockholders: the Sun Communities, Inc. 2015 Equity Incentive Plan (the "2015 Equity Plan") and the First Amended and Restated 2004 Non-Employee Director Option Plan (“Director Plan”). In July 2015, the 2015 Equity Plan replaced the Sun Communities, Inc. 2009 Equity Incentive Plan (the "2009 Equity Plan"). We believe granting equity awards will provide certain executives, key employees and directors additional incentives to promote our financial success, and promote employee and director retention by providing an opportunity to acquire or increase the direct proprietary interest of those individuals in our operations and future.

Restricted Stock

The majority of our share-based compensation is awarded as service vesting restricted stock grants to executives and key employees. We have also awarded restricted stock to our non-employee directors. We measure the fair value associated with these awards using the closing price of our common stock as of the grant date to calculate compensation cost. Employee awards typically vest over several years and are subject to continued employment by the employee. Award recipients receive distribution payments on unvested shares of restricted stock.

Restricted Stock - 2015 Equity Plan

At the Annual Meeting of Stockholders held on July 20, 2015, the stockholders approved the 2015 Equity Plan. The 2015 Equity Plan had been adopted by the Board and was effective upon approval by our stockholders. The maximum number of shares of common stock that may be issued under the 2015 Equity Plan is 1,750,000 shares of our common stock, with 1,542,500 shares remaining for future issuance.

During 2016, we granted 81,000 shares of restricted stock to key employees under the Sun Communities, Inc. 2015 Equity Incentive Plan. The shares had a weighted average fair value of $69.70 per share and generally vest in the following manner: 35% on the third anniversary; 35% on the fourth anniversary; 20% on the fifth anniversary; 5% on the six anniversary; and 5% on the seventh anniversary. The fair values of the issued awards were determined by using the closing price of our common stock on the dates the shares were issued.

During the three months ended March 31, 2016, we granted 130,000 shares of restricted stock to our executive officers under the Sun Communities, Inc. 2015 Equity Incentive Plan. The shares had a fair value of $69.25 per share. Half of the shares will vest as follows: March 20, 2019: 20%; March 20, 2020, 30%; March 20, 2021, 35%; March 20, 2022, 10%; and March 20, 2023, 5%. The remaining 65,000 shares are subject to market and performance conditions with multiple tranches that vest through March 2022. Share-based compensation for restricted stock awards with performance conditions is measured based on an estimate of shares expected to vest. We estimate the fair value of share-based compensation for restricted stock with market conditions using a Monte Carlo simulation.

During the year ended December 31, 2015, we granted 6,000 shares of restricted stock to key employees under our 2015 Equity Plan. The shares had a weighted average fair value of $66.10 per share and will vest as follows: during the second half of 2018: 35%, during the second half of 2019: 35%, during the second half of 2020: 20%, during the second half of 2021: 5%, and during the second half of 2020: 5%. The fair value of issued grants was determined by using the closing price of our common stock on the date the shares were issued.

Restricted Stock - 2009 Equity Plan

During the year ended December 31, 2015, we granted 45,000 shares of restricted stock to executive officers under our 2009 Equity Plan. The shares had a weighted average fair value of $65.00 per share and will vest as follows: during 2018: 35%; during 2019: 35%; during 2020: 20%; during 2021: 5%; and during 2022: 5%. The fair value was determined by using the closing share price of our common stock on the date the shares were issued.

In April 2015, we granted 145,000 shares of restricted stock to our executive officers under our 2009 Equity Plan. The shares had a fair value of $63.81 per share. Half of the shares will vest as follows: April 14, 2018: 20%; April 14, 2019: 30%; April 14, 2020: 35%; April 14, 2021: 10%; and April 14, 2022: 5%. The remaining 72,500 shares are subject to market and performance conditions with multiple tranches that vest through April 2020. Share-based compensation for restricted stock awards with performance conditions is measured based on an estimate of shares expected to vest. We estimate the fair value of share-based compensation for restricted stock with market conditions using a Monte Carlo simulation.

The following table summarizes our restricted stock activity for the years ended December 31, 2016, 2015 and 2014:



	Number of Shares		Weighted Average Grant Date Fair Value
Unvested restricted shares at January 1, 2014	631,956		$	41.14
Granted	117,250		$	49.97
Vested	(55,488	)	$	25.57
Forfeited	(4,975	)	$	38.45
Unvested restricted shares at December 31, 2014	688,743		$	43.87
Granted	216,800		$	64.32
Vested	(85,021	)	$	31.89
Forfeited	(7,262	)	$	45.94
Unvested restricted shares at December 31, 2015	813,260		$	50.59
Granted	227,800		$	69.43
Vested	(165,631	)	$	45.90
Forfeited	(33,795	)	$	56.49
Unvested restricted shares at December 31, 2016	841,634		$	56.38

Total compensation cost recognized for restricted stock was $9.6 million, $7.1 million, and $4.9 million for the years ended December 31, 2016, 2015, and 2014, respectively. The total fair value of shares vested was $7.6 million, $2.7 million, and $1.4 million for the years ended December 31, 2016, 2015 and 2014, respectively. The remaining net compensation cost related to our unvested restricted shares outstanding as of December 31, 2016 is approximately $32.0 million. That expense is expected to be recognized $9.7 million in 2017, $8.2 million in 2018, $5.8 million in 2019 and $8.3 million thereafter.

Director Plan

The Director Plan was approved by our stockholders at the Annual Meeting of Stockholders held on July 19, 2012. The Director Plan amended and restated in its entirety our 2004 Non-Employee Director Stock Option Plan.

The types of awards that may be granted under the Director Plan are options, restricted stock and OP units. Only non-employee directors are eligible to participate in the Director Plan. The maximum number of options, restricted stock and OP units that may be issued under the Director Plan is 175,000 shares, with 43,474 shares remaining for future issuance.

In March 2016, we granted 16,800 shares of restricted stock to our non-employee directors under our First Amended and Restated 2004 Non-Employee Director Option Plan. The awards vest on March 11, 2018, and had a fair value of $69.45 per share. The fair value was determined by using the closing share price of our common stock on the date the shares were issued.

In February 2015, we granted 19,800 shares of restricted stock to our non-employee directors under our First Amended and Restated 2004 Non-Employee Director Option Plan. The awards vest on February 11, 2018, and had a fair value of $65.87 per share. The fair value was determined by using the closing share price of our common stock on the date the shares were issued.

During the year ended December 31, 2016, 14,199 shares of common stock were issued in connection with the exercise of stock options and the net proceeds received were $0.1 million.

Options

We have granted stock options to certain employees and non-employee directors. Option awards are generally granted with an exercise price equal to the market price of our common stock as of the grant date. Stock options generally vest over a three year period from the date of grant and have a maximum term of 10 years. No grants of options were made in 2016, 2015 or 2014. We issue new shares of common stock at the time of share option exercise (or share unit conversion).

The weighted average fair value of the options issued is estimated on the date of the grant using the Binomial (lattice) option pricing model. The options outstanding as of December 31, 2016, consist of 4,500 non-employee director options. There are no employee options outstanding. There was no compensation expense associated with non-vested stock option awards for the years ended December 31, 2016, and 2015. The compensation expense associated with non-vested stock option awards was not significant for the year ended December 31, 2014.

The following table summarizes our option activity during the years ended December 31, 2016, 2015 and 2014:



	Number of Options		Weighted Average Exercise Price (per common share)
Options outstanding at January 1, 2014	46,250		$	30.77
Granted	—		—
Exercised	(12,250	)	33.4
Forfeited or expired	(1,500	)	35.44
Options outstanding at December 31, 2014	32,500		29.56
Granted	—		—
Exercised	(8,000	)	30.96
Forfeited or expired	—		—
Options outstanding at December 31, 2015	24,500		29.11
Granted	—		—
Exercised	(20,000	)	28.39
Forfeited or expired	—		—
Options outstanding at December 31, 2016	4,500		$	32.27

The following table summarizes our options outstanding and options currently exercisable at December 31, 2016:



	December 31, 2016
	Number of Options	Weighted Average Exercise Price (per common share)		Weighted Average Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Options vested and exercisable	4,500	$	32.27	2.9	$	200

Aggregate intrinsic value represents the value of our closing share price as of the end of the year in excess of the exercise price multiplied by the number of options outstanding or exercisable. The aggregate intrinsic value excludes the effect of stock options that have a zero or negative intrinsic value. For the years ended December 31, 2016, 2015 and 2014, the intrinsic value of exercised options was $1.0 million, $0.3 million and $0.3 million, respectively. For the years ended December 31, 2016, 2015 and 2014, the intrinsic value of vested and exercisable options was $0.2 million, $1.0 million and $1.0 million, respectively.