Stock-Based and Other Compensation

Stock-Based Compensation

At December 31, 2016, we maintained several stock-based compensation plans as described below. The total compensation expense (net of forfeitures) for awards issued under these plans was $21.2 million, $21.6 million, and $31.1 million for the years ended December 31, 2016, 2015, and 2014, respectively, of which $3.2 million was included in Restructuring and other compensation in the consolidated financial statements for the year ended December 31, 2016. The remaining amounts for the years ended December 31, 2016, 2015, and 2014 were included in Stock-based compensation expense in the consolidated financial statements. The tax benefit recognized by us related to these awards totaled $6.7 million, $12.5 million, and $17.3 million for the years ended December 31, 2016, 2015, and 2014, respectively.

2009 Incentive Plan

We maintain the W. P. Carey Inc. 2009 Share Incentive Plan, or the 2009 Incentive Plan, which as amended currently authorizes the issuance of up to 5,900,000 shares of our common stock. At December 31, 2016, there were 1,873,145 shares available for issuance under the 2009 Share Incentive Plan. The 2009 Incentive Plan provides for the grant of (i) stock options, (ii) RSUs, (iii) PSUs, and (iv) dividend equivalent rights. The vesting of grants under both plans is accelerated upon a change in our control and under certain other conditions.

In December 2007, the Compensation Committee approved the long-term incentive plan, or LTIP, and terminated further contributions to the Partnership Equity Unit Plan described below. During the years ended December 31, 2016, 2015, and 2014, we awarded RSUs totaling 262,824, 173,741, and 172,460, respectively, and PSUs totaling 200,005, 75,277, and 89,653, respectively, to key employees. PSUs are reflected at 100% of target but may settle at up to three times the target amount shown or less. PSUs awarded during each of the years ended December 31, 2015 and 2014 include 10,000 PSUs awarded for which the undetermined terms and conditions of the grant were finalized in subsequent years.

2009 Non-Employee Directors Incentive Plan

We maintain the W. P. Carey, Inc. 2009 Non-Employee Directors’ Incentive Plan, or the 2009 Directors’ Plan, which authorizes the issuance of 325,000 shares of our common stock in the aggregate. At the discretion of our board of directors, the awards may be in the form of RSUs, share options, or RSAs, or any combination of the permitted awards. In July 2014, we issued 16,159 RSAs with a total value of $1.0 million to our directors. In July 2015, we issued 16,152 RSAs with a total value of $1.0 million to our directors. These RSAs are scheduled to vest one year from the date of grant. In July 2016, we issued 13,860 RSAs with a total value of $1.0 million to our directors. At December 31, 2016, there were 185,693 shares that remained available for issuance under this plan.

Employee Share Purchase Plan

We sponsor an employee share purchase plan, or ESPP, pursuant to which eligible employees may contribute up to 10% of compensation, subject to certain limits, to purchase our common stock. During the years ended December 31, 2016 and 2015, employees were entitled to purchase stock through the ESPP semi-annually at a price equal to 90% of the fair market value at certain plan defined dates. During the year ended December 31, 2014, employees were entitled to purchase stock through the ESPP semi-annually at a price equal to 85% of the fair market value at certain plan defined dates. Compensation expense under this plan for the years ended December 31, 2016, 2015, and 2014 was $0.1 million, less than $0.1 million, and $0.3 million, respectively.

Restricted and Conditional Awards

Nonvested RSAs, RSUs, and PSUs at December 31, 2016 and changes during the years ended December 31, 2016, 2015, and 2014 were as follows:



	RSA and RSU Awards				PSU Awards
	Shares		Weighted-Average Grant Date Fair Value		Shares		Weighted-Average Grant Date Fair Value
Nonvested at January 1, 2014	519,608		$	45.19	1,220,720		$	28.28
Granted	188,619		61.08		89,653		76.05
Vested ^(a)	(264,724	)	43.35		(881,388	)	51.00
Forfeited	(1,001	)	59.45		(78	)	54.31
Adjustment ^(b)	—		—		448,734		55.91
Nonvested at December 31, 2014	442,502		53.03		877,641		32.06
Granted	189,893		69.92		75,277		83.68
Vested ^(a)	(264,628	)	49.69		(792,465	)	56.77
Forfeited	(10,996	)	66.46		—		—
Adjustment ^(b)	—		—		179,905		49.70
Nonvested at December 31, 2015	356,771		64.09		340,358		52.26
Granted ^(c)	277,836		58.27		200,005		73.18
Vested ^(a)	(217,617	)	61.32		(180,723	)	80.21
Forfeited	(60,125	)	61.81		(51,657	)	75.49
Adjustment ^(b)	—		—		2,035		72.22
Nonvested at December 31, 2016 ^(d)	356,865		$	61.63	310,018		$	73.80

__________

(a)

The total fair value of shares vested during the years ended December 31, 2016, 2015, and 2014 was $27.8 million, $58.1 million, and $56.4 million, respectively. Employees have the option to take immediate delivery of the shares upon vesting or defer receipt to a future date, pursuant to previously made deferral elections. At December 31, 2016 and 2015, we had an obligation to issue 1,217,274 and 1,395,907 shares, respectively, of our common stock underlying such deferred awards, which is recorded within W. P. Carey stockholders’ equity as a Deferred compensation obligation of $50.2 million and $56.0 million, respectively.

(b)

Vesting and payment of the PSUs is conditioned upon certain company and market performance goals being met during the relevant three-year performance period. The ultimate number of PSUs to be vested will depend on the extent to which the performance goals are met and can range from zero to three times the original awards. As a result, we recorded adjustments to reflect the number of shares expected to be issued when the PSUs vest.

(c)

The grant date fair values of RSAs and RSUs reflect our stock price on the date of grant on a one-for-one basis. The grant date fair value of PSUs was determined utilizing a Monte Carlo simulation model to generate a range of possible future stock prices for both us and the plan defined peer index over the three-year performance period. To estimate the fair value of PSUs granted during the year ended December 31, 2016, we used risk-free interest rates ranging from 0.9% - 1.1% and expected volatility rates ranging from 18.2% - 19.1% (the plan defined peer index assumes a range of 15.0% - 15.6%) and assumed a dividend yield of zero.


(d)	At December 31, 2016, total unrecognized compensation expense related to these awards was approximately $19.6 million, with an aggregate weighted-average remaining term of less than 2 years.

At the end of each reporting period, we evaluate the ultimate number of PSUs we expect to vest based upon the extent to which we have met and expect to meet the performance goals and where appropriate, revise our estimate and associated expense. We do not adjust the associated expense for revision on PSUs expected to vest based on market performance. Upon vesting, the RSUs and PSUs may be converted into shares of our common stock. Both the RSUs and PSUs carry dividend equivalent rights. Dividend equivalent rights on RSUs are paid in cash on a quarterly basis whereas dividend equivalent rights on PSUs accrue during the performance period and may be converted into additional shares of common stock at the conclusion of the performance period to the extent the PSUs vest. Dividend equivalent rights are accounted for as a reduction to retained earnings to the extent that the awards are expected to vest. For awards that are not expected to vest or do not ultimately vest, dividend equivalent rights are accounted for as additional compensation expense.

Stock Options

Option activity and changes for all periods presented were as follows:



	Year Ended December 31, 2016
	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding – beginning of year	258,787		$	31.10
Exercised	(113,002	)	28.34
Canceled / Expired	(752	)	28.42
Outstanding – end of year	145,033		$	33.27	0.30	$	3,745,163
Vested and expected to vest – end of year	145,033		$	33.27	0.30	$	3,745,163
Exercisable – end of year	145,033		$	33.27	0.30	$	3,745,163



	Years Ended December 31,
	2015					2014
	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in Years)	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in Years)
Outstanding – beginning of year	475,765		$	29.95		619,601		$	30.30
Exercised	(213,479	)	28.57			(140,718	)	31.41
Canceled / Expired	(3,499	)	28.71			(3,118	)	32.99
Outstanding – end of year	258,787		$	31.10	1.06	475,765		$	29.95	1.75
Exercisable – end of year	236,112		$	30.99		421,656		$	29.75

Options granted under the 1997 Incentive Plan generally have a ten-year term and generally vested in four equal annual installments. We have not issued option awards since 2007. Our options will be fully expired in December 2017. The total intrinsic value of options exercised during the years ended December 31, 2016, 2015, and 2014 was $3.7 million, $7.4 million, and $4.9 million, respectively. The tax benefit recognized by us related to these awards totaled $1.6 million during the year ended December 31, 2016.

At December 31, 2016, all of our options were fully vested and exercisable, and all related compensation expense has been previously recognized.

We have the ability and intent to issue shares upon stock option exercises. Historically, we have issued authorized but unissued common stock to satisfy such exercises. Cash received from stock option exercises and purchases under the ESPP during the years ended December 31, 2016, 2015, and 2014 was $0.5 million, $0.5 million, and $1.9 million, respectively.

Other Compensation

Profit-Sharing Plan

We sponsor a qualified profit-sharing plan and trust that generally permits all employees, as defined by the plan, to make pre-tax contributions into the plan. We are under no obligation to contribute to the plan and the amount of any contribution is determined by and at the discretion of our board of directors. In December 2016, 2015, and 2014, our board of directors determined that the contribution to the plan for each of those respective years would be 10% of an eligible participant’s compensation, up to the legal maximum allowable in each of those years of $26,500 for 2016 and 2015, and $26,000 for 2014. For the years ended December 31, 2016, 2015, and 2014, amounts expensed for contributions to the trust were $3.9 million, $4.1 million, and $3.5 million, respectively, which were included in General and administrative expenses in the consolidated financial statements. The profit-sharing plan is a deferred compensation plan and is therefore considered to be outside the scope of current accounting guidance for stock-based compensation.

Other

During each of the periods presented, we had employment contracts with certain senior executives. These contracts also provided for severance payments in the event of termination under certain conditions (Note 13). No such agreements were outstanding as of December 31, 2016. During the years ended December 31, 2016, 2015, and 2014, we recognized severance costs totaling approximately $0.5 million, $0.8 million, and $1.0 million, respectively, related to several former employees who did not have employment contracts. Such costs are included in General and administrative expenses in the accompanying consolidated financial statements, and exclude severance-related costs that are included in Restructuring and other compensation in the consolidated financial statements (Note 13).