Share-Based Compensation

As of December 31, 2015, 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.

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 1,744,000 shares remaining for future issuance.

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.

2009 Equity Plan

In July 2015, we granted 20,000 shares of restricted stock to an executive officer under to 2009 Equity Plan. The shares had a fair value of $67.57 per share and will vest as follows: July 16, 2018: 35%; July 19, 2019: 35%; July 16, 2020: 20%; July 16, 2021: 5%; and July 16, 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 May 2015, we granted 25,000 shares of restricted stock to an executive officer under our 2009 Equity Plan. The shares had a fair value of $62.94 per share and will vest as follows: May 19, 2018: 35%; May 19, 2019: 35%; May 19, 2020: 20%; May 19, 2021: 5%; and May 19, 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.

During 2014, the Company and Gary A. Shiffman (the Company's Chairman and Chief Executive Officer) entered into an Amended and Restated Restricted Stock Award Agreement, which amended and restated in its entirety the Restricted Stock Award Agreement dated June 20, 2013, between the Company and Mr. Shiffman. Under the original stock award agreement, the Company granted Mr. Shiffman 250,000 restricted shares of the Company's common stock, of which 175,000 restricted shares were awarded in respect of the performance of Mr. Shiffman and the Company over the prior three years and 75,000 restricted shares were awarded to induce Mr. Shiffman to execute a new five-year employment agreement. All of these restricted shares were scheduled to vest over time through June 2020. The restated stock award agreement amended the vesting schedule of the restricted shares, of which 100,000 restricted shares are now subject to market and performance conditions and the remaining 150,000 shares will vest over time through June 2020. We accounted for the modification of this award is accordance with the FASB ASC Topic 718. See discussion below on the fair value measurement of these awards.

During 2014, we granted 45,250 shares of restricted stock to employees under our 2009 Equity Plan. The restricted shares had a an average fair value of $52.54 per share and will vest as follows: 35% in 2017; 35% in 2018; 20% in 2019, 5% in 2020; and 5% in 2021. The fair value was determined using the closing price of our common stock on the date the shares were issued.

During 2014, we also granted 58,000 shares of restricted stock to our executive officers under our 2009 Equity Plan. The restricted shares had a fair value of $48.93 per share and will vest as follows: 20% in 2018; 30% in 2019; 35% in 2020; 10% in 2021; and 5% in 2022. The fair value was determined by using the closing share price of our common stock on the date the shares were issued.

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 75,674 shares remaining for future issuance.

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.

In February 2014, we granted 14,000 shares of restricted stock to our directors under our Director Plan. The awards vest on February 12, 2017, and had a fair value of $48.01 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, 2015, 5,584 shares of common stock were issued in connection with the exercise of stock options and the net proceeds received were $0.1 million.

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.

As of December 31, 2014, we had 50,000 shares of restricted stock that was issued to Mr. Shiffman subject to certain Company performance criteria, of which 37,500 shares are still outstanding as of December 31, 2015. The remaining shares will vest in equal shares of 12,500 on March 1 of each 2016, 2017, and 2018. Compensation expense is recognized in accordance with ASC Topic 718 and based on an estimate of shares expected to vest. If it is not probable that the performance conditions will be satisfied, we do not recognize compensation expense. The fair value of these awards was measured using the closing price of our common stock as of the grant modification date to calculate compensation cost. Each reporting period, we reevaluate our estimate of the number of shares expected to vest. The performance conditions were satisfied for the shares vesting on March 1, 2016 and compensation expense was recognized as of December 31, 2015.

We also have 50,000 shares of restricted stock issued to Mr. Shiffman subject to certain market performance criteria, of which 16,667 shares vest on March 1 of each 2016, 2017 and 2018. In accordance with ASC Topic 718, we estimated the fair value of the shares using a Monte Carlo simulation. We recognize compensation cost ratably over each tranche of shares based on the fair value estimated by the model.

The following table summarizes our restricted stock activity for the years ended December 31, 2015, 2014 and 2013:



	Number of Shares		Weighted Average Grant Date Fair Value
Unvested restricted shares at January 1, 2013	310,507		$	30.88
Granted	371,300		$	47.19
Vested	(37,291	)	$	16.87
Forfeited	(12,560	)	$	38.47
Unvested restricted shares at December 31, 2013	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

Total compensation cost recognized for restricted stock was $7.1 million, $4.9 million, and $3.2 million for the years ended December 31, 2015, 2014, and 2013, respectively. The total fair value of shares vested was $2.7 million, $1.4 million, and $0.6 million for the years ended December 31, 2015, 2014 and 2013, respectively. The remaining net compensation cost related to our unvested restricted shares outstanding as of December 31, 2015 is approximately $27.4 million. That expense is expected to be recognized $7.3 million in 2016, $7.3 million in 2017, $5.5 million in 2018 and $7.3 million thereafter.

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 2015, 2014 or 2013. 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, 2015, consist of 24,500 non-employee director options. There are no employee options outstanding. The compensation expense associated with non-vested stock option awards was not significant for the years ended December 31, 2015, 2014, and 2013.

The following table summarizes our option activity during the years ended December 31, 2015, 2014 and 2013:



	Number of Options		Weighted Average Exercise Price (per common share)
Options outstanding at January 1, 2013	55,950		$	29.19
Granted	—		$	—
Exercised	(9,700	)	$	21.67
Forfeited or expired	—		$	—
Options outstanding at December 31, 2013	46,250		$	30.77
Granted	—		$	—
Exercised	(12,250	)	$	33.40
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

The following table summarizes our options outstanding and options currently exercisable at December 31, 2015:



	December 31, 2015
	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	24,500	$	29.11	3.4	$	966

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, 2015, 2014 and 2013, the intrinsic value of exercised options was $0.3 million, $0.3 million and $0.2 million, respectively. For the years ended December 31, 2015, 2014 and 2013, the intrinsic value of vested and exercisable options was $1.0 million, $1.0 million and $0.5 million, respectively.