Stock Incentive Plans

On February 17, 2016, our board of directors adopted the 2016 Equity Incentive Plan (the “2016 Plan”). The 2016 Plan was approved by our stockholders on May 3, 2016 and replaced the 2004 Stock Option and Incentive Plan, as amended (the "2004 Plan"), which was scheduled to expire on April 26, 2017. We no longer make share grants and issuances under the 2004 Plan, although awards previously made under the 2004 Plan that are outstanding will remain in effect in accordance with the terms of that plan and the applicable award agreements. Under the 2016 Plan, we are authorized to issue up to 6,082,664 shares of our common stock. We have issued or committed to issue 53,574 shares under the 2016 Plan as of September 30, 2016.

Restricted Stock Awards

Restricted stock awards issued to our officers and employees generally vest over a 3-year period from the date of the grant based on continued employment. We measure compensation expense for the restricted stock awards based upon the fair market value of our common stock at the date of grant. Compensation expense is recognized on a straight-line basis over the vesting period and is included in corporate expenses in the accompanying condensed consolidated statements of operations. A summary of our restricted stock awards from January 1, 2016 to September 30, 2016 is as follows:



	Number of Shares		Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2016	474,567		$	12.72
Granted	451,739		8.91
Vested	(241,698	)	11.83
Forfeited	(122,121	)	10.12
Unvested balance at September 30, 2016	562,487		$	10.61

The remaining share awards are expected to vest as follows: 245,907 shares during 2017, 187,977 shares during 2018, 117,379 shares during 2019, and 11,224 during 2020. As of September 30, 2016, the unrecognized compensation cost related to restricted stock awards was $4.4 million and the weighted-average period over which the unrecognized compensation expense will be recorded is approximately 24 months. We recorded $0.5 million and $0.7 million, respectively, of compensation expense related to restricted stock awards for the three months ended September 30, 2016 and 2015. We recorded $2.1 million of compensation expense related to restricted stock awards for the nine month periods ended September 30, 2016 and 2015.

The compensation expense recorded for the three and nine months ended September 30, 2016 includes the reversal of $0.2 million of previously recognized compensation expense resulting from the forfeiture of restricted stock awards related to the resignation of our former Executive Vice President and Chief Operating Officer.

Performance Stock Units

Performance stock units (“PSUs”) are restricted stock units that vest three years from the date of grant. Each executive officer is granted a target number of PSUs (the “PSU Target Award”). For the PSUs issued in 2014 and 2015 and vesting in 2017 and 2018, respectively, the actual number of shares of common stock issued to each executive officer is subject to the achievement of certain levels of total stockholder return relative to the total stockholder return of a peer group of publicly traded lodging REITs over a three-year performance period. There will be no payout of shares of our common stock if our total stockholder return falls below the 30th percentile of the total stockholder returns of the peer group. The maximum number of shares of common stock issued to an executive officer is equal to 150% of the PSU Target Award and is earned if our total stockholder return is equal to or greater than the 75th percentile of the total stockholder returns of the peer group. For the PSUs issued in 2016 and vesting in 2019, the calculation of total stockholder return relative to the total stockholder return of a peer group over a three-year performance period remained in effect for 75% of the number of PSUs to be earned in the performance period. The remaining 25% is determined based on achieving improvement in market share for each of our hotels over the three-year performance period.

We measure compensation expense for the PSUs based upon the fair market value of the award at the grant date. Compensation expense is recognized on a straight-line basis over the three-year performance period and is included in corporate expenses in the accompanying condensed consolidated statements of operations. The grant date fair value of the portion of the PSUs based on our relative total stockholder return is determined using a Monte Carlo simulation performed by a third-party valuation firm. The grant date fair value of the portion of the PSUs based on improvement in market share for each of our hotels is the closing price of our common stock on the grant date.

On February 26, 2016, our board of directors granted 310,398 PSUs to our executive officers. The grant date fair value of the portion of the PSUs based on our relative total stockholder return was $8.42 using the assumptions of volatility of 24.3% and a risk-free rate of 0.93%. The grant date fair value of the portion of the PSUs based on hotel market share $8.91.

A summary of our PSUs from January 1, 2016 to September 30, 2016 is as follows:



	Number of Target Units		Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2016	676,359		$	11.41
Granted	310,398		8.54
Additional units from dividends	29,131		9.42
Vested (1)	(242,096	)	9.85
Forfeited	(96,301	)	10.75
Unvested balance at September 30, 2016	677,491		$	10.66

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(1)	The number of shares of common stock earned for the PSUs vested in 2016 was equal to 89.5% of the PSU Target Award.

The remaining target units are expected to vest as follows: 195,525 units during 2017, 204,010 units during 2018 and 277,956 units during 2019. The number of shares earned upon vesting is subject to the attainment of the performance goals described above. As of September 30, 2016, the unrecognized compensation cost related to the PSUs was $3.3 million and is expected to be recognized on a straight-line basis over a weighted average period of 23 months. We recorded $0.1 million and $0.6 million of compensation expense related to the PSUs for the three months ended September 30, 2016 and 2015, respectively. We recorded $1.4 million and $1.7 million of compensation expense related to the PSUs for the nine months ended September 30, 2016 and 2015, respectively.

The compensation expense recorded for the three and nine months ended September 30, 2016 includes the reversal of $0.4 million of previously recognized compensation expense resulting from the forfeiture of PSUs related to the resignation of our former Executive Vice President and Chief Operating Officer.

Director Stock Grants

On May 11, 2016, we issued (i) 44,645 shares of common stock and (ii) 8,929 deferred stock units to our board of directors having an aggregate value of $510,000, based on the closing stock price for our common stock on such day. The shares of common stock and the deferred stock units issued to our board of directors vest immediately upon issuance.