Stock Option Plan

12 Months Ended

Dec. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK OPTION PLAN

The Company established a stock option plan in 1993 (the “1993 Plan”) for the purpose of attracting and retaining executive officers and other key personnel. The 1993 Plan provides for grants of options to purchase up to 400,000 shares of common stock. The 1993 Plan authorizes the Compensation Committee of the Board of Directors to grant options at an exercise price which may not be less than the market value of the common stock on the date the option is granted.

At the annual meeting of the Company’s stockholders in 2004, the stockholders approved the adoption of the 2004 stock plan for the purpose of attracting and retaining executive officers, directors and other key personnel. The 2004 stock plan was subsequently amended by the Company’s stockholders at the 2008 Annual Meeting and further amended at the 2013 Annual Meeting (the “Amended 2004 Plan”). The Amended 2004 Plan, which terminates in 2023, provides for grants of options to purchase up to 2,000,000 shares of common stock as well as grants of up to 200,000 shares of common stock to directors. The Amended 2004 Plan authorizes the Compensation Committee of the Board of Directors to grant options at an exercise price which may not be less than the market value of the common stock on the date the option is granted.

Effective May 6, 2005, the Compensation Committee granted options to purchase 162,500 shares (35,500 incentive stock options and 127,000 nonqualified stock options) to twelve Company officers and to twelve Company directors (the “2005 Options”), which expire on May 5, 2015. The officers’ 2005 Options vested 25% per year over four years and are subject to early expiration upon termination of employment. The directors’ options were immediately exercisable. The exercise price of $33.22 per share was the closing market price of the Company’s common stock on the date of the award. Using the Black-Scholes model, the Company determined the total fair value of the 2005 Options to be $484,500, of which $413,400 and $71,100 were the values assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire $71,100 was expensed as of the date of grant. The expense of the officers’ options was recognized as compensation expense monthly during the four years the options vested.

Effective May 1, 2006, the Compensation Committee granted options to purchase 30,000 shares (all nonqualified stock options) to twelve Company directors (the “2006 Options”), which were immediately exercisable and expire on April 30, 2016. The exercise price of $40.35 per share was the closing market price of the Company’s common stock on the date of the award. Using the Black-Scholes model, the Company determined the total fair value of the 2006 Options to be $143,400. Because the directors’ options vested immediately, the entire $143,400 was expensed as of the date of grant. No options were granted to the Company’s officers in 2006.

Effective April 27, 2007, the Compensation Committee granted options to purchase 165,000 shares (27,560 incentive stock options and 137,440 nonqualified stock options) to thirteen Company officers and twelve Company Directors (the “2007 options”), which expire on April 26, 2017. The officers’ 2007 Options vest 25% per year over four years and are subject to early expiration upon termination of employment. The directors’ options were immediately exercisable. The exercise price of $54.17 per share was the closing market price of the Company’s common stock on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2007 Options to be $1.5 million, of which $1.3 million and $285,300 were the values assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire $285,300 was expensed as of the date of grant. The expense for the officers’ options was recognized as compensation expense monthly during the four years the options vested.

Effective April 25, 2008, the Compensation Committee granted options to purchase 30,000 shares (all nonqualified stock options) to twelve Company directors (the “2008 Options”), which were immediately exercisable and expire on April 24, 2018. The exercise price of $50.15 per share was the closing market price of the Company’s common stock on the date of the award. Using the Black-Scholes model, the Company determined the total fair value of the 2008 Options to be $254,700. Because the directors’ options vest immediately, the entire $254,700 was expensed as of the date of grant. No options were granted to the Company’s officers in 2008.

Effective April 24, 2009, the Compensation Committee granted options to purchase 32,500 shares (all nonqualified stock options) to thirteen Company directors (the “2009 Options”), which were immediately exercisable and expire on April 23, 2019. The exercise price of $32.68 per share was the closing market price of the Company’s common stock on the date of the award. Using the Black-Scholes model, the Company determined the total fair value of the 2009 Options to be $222,950. Because the directors’ options vested immediately, the entire $222,950 was expensed as of the date of grant. No options were granted to the Company’s officers in 2009.

Effective May 7, 2010, the Compensation Committee granted options to purchase 32,500 shares (all nonqualified stock options) to thirteen Company directors (the “2010 Options”), which were immediately exercisable and expire on May 6, 2020. The exercise price of $38.76 per share was the closing market price of the Company’s common stock on the date of the award. Using the Black-Scholes model, the Company determined the total fair value of the 2010 Options to be $287,950. Because the directors’ options vested immediately, the entire $287,950 was expensed as of the date of grant. No options were granted to the Company’s officers in 2010.

Effective May 13, 2011, the Compensation Committee granted options to purchase 195,000 shares (65,300 incentive stock options and 129,700 nonqualified stock options) to fifteen Company officers and thirteen Company Directors (the “2011 options”), which expire on May 12, 2021. The officers’ 2011 Options vest 25% per year over four years and are subject to early expiration upon termination of employment. The directors’ 2011 options were immediately exercisable. The exercise price of $41.82 per share was the closing market price of the Company’s common stock on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2011 Options to be $1.6 million, of which $1.3 million and $297,375 were assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire $297,375 was expensed as of the date of grant. The expense for the officers’ options is being recognized as compensation expense monthly during the four years the options vest.

Effective May 4, 2012, the Compensation Committee granted options to purchase 277,500 shares (26,157 incentive stock options and 251,343 nonqualified stock options) to fifteen Company officers and fourteen Company Directors (the “2012 options”), which expire on May 3, 2022. The officers’ 2012 Options vest 25% per year over four years and are subject to early expiration upon termination of employment. The directors’ 2012 Options were immediately exercisable. The exercise price of $39.29 per share was the closing market price of the Company’s common stock on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2012 Options to be $1.7 million, of which $1.4 million and $257,250 were assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire $257,250 was expensed as of the date of grant. The expense for the officers’ options is being recognized as compensation expense monthly during the four years the options vest.

Effective May 10, 2013, the Compensation Committee granted options to purchase 237,500 shares (35,592 incentive stock options and 201,908 nonqualified stock options) to fifteen Company officers and fourteen Company Directors (the "2013 options"), which expire on May 9, 2023. The officers' 2013 Options vest 25% per year over four years and are subject to early expiration upon termination of employment. The directors' 2013 options were immediately exercisable. The exercise price of $44.42 per share was the closing market price of the Company's common stock on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2013 Options to be $1.5 million, of which $1.3 million and $0.3 million were assigned to the officer options and director options, respectively. Because the directors' options vested immediately, the entire $0.3 million was expensed as of the date of grant. The expense for the officers' options is being recognized as compensation expense monthly during the four years the option was vested.

Effective May 9, 2014, the Compensation Committee granted options to purchase 200,000 shares (29,300 incentive stock options and 170,700 nonqualified stock options) to eighteen Company officers and twelve Company Directors (the “2014 options”), which expire on May 8, 2024. The officers’ 2014 Options vest 25% per year over four years and are subject to early expiration upon termination of employment. The directors’ 2014 Options were immediately exercisable. The exercise price of $47.03 per share was the closing market price of the Company’s common stock on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2014 Options to be $1.3 million, of which $1.2 million and $109,500 were assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire $109,500 was expensed as of the date of grant. The expense for the officers’ options is being recognized as compensation expense monthly during the four years the options vest.

The following table summarizes the amount and activity of each grant, the total value and variables used in the computation and the amount expensed and included in general and administrative expense in the Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012:



SAUL CENTERS, INC. Notes to Consolidated Financial Statements
Stock options issued
	Directors
Grant date	5/6/2005			5/1/2006				4/27/2007			4/25/2008			4/24/2009			5/7/2010			5/13/2011			5/4/2012			5/10/2013			5/9/2014			Subtotals
Total grant	30,000			30,000				30,000			30,000			32,500			32,500			32,500			35,000			35,000			30,000			317,500
Vested	30,000			30,000				30,000			30,000			32,500			32,500			32,500			35,000			35,000			30,000			317,500
Exercised	22,500			10,000				—			—			20,000			10,000			10,000			10,000			7,500			—			90,000
Forfeited	—			2,500				7,500			7,500			—			2,500			2,500			—			—			—			22,500
Exercisable at December 31, 2014	7,500			17,500				22,500			22,500			12,500			20,000			20,000			25,000			27,500			30,000			205,000
Remaining unexercised	7,500			17,500				22,500			22,500			12,500			20,000			20,000			25,000			27,500			30,000			205,000
Exercise price	$	33.22		$	40.35			$	54.17		$	50.15		$	32.68		$	38.76		$	41.82		$	39.29		$	44.42		$	47.03
Volatility	0.198			0.206				0.225			0.237			0.344			0.369			0.358			0.348			0.333			0.173
Expected life (years)	10.0			9.0				8.0			7.0			6.0			5.0			5.0			5.0			5.0			5.0
Assumed yield	6.91		%	5.93		%		4.39		%	4.09		%	4.54		%	4.23		%	4.16		%	4.61		%	4.53		%	4.48		%
Risk-free rate	4.28		%	5.11		%		4.65		%	3.49		%	2.19		%	2.17		%	1.86		%	0.78		%	0.82		%	1.63		%
Total value at grant date	$	71,100		$	143,400			$	285,300		$	254,700		$	222,950		$	287,950		$	297,375		$	257,250		$	278,250		$	109,500		$	2,207,775
Expensed in previous years	71,100			143,400				285,300			254,700			222,950			287,950			297,375			—			—			—			1,562,775
Expensed in 2012	—			—				—			—			—			—			—			257,250			—			—			257,250
Expensed in 2013	—			—				—			—			—			—			—			—			278,250			—			278,250
Expensed in 2014	—			—				—			—			—			—			—			—			—			109,500			109,500
Future expense	—			—				—			—			—			—			—			—			—			—			—
	Officers
Grant date	5/6/2005			4/27/2007				5/13/2011			5/4/2012			5/10/2013			5/9/2014			Subtotals												Grand Totals
Total grant	132,500			135,000				162,500			242,500			202,500			170,000			1,045,000												1,362,500
Vested	118,750			67,500				105,625			56,250			50,625			—			398,750												716,250
Exercised	115,750			3,528				46,889			30,000			15,625			—			211,792												301,792
Forfeited	13,750			67,500				43,750			135,000			30,000			—			290,000												312,500
Exercisable at December 31, 2014	3,000			63,972				47,486			26,250			35,000			—			175,708												380,708
Remaining unexercised	3,000			63,972				71,861			77,500			156,875			170,000			543,208												748,208
Exercise price	$	33.22		$	54.17			$	41.82		$	39.29		$	44.42		$	47.03
Volatility	0.207			0.233				0.330			0.315			0.304			0.306
Expected life (years)	8.0			6.5				8.0			8.0			8.0			7.0
Assumed yield	6.37		%	4.13		%		4.81		%	5.28		%	5.12		%	4.89		%
Risk-free rate	4.15		%	4.61		%		2.75		%	1.49		%	1.49		%	2.17		%
Gross value at grant date	$	413,400		$	1,339,200			$	1,366,625		$	1,518,050		$	1,401,300		$	1,349,800		$	7,388,375											$	9,596,150
Estimated forfeitures	35,100			62,000				387,550			889,690			280,468			168,749			1,823,557												1,823,557
Expensed in previous years	378,300			1,277,200				186,347			—			—			—			1,841,847												3,404,622
Expensed in 2012				—				270,391			104,724			—			—			375,115												632,365
Expensed in 2013				—				235,350			157,083			209,027			—			601,460												879,710
Expensed in 2014	—			—				217,475			157,092			283,910			196,848			855,325												964,825
Future expense	—			—				69,512			209,461			627,895			984,203			1,891,071												1,891,071
Weighted average term of remaining future expense				2.7			years

The table below summarizes the option activity for the years 2014, 2013, and 2012:



	2014				2013				2012
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Outstanding at January 1	753,625		$	42.55	570,840		$	41.04	674,585		$	40.40
Granted	200,000		47.03		237,500		44.42		277,500		39.29
Exercised	(167,917	)	37.71		(49,715	)	33.15		(149,995	)	31.03
Expired/Forfeited	(37,500	)	43.56		(5,000	)	52.16		(231,250	)	43.56
Outstanding December 31	748,208		44.79		753,625		42.55		570,840		41.04
Exercisable at December 31	380,708		44.85		413,000		42.42		377,715		41.41

The intrinsic value of options exercised in 2014, 2013, and 2012, was $2.0 million, $0.6 million and $1.6 million, respectively. The intrinsic value of options outstanding and exercisable at year end 2014 was $9.3 million and $4.7 million, respectively. The intrinsic value measures the difference between the options’ exercise price and the closing share price quoted by the New York Stock Exchange as of the date of measurement. The date of exercise was the measurement date for shares exercised during the period. At December 31, 2014, the final trading day of calendar 2014, the closing price of $57.19 per share was used for the calculation of aggregate intrinsic value of options outstanding and exercisable at that date. At December 31, 2014, there were no options with an exercise price in excess of the market closing price. The weighted average remaining contractual life of the Company’s exercisable and outstanding options at December 31, 2014 are 5.4 and 7.0 years, respectively.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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