Stock Option Plan

12 Months Ended

Dec. 31, 2016

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 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 vested 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 $1.2 million and $278,250 were assigned to the officer options and director options, respectively. Because the directors' options vested immediately, the entire $278,250 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 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.

Effective May 8, 2015, the Compensation Committee granted options to purchase 225,000 shares (33,690 incentive stock options and 191,310 nonqualified stock options) to 19 Company officers and 14 Company Directors (the “2015 options”), which expire on May 7, 2025. The officers’ 2015 Options vest 25% per year over four years and are subject to early expiration upon termination of employment. The directors’ 2015 Options were immediately exercisable. The exercise price of $51.07 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 2015 Options to be $1.6 million, of which $1.4 million and $125,300 were assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire $125,300 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 6, 2016, the Compensation Committee granted options to purchase 226,500 shares (24,248 incentive stock options and 202,252 nonqualified stock options) to 19 Company officers and 13 Company Directors (the “2016 options”), which expire on May 5, 2026. The officers’ 2016 Options vest 25% per year over four years and are subject to early expiration upon termination of employment. The directors’ 2016 Options were immediately exercisable. The exercise price of $57.74 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 2016 Options to be $1.2 million, of which $1.0 million and $151,125 were assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire $151,125 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, 2016, 2015 and 2014.



SAUL CENTERS, INC. Notes to Consolidated Financial Statements (Dollars in thousands, except per share data)
Stock options issued
	Directors
Grant date		4/27/2007			4/25/2008			4/24/2009			5/7/2010			5/13/2011			5/4/2012			5/10/2013			5/9/2014			5/8/2015			5/6/2016			Subtotals
Total grant		30,000			30,000			32,500			32,500			32,500			35,000			35,000			30,000			35,000			32,500			325,000
Vested		30,000			30,000			32,500			32,500			32,500			35,000			35,000			30,000			35,000			32,500			325,000
Exercised		10,000			12,500			25,000			17,500			17,500			17,500			15,000			10,000			5,000			—			130,000
Forfeited		7,500			7,500			—			2,500			2,500			—			—			—			—			—			20,000
Exercisable at December 31, 2016		12,500			10,000			7,500			12,500			12,500			17,500			20,000			20,000			30,000			32,500			175,000
Remaining unexercised		12,500			10,000			7,500			12,500			12,500			17,500			20,000			20,000			30,000			32,500			175,000
Exercise price		$	54.17		$	50.15		$	32.68		$	38.76		$	41.82		$	39.29		$	44.42		$	47.03		$	51.07		$	57.74
Volatility		0.225			0.237			0.344			0.369			0.358			0.348			0.333			0.173			0.166			0.166
Expected life (years)		8.0			7.0			6.0			5.0			5.0			5.0			5.0			5.0			5.0			5.0
Assumed yield		4.39		%	4.09		%	4.54		%	4.23		%	4.16		%	4.61		%	4.53		%	4.48		%	4.54		%	3.75		%
Risk-free rate		4.65		%	3.49		%	2.19		%	2.17		%	1.86		%	0.78		%	0.82		%	1.63		%	1.50		%	1.23		%
Total value at grant date		$	285		$	255		$	223		$	288		$	298		$	257		$	278		$	110		$	125		$	151		$	2,270
Expensed in previous years		285			255			223			288			298			257			278			—			—			—			1,884
Expensed in 2014		—			—			—			—			—			—			—			110			—			—			110
Expensed in 2015		—			—			—			—			—			—			—			—			125			—			125
Expensed in 2016		—			—			—			—			—			—			—			—			—			151			151
Future expense		—			—			—			—			—			—			—			—			—			—			—
	Officers
Grant date		4/27/2007			5/13/2011			5/4/2012			5/10/2013			5/9/2014			5/8/2015			5/6/2016			Subtotals									Grand Totals
Total grant		135,000			162,500			242,500			202,500			170,000			190,000			194,000			1,296,500									1,621,500
Vested		67,500			118,750			107,500			131,875			85,000			47,500			—			558,125									883,125
Exercised		67,500			92,915			91,205			68,750			31,250			6,250			—			357,870									487,870
Forfeited		67,500			43,750			135,000			30,625			1,250			1,875			—			280,000									300,000
Exercisable at December 31, 2016		—			25,835			16,295			63,125			53,750			41,250			—			200,255									375,255
Remaining unexercised		—			25,835			16,295			103,125			137,500			181,875			194,000			658,630									833,630
Exercise price		$	54.17		$	41.82		$	39.29		$	44.42		$	47.03		$	51.07		$	57.74
Volatility		0.233			0.330			0.315			0.304			0.306			0.298			0.185
Expected life (years)		6.5			8.0			8.0			8.0			7.0			7.0			7.0
Assumed yield		4.13		%	4.81		%	5.28		%	5.12		%	4.89		%	4.94		%	3.80		%
Risk-free rate		4.61		%	2.75		%	1.49		%	1.49		%	2.17		%	1.89		%	1.55		%
Gross value at grant date		$	1,339		$	1,366		$	1,518		$	1,401		$	1,350		$	1,585		$	1,137		$	9,696								$	11,966
Estimated forfeitures		62			368			845			280			169			142			87			1,953									1,953
Expensed in previous years		1,277			692			262			209			—			—			—			2,440									4,324
Expensed in 2014		—			217			157			284			197			—			—			855									965
Expensed in 2015		—			89			157			269			295			241			—			1,051									1,176
Expensed in 2016					—			97			269			295			361			175			1,197									1,348
Future expense		—			—			—			90			394			841			875			2,200									2,200
Weighted average term of remaining future expense		2.5			years

The table below summarizes the option activity for the years 2016, 2015, and 2014:



	2016				2015				2014
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Outstanding at January 1	860,274		$	46.58	748,208		$	44.79	753,625		$	42.55
Granted	226,500		57.74		225,000		51.07		200,000		47.03
Exercised	(246,894	)	45.59		(112,934	)	43.67		(167,917	)	37.71
Expired/Forfeited	(6,250	)	45.31		—		—		(37,500	)	43.56
Outstanding December 31	833,630		49.92		860,274		46.58		748,208		44.79
Exercisable at December 31	375,255		46.68		435,899		45.33		380,708		44.85

The intrinsic value of options exercised in 2016, 2015, and 2014, was $3.4 million, $1.5 million and $2.0 million, respectively. The intrinsic value of options outstanding and exercisable at year end 2016 was $13.9 million and $7.5 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 30, 2016, the final trading day of calendar 2016, the closing price of $66.61 per share was used for the calculation of aggregate intrinsic value of options outstanding and exercisable at that date. The weighted average remaining contractual life of the Company’s exercisable and outstanding options at December 31, 2016 are 6.4 and 7.5 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.

+ References + Details