STOCK-BASED COMPENSATION PLANS:

The Omnibus Plan allows for the issuance of up to 6,187,500 shares of Class A Common Stock for awards, which include stock options, restricted stock, restricted stock units and any other form of award established by the Compensation Committee, in each case consistent with the plan's purpose. Stock-based awards generally have three-year requisite service periods and five year contractual terms. Any shares of common stock related to awards that terminate by expiration, forfeiture or cancellation are deemed available for issuance or reissuance under the Omnibus Plan. In total, at December 31, 2014, there remained 1,729,535 shares of Class A Common Stock available for future issuance under the Omnibus Plan.

A summary of option activity under the Omnibus Plan as of December 31, 2014 and changes during the year then ended is presented below:



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at beginning of year	969,332		$	54.32
Granted	358,469		98.31
Exercised	(326,494	)	32.67
Expired	(2,138	)	42.44
Forfeited	(15,889	)	89.82
Outstanding at end of year	983,280		$	76.99	3.1	$	15,941
Vested or expected to vest at end of year	980,480		$	76.94	3.1	$	15,940
Exercisable at end of year	442,575		$	58.91	1.9	$	13,836

The weighted average grant date fair value of options granted during the years ended December 31, 2014, 2013 and 2012 was $18.90, $22.16 and $16.25, respectively. The total intrinsic value of options exercised during the years ended December 31, 2014, 2013 and 2012 was $20.9 million, $17.6 million and $17.3 million, respectively.

The Company determines the fair value of each option award on the date of grant using the Black-Scholes option pricing model. There are six input variables to the Black-Scholes model: stock price, strike price, volatility, term, risk-free interest rate and dividend yield. Both the stock price and strike price inputs are typically the closing stock price on the date of grant. The assumption for expected future volatility is based on a combination of historical and implied volatility of the Company's Class A Common Stock. The expected term of options is derived from the vesting period of the award, as well as historical exercise data, and represents the period of time that options granted are expected to be outstanding. The expected risk-free rate is calculated using the United States Treasury yield curve over the expected term of the option. The expected dividend yield is 0% for all periods presented, based upon the Company's historical practice of not paying cash dividends on its common stock. The Company uses historical data, as well as management's current expectations, to estimate forfeitures.

The following weighted average assumptions were used to estimate the grant date fair value of options granted during the years ended December 31, 2014, 2013 and 2012 using the Black-Scholes option pricing model:



	2014		2013		2012
Expected volatility	22	%	29	%	33	%
Expected term (in years)	4		4		4
Risk-free interest rate	1.20	%	0.89	%	0.52	%
Expected dividend yield	0	%	0	%	0	%

As required under the RailAmerica acquisition agreement, on October 1, 2012, the Company converted approximately 432,000 RailAmerica restricted stock awards and 775,000 RailAmerica restricted stock unit awards into approximately 180,000 and 322,000 G&W restricted stock awards and restricted stock unit awards, respectively, at a ratio of 0.4151 based upon the acquisition cash purchase price of $27.50 per share and the Company's average 10-day closing stock price prior to the RailAmerica acquisition closing date of $66.26 per share.

The Company determines fair value of its restricted stock and restricted stock units based on the closing stock price on the date of grant.

The following table summarizes the Company's non-vested restricted stock outstanding as of December 31, 2014 and changes during the year then ended:



	Shares		Weighted Average Grant Date Fair Value
Non-vested at beginning of year	126,664		$	73.25
Granted	74,880		98.18
Vested	(73,974	)	68.80
Forfeited	(3,331	)	87.75
Non-vested at end of year	124,239		$	90.54

The weighted average grant date fair value of restricted stock granted during the years ended December 31, 2014, 2013 and 2012 was $98.18, $90.12 and $65.70, respectively. The total grant date fair value of restricted stock that vested during the years ended December 31, 2014, 2013 and 2012 was $5.1 million, $11.3 million and $7.8 million, respectively.

The following table summarizes the Company's non-vested restricted stock units outstanding as of December 31, 2014 and changes during the year then ended:



	Shares		Weighted Average Grant Date Fair Value
Non-vested at beginning of year	93,242		$	72.78
Granted	37,007		98.24
Vested	(57,995	)	75.94
Forfeited	(6,848	)	80.73
Non-vested at end of year	65,406		$	83.55

The weighted average grant date fair value of restricted stock units granted during the years ended December 31, 2014, 2013 and 2012 was $98.24, $89.44 and $67.43, respectively. The total grant date fair value of restricted stock units that vested during the years ended December 31, 2014, 2013 and 2012 was $4.4 million, $14.3 million and $3.4 million, respectively.

During 2014, the Company's Compensation Committee started awarding performance-based restricted stock units under the Omnibus Plan. These performance-based restricted stock units are typically granted once per year and vest based upon the achievement of market performance criteria, ranging from 0% to 100%, as determined by the Compensation Committee prior to the date of the award, and continued service during the performance period. The performance period for these awards are generally three years. The performance-based restricted stock units entitle the grantee to receive shares of Class A Common Stock based upon the Company's Relative Total Shareholder Return as independently ranked against the components of the S&P 500 Index and the custom peer group over the performance period with each discrete half of the award's payouts being measured independently and then averaged together to find the final payout. The expense for these awards is recognized over the service period, even if the market condition is never satisfied.

The following table summarizes the performance-based restricted stock units at the maximum award amounts as of December 31, 2014 and changes during the year then ended. Actual shares that will vest depending on the level of attainment of the performance-based criteria:



	Shares	Weighted Average Grant Date Fair Value
Non-vested at beginning of year	—	$	—
Granted	14,424	42.39
Vested	—	—
Forfeited	—	—
Non-vested at end of year	14,424	$	42.39

The Company determines the fair value of each performance-based restricted stock units on the date of grant using the Monte Carlo valuation model. There are six input variables to the Monte Carlo valuation model: stock price, volatility of the Company's Class A Common Stock, volatility of the two peer groups, correlation coefficients, risk-free interest rate and dividend yield. The stock price is determined based upon the Company's closing stock price on the day prior to the date of grant. Volatility is based on a combination of historical and implied volatility. The correlation coefficients are calculated based upon the price data used to calculate the volatilities. The expected risk-free rate is calculated using the United States Treasury bill over the expected term of the award. The expected dividend yield is 0% for all periods presented, based upon the Company's historical practice of not paying cash dividends on its common stock. The expected term of the performance-based restricted stock units is derived from the plan's performance period as of the grant date. The Company uses historical data, as well as management's current expectations, to estimate forfeitures.

The following assumptions were used to estimate the grant date fair value of the performance-based restricted stock units granted during the year ended December 31, 2014 using the Monte Carlo simulation model:



	2014
Volatility of the Company's common stock	25	%
Average volatility of peer group and S&P 500 companies	29	%
Average correlation coefficient of peer group and S&P 500 companies	0.6
Risk-free interest rate	0.81	%
Expected dividend yield	0	%
Expected term (in years)	3

For the year ended December 31, 2014, total compensation costs from all of the Company's stock-based awards was $12.7 million. Total compensation costs related to non-vested awards not yet recognized was $17.7 million as of December 31, 2014, which will be recognized over the next three years with a weighted average period of 1.3 years. The total income tax benefit recognized in the consolidated statement of operations for stock-based awards was $4.4 million for the year ended December 31, 2014.

For the year ended December 31, 2013, compensation costs from all of the Company's stock-based awards was $11.7 million. The Company also recorded an additional $5.1 million of costs from the acceleration of stock-based awards for terminated RailAmerica employees. The total income tax benefit recognized in the consolidated statement of operations for stock-based awards was $5.3 million for the year ended December 31, 2013.

For the year ended December 31, 2012, compensation cost from stock-based awards was $7.9 million. The Company also recorded an additional $4.1 million of costs from the acceleration of stock-based awards for terminated RailAmerica employees. The total income tax benefit recognized in the consolidated statement of operations for stock-based awards was $4.5 million for the year ended December 31, 2012.

The total income tax benefit realized from the exercise of stock-based awards was $11.0 million, $17.7 million and $10.9 million for the years ended December 31, 2014, 2013 and 2012, respectively.

The Company has reserved 1,265,625 shares of Class A Common Stock that the Company may sell to its full-time employees under its Employee Stock Purchase Plan (ESPP) at 90% of the stock's market price on the date of purchase. At December 31, 2014, 210,988 shares had been purchased under this plan. The Company recorded compensation expense for the 10% purchase discount of approximately $0.1 million in each of the years ended December 31, 2014, 2013 and 2012.