Stock-Based Employee Compensation

The Company has two nonqualified stock option plans, the 2004 Plan and the SCL Equity Plan, which are described below. The plans provide for the granting of stock options pursuant to the applicable provisions of the Internal Revenue Code and regulations.

Las Vegas Sands Corp. 2004 Equity Award Plan

The Company adopted the 2004 Plan for grants of options to purchase its common stock. The purpose of the 2004 Plan is to give the Company a competitive edge in attracting, retaining and motivating employees, directors and consultants and to provide the Company with a stock plan providing incentives directly related to increases in its stockholder value. Any of the Company’s subsidiaries’ or affiliates’ employees, directors or officers and many of its consultants are eligible for awards under the 2004 Plan. The 2004 Plan provides for an aggregate of 26,344,000 shares of the Company’s common stock to be available for awards. The 2004 Plan originally had a term of ten years, but in June 2014, the Company's Board of Directors approved an amendment to the 2004 Plan, extending the term to December 2019. The compensation committee may grant awards of nonqualified stock options, incentive (qualified) stock options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards or any combination of the foregoing. As of December 31, 2014, there were 4,578,311 shares available for grant under the 2004 Plan.

Stock option awards are granted with an exercise price equal to the fair market value (as defined in the 2004 Plan) of the Company’s stock on the date of grant. The outstanding stock options generally vest over four years and have ten-year contractual terms. Compensation cost for all stock option grants, which all have graded vesting, is net of estimated forfeitures and is recognized on a straight-line basis over the awards’ respective requisite service periods. The Company estimates the fair value of stock options using the Black-Scholes option-pricing model. Expected volatilities are based on the Company’s historical volatility for a period equal to the expected life of the stock options. The expected option life is based on the contractual term of the option as well as historical exercise and forfeiture behavior. The risk-free interest rate for periods equal to the expected term of the stock option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is based on the estimate of annual dividends expected to be paid at the time of the grant.

Sands China Ltd. Equity Award Plan

The Company’s subsidiary, SCL, adopted an equity award plan (the “SCL Equity Plan”) for grants of options to purchase ordinary shares of SCL. The purpose of the SCL Equity Plan is to give SCL a competitive edge in attracting, retaining and motivating employees, directors and consultants and to provide SCL with a stock plan providing incentives directly related to increases in its stockholder value. Subject to certain criteria as defined in the SCL Equity Plan, SCL’s subsidiaries’ or affiliates’ employees, directors or officers and many of its consultants are eligible for awards under the SCL Equity Plan. The SCL Equity Plan provides for an aggregate of 804,786,508 shares of SCL’s common stock to be available for awards. The SCL Equity Plan has a term of ten years and no further awards may be granted after the expiration of the term. SCL’s compensation committee may grant awards of stock options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards or any combination of the foregoing. As of December 31, 2014, there were 758,729,151 shares available for grant under the SCL Equity Plan.

Stock option awards are granted with an exercise price not less than (i) the closing price of SCL’s stock on the date of grant or (ii) the average closing price of SCL’s stock for the five business days immediately preceding the date of grant. The outstanding stock options generally vest over four years and have ten-year contractual terms. Compensation cost for all stock option grants, which all have graded vesting, is net of estimated forfeitures and is recognized on a straight-line basis over the awards’ respective requisite service periods. The Company estimates the fair value of stock options using the Black-Scholes option-pricing model. Expected volatilities are based on a combination of SCL's historical volatilities and the historical volatilities from a selection of companies from SCL’s peer group due to SCL’s lack of historical information. The Company used the simplified method for estimating expected option life, as the options qualify as “plain-vanilla” options. The risk-free interest rate for periods equal to the expected term of the stock option is based on the Hong Kong Exchange Fund Note rate in effect at the time of grant. The expected dividend yield is based on the estimate of annual dividends expected to be paid at the time of the grant.

Stock-Based Employee Compensation Activity

The fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:



	Year Ended December 31,
	2014		2013		2012
LVSC 2004 Plan:
Weighted average volatility	56.5	%	94.8	%	95.2	%
Expected term (in years)	6.0		5.5		5.5
Risk-free rate	1.7	%	1.3	%	1.1	%
Expected dividends	4.6	%	2.5	%	1.9	%
SCL Equity Plan:
Weighted average volatility	65.1	%	67.7	%	70.0	%
Expected term (in years)	6.3		6.3		6.2
Risk-free rate	1.3	%	0.7	%	0.5	%
Expected dividends	3.0	%	3.1	%	4.0	%

A summary of the stock option activity for the Company’s equity award plans for the year ended December 31, 2014, is presented below:



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
LVSC 2004 Plan:
Outstanding as of January 1, 2014	6,907,191		$	49.18
Granted	2,359,455		56.74
Exercised	(1,955,108	)	23.00
Forfeited	(347,369	)	65.95
Outstanding as of December 31, 2014	6,964,169		$	58.25	5.88	$	51,865,574
Exercisable as of December 31, 2014	3,975,245		$	59.89	3.21	$	44,022,494
SCL Equity Plan:
Outstanding as of January 1, 2014	17,607,046		$	3.49
Exercised	(112,875	)	2.07
Forfeited	(244,700	)	7.02
Outstanding as of February 14, 2014	17,249,471		3.45
Outstanding as of February 15, 2014⁽¹⁾	17,249,471		3.35
Granted	11,660,500		7.43
Exercised	(4,394,825	)	2.36
Forfeited	(1,265,450	)	4.83
Outstanding as of December 31, 2014	23,249,696		$	5.50	8.28	$	17,316,424
Exercisable as of December 31, 2014	5,139,498		$	2.90	6.67	$	10,692,221

__________


(1)	As a result of SCL declaring a special dividend on January 24, 2014, the exercise price of all SCL stock options outstanding on February 14, 2014, was reduced by $0.10 per share. This adjustment was the result of an antidilution provision in the SCL Equity Plan and did not result in any additional compensation expense.

A summary of the unvested restricted stock and stock units under the Company’s equity award plans for the year ended December 31, 2014, is presented below:



	Shares		Weighted Average Grant Date Fair Value
LVSC 2004 Plan:
Unvested restricted stock as of January 1, 2014	912,713		$	45.94
Granted	31,137		75.46
Vested	(426,370	)	42.00
Forfeited	(8,675	)	40.34
Unvested restricted stock as of December 31, 2014	508,805		$	51.15
Unvested restricted stock units as of January 1, 2014	387,707		$	38.47
Granted	9,984		68.30
Vested	(29,541	)	49.40
Forfeited	(209,000	)	25.02
Unvested restricted stock units as of December 31, 2014	159,150		$	55.98
SCL Equity Plan:
Unvested restricted stock units as of January 1, 2014	2,608,400		$	6.64
Granted	362,800		6.81
Vested	—		—
Forfeited	—		—
Unvested restricted stock units as of December 31, 2014	2,971,200		$	6.66

As of December 31, 2014, under the 2004 Plan there was $41.5 million of unrecognized compensation cost, net of estimated forfeitures of 8.0% per year, related to unvested stock options and there was $15.8 million of unrecognized compensation cost, net of estimated forfeitures of 8.0% per year, related to unvested restricted stock and stock units. The stock option and restricted stock and stock unit costs are expected to be recognized over a weighted average period of 4.6 years and 1.6 years, respectively.

As of December 31, 2014, under the SCL Equity Plan there was $32.6 million of unrecognized compensation cost, net of estimated forfeitures of 8.8% per year, related to unvested stock options and there was $13.5 million of unrecognized compensation cost related to unvested restricted stock units. The stock option and restricted stock unit costs are expected to be recognized over a weighted average period of 2.7 years and 2.5 years, respectively.

The stock-based compensation activity for the 2004 Plan and SCL Equity Plan is as follows for the three years ended December 31, 2014 (in thousands, except weighted average grant date fair values):



	Year Ended December 31,
	2014		2013		2012
Compensation expense:
Stock options	$	24,964	$	32,549	$	35,777
Restricted stock and stock units	23,094		20,828		29,651
	$	48,058	$	53,377	$	65,428
Income tax benefit recognized in the consolidated statements of operations	$	6,743	$	—	$	—
Compensation cost capitalized as part of property and equipment	$	1,437	$	941	$	938
LVSC 2004 Plan:
Stock options granted	2,359		288		537
Weighted average grant date fair value	$	20.25	$	35.76	$	36.17
Restricted stock granted	31		47		517
Weighted average grant date fair value	$	75.46	$	54.72	$	52.97
Restricted stock units granted	10		123		333
Weighted average grant date fair value	$	68.30	$	58.82	$	25.98
Stock options exercised:
Intrinsic value	$	105,386	$	129,149	$	84,761
Cash received	$	44,973	$	50,223	$	34,668
Tax benefit realized for tax deductions from stock-based compensation	$	—	$	—	$	—
SCL Equity Plan:
Stock options granted	11,661		4,537		7,762
Weighted average grant date fair value	$	3.40	$	2.63	$	1.65
Restricted stock units granted	363		2,608		—
Weighted average grant date fair value	$	6.81	$	6.64	$	—
Stock options exercised:
Intrinsic value	$	19,282	$	25,786	$	12,261
Cash received	$	10,677	$	19,373	$	11,572
Tax benefit realized for tax deductions from stock-based compensation	$	—	$	—	$	—