NOTE 10 — Stock-Based Awards and Other Equity Instruments

Pursuant to the Amended and Restated Expedia, Inc. 2005 Stock and Annual Incentive Plan, we may grant restricted stock, restricted stock awards, RSUs, stock options and other stock-based awards to directors, officers, employees and consultants. As of December 31, 2015, we had approximately 10 million shares of common stock reserved for new stock-based awards under the 2005 Stock and Annual Incentive Plan. We issue new shares to satisfy the exercise or release of stock-based awards.

The following table presents a summary of our stock option activity:


	Options			Weighted Average Exercise Price		Remaining Contractual Life		Aggregate Intrinsic Value
	(In thousands)					(In years)		(In thousands)
Balance as of January 1, 2013		15,236		$	25.24
Granted		4,016			65.29
Exercised		(2,730	)		18.10
Cancelled		(1,095	)		37.87

Balance as of December 31, 2013		15,427			36.03
Granted		4,113			78.70
Exercised		(3,804	)		25.66
Cancelled		(1,301	)		53.69

Balance as of December 31, 2014		14,435			49.33
Granted		7,572			94.13
Exercised		(4,201	)		34.57
Cancelled		(751	)		74.06

Balance as of December 31, 2015		17,055			71.77		4.9	$	896,377

Exercisable as of December 31, 2015		4,880			42.32		3.2		400,120

Vested and expected to vest after December 31, 2015		15,980			70.70		4.9		856,574

The aggregate intrinsic value of outstanding options shown in the stock option activity table above represents the total pretax intrinsic value at December 31, 2015, based on our closing stock price of $124.30 as of the last trading date in 2015. The total intrinsic value of stock options exercised was $314 million, $208 million and $117 million for the years ended December 31, 2015, 2014 and 2013. Included within options granted for 2015 are 2.7 million options awarded to our Chief Executive Officer with his entry into a new five-year employment agreement, of which 1.1 million options are subject to a stock price performance goal.

During the three years ended December 31, 2015, 2014 and 2013, we awarded stock options as our primary form of stock-based compensation. The fair value of stock options granted during the years ended December 31, 2015, 2014 and 2013 were estimated at the date of grant using appropriate valuation techniques, including the Black-Scholes and Monte Carlo option-pricing models, assuming the following weighted average assumptions:


	2015			2014			2013
Risk-free interest rate		1.19	%		1.13	%		0.71	%
Expected volatility		41.48	%		42.97	%		44.81	%
Expected life (in years)		4.06			4.04			4.07
Dividend yield		0.78	%		0.76	%		0.80	%
Weighted-average estimated fair value of options granted during the year	$	30.56		$	25.80		$	21.96

The following table presents a summary of RSU activity:


	RSUs			Weighted Average Grant-Date Fair Value
	(In thousands)
Balance as of January 1, 2013		1,218			29.57
Granted		216			63.04
Vested		(480	)		23.29
Cancelled		(522	)		86.10

Balance as of December 31, 2013		432			50.64
Granted		108			80.94
Vested		(159	)		45.90
Cancelled		(44	)		55.52

Balance as of December 31, 2014		337			61.97
Granted		1,643			123.42
Vested		(493	)		103.73
Cancelled		(91	)		67.11

Balance as of December 31, 2015		1,396			119.20

RSUs, which are stock awards that are granted to employees entitling the holder to shares of our common stock as the award vests, were our primary form of stock-based award prior to 2009. Our RSUs generally vest over three or four-years, but may accelerate in certain circumstances, including certain changes in control. During 2015, in connection with the acquisitions disclosed in Note 3 – Acquisition and Other Investments, we replaced certain unvested employee RSUs of the acquiree with Expedia awards the amount of which is included within granted in the above table.

The total market value of shares vested during the years ended December 31, 2015, 2014 and 2013 was $60 million, $12 million and $29 million.

In 2015, 2014 and 2013, we recognized total stock-based compensation expense of $178 million, $85 million and $130 million. The total income tax benefit related to stock-based compensation expense was $45 million, $20 million and $17 million for 2015, 2014 and 2013.

Cash received from stock-based award exercises for the years ended December 31, 2015 and 2014 was $89 million and $101 million. Our employees that held IAC vested stock options prior to the IAC/InterActiveCorp (“IAC”) spin-off in August 2005 received vested stock options in both Expedia and IAC. In addition, our employees that held vested Expedia options prior to the TripAdvisor, Inc. (“TripAdvisor”) spin-off on December 20, 2011 received vested stock options in both Expedia and TripAdvisor. As these IAC and TripAdvisor stock options are exercised, we receive a tax deduction. Total current income tax benefits during the years ended December 31, 2015 and 2014 associated with the exercise of IAC, TripAdvisor and Expedia stock-based awards held by our employees were $130 million and $69 million.

During 2015, our Chairman and Senior Executive exercised options to purchase 1.9 million shares. 0.5 million shares were withheld and concurrently cancelled by the Company to cover the weighted average exercise price of $30.38 per share and 0.8 million shares were withheld and concurrently cancelled to cover tax obligations, with a net delivery of 0.6 million shares.

As of December 31, 2015, there was approximately $345 million of unrecognized stock-based compensation expense, net of estimated forfeitures, related to unvested stock-based awards, which is expected to be recognized in expense over a weighted-average period of 3.0 years.

Employee Stock Purchase Plan

During 2013, we implemented our 2013 Employee Stock Purchase Plan (“ESPP”), which allows shares of our common stock to be purchased by eligible employees at three-month intervals at 85% of the fair market value of the stock on the last day of each three-month period. Eligible employees are allowed to contribute up to 10% of their base compensation. During 2015, 2014 and 2013, approximately 95,000, 102,000, and 69,000 shares were purchased under this plan for an average price of $93.30, $68.70 and $46.31 per share. As of December 31, 2015, we have reserved approximately 1.2 million shares of our common stock for issuance under the ESPP.