Stock-Based Compensation

We offer stock-based compensation in the form of stock options and RSUs. We also offered an ESPP through June 30, 2015 at which point in time the shares allocated to this plan were fully issued.

We grant stock options to employees and directors under our equity-based compensation plans with exercise prices that are not less than the fair market value of our common stock on the date of grant. The terms of the stock option and RSU awards, including the vesting schedule of such awards, are generally determined at the discretion of the compensation committee of our board of directors, subject to the terms of the applicable equity-based compensation plan. Options granted in recent years have generally become exercisable in four equal annual installments beginning on the first anniversary of the date of grant or when certain performance targets are determined to have been met and have a maximum term of ten years. RSUs typically vest in four equal annual installments beginning on the first anniversary of the date of grant or when certain performance targets are determined to have been met. We record compensation cost for all stock options and RSUs based on the grant date fair value.

On January 1, 2015, the Company granted 0.3 million performance-conditioned RSUs with a grant date fair value of $13.26 and a three-year vesting schedule to one of the Company's executives. Of the total award, half of the RSUs have three one-year performance targets and half have a three-year cumulative performance target. For the RSUs with one-year performance targets, one-third vest each year if specified performance targets are met. In any year in which the performance targets are not achieved, that one-third will be canceled. For the RSUs with the three-year performance target, the RSUs only vest at the end of the three-year period if specified cumulative performance targets are met. If the performance targets are not met on December 31, 2017, the RSUs will be canceled. If the performance targets are determined to be met following the conclusion of the performance period on December 31, 2017, the performance-conditioned units will vest and be distributed by no later than March 15, 2018

On April 27, 2015, the Company granted approximately 0.2 million performance-conditioned RSUs with a grant date fair value of $12.83 to certain executives, which awards are subject to three-year cliff vesting at the conclusion of the performance period, contingent upon the achievement of a specified performance target. Performance achievement is measured against the performance targets following the end of the performance period (December 31, 2017) and the RSUs will be cancelled if the threshold performance targets are not met. If the performance targets are determined to be met following the conclusion of the performance period on December 31, 2017, the performance-conditioned units will vest and be distributed by no later than March 15, 2018.

When we acquired Bally in November 2014, we consolidated the Bally 2010 Long Term Incentive Plan (amended and restated in 2013) (the “Legacy Bally Plan”) with and into the Company’s 2003 Incentive Compensation Plan (the “2003 Plan”) such that the Legacy Bally Plan became a sub-plan of the 2003 Plan with respect to the Bally awards that we assumed (discussed below). In connection therewith, Bally equity awards that were not cashed out in connection with the acquisition were assumed and adjusted (using an exchange ratio based on the stock prices of Bally and the Company at the time of the acquisition) to become awards relating to approximately 1.4 million shares of our common stock. In addition, we assumed shares available for future awards under the Legacy Bally Plan that totaled (after adjustment using the exchange ratio) 3.4 million shares of our common stock (such shares, together with the shares underlying the assumed Bally equity awards, the “Legacy Bally Shares”).

On June 10, 2015, the Company held its annual meeting of stockholders. At the annual meeting, the Company’s stockholders approved an amendment and restatement of the Company’s 2003 Plan in which the Legacy Bally Shares were consolidated with the shares of Company common stock previously reserved and available for issuance under the 2003 Plan. As a result, the shares reserved and available for issuance under the 2003 Plan were combined into a single share pool, with such shares available for equity awards to any employee, non-employee director or other eligible service provider of the Company or its subsidiaries, including Bally.

As a result of merging the Legacy Bally Plan into the 2003 Plan, as of September 30, 2015, we had approximately 5.1 million shares available for future grants of equity awards under the 2003 Plan plus available shares from a pre-existing equity-based compensation plan (excluding shares underlying outstanding awards). We also have outstanding stock options and RSUs granted as part of inducement awards that were not approved by our stockholders, as permitted by applicable stock exchange rules.

Under the share counting rules of our 2003 Plan, awards may be outstanding relating to a greater number of shares than the aggregate remaining shares available under our 2003 Plan so long as awards will not result in delivery and vesting of shares in excess of the number then available under the plan. Shares available for future issuance do not include shares expected to be withheld in connection with outstanding awards to satisfy tax withholding obligations, which would be available for future awards under our 2003 Plan under the applicable share counting rules.

The shares available for issuance through the ESPP were exhausted following the purchase period which ended June 30, 2015 and our Board of Directors did not recommend to stockholders that additional shares be added to the ESPP. Our ESPP allowed for a total of up to 1.0 million shares of Class A common stock to be purchased by eligible employees under offerings made each January 1 and July 1. Employees participated through payroll deductions up to a maximum of 15% of eligible compensation. The term of each offering period was six months and shares were purchased on the last day of the offering period at a 15% discount to the stock's market value.

Stock Options

A summary of the changes in stock options outstanding during the nine months ended September 30, 2015 is presented below:



	Number of Options		Weighted Average Remaining Contract Term (Years)	Weighted Average Exercise Price		Aggregate Intrinsic Value
Options outstanding as of December 31, 2014	1.6		6.3	$	11.61	$	4.0
Granted	0.2			12.04		—
Exercised	(0.3	)		9.83		0.9
Canceled	—					—
Options outstanding as of March 31, 2015	1.5		7.2	$	11.78	$	1.2
Granted	0.6			12.83		—
Exercised	(0.1	)		9.10		0.2
Canceled	(0.1	)		10.47		—
Options outstanding as of June 30, 2015	1.9		7.9	$	12.24	$	7.1
Granted	—			—		—
Exercised	—			—		—
Canceled	—			—		—
Options outstanding as of September 30, 2015	1.9		7.8	$	12.29	$	1.0
Options exercisable as of September 30, 2015	0.8		5.7	11.25		$	0.8

The weighted average grant date fair value of options awarded during the three months ended September 30, 2015, June 30, 2015, and March 31, 2015 was $7.56, $6.43 and $6.05, respectively. For the three and nine months ended September 30, 2015, we recognized stock-based compensation expense of $0.6 million and $1.5 million, respectively, related to the service period of stock options and a related tax benefit of $0.2 million and $0.6 million, respectively. For the three and nine months ended September 30, 2014, we recognized stock-based compensation expense of approximately $0.3 million and $1.8 million, respectively, related to the service period of stock options and a related tax benefit of $0.1 million and $0.7 million, respectively.

As of September 30, 2015, we had unrecognized compensation expense of $6.3 million relating to stock option awards that is scheduled to be expensed over a weighted average period of approximately two years.

Restricted Stock Units

A summary of the changes in RSUs outstanding during the nine months ended September 30, 2015 is presented below:



	Number of RSUs		Weighted Average Grant Date Fair Value Per RSU
Unvested units as December 31, 2014	5.0		$	13.12
Granted	0.3		13.15
Vested	(0.7	)	12.72
Canceled	(0.3	)	15.08
Unvested units as of March 31, 2015	4.3		$	13.39
Granted	2.4		12.90
Vested	(0.2	)	10.53
Canceled	(0.1	)	14.32
Unvested units as of June 30, 2015	6.4		$	13.27
Granted	0.1		15.18
Vested	(0.2	)	13.48
Canceled	(0.3	)	13.82
Unvested Units as of September 30, 2015	6.0		13.21

For the three and nine months ended September 30, 2015, we recognized stock-based compensation expense of $6.6 million and $17.6 million, respectively, related to the service period of RSUs and a related tax benefit of $2.5 million and $6.5 million, respectively. For the three and nine months ending September 30, 2014 we recognized stock-based compensation of $4.3 million and $15.9 million respectively, related to the service period of RSUs and a related tax benefit of $1.6 million and $5.9 million, respectively.

As of September 30, 2015, we had unrecognized compensation expense of $60.6 million relating to RSUs that is scheduled to be expensed over a weighted average period of approximately two years.