Stock-Based and Other Incentive Compensation (all share amounts in thousands)

We offer stock-based compensation through the use of stock options and RSUs. We also offer an ESPP.

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 determined at our discretion subject to the terms of the applicable equity-based compensation plan. Options granted over the last several years have generally become exercisable in four or five equal installments beginning on the first anniversary of the date of grant with a maximum term of ten years or when certain performance targets are determined to have been met. RSUs typically vest in four or five equal installments beginning on the first anniversary of the date of grant or when certain performance targets are determined to have been met. There are 13,500 shares of common stock authorized for awards under the 2003 Plan plus available shares from a pre-existing equity-based compensation plan, which plans were approved by our stockholders. In connection with the WMS acquisition, we assumed the 2013 Plan and the outstanding awards under such plan. At the time of the assumption, there were 5,627 shares available for future issuance under the 2013 Plan, excluding shares available under outstanding awards. We record compensation cost for all stock options and RSUs based on the fair value at the grant date.

Our ESPP allows for a total of up to 1,000 shares of Class A common stock to be purchased by eligible employees under offerings made each January 1 and July 1. Employees participate through payroll deductions up to a maximum of 15% of eligible compensation. The term of each offering period is six months and shares are purchased on the last day of the offering period at a 15% discount to the stock's market value. For offering periods in 2013, 2012 and 2011, we issued a total of 58, 85 and 72 shares, respectively, of common stock at an average price of $11.62, $7.32 and $8.50 per share, respectively. As of December 31, 2013, we had approximately 299 shares of the 1,000 authorized shares of common stock available to be granted under the ESPP.

The Company may grant certain awards the vesting of which is contingent upon the Company achieving certain performance targets. Upon determining that the performance target is probable, the fair value of the award is recognized over the service period, subject to potential adjustment.

In connection with A. Lorne Weil becoming our chief executive officer in 2010, the Company awarded to Mr. Weil performance-conditioned awards consisting of 1,000 stock options with an exercise price of $8.06 per share (representing the market value of our common stock on the date of grant) and 1,000 RSUs, which awards had a five-year vesting schedule, with 20% of such options and RSUs scheduled to vest each year if specified performance targets are met (subject to certain "carryover" vesting provisions as described in the employment agreement amendment), (such performance-conditioned stock options and RSUs, the "performance-conditioned equity awards"). In November 2013, David L. Kennedy succeeded Mr. Weil as our chief executive officer. In connection with Mr. Weil's separation from the Company, as contemplated by his employment agreement, all unvested stock options and RSUs then held by Mr. Weil vested, other than the performance-conditioned equity awards, which were forfeited. During the fourth quarter of 2013, we recorded $4.6 million of stock-based compensation expense associated with the vesting of the equity awards and reversed $5.6 million of previously recorded stock-based compensation expense as a result of the forfeiture of the performance-conditioned equity awards. In January 2014, all of Mr. Weil's exercisable options were cancelled in exchange for a cash payment to Mr. Weil of $8.2 million, net of withholding taxes, representing the value of such stock options based on the closing price of the Company's common stock on the date of cancellation.

On February 22, 2012, the Company granted approximately 494 RSUs to certain executives, which awards have a four-year vesting schedule, with 25% scheduled to vest each year if specified performance targets are met (subject to certain "carryover" vesting provisions. Delivery of shares in respect of any vested performance-vesting RSUs will occur on March 15, 2016. The performance-conditioned stock options will expire, and the performance-conditioned RSUs will be forfeited, on March 15, 2016 to the extent that such awards remain unvested on such date. Any performance-conditioned stock options that have vested by March 15, 2016 will expire ten years from the date of grant. The performance-conditioned RSUs will be forfeited on March 15, 2016 to the extent that such awards remain unvested on such date. See "Management Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates—Performance-based compensation" in Item 7 of this Annual Report on Form 10-K for a discussion regarding the expensing of these performance-condition RSUs.

As of December 31, 2013, we had approximately 1,556 shares available for grants of equity awards to our employees (including WMS employees) under our equity-based compensation plans (excluding 299 shares available under our ESPP) and an additional 4,959 shares available for grants of equity awards to WMS employees only under the 2013 Plan.

Under the share counting rules of the 2003 Plan, awards may be outstanding relating to a greater number of shares than the aggregate remaining 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 may be deemed to be available for awards under the 2003 Plan as permitted under the applicable share counting rules.

Stock Options

A summary of the changes in stock options outstanding under our equity-based compensation plans during 2013 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, 2012	3,461		7.8	$	9.34	$	0.7
Granted	235			$	17.73	—
Exercised	(113	)		$	9.87	$	0.6
Cancelled	(952	)		$	8.25	—
Options outstanding as of December 31, 2013	2,631		4.2	$	10.46	$	17.8
Options exercisable as of December 31, 2013	1,261		3.4	$	10.31	$	9.0
Options expected to vest after December 31, 2013	1,371		5.0	$	10.60	$	8.8

The weighted-average grant date fair value of options granted during 2013, 2012 and 2011 was $10.16, $4.65 and $4.10, respectively. The aggregate intrinsic value of the options exercised during the years ended December 31, 2012 and 2011 was approximately $0.5 million and $0.3 million, respectively.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. The weighted-average assumptions used in the model are outlined in the following table:



	2013		2012		2011
Assumptions:
Expected volatility	60	%	56	%	52	%
Risk-free interest rate	2.2	%	1.3	%	1.9	%
Dividend yield	—		—		—
Expected life (in years)	6		6		6

The computation of the expected volatility is based on historical daily stock prices over a period commensurate with the expected life of the option. Expected life is based on annual historical employee exercise behavior of option grants with similar vesting periods and option expiration data. The risk-free interest rate is based on the yield of zero-coupon U.S. Treasury securities of comparable terms. We do not anticipate paying dividends in the foreseeable future.

For the years ended December 31, 2013, 2012 and 2011, we recognized stock-based compensation expense of $2.0 million, $4.3 million and $6.3 million, respectively, and the related tax benefit of $0.7 million, $1.7 million and $2.4 million, respectively, related to the vesting of stock options, prior to consideration of any valuation allowance recorded against the tax benefit. At December 31, 2013, we had $3.7 million of unrecognized stock-based compensation expense relating to unvested stock options that will be amortized over a weighted-average period of approximately two years. During the year ended December 31, 2013, we received $1.1 million in cash from the exercise of stock options. The actual tax benefit realized for the tax deductions from the exercise of stock options totaled $0.2 million for the year ended December 31, 2013, prior to consideration of any valuation allowance recorded against the tax benefit.

Restricted Stock Units

A summary of the changes in RSUs outstanding under our equity-based compensation plans during 2013 is presented below:



	Number of Restricted Stock Units		Weighted Average Grant Date Fair Value
Unvested RSUs as of December 31, 2012	4,815		$	10.53
Granted	2,723		$	12.49
Vested	(1,115	)	$	12.61
Cancelled	(1,211	)	$	9.13
Unvested RSUs as of December 31, 2013	5,212		$	11.93

The weighted-average grant date fair value of RSUs granted during 2012 and 2011 was $12.23 and $8.52, respectively. The fair value of each RSU grant is based on the market value of our common stock at the time of grant. During the years ended December 31, 2013, 2012 and 2011, we recognized stock-based compensation expense of $19.7 million, $19.7 million and $15.2 million, respectively, and the related tax benefits of $7.2 million, $7.4 million and $5.7 million, respectively, related to the vesting of RSUs, prior to consideration of any valuation allowance recorded against the tax benefit. At December 31, 2013, we had $40.5 million of unrecognized stock-based compensation relating to unvested RSUs that will be amortized over a weighted-average period of approximately two years. The fair value at vesting date of RSUs vested during the years ended December 31, 2013, 2012 and 2011 was $11.0 million, $14.3 million and $8.6 million, respectively.

Other Incentive Compensation

In December 2010, the Company adopted a performance-based incentive compensation plan relating to our Asia-Pacific business. The purpose of the Asia-Pacific Plan is to provide an equitable and competitive compensation opportunity to certain key employees and consultants of the Company who are involved in the Company's Asia-Pacific Business and to promote the creation of long-term value for our stockholders by directly linking Asia-Pacific Plan participants' compensation under the plan to the appreciation in value of such business. Each participant will be eligible to receive a cash payment following the end of 2014 equal to a pre-determined share of an Asia-Pacific Business incentive compensation pool. The incentive compensation pool will equal a certain percentage of the growth in the value of the Asia-Pacific Business over four years, calculated in the manner provided under the Asia-Pacific Plan and subject to a cap of (1) $35.0 million, in the event an Asia-Pacific Business liquidity event does not occur by December 31, 2014 or (2) $50.0 million, in the event an Asia-Pacific Business liquidity event occurs by December 31, 2014. An "Asia-Pacific Business liquidity event" means an initial public offering of at least 20% of the Asia-Pacific Business or a strategic investment by a third-party to acquire at least 20% of the Asia-Pacific Business, in each case, that is approved by the Company. Our accrual recorded in other long-term liabilities related to the Asia-Pacific Plan was $1.9 million as of December 31, 2013 and 2012.