EQUITY BASED COMPENSATION

In May 2014, the Board of Directors adopted the Carmike Cinemas, Inc. 2014 Incentive Stock Plan (the “2014 Incentive Stock Plan”). The Company’s Compensation and Nominating Committee may grant stock options, stock grants, stock units, and stock appreciation rights under the 2014 Incentive Stock Plan to certain eligible employees and to outside directors. As of September 30, 2015, there were 1,115,695 shares available for future grants under the 2014 Incentive Stock Plan. The Company’s policy is to issue new shares upon exercise of options and the issuance of stock grants.

The Company also issues restricted stock awards to certain key employees and directors. Generally, the restricted stock vests over a one to three year period and compensation expense is recognized over the one to three year period equal to the grant date fair value of the shares awarded. For certain employees who have met retirement eligibility criteria as defined in the respective award agreements, compensation expense for restricted stock awards is recognized immediately. As of September 30, 2015, the Company also had 126,625 shares of performance-based awards outstanding which are dependent on the achievement of EBITDA targets that vest over a three-year period. As of September 30, 2015, 31,036 shares of these performance-based stock awards have been earned due to the achievement of EBITDA targets. Performance-based stock awards are recognized as compensation expense over the vesting period based on the fair value on the date of grant and the number of shares ultimately expected to vest. For those employees who have met retirement eligibility criteria as defined in the 2014 Incentive Stock Plan, compensation expense for performance-based stock awards is recognized immediately once all conditions of the award have been satisfied. The Company has determined the achievement of the performance target for the unearned awards in the current year is probable.

The Company’s total stock-based compensation expense was approximately $1,198 and $826 for the three months ended September 30, 2015 and 2014, respectively and $5,057 and $2,419, respectively for the nine months ended September 30, 2015 and 2014, respectively. Stock-based compensation expense is included in general and administrative expenses in the consolidated statement of operations. As of September 30, 2015, the Company had approximately $2,893 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company’s plans. This cost is expected to be recognized as stock-based compensation expense over a weighted-average period of approximately 1.2 years. This expected cost does not include the impact of any future stock-based compensation awards.

Options—Service Condition Vesting

The Company currently uses the Black-Scholes option pricing model to determine the fair value of its stock options for which vesting is dependent only on employees providing future service. Such stock options vest equally over a three-year period, except for options granted to members of the Board of Directors that vest immediately upon issuance. The stock options expire 10 years after the grant date. The Company’s stock-based compensation expense is recorded based on an estimated forfeiture rate of 5%.

No options were granted during the first nine months of 2015 or 2014. The following table sets forth the summary of option activity for stock options with service vesting conditions as of September 30, 2015:



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Yrs.)	Aggregate Intrinsic Value
Outstanding at January 1, 2015	600,000		$	8.65	5.08
Granted	—		$	—
Exercised	(50,000	)	8.38			1,026
Expired	—		—
Forfeited	—		—
Outstanding at September 30, 2015	550,000		$	8.67	4.38	$	6,281
Exercisable on September 30, 2015	550,000		$	8.67	4.38	$	6,281
Expected to vest September 30, 2015	—		$	—	—	$	—

Options – Market Condition Vesting

In April 2007, the Compensation and Nominating Committee approved (pursuant to the 2004 Incentive Stock Plan) the grant of an aggregate of 260,000 stock options, at an exercise price equal to $25.95 per share, to a group of eight senior executives. The

April 2007 stock option grants are aligned with market performance, as one-third of these stock options each will vest when the Company achieves an increase in the trading price of its common stock (over the $25.95 exercise price) equal to 25%, 30% and 35%, respectively. The Company determined the aggregate grant date fair value of these stock options to be approximately $1,430. The fair value of these options was estimated on the date of grant using a Monte Carlo simulation model. Compensation expense is not subsequently adjusted for the number of shares that are ultimately vested.

The following table sets forth the summary of option activity for the Company’s stock options with market condition vesting for the nine months ended September 30, 2015:



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at January 1, 2015	100,000		$	25.95	2.28	$	—
Exercised	(26,666	)	25.95		—	76
Outstanding at September 30, 2015	73,334		$	25.95	1.54	$	—
Exercisable on September 30, 2015	40,000		$	25.95	1.54	$	—
Expected to vest September 30, 2015	—		$	—	—	$	—

Restricted Stock

The following table sets forth the summary of activity for restricted stock grants, including performance-based awards, for the nine months ended September 30, 2015:



	Shares		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2015	346,377		$	19.15
Granted	182,492		$	33.23
Vested	(277,066	)	$	21.23
Forfeited	—		$	—
Nonvested at September 30, 2015	251,803		$	27.07