8. Stock-Based Compensation

The Company's current equity compensation plan, the 2015 Incentive Plan, was approved by shareholders at the Company's Annual Meeting of Shareholders on May 21, 2015. The 2015 Incentive Plan is administered by the Compensation Committee and the Board of Directors of the Company. Under the terms of the 2015 Incentive Plan, the Company is authorized to grant a variety of incentive awards based on its common stock, including stock options (both incentive stock options and non-qualified stock options), performance options/shares and other stock awards, as well as the payment of incentive bonuses to all employees and non-employee directors. On May 21, 2015, 5,000,000 shares of the Company's common stock were authorized and as of December 31, 2015, there were 4,295,221 shares remaining for future grants (or issuances) of stock options, stock appreciation rights, restricted stock, restricted stock units and incentive bonuses under the 2015 Incentive Plan. The 2015 Incentive Plan will terminate on April 9, 2025 unless it is extended or terminated earlier pursuant to its terms. In addition, from time to time, the Company makes inducement grants of stock options. These awards are made pursuant to the NASDAQ inducement grant exception as a component of new hires' employment compensation in connection with the Company's equity grant program. During the year ended December 31, 2015, the Company granted 227,000 inducement stock options to new employees.

During 2013, the Company had three equity compensation plans: the 2013 Incentive Plan, the Amended and Restated 2000 Stock Incentive Plan, as amended (the "2000 Stock Incentive Plan") and the Amended and Restated 2000 Employee Stock Purchase Plan (the "Stock Purchase Plan"). Both the 2000 Stock Incentive Plan and the Stock Purchase Plan were adopted by the Company's Board of Directors in 2000. Upon the approval of the 2013 Incentive Plan, no additional awards were issued under the 2000 Stock Incentive Plan and the shares remaining for future grant under the 2000 Stock Incentive Plan were transferred to the 2013 Incentive Plan.

During the first quarter of 2013, the Company completed a review of equity compensation awards granted under its 2000 Stock Incentive Plan and determined that it had inadvertently exceeded the annual per-person sub-limits involving certain awards previously made to certain of its current and past officers and directors (the "excess awards"). The aggregate amount of common stock represented by these excess awards, which consisted of RSUs and stock options, was approximately 1.4 million shares. These awards were deemed to be granted outside of the 2000 Stock Incentive Plan and as such the Company applied liability accounting to these awards. On May 23, 2013 (the date of the Company's 2013 Annual Meeting of Stockholders), shareholders approved the grants associated with the excess awards, which as of this date, allowed the excess awards to be deemed granted under the 2000 Stock Incentive Plan. As a result, the excess awards were re-measured at fair value on May 23, 2013 and the liability was reclassified to additional paid-in capital. The unrecognized fair value calculated for the excess awards as of May 23, 2013 is being recognized as compensation expense ratably over the remaining requisite service period for each award.

Stock Options—The Company calculates the fair value of stock options granted using the Black-Scholes valuation model. The Company calculated the fair value of stock options granted outside of the 2000 Stock Incentive Plan using liability accounting. These awards were classified as a liability and were re-measured at fair value at the end of each reporting period using the Black-Scholes valuation model and changes in fair value were included in compensation expense in the Consolidated Statements of Comprehensive Loss (see additional disclosures related to stock options granted outside the 2000 Stock Incentive Plan at the end of this footnote).

The following table summarizes the grant date fair value and assumptions used in determining the fair value of all stock options granted, including grants of inducement shares, during the years ended December 31, 2015, 2014 and 2013.

	2015	2014	2013
Volatility	78% - 82%	83% - 86%	86% - 96%
Risk-free interest rate	1.31% - 1.75%	1.46% - 1.83%	0.65% - 1.65%
Dividend yield	0.0%	0.0%	0.0%
Expected option term (in years)	6.25	6.25	6.25
Weighted-average fair value of stock options granted	$14.20	$11.74	$8.16

For the years ended December 31, 2015, 2014 and 2013, the volatility factor was based on the Company's historical volatility since the closing of the Merger on December 1, 2010. The expected life was determined using the simplified method as described in ASC Topic 718, "Accounting for Stock Compensation", which is the midpoint between the vesting date and the end of the contractual term. The risk-free interest rate was based on the US Treasury yield in effect at the date of grant. Forfeitures are based on actual percentage of option forfeitures since the closing of the Merger on December 1, 2010, and this is the basis for future forfeiture expectations.

From time to time, the Company grants performance-condition options to certain employees. Vesting of these options is subject to the Company achieving certain performance criteria established at the date of grant and the individuals fulfilling a service condition (continued employment). As of December 31, 2015, the Company had performance options totaling 158,334 shares outstanding. As a result of the Marketing Authorization Application ("MAA") acceptance for ARIKAYCE, which was received from the European Medicines Agency ("EMA") in February 2015, performance options totaling $1.5 million were recorded as non-cash compensation expense in the first quarter of 2015.

The following table summarizes stock option activity for stock options granted under the 2013 Incentive Plan and the 2000 Stock Incentive Plan, as well as grants of inducement shares, for the years ended December 31, 2015, 2014 and 2013 as follows:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value (in '000)
Options outstanding at January 1, 2013		1,817,839		$	4.10
Granted		2,323,500			10.53
Exercised		(371,743	)		4.37
Forfeited and expired		(136,600	)		10.49

Options outstanding at December 31, 2013		3,632,996			7.94


Vested and expected to vest at December 31, 2013		3,402,306			7.88


Exercisable at December 31, 2013		484,213			4.25


Options outstanding at December 31, 2013		3,632,996		$	7.94
Granted		1,600,452			16.10
Exercised		(283,057	)		6.11
Forfeited and expired		(550,285	)		11.42

Options outstanding at December 31, 2014		4,400,106			10.59


Vested and expected to vest at December 31, 2014		3,891,511			10.32


Exercisable at December 31, 2014		1,235,710			6.90


Options outstanding at December 31, 2014		4,400,106		$	10.59
Granted		1,902,850			20.45
Exercised		(481,140	)		10.62
Forfeited and expired		(548,094	)		15.43

Options outstanding at December 31, 2015		5,273,722			13.64		8.00	$	29,699


Vested and expected to vest at December 31, 2015		5,059,645			13.46		7.96	$	29,240


Exercisable at December 31, 2015		1,991,141			8.70		7.11	$	19,128

The total intrinsic value of stock options exercised during the years ended December 31, 2015, 2014 and 2013 was $4.7 million, $2.5 million and $2.7 million, respectively.

As of December 31, 2015, there was $26.9 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of 2.5 years. Included above in unrecognized compensation expense was $1.2 million related to outstanding performance-based options. The following table summarizes the range of exercise prices and the number of stock options outstanding and exercisable as of December 31, 2015:

Outstanding as of December 31, 2015										Exercisable as of December 31, 2015
Range of Exercise Prices				Number of Options		Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
$	3.03	$	3.29		153,878		5.62	$	3.05		152,017	$	3.05
$	3.40	$	3.40		708,314		6.69	$	3.40		531,236	$	3.40
$	3.60	$	6.90		583,542		6.90	$	6.01		389,433	$	5.90
$	6.96	$	12.44		693,090		7.37	$	11.36		378,156	$	11.35
$	12.58	$	14.20		527,974		8.36	$	12.78		189,989	$	12.76
$	14.24	$	16.07		768,900		8.48	$	15.36		161,331	$	14.46
$	16.09	$	20.49		782,624		8.46	$	19.28		183,354	$	19.52
$	20.92	$	22.14		106,300		9.14	$	21.54		5,625	$	21.54
$	22.76	$	22.76		793,000		9.38	$	22.76		-		-
$	22.84	$	27.38		156,100		9.41	$	23.76		-		-

Restricted Stock and Restricted Stock Units—The Company may grant Restricted Stock ("RS") and Restricted Stock Units ("RSUs") to employees and non-employee directors. Each RS and RSU represents a right to receive one share of the Company's common stock upon the completion of a specific period of continued service or achievement of a certain milestone. RS and RSU awards granted are valued at the market price of the Company's common stock on the date of grant. The Company recognizes noncash compensation expense for the fair values of these RS and RSUs on a straight-line basis over the requisite service period of these awards.

The following table summarizes RSU awards granted during the years ended December 31, 2015, 2014 and 2013:

	Number of RSU's			Weighted Average Grant Price
Outstanding at January 1, 2013		215,525		$	6.26
Granted		55,317			6.77
Released		(177,316	)		6.42
Forfeited		(885	)		5.00

Outstanding at December 31, 2013		92,641		$	6.27
Granted		20,502			19.47
Released		(92,641	)		6.27
Forfeited		-			-

Outstanding at December 31, 2014		20,502		$	19.47
Granted		49,776			16.07
Released		(26,724	)		18.68
Forfeited		-			-

Outstanding at December 31, 2015		43,554		$	16.07


Expected to Vest		43,554		$	16.07

Awards Granted Outside of the 2000 Stock Incentive Plan—As described above, during the first quarter of 2013, the Company completed a review of equity compensation awards granted under its 2000 Stock Incentive Plan and determined that it had inadvertently exceeded the annual per-person sub-limits involving certain awards previously made to certain of its current and past officers and directors (the "excess awards"). The aggregate amount of common stock represented by these excess awards, which consisted of RSUs and stock options, was approximately 1.4 million shares. These awards were deemed to be granted outside of the 2000 Stock Incentive Plan and as such the Company applied liability accounting to these awards. On May 23, 2013 (the date of the Company's 2013 Annual Meeting of Stockholders), shareholders approved the grants associated with the excess awards, which as of this date, allowed the excess awards to be deemed granted under the 2000 Stock Incentive Plan. As a result, the excess awards were re-measured at fair value on May 23, 2013 and the liability was reclassified to additional paid-in capital. The unrecognized fair value calculated for the excess awards as of May 23, 2013 is being recognized as compensation expense ratably over the remaining requisite service period for each award.

The following table summarizes the stock-based compensation recorded in the Consolidated Statements of Comprehensive Loss related to stock options and RSUs during the years ended December 31, 2015, 2014 and 2013:

		2015		2014		2013
		(in millions)
Research and development expenses		$	4.0	$	4.5	$	2.4
General and administrative expenses			11.6		6.8		6.3

	Total(1)	$	15.6	$	11.3	$	8.7


(1)	Includes $2.3 million, $2.4 million and $4.1 million for the years ended December 31, 2015, 2014 and 2013, respectively, for the remeasurement of certain stock options and RSUs that occurred during May 2013.