Stock Compensation

The Company recognized consolidated stock compensation expense of $91.8, $91.1 and $61.5 during Fiscal 2015, 2014 and 2013, respectively. Stock compensation expense is principally included in “Selling, acquisition, operating and general expenses” in the accompanying Consolidated Statements of Operations.

A summary of stock options outstanding as of September 30, 2015 and related activity during the year then ended, under HRG, FGH and FGL’s respective incentive plans are as follows (option amounts in thousands):



	HRG						FGH				FGL
Stock Option Awards	Options		Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Stock options outstanding at September 30, 2014	4,624		$	8.14	$	3.28	225		$	46.19	242		$	17.00
Granted	977		13.20		5.14		—		—		206		24.40
Exercised	(623	)	6.66		2.59		(137	)	46.89		(113	)	17.00
Forfeited or expired	(208	)	10.92		4.45		(1	)	49.45		(18	)	20.73
Stock options outstanding at September 30, 2015	4,770		9.25		3.70		87		45.04		317		21.60
Stock options vested and exercisable at September 30, 2015	2,358		8.19		3.26		61		45.01		111		22.04
Stock options outstanding and expected to vest	2,412		10.30		4.14		25		49.65		199		21.32

A summary of restricted stock, restricted stock units and performance restricted stock units ("PRSUs") outstanding as of September 30, 2015 and related activity during the year then ended, under HRG, Spectrum Brands, FGH and FGL’s respective incentive plans are as follows (share amounts in thousands):



	HRG				FGL
Restricted Stock Awards	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Nonvested restricted stock outstanding at September 30, 2014	5,438		$	9.75	172		$	18.18
Granted	1,885		13.36		325		23.66
Exercised / Released	(2,710	)	8.92		(231	)	21.60
Forfeited	(343	)	11.44		(20	)	21.67
Restricted stock units released as restricted stock awards	13		11.74		—		—
Nonvested restricted stock outstanding at September 30, 2015	4,283		11.74		246		21.92



	HRG				Spectrum Brands				FGH
Restricted Stock Units	Units		Weighted Average Grant Date Fair Value		Units		Weighted Average Grant Date Fair Value		Units		Weighted Average Grant Date Fair Value
Restricted stock units outstanding at September 30, 2014	7		$	11.84	827		$	67.66	26		$	49.55
Granted	48		12.46		573		92.51		—		—
Exercised / Released	(13	)	12.54		(730	)	69.00		(14	)	49.55
Forfeited	—		—		(62	)	85.16		(1	)	49.57
Restricted stock units outstanding at September 30, 2015	42		12.46		608				11		49.57



	FGL
Performance Restricted Stock Units	Units		Weighted Average Grant Date Fair Value
Performance restricted stock units outstanding at September 30, 2014	578		$	17.37
Granted, including 8 additional units based on 2014 financial performance	54		19.68
Vested	(45	)	17.00
Forfeited	(72	)	17.00
Nonvested performance restricted stock units outstanding at September 30, 2015	515		17.69

A summary of warrants outstanding as of September 30, 2015 and related activity during the year then ended, under HRG's incentive plan are as follows (share amounts in thousands):



	HRG
Warrants	Units		Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Warrants outstanding at September 30, 2014	3,000		$	13.13	$	3.22
Forfeited	(1,200	)	13.13		3.22
Warrants outstanding at September 30, 2015	1,800		13.13		3.22
Warrants vested and exercisable at September 30, 2015	—		—		—
Warrants outstanding and expected to vest	1,800		13.13		3.22

HRG

On September 15, 2011, the Company’s stockholders approved the 2011 Omnibus Award Plan (the “2011 HRG Plan”). The 2011 HRG Plan provides for the issuance of stock options or stock appreciation rights (“SARs”) for up to 17 million shares of common stock. Such authorization was increased by 7 million shares upon the approval of an amendment to the 2011 Plan by our shareholders at the annual meeting held on May 30, 2015. Further, at that meeting, our shareholders approved the adoption of the 2014 Warrant Award Plan, authorizing the issuance of 3 million warrants on HRG common stock to our former Chief Executive Officer, Mr. Philip Falcone. The 2011 HRG Plan, as amended, prohibits granting stock options with exercise prices and SARs with grant prices lower than the fair market value of the common stock on the date of grant, except in connection with the issuance or assumption of awards in connection with certain mergers, consolidations, acquisitions of property or stock or reorganizations. As of September 30, 2015, 9,198 thousand shares were available for issuance under the 2011 HRG Plan.

During Fiscal 2015, HRG granted stock option awards, restricted stock awards and restricted stock unit awards representing approximately 977 thousand, 1,885 thousand and 48 thousand shares, respectively. All of these grants are time based, and vest either immediately, or over a period of up to 3 years. The total fair value of the stock grants during Fiscal 2015 on their respective grant dates was approximately $30.8. During Fiscal 2015, stock option awards and restricted stock awards with a total fair value of $32.0 vested. The total intrinsic value of share options exercised during Fiscal 2015 was $4.0, for which HRG received cash of $4.1 in settlement.

During Fiscal 2014, HRG granted stock option awards, restricted stock awards and restricted stock units representing approximately 1,356 thousand, 3,325 thousand and 7 thousand shares, respectively. All of these grants are time based, and vest over periods of up to 3 years. The total fair value of the stock grants during Fiscal 2014 on their respective grant dates was approximately $46.7. During Fiscal 2014, stock option awards, restricted stock awards and restricted stock units with a total fair value of $15.2 vested. The total intrinsic value of share options exercised during Fiscal 2014 was $3.6, for which HRG received cash of $2.8 in settlement.

In March 2014, the Company awarded warrants to our former Chief Executive Officer, Philip Falcone, representing the right to purchase approximately 3 million shares of our common stock, at an exercise price of $13.13 per share. The warrants awarded to our former Chief Executive Officer were granted following receipt of approval from our stockholders in May 2014. A portion of the warrants, representing 600 thousand shares, vested immediately upon approval of the grant, and the remainder would vest over a period of 4 years. The estimated grant date fair value of this award was $9.6.

During Fiscal 2013, HRG granted stock option awards, restricted stock awards and restricted stock units representing approximately 1,734 thousand, 3,319 thousand and 9 thousand shares, respectively. All of these grants are time based, and vest over periods of 1 month up to 4 years. The total fair value of the stock grants during Fiscal 2013 on their respective grant dates was approximately $34.6. During Fiscal 2013, stock option awards, restricted stock awards and restricted stock units with a total fair value of $7.5 vested. The total intrinsic value of share options exercised during Fiscal 2013 was $0.1, for which HRG received cash of $0.2 in settlement.

Under HRG’s executive bonus plan for the fiscal year ending September 30, 2015, executives will be paid in cash, stock, stock options and restricted stock shares. The equity grants are expected to be granted in the first quarter of the fiscal year ending September 30, 2016, and to vest, either immediately, or between one year and three years from the grant date. HRG repurchases restricted stock awards upon vesting only to cover the required minimum statutory tax withholding requirements.

As of September 30, 2015, there was approximately $17.2 of total unrecognized compensation cost related to unvested share-based compensation agreements previously granted, which is expected to be recognized over a weighted-average period of 1.46 years.

The following assumptions were used in the determination of these grant date fair values using the Black-Scholes option pricing model:



	2015	2014	2013
Risk-free interest rate	1.57% to 1.87%	1.37% to 1.70%	0.84% to 1.86%
Assumed dividend yield	—%	—%	—%
Expected option term	5.0 to 6.5 years	5.0 to 5.9 years	5.3 to 6.2 years
Volatility	36.3% to 39.0%	37.8% to 39.8%	41.9% to 44.0%

The weighted-average remaining contractual term of outstanding stock option awards and warrants at September 30, 2015, was 7.39 years.

Spectrum Brands

On October 21, 2010, Spectrum Brands’ board of directors adopted the Spectrum Brands Holdings, Inc. 2011 Omnibus Equity Award Plan (the “2011 Plan”). During Fiscal 2014, the 2011 Plan was amended to increase the shares issuable to 5,626 thousand shares of common stock of Spectrum Brands, net of cancellations.

Spectrum Brands measures the compensation expense of its stock-based compensation plans, which consist of restricted stock units, based on the fair value of the awards at the date of grant and recognizes these costs on a straight line basis over the requisite service period of the awards. The fair value of the restricted stock units is determined based on the market price of the Spectrum Brands’ shares of common stock on the grant date.

Spectrum Brands granted restricted stock units representing approximately 573 thousand shares during Fiscal 2015. Of these grants, 119 thousand restricted stock units vested immediately and 160 thousand restricted stock units are time-based and vest over a period of 1 year, and 294 thousand restricted stock units are performance based and vest over a period of up to 2 years. The total market value of the restricted shares on the date of the grant was approximately $52.9.

Spectrum Brands granted restricted stock units representing approximately 669 thousand shares during Fiscal 2014. Of these grants, 203 thousand restricted stock units vested immediately and 143 thousand restricted stock units are time-based and vest over a period of 1 year. The remaining 323 thousand restricted stock units are performance-based and vest over 2 years. The total market value of the restricted shares on the date of the grant was approximately $50.5.

Spectrum Brands granted restricted stock units representing approximately 700 thousand shares during Fiscal 2013. Of these grants, 48 thousand restricted stock units are time-based and vest over a period of 1 year. Of the remaining 652 thousand restricted stock units, 90 thousand are performance-based and vest over a 1 year period and 562 thousand are both performance and time-based and vest over a 1 year performance-based period followed by a 1 year time-based period. The total market value of the restricted shares on the date of the grant was approximately $32.2

FGL

In conjunction with the initial public offering, on November 7, 2013, FGL’s board of directors adopted a long term stock-based incentive plan (the “FGL 2013 Stock Incentive Plan”) under which certain officers, employees, directors and consultants are eligible to receive equity based awards. The FGL 2013 Stock Incentive Plan was approved by FGL's stockholder on November 19, 2013, became effective on December 12, 2013 and expires in December 2023. FGL’s compensation committee approved the granting of awards under the FGL 2013 Stock Incentive Plan to certain employees, officers and directors (other than the members of the compensation committee). In addition, FGL’s board of directors approved the granting of awards to members of FGL’s compensation committee. The awards made to members of the FGL's compensation committee were not made under the FGL 2013 Stock Incentive Plan; however, these awards will be construed and administered as if subject to the terms of the FGL 2013 Stock Incentive Plan. FGL’s board of directors and majority stockholder, HRG, also approved the granting of unrestricted common shares to its directors in lieu of cash compensation at the election of each individual director.

FGL’s principal subsidiary, FGH, sponsors stock-based incentive plans and dividend equivalent plans (“DEPs”) for its employees (“FGH Plans”). Awards under the FGH Plans are based on the common stock of FGH. In Fiscal 2013, FGH determined that all equity awards will be settled in cash when exercised and therefore are classified as liability plans. The FGH plans were frozen in November 2013 and, therefore, no stock options were issued under these plans during Fiscal 2014.

During Fiscal 2015, FGL granted stock option awards, restricted stock awards and performance restricted stock units representing approximately 206 thousand, 325 thousand and 54 thousand shares, respectively. The stock option and restricted stock awards vest over a period of 3 years. The performance restricted stock units vest on September 30, 2016 contingent on the satisfaction of performance criteria and on the participant's continued employment unless otherwise noted in the agreement. The total fair value of the stock grants during Fiscal 2015 on their respective grant dates was approximately $9.8.

During Fiscal 2014, FGL granted stock option awards, restricted stock awards and performance restricted stock units representing approximately 249 thousand, 179 thousand and 578 thousand shares, respectively. The stock options and restricted stock awards vest over a period of 3 years. The performance restricted stock units vest on September 30, 2016 contingent on the satisfaction of performance criteria and on the participant's continued employment unless otherwise noted in the agreement. The total fair value of the stock grants during Fiscal 2014 on their respective grant dates was approximately $14.2.

During Fiscal 2013, FGL granted stock option awards and restricted stock units representing approximately 195 thousand and 53 thousand shares, respectively. These stock options and restricted shares vest over a period of 3 years and expire on the seventh anniversary of the grant date. The total fair value of the option grants and restricted stock unit grant on the grant date was $0.6, and $2.0, respectively.

The following assumptions were used in the determination of the grant date fair values using the Black-Scholes option pricing model for the former Chief Executive Officer’s modified stock options and based on the value of FGL’s common stock:



	2015
Weighted average fair value per option granted	$2.53
Risk-free interest rate	0.2%
Assumed dividend yield	1.2%
Expected option term	0.75 years
Volatility	25%

Expected volatility is based on the historical volatility of FGL’s stock price for awards granted in 2015.

On March 18, 2015, the expected requisite service periods for executives that received certain FGL restricted shares granted on November 19, 2014 and February 11, 2015 were completed resulting in expense acceleration under the terms of the original awards due to their termination other than for cause from FGL's Board and all related committee positions of the two grantees. FGL recognized additional compensation expense of $3.1 related to the equity compensation expense acceleration related to completion of the executives' requisite service periods.

The total compensation cost related to non-vested options, restricted stock units and dividend equivalent plans, not yet recognized as of September 30, 2015 totaled $10.7 and will be recognized over a weighted-average period of 1.3 years.

The fair values of restricted stock and restricted stock unit awards are determined based on the market price of FGL's common stock on the grant date. The fair value of stock options awarded by FGL during Fiscal 2015 and 2014, and by FGH during Fiscal 2013, was determined using the Black-Scholes option pricing model. The following assumptions were used in the determination of these grant date fair values using the Black-Scholes option pricing model:



	2015	2014	2013
Weighted average fair value per option granted	$4.96	$3.76	$3.85
Risk-free interest rate	1.41% to 1.50%	1.40% to 1.41%	0.80%
Assumed dividend yield	1.18% to 1.19%	1.30% to 1.50%	6.00%
Expected option term	4.5 years	4.5 years	4.5 years
Volatility	25%	25%	27%

At September 30, 2015, the liability for vested or expected to vest stock options, under the FGH option awards, was based on the fair values of the outstanding options. The following assumptions were used in the determination of these fair values using the Black-Scholes option pricing model and based on the value of FGH's common stock:



	2015	2014
Weighted average stock option fair value	$74.99	$50.63
FGH common stock fair value	$122.02	$98.28
FGL common stock value	$24.54	$21.35
Risk-free interest rate	0.48%-0.74%	0.65%-1.02%
Assumed dividend yield	1.16%	1.20%
Expected option term	1.50 - 2.25 years	2.00-2.75 years
Volatility	25.0%	25.0%

Compass

In May 2013, Compass adopted an incentive plan (“Incentive Unit Plan”) which allowed for awards to be issued that cover up to 1 million Class B Units. The plan is intended to grant phantom units that correspond to Class B Units prior to the vesting date, in tandem with dividend equivalent rights (“DER”) to participate in distributions of Compass. The phantom units vest over a range of 2 to 3 years. Upon vesting, the phantom units will be settled by either cash or the issuance of a Class B Unit to the participant. The accumulated distributions related to the DER will be paid to the participant upon the vesting of the related

phantom unit. Upon termination of a participant, any unvested phantom units or DER's (including accrued distributions) will be forfeited.

In February 2014, Compass issued 83 thousand Class B Units in the limited partnership to its chief executive officer under its employee incentive plan. The Class B Units have the following features: (i) right to share in gains, losses, deductions, and credits on a pro rata basis; (ii) right to share in distributions on a pro rata basis; (iii) no voting rights; and (iv) are not convertible into Class A Units.

The agreement includes a call-right on behalf of Compass and a put-right on behalf of the participant. The call-right becomes exercisable upon the termination of a participant, and gives Compass the option to repurchase any Class B Units held by the participant. The put-right becomes exercisable during the first designated window period after the participant has held the Class B Unit for a period of 6 months, and gives the participant the option to cause Compass to repurchase the participant’s Class B Units. The repurchase price under the call-right and put-rights shall be the fair market value as of the date of exercise as determined by Compass.

As of September 30, 2015, a portion of the vested shares were settled in cash resulting in a liability classification in accordance with ASC 718. The vested shares that were not settled in cash included 191 thousand Class B Units in the limited partnership issued to its CEO and CFO under Incentive Unit Plan.

As of September 30, 2015, there were 432 thousand awards available for issuance under the Incentive Unit Plan. The grant date fair value of the awards was based on Compass’ determination of the market value, with each determination occurring every six months. A summary of the activity related to the incentive unit plan was as follows (share amounts in thousands):



	Shares		Weighted average grant date fair value per share
Non-vested awards at September 30, 2014	270		$	8.67
Granted	662		4.33
Vested	(322	)	5.98
Terminated	(43	)	4.33
Non-vested awards at September 30, 2015	568		$	5.19

(1) 83 thousand and 191 thousand vested units where settled by issuance of Class B Units during the years ended September 30, 2014 and 2015, respectively. All remaining units were settled in cash.