10. Share-Based Compensation

On August 27, 2015, the Board of Directors of the Company approved the Golden Entertainment, Inc. 2015 Incentive Award Plan (the “2015 Plan”), subject to shareholder approval at the Company’s 2016 annual meeting of shareholders. The 2015 Plan authorizes the issuance of stock options, restricted stock, restricted stock units, dividend equivalents, stock payment awards, stock appreciation rights, performance bonus awards and other incentive awards. The 2015 Plan authorizes the grant of awards to employees, non-employee directors and consultants of the Company and its subsidiaries. Options generally have a ten-year term. Except as provided in any employment agreement between the Company and the employee, if an employee is terminated (voluntarily or involuntarily), any unvested options as of the date of termination will be forfeited. If the 2015 Plan is not approved by the Company’s shareholders at the 2016 annual meeting, any awards under the 2015 Plan will be automatically cancelled and become null and void.

The maximum number of shares of the Company’s common stock for which grants may be made under the 2015 Plan is 2.25 million shares, plus an annual increase on each January 1 during the ten-year term of the 2015 Plan equal to the lesser of 1.8 million shares, 4% of the total shares of the Company’s common stock outstanding (on an as-converted basis) and such smaller amount as may be determined by the Board in its sole discretion. In addition, the maximum aggregate number of shares of common stock that may be subject to awards granted to any one participant during a calendar year is 2.0 million shares.

The 2015 Plan provides that no stock option or stock appreciation right (even if vested) may be exercised prior to the earlier of August 1, 2018 or immediately prior to the consummation of a change in control of the Company that would result in an “ownership change” as defined in Section 382 of the Internal Revenue Code of 1986, as amended.

In June 2007, the Company’s shareholders approved the 2007 Lakes Stock Option and Compensation Plan (the “2007 Plan”), which is authorized to grant a total of 1.25 million shares of the Company’s common stock. There were 732,117 stock options outstanding under the 2007 Plan as of September 30, 2015, all of which were fully vested. As of September 30, 2015, a total of 282,635 shares of the Company’s common stock remain available for grants of awards under the 2007 Plan.

The Company also has a 1998 Stock Option and Compensation Plan. There were 12,500 stock options outstanding under this plan as of September 30, 2015. No additional options will be granted under this plan.

Share-based compensation expense related to stock options for the three and nine months ended September 30, 2015 and September 28, 2014 were as follows:

	Three Months Ended				Nine Months Ended
	September 30,		September 28,		September 30,		September 28,
	2015		2014		2015		2014
	(In thousands)
Share-based compensation	$	291	$	67	$	410	$	210

The Company uses the Black-Scholes option pricing model to estimate the fair value and compensation cost associated with employee incentive stock options, which requires the consideration of historical employee exercise behavior data and the use of a number of assumptions including volatility of the Company’s stock price, the weighted-average risk-free interest rate and the weighted-average expected life of the options. 1,610,000 options were granted under the 2015 Plan during the three and nine months ended September 30, 2015 with a weighted-average grant date fair value of $3.72 per share. 3,000 and 11,000 options were granted under the 2007 Plan during the three and nine months ended September 28, 2014, respectively. The weighted-average grant date fair value of the stock options granted during the three and nine months ended September 28, 2014 was $3.98 and $4.65, respectively.

The following table summarizes the Company’s stock option activity during the nine months ended September 30, 2015 and September 28, 2014:

	Number of Common Shares								Weighted
	Options					Available			Average
	Outstanding			Exercisable		for Grant			Exercise Price
2015
Balance at December 28, 2014		755,617			616,792		276,635		$	6.09
Authorized		—					2,250,000			—
Forfeited/cancelled/expired		(6,000	)				6,000			9.19
Exercised		(5,000	)				—			8.05
Granted		1,610,000					(1,610,000	)		9.05
Balance at September 30, 2015		2,354,617			744,617		922,635		$	8.10

2014
Balance at December 29, 2013		798,171			585,769		263,424		$	5.97
Forfeited/cancelled/expired		(25,211	)				24,211			5.19
Exercised		(28,343	)				—			4.73
Granted		11,000					(11,000	)		9.18
Balance at September 28, 2014		755,617			615,792		276,635		$	6.09

As of September 30, 2015, the options outstanding had a weighted-average remaining contractual life of 7.6 years, weighted-average exercise price of $8.10 and an aggregate intrinsic value of $2.3 million. The options exercisable have a weighted-average remaining contractual life of 2.5 years, weighted-average exercise price of $6.05 and an aggregate intrinsic value of $2.3 million as of September 30, 2015.

There were 2,500 and 5,000 options exercised during the three and nine months ended September 30, 2015, respectively. The total intrinsic value of options exercised during both the three and nine months ended September 30, 2015 was less than $0.1 million. There were 500 and 28,343 options exercised during the three and nine months ended September 28, 2014, respectively. The total intrinsic value of options exercised during the three and nine months ended September 28, 2014 was less than $0.1 million and $0.1 million, respectively. The Company’s unrecognized share-based compensation expense related to stock options was approximately $5.8 million as of September 30, 2015, which is expected to be recognized over a weighted-average period of 3.8 years.

The Company issues new shares of common stock upon the exercise of options.