Equity-Based Compensation

Equity-based compensation awards may be granted to Actua employees, directors and consultants and certain employees of its consolidated businesses under Actua’s 2005 Omnibus Equity Compensation Plan (as amended from time to time, the "Plan"). Generally, the awards vest over a period from one to four years or based on the achievement of performance-based or market-based conditions, and expire eight or ten years after the grant date. Most businesses in which Actua holds equity ownership interests also maintain their own equity incentive compensation plans. As of March 31, 2017, Actua had 2,110,719 shares of Common Stock reserved under the Plan for possible future issuance.

Actua may issue the following types of equity-based compensation to its employees and non-employee directors: (1) restricted stock and restricted stock units (which may be subject to performance-based or market-based conditions), (2) stock appreciation rights ("SARs"), (3) stock options and (4) deferred stock units ("DSUs").

Actua’s grants of equity-based compensation are approved by the Board or the Compensation Committee of the Board. Equity-based compensation is included in operating expenses, primarily in the line item "General and administrative" in Actua’s Consolidated Statements of Operations and Comprehensive Income (Loss).

The following table summarizes the equity-based compensation recognized by expense line item on Actua’s Consolidated Statements of Operations and Comprehensive Income (Loss):



(in thousands)	Three Months Ended March 31,
	2017		2016
Cost of revenue	$	102	$	32
Sales and marketing	92		88
General and administrative	3,489		4,423
Research and development	82		114
Total equity-based compensation	$	3,765	$	4,657

Equity-based compensation by equity award type:



(in thousands)	Three Months Ended March 31,
	2017		2016
Restricted stock	$	3,061	$	3,925
SARs	10		58
DSUs	74		99
	3,145		4,082
Equity-based compensation for consolidated businesses	620		575
Total equity-based compensation	$	3,765	$	4,657

Unrecognized equity-based compensation by equity award type:



(in thousands, except weighted average years)	Three Months Ended March 31,				Weighted Average Years Remaining of Equity-Based Compensation as of
	2017		2016		March 31, 2017
Restricted stock	$	10,864	$	18,387	1.04
SARs	108		67		3.03
DSUs	356		869		1.20
	11,328		19,323
Equity-based compensation for consolidated businesses	6,973		5,879		2.87
Total equity-based compensation	$	18,301	$	25,202

Restricted Stock

Actua periodically issues shares of restricted stock to its employees, employees of its consolidated businesses and its non-management directors. Recipients of restricted stock do not pay any cash consideration for the shares and have the right to vote all shares subject to the grant. Any cash dividends paid by Actua in respect of unvested restricted stock would be paid to the holders of outstanding restricted stock at the same time as cash dividends are paid to common stockholders. Any dividends paid by Actua in stock or other property in respect of unvested restricted stock would be paid to the holders of outstanding unvested restricted stock subject to the same terms and conditions related to vesting, forfeiture and non-transferability as the underlying stock.

Share activity with respect to restricted stock awards for the three months ended March 31, 2017 and 2016 was as follows:



	Number of Shares		Weighted Average Grant Date Fair Value Per Share
Issued and unvested as of December 31, 2015	3,480,828		$	16.51
Granted	434,283		$	8.44
Vested	(657,317	)	$	18.75
Forfeited	(588,819	)	$	10.69
Issued and unvested as of March 31, 2016	2,668,975		$	15.93



	Number of Shares		Weighted Average Grant Date Fair Value Per Share
Issued and unvested as of December 31, 2016	2,644,030		$	14.15
Granted	286,256		$	13.85
Vested	(625,646	)	$	15.30
Forfeited	(167,712	)	$	8.44
Issued and unvested as of March 31, 2017	2,136,928		$	14.22

The total aggregate fair value of restricted stock awards that vested and were converted into Actua’s Common Stock during the three months ended March 31, 2017 and 2016 was as follows:



(in thousands)	2017		2016
Three months ended March 31,	$	8,548	$	5,243

The following shares were surrendered by Actua's employees to satisfy their obligations for withholding taxes:

As of March 31, 2017, issued and unvested shares of restricted stock granted to Actua’s employees and directors vest as follows:



Number of Shares Unvested			Vesting Conditions
1,335,700			Subject to certain market conditions, as discussed below
263,756			Subject to certain performance conditions, as discussed below
537,472			Subject to certain service conditions, as discussed below
2,136,928

Restricted Stock – Awards with Market Conditions

Actua has issued restricted stock awards with market-based vesting conditions to its employees and certain employees of its consolidated businesses, the vesting of which is contingent upon achievement of specified price targets of Actua’s Common Stock. The equity-based compensation expense for awards with market-based vesting conditions is recorded based on the fair value of the awards, which is determined using a Monte Carlo simulation model at the time the award is granted. For the majority of the market-based awards that are outstanding as of March 31, 2017, the derived service period over which the expense is to be recognized is also determined by the Monte Carlo simulation model. In the event that the market-based conditions are not achieved and the related restricted stock awards are forfeited, equity-based compensation expense would not be reversed; if an employee terminates service with Actua prior to vesting of a market-based vesting, any compensation expense associated with the unvested award would be reversed.

During 2011, a total of 366,666 shares of restricted stock with market-based conditions were granted to Actua’s Chief Executive Officer and its President. The market-based conditions were not achieved and the relevant shares of restricted stock lapsed unvested in the first quarter of 2016.

In February 2014, a total of 1,277,500 shares of restricted stock with market-based conditions were granted to certain of Actua’s employees, including Actua’s executive officers, and certain executives of Actua’s consolidated businesses. The vesting of those shares is contingent upon the 45-trading day volume-weighted average price per share ("VWAP") of Actua’s Common Stock meeting or exceeding specified 45-trading day VWAP targets ($28.07, $30.16, $32.38 and $34.71) (the "2014 VWAP Targets") on or before February 28, 2018, with 25% of the shares vesting upon achievement of each of the targets. Through the quarter ended March 31, 2017, 20,000 shares related to this award have been forfeited. In the event that any of the 2014 VWAP Targets are not achieved, the relevant shares of restricted stock will lapse unvested.

There are various other restricted stock awards that have been issued, the vesting of which are contingent upon the 45-trading day VWAP of Actua’s Common Stock meeting or exceeding the 2014 VWAP Targets on or before February 28, 2018, and such awards remain unvested as of March 31, 2017. These issuances total 90,800 shares awarded, of which 12,600 shares have been forfeited through the quarter ended March 31, 2017.

In aggregate, and inclusive of any amounts noted in the paragraphs of this subsection, compensation expense related to awards with market conditions was less than $0.1 million for the three months ended March 31, 2017 and $0.8 million for the equivalent period of 2016. Unamortized compensation expense is nominal and will be fully amortized in 2017.

Restricted Stock – Awards with Performance Conditions

Actua also grants restricted stock awards with performance-based vesting conditions to its employees and certain employees of its consolidated businesses, the vesting of which is contingent upon the achievement of specified financial goals. The equity-based compensation expense for awards with performance-based vesting conditions is recorded based on the fair value of the awards, determined by the closing price of Actua’s Common Stock on the date of grant. Actua assesses the probability of the achievement of any performance conditions and adjusts the related equity compensation expense accordingly. In the event that the performance-based conditions are not achieved and the related restricted stock awards are forfeited, equity-based compensation expense related to those awards would be reversed.

For the years ended or ending December 31, 2015, 2016 and 2017, senior Actua employees, including Actua's executive officers, were issued a certain number of shares of restricted stock in lieu of the right to receive up to a certain percentage of their respective target bonuses (ranging from 100% to 150%) in cash. The number of shares of restricted stock issued to each senior Actua employee was determined by reference to the closing price of Actua's Common Stock on the date of issue and the dollar amount of the target bonus potentially payable in Actua Common Stock. The number of each employee's restricted shares that vested or will vest in 2015, 2016 or 2017 is based on each employee's achievement percentage under the relevant performance plan. All expense related to the grant of restricted shares in connection with Actua's performance plans is recorded in the year of issuance; however, the vesting of such restricted shares occurs in the first quarter of the following year. The table below summarizes the grant and vesting of performance plan-related restricted stock grants for each of 2015, 2016 and 2017.



	Percentage of Target Bonus Potentially Payable in Restricted Stock		ACTA Stock Price at Issuance		Restricted Shares Granted	Performance Plan Achievement Percentage		Restricted Shares Vested	Restricted Shares Forfeited
Actua 2015 Performance Plan	150	%	$	16.76	316,715	83	%	175,249	141,466
Actua 2016 Performance Plan	100	%	$	8.44	419,283	60	%	251,570	167,713
Actua 2017 Performance Plan	100	%	$	13.85	263,756	*		*	*

*To be determined in the first quarter of 2018.

In aggregate, and inclusive of any amounts noted in the paragraphs of this subsection, compensation expense related to performance-based awards was $0.9 million for the three months ended March 31, 2017 and $1.0 million for the equivalent period of 2016. Unamortized compensation expense of $2.7 million will be amortized over the nine months remaining in 2017.

Restricted Stock – Awards with Service Conditions

Actua grants restricted stock awards to its employees, its directors and certain employees of its consolidated businesses that vest over a period of time of employee or director service. The equity-based compensation expense for those time-based awards is recorded based on the fair value of the awards, determined by the ending price of Actua’s Common Stock on the date of grant. In the event that an individual terminates service with Actua (or its consolidated businesses) prior to the vesting of a time-based award, the related restricted stock awards are forfeited and equity-based compensation expense related to any forfeited award is reversed.

During February 2014, 1,377,500 shares of restricted stock were granted to certain of Actua’s employees, including Actua’s executive officers, and certain executives of Actua’s consolidated businesses. Those awards vest in equal increments each year for four years on the anniversary of the grant date. Accordingly, 344,375 and 339,375 shares of restricted stock vested during the first quarter of 2016 and 2017, respectively. During the year ended December 31, 2016, 10,000 shares related to this award were forfeited. The unamortized equity-based compensation expense as of March 31, 2017 related to those time-based awards was $6.3 million; this amount will be recognized as follows: $5.2 million in the remaining nine months of 2017 and $1.1 million in 2018.

During June 2015, 140,416 shares of restricted stock were granted to Actua's non-management directors in accordance with the Amended Director Plan. Through the quarter ended March 31, 2017, 102,402 shares have vested and 514 shares have been forfeited; the remaining 37,500 shares vest in equal quarterly increments from June 2017 through June 2018. See "Non-Management Director Equity-Based Compensation - The Amended Director Plan" in this Note 10 for additional details regarding equity-based compensation awarded to Actua’s Board.

During June 2016, 72,397 shares of restricted stock with a grant date fair value of $9.02 were granted to Actua's non-management directors in accordance with the Amended Director Plan. These shares vest on the one-year anniversary of the grant date. See "Non-Management Director Equity-Based Compensation - The Amended Director Plan" in this Note 10 for additional details regarding equity-based compensation awarded to Actua’s Board.

There are various other restricted stock awards that were issued in the current and previous years to Actua employees, which vest according to specified service criteria and remain unvested as of March 31, 2017. Those awards include 88,200 shares of restricted stock from multiple grants, which vest on various dates through 2021.

In aggregate, and inclusive of any amounts noted in the foregoing paragraphs of this subsection, compensation expense related to awards with service conditions was $2.1 million for the three months ended March 31, 2017 and $2.2 million for the corresponding period of 2016. Unamortized compensation expense of $8.1 million will be amortized as follows: $6.1 million during the nine months remaining in 2017 and $2.0 million during the years 2018 through 2021.

SARs

Each SAR represents the right of the holder to receive, upon exercise of that SAR, shares of Actua Common Stock equal to the amount by which the fair market value of a share of that Common Stock on the date of exercise of the SAR exceeds the base price of the SAR. The base price is determined by the NASDAQ closing price of Actua’s Common Stock on the date of grant (or the closing price on the next trading day if there are no trades in Actua’s Common Stock on the date of grant). The fair value of each SAR is estimated on the grant date using the Black-Scholes option-pricing model. SARs generally vest over four years, with 25% vesting on the first anniversary of the grant date, and the remaining 75% vesting ratably each month over the subsequent 36 months.

The activity with respect to SARs for the three months ended March 31, 2017 and 2016 was as follows:



	Number of SARs		Weighted Average Base Price		Weighted Average Fair Value
Outstanding as of December 31, 2015	479,656		$	10.64	$	5.80
Activity for the three months ended March 31, 2016	—		$	—	$	—
Outstanding as of March 31, 2016	479,656		$	10.64	$	5.80

	Number of SARs		Weighted Average Base Price		Weighted Average Fair Value
Outstanding as of December 31, 2016	307,514		$	11.28	$	6.21
Exercised ⁽¹⁾	(939	)	$	9.98	$	5.33
Outstanding as of March 31, 2017	306,575		$	11.28	$	6.21


⁽¹⁾	The exercise of SARs listed above resulted in the issuance of the following shares of Actua's Common Stock:

The following table summarizes information about SARs outstanding as of March 31, 2017:



Grant price	Number of SARs outstanding	Number of SARs exercisable	Weighted average remaining contractual life of SARs outstanding (in years)	Aggregate intrinsic value of SARs outstanding as of March 31, 2017 (in thousands)
$6.70 - $8.76	29,950	29,950	1.47	$	169
$9.02 - $9.25	43,625	18,625	7.50	$	215
$11.69 - $17.31	233,000	231,988	4.02	$	475
	306,575	280,563		$	859

As of March 31, 2017 and 2016, there were 280,563 and 465,961 SARs exercisable, respectively, at a weighted average base price of $11.47 per share and $10.65 per share, respectively, under the Plan. As of March 31, 2017, Actua expects an additional 26,012 SARs to vest in the future. The aggregate intrinsic value of the SARs outstanding as of March 31, 2017 and 2016 was $0.9 million and $0.1 million, respectively.

Stock Options

The fair value of each stock option is estimated on the grant date using the Black-Scholes option-pricing model. Stock options generally vest over four years as follows: 25% vest on the first anniversary of the grant date, and the remaining 75% vest ratably each month over the subsequent 36 months.

There was no activity with respect to stock options during the three months ended March 31, 2017 and 2016. There were 250 stock options outstanding as of both March 31, 2017 and 2016; the aggregate intrinsic value of the stock options outstanding as of both March 31, 2017 and 2016 was de minimis.

SARs and Stock Options Fair Value Assumptions

Actua estimates the grant date fair value of SARs and stock options using the Black-Scholes option-pricing model, which requires the input of highly subjective assumptions. Those assumptions include estimating the expected life of the award and estimating the volatility of Actua’s stock price over the expected term. Expected volatility approximates the historical volatility of Actua’s Common Stock over the period, commensurate with the expected term of the award. Actua has sufficient historical data to calculate an expected term for SARs and stock options granted in the future. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for an instrument with a maturity that is commensurate with the expected term of the award. Changes in the above assumptions, the estimated forfeitures and/or the requisite service period can materially affect the amount of equity-based compensation recognized in Actua’s Consolidated Statements of Operations and Comprehensive Income (Loss). There were no SARs or stock options granted to Actua employees during the quarters ended March 31, 2017 and 2016.

Non-Management Director Equity-Based Compensation

Actua has periodically issued DSUs and/or shares of restricted stock to its non-management directors in accordance with the Director Plan and the Amended Director Plan. Each DSU represents a share of Actua's Common Stock into which that DSU will be converted upon the termination of the recipient’s service at Actua.

Non-Management Director Equity-Based Compensation – The Amended Director Plan

Pursuant to the Amended Director Plan, the compensation of Actua’s non-management directors was modified as follows for 2015: (1) the form of director retainer fee payments changed from quarterly cash payments to annual director restricted stock grants (with restricted stock with a six-month vesting period being granted in January 2015 and, thereafter, annual grants being made in connection with Actua’s annual meetings of stockholders), and (2) the number and frequency of non-management director service grant DSUs/shares of director restricted stock changed from 7,500 annually to 22,500 triennially (with 7,500 DSUs/shares of director restricted stock vesting on the one-year anniversary of the grant date, and the remaining 15,000 DSUs/shares of director restricted stock vesting in equal quarterly installments over the following two years). The annual grants of shares of director restricted stock that replaced the quarterly cash retainer fees (a) are made at the board meeting immediately following the annual meeting of stockholders, (b) are equal in value to the total amount of annual retainer fees that were previously payable for the year (based on the NASDAQ closing price of Actua’s Common Stock on the grant date), (c) vest on the one-year anniversary of the grant date and (d) are no longer subject to a director option to receive DSUs in lieu of the shares.

During June 2015, 50,416 shares of restricted stock with a grant date fair value of $13.17 per share were granted to Actua’s non-management directors (as discussed previously in this Note 10), representing the director retainer fee for the period from the June 12, 2015 grant date through June 12, 2016; those awards vested in June 2016.

During June 2015, 90,000 shares of restricted stock and 90,000 DSUs (both with a grant date fair value of $13.17 per share) were granted to Actua’s non-management directors, representing the directors’ triennial service awards. Through the quarter ended March 31, 2017, 52,500 shares of restricted stock and 46,875 DSUs have vested, and 15,000 DSUs were forfeited in connection with a director's retirement. The remaining 37,500 shares of restricted stock and 28,125 DSUs are scheduled to vest in equal quarterly installments from June 2017 through June 2018.

The following table summarizes the activity related to DSUs for the quarters ended March 31, 2017 and 2016:



	Number of shares		Weighted average grant date fair value
Issued and unvested as of December 31, 2015	90,000		$	13.17
Activity for the three months ended March 31, 2016	—		$	—
Issued and unvested as of March 31, 2016	90,000		$	13.17

	Number of shares		Weighted average grant date fair value
Issued and unvested as of December 31, 2016	33,750		$	13.17
Vested	(5,625	)	$	13.17
Issued and unvested as of March 31, 2017	28,125		$	13.17

Expense associated with DSUs was $0.1 million for both the three months ended March 31, 2017 and 2016.

Consolidated Businesses

All of Actua’s consolidated businesses issue equity-based compensation awards to their employees. Those awards are most often in the form of stock options for the respective businesses’ stock that vest over four years. The fair value of the stock option awards is estimated on the grant date using the Black-Scholes option pricing model. The majority of the stock options vest 25% on the first anniversary of the grant date, with the remaining 75% vesting ratably each month over the subsequent 36 months. The other awards generally vest ratably over four years, with 25% vesting on each anniversary date over that term.

In conjunction with Actua’s acquisition of FolioDynamix, stock options with a total fair value of $5.1 million were granted to certain of FolioDynamix’s employees. The majority of those stock options vest as follows: 25% vested in November 2015, and the remaining 75% vest ratably each month through November 2018. The remaining stock options vest upon the achievement of certain performance or market conditions, as well as service conditions; to the extent that the performance or market conditions are not achieved, those stock options will lapse unvested. The expense associated with those awards is being recognized over the relative vesting periods. That expense is included in the line item "Equity-based compensation for consolidated businesses" in the equity-based compensation table above.

The following assumptions were used to determine the fair value of stock options granted by Actua's consolidated businesses to their employees during the three-month periods ended March 31, 2017 and 2016. Due to insufficient historical data, Actua's consolidated businesses used the simplified method to determine the expected life of all stock options granted under the respective equity incentive plans.



	Three Months Ended March 31,
	2017	2016
Expected volatility	50%	45% - 50%
Average expected life of stock options (in years)	6.25	5.93 - 6.25
Risk-free interest rate	2.07%	1.42% - 1.44%
Dividend yield	—	—

Three months ended March 31,