10. Equity-Based Compensation

Equity-based compensation awards may be granted to Actua employees, directors and consultants under Actua’s 2005 Omnibus Equity Compensation Plan, as such has been amended from time to time (the “Plan”). Generally, the grants vest over a period from one to four years and expire eight to ten years after the grant date. Most businesses in which Actua holds equity ownership interests also maintain their own equity incentive/compensation plans.

Actua issues the following types of equity-based compensation to its employees and non-employee directors: (1) stock appreciation rights (SARs), (2) stock options, (3) restricted stock (often subject to performance-based or market-based conditions) and (4) deferred stock units (DSUs). Actua’s grants of equity-based compensation are approved by the Compensation Committee of its Board of Directors. The following table summarizes the equity-based compensation recognized in the respective periods; that equity-based compensation is included in operating expenses, primarily in the line item “General and administrative” in Actua’s Consolidated Statements of Operations.

Equity-Based Compensation (in thousands, except weighted average years):

	Three Months Ended September 30,				Nine Months Ended September 30,				Unrecognized Equity-Based Compensation as of		Weighted Average Years Remaining of Equity-Based Compensation as of
	2014		2013		2014		2013		September 30, 2014		September 30, 2014
SARs	$	195	$	599	$	646	$	1,801	$	666		1.51
Restricted Stock		5,870		1,020		15,431		3,446		42,015		2.50
DSUs	99		96		347		282		116			0.30
		6,164		1,715		16,424		5,529		42,797
Equity-Based Compensation for Consolidated Businesses	193		165		548		510			978		1.57
Total Equity-Based Compensation	$	6,357	$	1,880	$	16,972	$	6,039	$	43,775

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.

Activity with respect to SARs during the three and nine months ended September 30, 2014 and 2013 was as follows:

	Three Months Ended September 30,
	2014						2013
	Number of SARs		Weighted Average Base Price		Weighted Average Fair Value		Number of SARs		Weighted Average Base Price		Weighted Average Fair Value
Granted		500	$	17.31	$	9.48		-	$	-	$	-
Exercised ⁽¹⁾		3,165	$	10.54	$	5.67		220,874	$	7.59	$	4.55
Forfeited		5,001	$	10.16	$	5.44		-	$	-	$	-


	Nine Months Ended September 30,
	2014						2013
	Number of SARs		Weighted Average Base Price		Weighted Average Fair Value		Number of SARs		Weighted Average Base Price		Weighted Average Fair Value
Granted		500	$	17.31	$	9.48		-	$	-	$	-
Exercised ⁽¹⁾		321,442	$	8.21	$	4.73		376,362	$	12.43	$	7.46
Forfeited		5,001	$	10.16	$	5.44		5,346	$	9.95	$	5.39

⁽¹⁾

The exercise of SARs listed in the three-month period table resulted in the issuance of 897 shares and 55,619 shares of Actua’s Common Stock during the three months ended September 30, 2014 and 2013, respectively. The exercise of SARs listed in the nine-month period table resulted in the issuance of 129,990 shares and 99,851 shares of Actua’s Common Stock during the nine months ended September 30, 2014 and 2013, respectively.

There were 906,865 SARs and 1,232,808 SARs outstanding as of September 30, 2014 and December 31, 2013, respectively. The aggregate intrinsic value of the SARs outstanding as of September 30, 2014 and December 31, 2013 was $6.3 million and $12.0 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 ratably over four years: 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 and nine months ended September 30, 2014 and 2013. There were 250 stock options outstanding as of both September 30, 2014 and December 31, 2013; the aggregate intrinsic value of the stock options outstanding as of both September 30, 2014 and December 31, 2013 was less than $0.1 million.

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 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. The expected term calculation is based on an average of the award vesting term and the life of the award. 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.

The following assumptions were used to determine the fair value of SARs granted to employees by Actua during the three and nine month periods ended September 30, 2014 and 2013:

	Three and Nine Months Ended September 30,
	2014			2013
Expected volatility		56	%		-	%
Average expected life of SAR (in years)		6.25			-
Risk-free interest rate		2.12	%		-	%
Dividend yield		-	%		-	%

Restricted Stock

Actua periodically issues shares of restricted stock to its employees and non-management directors. Recipients of restricted stock do not pay cash consideration for the shares and have the right to vote all shares subject to the grant and receive all dividends with respect to the shares, whether or not the shares have vested. As of September 30, 2014, issued and unvested shares of restricted stock granted to Actua’s employees vest as follows: (1) 1,505,260 shares of restricted stock vest 25% each year over a four-year period, (2) 137,500 shares of restricted stock vest in equal installments every six months each May and November through 2015, (3) 32,060 shares of restricted stock vest in equal installments every six months each March and September through 2016, (4) 403,448 shares of restricted stock vest upon the achievement of certain performance goals, as discussed below, and (5) 1,694,966 shares of restricted stock vest upon the achievement of certain market conditions, as discussed below. Additionally, as of September 30, 2014, 37,500 shares of restricted stock granted to Actua’s non-management directors vest on the one-year anniversary of the grant date, as discussed below.

During the nine months ended September 30, 2013, in lieu of the right to receive 50% of their respective target bonus amounts under the Actua 2013 Performance Plan (the “2013 Performance Plan”) in cash, senior Actua employees, including each of Actua’s executive officers, were issued a total of 130,440 shares of restricted stock (the “2013 Performance Shares”) (determined based on the value of 50% of their respective individual target bonuses under the 2013 Performance Plan and the closing price of Actua’s Common Stock of $13.09 per share on March 1, 2013, the date of the restricted stock grant). If and to the extent that an individual’s achievement percentage under the 2013 Performance Plan (1) was greater than or equal to 50%, all of that employee’s 2013 Performance Shares vested or (2) was greater than 0% but less than 50%, a portion of that employee’s 2013 Performance Shares equal to two times the achievement percentage vested. All of the 2013 Performance Shares vested during the first quarter of 2014.

During the nine months ended September 30, 2014, in lieu of any right to receive 100% of their respective target bonus amounts under the Actua 2014 Performance Plan (the “2014 Performance Plan”) in cash, senior Actua employees, including Actua’s executive officers, were issued a total of 158,942 shares of restricted stock (the “2014 Performance Shares”) (determined based on the value of their respective individual target bonuses under the 2014 Performance Plan and the closing price of Actua’s Common Stock of $20.33 per share on February 28, 2014, the date of the restricted stock grant). If and to the extent that an individual’s achievement percentage under the 2014 Performance Plan (1) is greater than or equal to 100%, all of that employee’s 2014 Performance Shares will vest or (2) is greater than 0% but less than 100%, a portion of that employee’s 2014 Performance Shares will vest, as determined by the Compensation Committee of Actua’s Board of Directors.

As of September 30, 2014, outstanding shares of restricted stock granted to Actua’s Chief Executive Officer and to its President during 2011 vest as follows: (1) 137,500 shares of restricted stock vest in equal installments each November and May through November 9, 2015 and (2) 366,666 shares of restricted stock vest based on stipulated market thresholds related to Actua’s Common Stock price through December 31, 2015. During the nine months ended September 30, 2014, in light of the sale of Procurian and the resulting improbability of the achievement of the 366,666 performance-based awards that were initially included in that grant, both Actua’s Chief Executive Officer and Actua’s President elected to forfeit those shares of restricted stock. Actua had reversed previously-recorded equity compensation cost related to those awards during 2013. In the event of a change of control (as defined by the Plan) before December 31, 2015, all of the shares contingent upon the achievement of the stock price metrics would automatically vest, and any unrecognized equity-based compensation expense associated with those awards would be immediately recognized. Additionally, in the event of a change of control during which Actua’s Chief Executive Officer and Actua’s President are terminated, any remaining service-based awards would automatically vest, and any unrecognized equity-based compensation expense associated with those awards would be immediately recognized.

During the nine months ended September 30, 2014, 2,782,000 shares of restricted stock were granted to Actua’s employees, including Actua’s executive officers. Those awards vest as follows: (1) 1,453,700 shares of restricted stock vest in equal installments on February 28th of 2015, 2016, 2017 and 2018 and (2) 1,328,300 shares of restricted stock vest based on stipulated market thresholds related to Actua’s Common stock price through February 28, 2018. The vesting of the market-based shares is contingent upon the 45-trading day volume-weighted average price (“VWAP”) of Actua’s Common Stock meeting or exceeding specified 45-trading day VWAP targets ($28.07, $30.16, $32.38 and $34.71) on or before February 28, 2018, with 25% of the shares vesting on the first business day following achievement of each of the targets. If any of the VWAP targets related to the shares granted during the first quarter of 2014 is achieved (1) on or prior to February 28, 2015, 50% of the shares that would have vested upon achieving the VWAP target will instead vest on the one-year anniversary of the grant, and the remaining 50% of the shares that would have vested upon achieving the VWAP target will instead vest on February 28, 2016, or (2) between March 1, 2015 and February 28, 2016, 50% of the applicable shares will vest on the date of achievement of the VWAP target, and the remaining 50% of the shares that would have vested upon achieving the VWAP target will instead vest on February 28, 2016. If any of the VWAP targets related to the shares granted during the second quarter of 2014 is achieved (1) on or prior to April 4, 2015, 50% of the shares that would have vested upon achieving the VWAP target will instead vest on the one-year anniversary of the grant, and the remaining 50% of the shares that would have vested upon achieving the VWAP target will instead vest on February 28, 2016, or (2) between April 5, 2015 and February 28, 2016, 50% of the applicable shares will vest on the date of achievement of the VWAP target, and the remaining 50% of the shares that would have vested upon achieving the VWAP target will instead vest on February 28, 2016. The unamortized equity-based compensation as of September 30, 2014 related to these service and market based awards was $37.2 million and will be recognized as follows: $4.3 million in the remaining three months of 2014, $16.2 million in 2015, $8.1 million in 2016, $7.4 million in 2017 and $1.2 million in the first quarter of 2018. To the extent the VWAP targets are achieved prior to Actua’s recognition of the full amount of related equity-based compensation costs, any related unamortized equity-based compensation expense would be immediately recognized, provided that the respective service conditions have been met.

During the nine months ended September 30, 2014, 244,506 shares of restricted stock were granted to certain Actua employees based on certain performance metrics for 2014 and 2015. These awards will vest to the extent the performance metrics are achieved in each year with a maximum vesting of 100,247 shares in the first quarter of 2015 and a maximum vesting of 144,259 shares in the first quarter of 2016. To the extent the performance metrics are not met against each year’s measurements, the restricted shares will lapse unvested.

During the nine months ended September 30, 2014 and 2013, Actua granted 37,500 shares and 30,750 shares, respectively, of restricted stock under Actua’s Amended and Restated Non-Management Director Compensation Plan (the “Director Plan”), which are included in the table below. See “Non-Management Director Equity-Based Compensation” in this Note 10 for additional details related to vesting.

Share activity with respect to restricted stock awards for the three and nine months ended September 30, 2014 and 2013 was as follows:

	Three Months Ended September 30,
	2014				2013
	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value
Granted		9,000	$	17.31		-	$	-
Vested		8,326	$	9.25		8,576	$	9.25
Forfeited		1,875	$	10.22		-	$	-


	Nine Months Ended September 30,
	2014				2013
	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value
Granted		3,239,948	$	17.22		168,190	$	13.06
Vested		245,744	$	12.02		146,480	$	10.69
Forfeited		368,541	$	9.96		10,395	$	10.58

There were 3,810,734 shares and 1,185,071 shares of restricted stock issued and unvested as of September 30, 2014 and December 31, 2013, respectively. All 3,810,734 issued and unvested shares of restricted stock at September 30, 2014 are expected to vest.

Non-Management Director Equity-Based Compensation

Actua periodically issues DSUs and/or shares of restricted stock to its non-management directors in accordance with the Director Plan. Each DSU represents a share of Common Stock into which that DSU will be converted upon the termination of the recipient’s service at Actua. Portions of those DSUs and/or shares of restricted stock vest on each anniversary date of the grant.

In 2014, each non-management director is also entitled to receive quarterly cash payments for his service on the Board of Directors and its committees, as applicable, under the Director Plan. Each director had the option to elect to receive DSUs in lieu of all or a portion of those cash fees. Each participating director receives DSUs representing shares of Actua’s Common Stock with a fair market value equal to the relevant cash fees (with such fair market value determined by reference to the closing Common Stock price reported by NASDAQ on the date these cash fees otherwise would have been paid). DSUs received in lieu of cash fees are fully vested at the time they are granted and are settled in shares of Actua’s Common Stock upon the termination of the recipient’s service at Actua. The expense for those DSUs is recorded when the fees to which the DSUs relate are earned and is included in the line item “General and administrative” on Actua’s Consolidated Statements of Operations (but is not reflected in the summarized Equity-Based Compensation table above).

Share activity with respect to periodically-issued DSUs for the nine months ended September 30, 2014 and 2013 was as follows:

	Nine Months Ended September 30,
	2014				2013
	Number of DSUs		Grant Date Fair Value		Number of DSUs		Grant Date Fair Value
Granted		22,500	$	17.63		29,250	$	13.09
Vested		29,250	$	13.09		41,250	$	8.40

There were 22,500 DSUs and 29,250 DSUs issued and unvested at September 30, 2014 and December 31, 2013, respectively. All 22,500 DSUs issued and unvested at September 30, 2014 are expected to vest.

Activity related to grants of DSUs for service in lieu of cash for the three and nine months ended September 30, 2014 and 2013 was as follows:

	Three Months Ended September 30,
	2014				2013
	Number of DSUs		Expense Recognized (in thousands)		Number of DSUs		Expense Recognized (in thousands)
Granted and vested		3,815	$	82		8,378	$	97


	Nine Months Ended September 30,
	2014				2013
	Number of DSUs		Expense Recognized (in thousands)		Number of DSUs		Expense Recognized (in thousands)
Granted and vested		13,483	$	240		23,750	$	288

In April 2014, the Director Plan was amended and restated (such plan, as amended, the “Amended Director Plan”). Pursuant to the Amended Director Plan, effective January 1, 2015, the compensation of Actua’s non-management directors will be modified as follows: (1) the form of director retainer fee payments will change 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 will change 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 will replace the quarterly cash retainer fees will (a) be made on the first business day of each year, (b) be equal in value to the total amount of annual retainer fees that are otherwise payable for the upcoming 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) no longer be subject to a director option to receive DSUs in lieu of the shares.

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, and the remaining 75% vest 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.