12. Equity-Based Compensation

As of December 31, 2014, 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. As of December 31, 2014, Actua had 1,893,678 shares of Common Stock reserved under the Plan for possible future issuance. 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 (subject to time/service based 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 or the Board of Directors. Actua recognizes expense associated with its service-based equity-based compensation awards on a straight-line basis over the requisite service period for the entire award. 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” on Actua’s Consolidated Statements of Operations.

Equity-based compensation (in thousands) by expense line item on Actua’s Consolidated Statements of Operations:

	Year Ended December 31,
	2014	2013	2012
Cost of revenue	$ 76	$ 63	$ 7
Sales and marketing	160	156	18
General and administrative	23,509	6,081	6,195
Research and development	144	111	16
Total Equity-Based Compensation	$ 23,889	$ 6,411	$ 6,236

Equity-based compensation (in thousands, except weighted average years) by type of award:

	Year Ended December 31,						Unrecognized Equity- Based Compensation as of		Weighted Average Years Remaining of Equity-Based Compensation as of
	2014		2013		2012		December 31, 2014		December 31, 2014
SARs	$	792	$	2,377	$	2,488	$	519		1.34
Restricted Stock		21,818		2,958		2,871		37,780		2.42
DSUs	444		377		419		17			0.04
		23,054		5,712		5,778		38,316
Equity-Based Compensation for Consolidated Businesses	835		699		458			1,899		1.63
Total Equity-Based Compensation	$	23,889	$	6,411	$	6,236	$	40,215

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 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 years ended December 31, 2014, 2013 and 2012 was as follows:

	Number of SARs			Weighted Average Base Price		Weighted Average Fair Value
Outstanding as of December 31, 2011		4,147,391		$	7.71	$	4.54
Granted		260,125		$	9.25	$	4.90
Exercised ⁽¹⁾		(54,873	)	$	7.89	$	4.65
Forfeited		(1,598	)	$	10.54	$	5.83
Cancelled		(12,795	)	$	6.70	$	3.93
Outstanding as of December 31, 2012		4,338,250		$	7.80	$	4.56
Granted		2,500		$	16.19	$	9.83
Exercised ⁽¹⁾		(3,045,700	)	$	14.42	$	8.64
Forfeited		(62,242	)	$	10.25	$	5.51
Outstanding as of December 31, 2013		1,232,808		$	8.86	$	4.99
Granted		500		$	17.31	$	9.48
Exercised ⁽¹⁾		(679,606	)	$	7.35	$	3.60
Forfeited		(5,220	)	$	10.14	$	5.43
Outstanding as of December 31, 2014		548,482		$	10.62	$	5.79

⁽¹⁾	The exercise of SARs listed in this table resulted in the issuance of 253,853 shares, 992,390 shares and 9,818 shares of Actua’s Common Stock during the years ended December 31, 2014, 2013 and 2012, respectively.

The following table summarizes information about SARs outstanding as of December 31, 2014:

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 Dec. 31, 2014 (in thousands)
$6.70-$8.76		73,311		73,311		3.93	$	774
$9.25-$9.84		172,499		100,354		7.46	$	1,590
$11.69-$17.31		302,672		271,573		6.13	$	1,941
		548,482		445,238			$	4,305

As of December 31, 2014, 2013 and 2012, there were 445,238 SARs, 966,045 SARs and 3,468,805 SARs exercisable, respectively, at a weighted average base price of $10.72 per share, $8.50 per share and $7.53 per share, respectively, under the Plan. As of December 31, 2014, Actua expects an additional 103,244 SARs to vest in the future.

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 on a monthly basis over the subsequent 36 months.

Activity with respect to stock options during the years ended December 31, 2014, 2013 and 2012 was as follows:

	Number of Options			Weighted Average Base Price		Weighted Average Fair Value
Outstanding as of December 31, 2011		183,208		$	6.25	$	4.97
Exercised ⁽¹⁾		(173,208	)	$	6.03	$	4.83
Forfeited		(21	)	$	8.41	$	4.96
Cancelled		(8,229	)	$	10.62	$	8.16
Outstanding as of December 31, 2012		1,750		$	6.91	$	4.14
Exercised ⁽¹⁾		(1,500	)	$	7.34	$	4.42
Outstanding as of December 31, 2013		250		$	4.30	$	2.47
Exercised, forfeited, cancelled		-		$	-	$	-
Outstanding as of December 31, 2014		250		$	4.30	$	2.47

⁽¹⁾	Actua received cash of less than $0.1 million and $1.0 million related to stock options exercised during the years ended December 31, 2013 and 2012.

As of December 31, 2014, there were 250, 250 and 1,729 stock options exercisable at a weighted average exercise price of $4.30, $4.30 and $6.94 per share, respectively, under the Plan. The weighted average remaining contractual life of the stock options outstanding as of December 31, 2014 was 4.3 years; the aggregate intrinsic value of those stock options as of December 31, 2014 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 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. We have, due to insufficient historical data, used the simplified method to determine the expected life of all SARs and stock options granted under our equity incentive plan from the inception of the plan in 2005 through December 31, 2013. We also used the simplified method to calculate the expected term for the de minimis (500) SARs granted in 2014. Actua believes that it now 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 on Actua’s Consolidated Statements of Operations.

The following assumptions were used to determine the fair value of SARs granted to employees and a non-management director by Actua during the years ended December 31, 2014, 2013 and 2012:

	Year Ended December 31,
	2014			2013			2012
Expected volatility		56	%		56	%		56	%
Average expected life of SAR (in years) (a)		6.25			6.25			6.25
Risk-free interest rate		2.12	%		1.86	%		0.92	%
Dividend yield		0	%		0	%		0	%

(a)	We have, due to insufficient historical data, used the simplified method. We believe that we have enough historical data to calculate an expected term for Actua SARs and stock options granted in the future.

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. 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, and any dividends paid by Actua in stock or other property in respect of unvested restricted stock would be paid to the holders of outstanding restricted stock subject to the same terms and conditions related to vesting, forfeiture and non-transferability as the underlying restricted stock. As of December 31, 2014, issued and unvested shares of restricted stock granted to Actua’s employees vest as follows: (1) 1,496,235 shares of restricted stock vest 25% each year over a four-year period, (2) 32,060 shares of restricted stock vest 12.5% on the nine-month anniversary of the grant date, and the remaining 87.5% every six months subsequent to the first vesting date, (3) 91,666 shares of restricted stock vest in six-month increments each May and November through November 2015, (4) 403,448 shares of restricted stock vest upon the achievement of certain performance goals, as discussed below and (5) 1,694,366 shares of restricted stock vest upon the achievement of certain market conditions, as discussed below. Additionally, as of December 31, 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 year ended December 31, 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 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. All of the 158,942 performance-based restricted stock awards are vested during the first quarter of 2015.

During the year ended December 31, 2013, in lieu of their 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 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 Performance Plan (1) was greater than or equal to 50%, all of that employee’s Performance Shares would have vested or (2) was greater than 0% but less than 50%, a portion of that employee’s Performance Shares equal to two times the achievement percentage would have vested. All of the 2013 Performance Shares vested during the first quarter of 2014.

As of December 31, 2014, outstanding shares of restricted stock granted to Actua’s Chief Executive Officer and Actua’s President during 2011 vest as follows: (1) 91,666 shares of restricted stock vest in equal installments in May and November 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 year ended December 31, 2014, in light of the sale of Procurian in 2013 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 reversed previously-recorded equity compensation cost related to those awards in the amount of $1.5 million during the year ended December 31, 2013. That equity compensation cost had been recognized as follows: $0.4 million, $0.9 million and $0.2 million was recognized during the years ended December 31, 2013, 2012 and 2011, respectively. 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 set forth in the 2011 grants 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 in connection with which Actua’s Chief Executive Officer and Actua’s President are terminated, any remaining service-based awards set forth in the 2011 grants would automatically vest, and any unrecognized equity-based compensation expense associated with those awards would be immediately recognized.

During the year ended December 31, 2014, 2,782,000 shares of restricted stock were granted to employees of Actua and its businesses, including Actua’s executive officers. Of those shares, 1,500 shares of restricted stock were forfeited prior to December 31, 2014. The remaining awards vest as follows: (1) 1,452,800 shares of restricted stock vest in equal installments on February 28th of 2015, 2016, 2017 and 2018 and (2) 1,327,700 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 December 31, 2014 related to these service and market based awards was $32.9 million and will be recognized as follows: $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 year ended December 31, 2014, 244,506 shares of restricted stock were granted to certain Actua employees based on certain performance metrics for one of Actua’s consolidated businesses 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. Actua expects 56,587 shares to vest related to 2014 performance in the first quarter of 2015 and approximately 97,000 shares to vest related to 2015 performance in the first quarter of 2016.

During the years ended December 31, 2014, 2013 and 2012, Actua granted 37,500 shares, 30,750 shares and 18,750 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 12, “Equity-Based Compensation” for additional details related to vesting.

Share activity with respect to restricted stock awards during the years ended December 31, 2014, 2013 and 2012 was as follows:

	Number of Shares			Weighted Average Grant Date Fair Value
Issued and unvested as of December 31, 2011		1,225,785		$	9.12
Granted		116,973		$	9.11
Vested		(124,920	)	$	10.01
Forfeited		(375	)	$	12.15
Issued and unvested as of December 31, 2012		1,217,463		$	9.03
Granted		183,190		$	13.35
Vested		(202,689	)	$	10.02
Forfeited		(12,893	)	$	10.55
Issued and unvested as of December 31, 2013		1,185,071		$	9.52
Granted		3,239,948		$	17.22
Vested		(299,703	)	$	11.76
Forfeited		(370,041	)	$	9.96
Issued and unvested as of December 31, 2014		3,755,275		$	15.94

The total aggregate fair value of restricted stock awards that vested and were converted to Actua’s Common Stock during the years ended December 31, 2014, 2013 and 2012 was $5.9 million, $2.6 million and $1.3 million, respectively. During the years ended December 31, 2014, 2013 and 2012, 93,115 shares, 46,616 shares and 39,817 shares, respectively, were surrendered for satisfying withholding taxes. As of December 31, 2014, Actua expects 3,664,278 shares of restricted stock to vest in the future.

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. DSUs issued annually under the Director Plan vest on the one-year anniversary of the grant date.

Share activity with respect to the annual DSU awards for the years ended December 31, 2014, 2013 and 2012 are as follows:

	Number of Shares			Weighted Average Grant Date Fair Value
Issued and unvested as of December 31, 2011		52,500		$	13.32
Granted		41,250		$	8.40
Vested		(52,500	)	$	13.32
Issued and unvested as of December 31, 2012		41,250		$	8.40
Granted		29,250		$	13.09
Vested		(41,250	)	$	8.40
Issued and unvested as of December 31, 2013		29,250		$	13.09
Granted		22,500		$	17.63
Vested		(29,250	)	$	13.09
Issued and unvested as of December 31, 2014		22,500		$	17.63

As of December 31, 2014, Actua expects 22,500 unvested DSUs related to the annual grant program under the Director Plan to vest in the future.

Through 2014, each non-management director was 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 right to elect to receive DSUs in lieu of all or a portion of those cash fees. Each participating director received 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 were fully vested at the time they are granted and are to be 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 years ended December 31, 2014, 2013 and 2012 was as follows:

	Number of Shares			Weighted Average Grant Date Fair Value
Issued and unvested as of December 31, 2011		-		$	-
Granted		32,923		$	9.42
Vested		(32,923	)	$	9.42
Issued and unvested as of December 31, 2012		-		$	-
Granted		30,540		$	12.30
Vested		(30,540	)	$	12.30
Issued and unvested as of December 31, 2013		-		$	-
Granted		18,790		$	18.56
Vested		(18,790	)	$	18.56
Issued and unvested as of December 31, 2014		-		$	-

Expense associated with the DSUs periodically issued in lieu of cash for the years ended December 31, 2014, 2013 and 2012 was $0.3 million, $0.4 million and $0.4 million, respectively.

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 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.