Stock Compensation

The Company recognized consolidated stock compensation expense of $19.7 and $22.7 during the three months ended June 30, 2014 and 2013, respectively and $67.1 and $44.9 during the nine months ended June 30, 2014 and 2013, respectively. Stock compensation expense is principally included in “Selling, acquisition, operating and general expenses” in the accompanying Condensed Consolidated Statements of Operations.

A summary of stock options outstanding as of June 30, 2014 and related activity during the nine months then ended, under HGI, Fidelity & Guaranty Life Holdings, Inc. ("FGH"), and FGL’s respective incentive plans are as follows (share amounts in thousands):



	HGI						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		Weighted Average Grant Date Fair Value
Stock options outstanding at September 30, 2013	3,954		$	6.52	$	2.55	335		$	44.23	—		$	—	$	—
Granted	1,356		11.75		4.91		—		—		249		17.00		3.76
Exercised	(497	)	4.96		1.77		(41	)	41.23		—		—		—
Forfeited or expired	(70	)	8.82		3.66		(3	)	47.06		(4	)	17.00		5.26
Stock options outstanding at June 30, 2014	4,743		8.15		3.29		291		44.62		245		17.00		3.73
Stock options vested and exercisable at June 30, 2014	1,429		7.46		2.96		132		42.33		—		—		—
Stock options outstanding and expected to vest	3,314		8.45		3.43		152		44.57		241		17.00		3.70

A summary of restricted stock, restricted stock units and Performance Restricted Stock Units ("PRSUs") outstanding as of June 30, 2014 and related activity during the nine months then ended, under HGI, Spectrum Brands, FGH and FGL’s respective incentive plans are as follows (share amounts in thousands):



	HGI				FGL
Restricted Stock Awards	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Restricted stock outstanding at September 30, 2013	3,456		$	7.72	—		$	—
Granted	3,313		12.00		171		18.11
Vested	(1,126	)	10.15		—		—
Forfeited	(62	)	10.04		(5	)	19.98
Restricted stock outstanding at June 30, 2014	5,581		9.74		166		18.06
Restricted stock outstanding and expected to vest	5,553		9.74		162		18.00



	HGI				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, 2013	22		$	4.61	1,118		$	39.11	46		$	49.60
Granted	7		11.84		442		69.21		—		—
Exercised / Released	(22	)	4.61		(949	)	39.65		(18	)	49.53
Forfeited	—		—		—		—		(1	)	49.45
Restricted stock units outstanding at June 30, 2014	7		11.84		611		60.04		27		49.55
Restricted stock units outstanding and expected to vest	7		11.84		611		60.04		25		49.55



	FGL
Performance Restricted Stock Units	Units	Weighted Average Grant Date Fair Value
Performance restricted stock units outstanding at September 30, 2013	—	$	—
Granted	541	17.37
Performance restricted stock units outstanding at June 30, 2014	541	17.37
Performance restricted stock units expected to vest	541	17.37

A summary of warrants outstanding as of June 30, 2014 and related activity during the nine months then ended, under HGI's incentive plan are as follows (share amounts in thousands):



	HGI
Warrants	Units	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Warrants outstanding at September 30, 2013	—	$	—	$	—
Granted	3,000	13.25		3.19
Warrants outstanding at June 30, 2014	3,000	13.25		3.19
Warrants vested and exercisable at June 30, 2014	600	13.25		3.19
Warrants outstanding and expected to vest	2,400	13.25		3.19

HGI

During the nine months ended June 30, 2014, HGI granted stock option awards, restricted stock awards and restricted stock unit awards representing approximately 1,356 thousand, 3,313 thousand and 7 thousand shares, respectively. HGI granted stock option awards, restricted stock awards and restricted stock unit awards representing approximately 30 thousand, 10 thousand and 7 thousand shares, respectively, during the three months ended June 30, 2014. All of these grants are time based, and vest either immediately, or over periods of 1 year to 3 years. The total fair value of the stock grants during the nine months ended June 30, 2014 on their respective grant dates was approximately $46.6. During the nine months ended June 30, 2014 stock option awards and restricted stock awards with a total fair value of $14.8 vested. The total intrinsic value of share options exercised during the nine months ended June 30, 2014 was $3.6, for which HGI received cash of $2.5 in settlement.

During the nine months ended June 30, 2013, HGI granted stock option awards, restricted stock awards, and restricted stock unit awards representing approximately 1,528 thousand, 3,256 thousand and 9 thousand shares, respectively. During the three months ended June 30, 2013 HGI granted no stock option awards, restricted stock awards or restricted stock unit awards. All of these grants are time based, and vest over periods of 7 months up to 48 months. The total fair value of the stock grants on their respective grant dates was approximately $33.2.

In March 2014, the Company awarded warrants to our Chief Executive Officer, Philip Falcone, representing the right to purchase approximately 3 million shares of our common stock, at an exercise price of $13.25 per share. The warrants awarded to our 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.

Under HGI’s executive bonus plan for the fiscal year ending September 30, 2014, 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, 2015, and to vest, either immediately, or between 1 year and 3 years from the grant date.

As of June 30, 2014, there was approximately $32.2 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 1.81 years.

The fair values of restricted stock and restricted stock unit awards are determined based on the market price of HGI’s common stock on the grant date. The fair value of stock option awards and warrants are determined using the Black-Scholes option pricing model.

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



	2014	2013
Risk-free interest rate	1.46% to 1.75%	0.85%
Assumed dividend yield	—%	—%
Expected option term	5.3 to 6.0 years	5.3 to 6.0 years
Volatility	41.2%	42.8% to 44.0%

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



	2014
Risk-free interest rate	0.53% to 1.27%
Assumed dividend yield	—%
Expected option term	2.4 to 4.3 years
Volatility	40.3% to 43.6%

The weighted-average remaining contractual term of outstanding stock option awards and warrants at June 30, 2014, was 8.44 years and 4.69 years, respectively.

Spectrum Brands

Spectrum Brands granted restricted stock units representing approximately 6 thousand and 442 thousand shares during the three and nine months ended June 30, 2014, respectively. Of these grants, 91 thousand restricted stock units vested immediately and 58 thousand restricted stock units are time-based and vest over a period of one year. The remaining 293 thousand restricted stock units are performance and time-based and vest over a period of two years. The total market value of the restricted shares on the date of the grant was approximately $30.6.

Spectrum Brands granted restricted stock units representing approximately 30 thousand and 666 thousand shares during the three and nine months ended June 30, 2013, respectively. Of these grants, 22 thousand restricted stock units are time-based and vest over a period of one year. Of the remaining 644 thousand restricted stock units, 90 thousand are performance-based and vest over a one year period, and 554 thousand restricted stock units are performance and time-based and vest over a period of two years. The total market value of the restricted shares on the date of the grant was approximately $30.2.

The fair value of restricted stock units are determined based on the market price of Spectrum Brands’ common stock on the grant date.

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, HGI, 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 the year ended September 30, 2013, FGH determined that all equity awards will be settled in cash when exercised and therefore are classified as liability plans.

During the nine months ended June 30, 2014, FGL granted stock option awards, restricted stock awards and performance restricted stock units representing approximately 249 thousand, 171 thousand and 541 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 the stock grants during nine months ended June 30, 2014 on their respective grant dates was approximately $13.4. Additionally, on December 12, 2013, FGL granted 58 thousand unrestricted shares to certain directors in payment for services rendered. Total fair value of the unrestricted shares on the grant date was $1.0. FGL made no grants of stock option awards, restricted stock awards or performance restricted stock awards during the three months ended June 30, 2014.

The total compensation cost related to non-vested options, restricted stock units and dividend equivalent plans, not yet recognized as of June 30, 2014 totaled $18.8 and will be recognized over a weighted-average period of 2.1 years.

The fair value of stock options awarded by, respectively, FGL during the nine months ended June 30, 2014, and FGH during the nine months ended June 30, 2013, is 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:



	2014	2013
Risk-free interest rate	1.4%	0.8%
Assumed dividend yield	1.5%	6%
Expected option term	4.5 years	4.5 years
Volatility	25%	27%