Stock Compensation

The Company recognized consolidated stock compensation expense of $91.1, $61.5 and $31.2 during Fiscal 2014, 2013 and 2012, respectively. Stock compensation expense is principally included in “Selling, acquisition, operating and general expenses” in the accompanying Consolidated Statements of Operations.

A summary of stock options outstanding as of September 30, 2014 and related activity during the year then ended, under 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	(526	)	5.27		1.92		(105	)	39.86		—		—		—
Forfeited or expired	(160	)	8.14		3.27		(5	)	47.30		(7	)	17.00		5.26
Stock options outstanding at September 30, 2014	4,624		8.14		3.28		225		46.19		242		17.00		3.72
Stock options vested and exercisable at September 30, 2014	1,448		7.45		2.96		99		46.68		—		—		—
Stock options outstanding and expected to vest	3,176		8.46		3.43		122		46.15		231		—		3.64

A summary of restricted stock, restricted stock units and Performance Restricted Stock Units ("PRSUs") outstanding as of September 30, 2014 and related activity during the year 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	3,325		12.00		179		18.25
Exercised / Released	(1,154	)	10.18		—		—
Forfeited	(197	)	9.57		(7	)	19.98
Restricted stock outstanding at September 30, 2014	5,430		9.76		172		18.18
Restricted stock outstanding and expected to vest	5,418		9.75		159		18.03



	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		669		75.50		—		—
Exercised / Released	(22	)	4.61		(954	)	39.69		(18	)	49.53
Forfeited	—		—		(6	)	69.33		(2	)	49.45
Restricted stock units outstanding at September 30, 2014	7		11.84		827		67.66		26		49.55
Restricted stock units vested and exercisable at September 30, 2014	—		—		—		—		—
Restricted stock units outstanding and expected to vest	7		11.84		827		67.66		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	578	17.37
Performance restricted stock units outstanding at September 30, 2014	578	17.37
Performance restricted stock units expected to vest	578	17.37

A summary of warrants outstanding as of September 30, 2014 and related activity during the year 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	13.13		3.22
Warrants outstanding at September 30, 2014	3,000	13.13		3.22
Warrants vested and exercisable at September 30, 2014	600	13.13		3.22
Warrants outstanding and expected to vest	2,400	13.13		3.22

HGI

On September 15, 2011, the Company’s stockholders approved the 2011 Omnibus Award Plan (the “2011 HGI Plan”). The 2011 HGI Plan provides for the issuance of stock options or stock appreciation rights (“SARs”) for up to 17 million shares of common stock. Such authorization was increased by 7 million shares upon the approval of an amendment to the 2011 Plan by our shareholders at the annual meeting held on May 30, 2015. Further, at that meeting, our shareholders approved the adoption of the 2014 Warrant Award Plan, authorizing the issuance of 3 million warrants on HGI common stock to our Chief Executive Officer, Mr. Philip Falcone. The 2011 HGI Plan, as amended, prohibits granting stock options with exercise prices and SARs with grant prices lower than the fair market value of the common stock on the date of grant, except in connection with the issuance or assumption of awards in connection with certain mergers, consolidations, acquisitions of property or stock or reorganizations. As of September 30, 2014, 11,557 thousand shares are available for issuance under the 2011 HGI Plan.

During Fiscal 2014, HGI granted stock option awards, restricted stock awards and restricted stock units representing approximately 1,356 thousand, 3,325 thousand and 7 thousand shares, respectively. All of these grants are time based, and vest over a period of up to 3 years. The total fair value of the stock grants during Fiscal 2014 on their respective grant dates was approximately $46.7. During Fiscal 2014, stock option awards, restricted stock awards and restricted stock units with a total fair value of $15.2 vested. The total intrinsic value of share options exercised during Fiscal 2014 was $3.6, for which HGI received cash of $2.8 in settlement.

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 $13.13 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.

During Fiscal 2013, HGI granted stock option awards, restricted stock awards and restricted stock units representing approximately 1,734 thousand, 3,319 thousand and 9 thousand shares, respectively. All of these grants are time based, and vest over periods of 1 month up to 4 years. The total fair value of the stock grants during Fiscal 2013 on their respective grant dates was approximately $34.6. During Fiscal 2013, stock option awards, restricted stock awards and restricted stock units with a total fair value of $7.5 vested. The total intrinsic value of share options exercised during Fiscal 2013 was $0.1, for which HGI received cash of $0.2 in settlement.

During Fiscal 2012, HGI granted stock option awards, restricted stock awards and restricted stock units representing approximately 2,275 thousand, 838 thousand and 22 thousand shares, respectively. All of these grants are time based, and vest over periods of 4 months up to 4 years. The total fair value of the stock grants on their respective grant dates was approximately$8.2.

Under HGI’s executive bonus plan, executives will be paid in cash, stock options and restricted stock shares. Based on Fiscal 2014 performance measures, the Company expects to grant approximately 2,500 thousand restricted shares and 1,100 thousand stock options in the first quarter of Fiscal 2015 with a portion vesting immediately and the remaining shares vesting between 12 and 36 months from the grant date. The Company expects to recognize approximately $35.0 of deferred bonus compensation expense with respect to cash and stock-based awards as it vests over the next three fiscal years, subject to clawback provisions if the subsequent increase in net asset value for bonus compensation purposes does not exceed specified threshold returns. As of September 30, 2014, there was approximately $25.6 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 1.70 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 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	2012
Risk-free interest rate	1.37% to 1.70%	0.84% to 1.86%	0.97% to 1.19%
Assumed dividend yield	—%	—%	—%
Expected option term	5.0 to 5.9 years	5.3 to 6.2 years	6 years
Volatility	37.8% to 39.8%	41.9% to 44.0%	33.0% to 35.5%

The weighted-average remaining contractual term of outstanding stock option awards at September 30, 2014, was 8.19 years.

Spectrum Brands

In September 2009, Spectrum Brands’ board of directors adopted the 2009 Spectrum Brands Inc. Incentive Plan (the “2009 Plan”). In conjunction with the combination of Spectrum Brands, Inc. and Russell Hobbs (the “SB/RH Merger”), the 2009 Plan was assumed by Spectrum Brands. Prior to October 21, 2010, up to 3,333 thousand shares of common stock, net of forfeitures and cancellations, could have been issued under the 2009 Plan.

In conjunction with the SB/RH Merger, Spectrum Brands adopted the Spectrum Brands Holdings, Inc. 2007 Omnibus Equity Award Plan (formerly known as the Russell Hobbs Inc. 2007 Omnibus Equity Award Plan, as amended on June 24, 2008) (the “2007 RH Plan”). Prior to October 21, 2010, up to 600 thousand shares of common stock, net of forfeitures and cancellations, could have been issued under the RH Plan.

On October 21, 2010, Spectrum Brands’ board of directors adopted the Spectrum Brands Holdings, Inc. 2011 Omnibus Equity Award Plan (the “2011 Plan”), which was approved by Spectrum Brands’ stockholders on March 1, 2011. During Fiscal 2014, the 2011 Plan was amended to increase the shares issuable by 1,000 thousand. Including the amendment to the 2011 Plan, up to 5,626 thousand shares of common stock of Spectrum Brands, net of cancellations, may be issued under the 2011 Plan.

Spectrum Brands granted restricted stock units representing approximately 669 thousand shares during Fiscal 2014. Of these grants, 203 thousand restricted stock units vested immediately and 143 thousand restricted stock units are time-based and vest over a period of one year. The remaining 323 thousand restricted stock units are performance-based and vest over a two year period. The total market value of the restricted shares on the date of the grant was approximately $50.5.

Spectrum Brands granted restricted stock units representing approximately 700 thousand shares during Fiscal 2013. Of these grants, 48 thousand restricted stock units are time-based and vest over a period of one year. Of the remaining 652 thousand restricted stock units, 90 thousand are performance-based and vest over a one year period and 562 thousand are both performance and time-based and vest over a one year performance-based period followed by a 1 year time-based period. The total market value of the restricted shares on the date of the grant was approximately $32.2.

Spectrum Brands granted restricted stock units representing approximately 863 thousand shares during Fiscal 2012. Of these grants, 160 thousand restricted stock units are time-based and vest over a period ranging from one year to two years. The remaining 703 thousand restricted stock units are both performance and time based and vest over one year performance-based period followed by a one year time-based period. The total market value of the restricted shares on the date of the grant was approximately $24.4.

The fair values of restricted stock awards and 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 Fiscal 2013, FGH determined that all equity awards will be settled in cash when exercised and therefore are classified as liability plans. The FGH plans were frozen in November 2013 and, therefore, no stock options were issued under these plans during Fiscal 2014.

During Fiscal 2014 FGL granted stock option awards, restricted stock awards and performance restricted stock units representing approximately 249 thousand, 179 thousand and 578 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 of the stock grants during Fiscal 2014 on their respective grant dates was approximately $14.2.

During Fiscal 2013, FGL granted stock option awards and restricted stock units representing approximately 195 thousand and 53 thousand shares, respectively. These stock options and restricted shares vest over a period of 3 years and expire on the seventh anniversary of the grant date. The total fair value of the option grants and restricted stock unit grant on the grant date was $0.6 and $2.0, respectively.

During Fiscal 2012 FGH granted stock option awards representing approximately 207 thousand shares. These stock options vest over a period of 3 years and expire on the seventh anniversary of the grant. The total fair value of the grants on their grant dates was approximately $0.8.

The total compensation cost related to non-vested options, restricted stock units and dividend equivalent plans, not yet recognized as of September 30, 2014 totaled $16.3 and will be recognized over a weighted-average period of 1.8 years.

The fair value of stock option awarded by, respectively, FGL during Fiscal 2014, and FGH during Fiscal 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	2012
Risk-free interest rate	1.40% to 1.41%	0.8%	0.8%
Assumed dividend yield	1.30% to 1.50%	6%	10%
Expected option term	4.5 years	4.5 years	4.5 years
Volatility	25%	27%	35%

Compass

In May 2013, Compass adopted an incentive plan (“Incentive Unit Plan”) which allowed for awards to be issued that cover up to 1 million Class B Units. The plan is intended to grant phantom units that correspond to Class B Units prior to the vesting date, in tandem with dividend equivalent rights (“DER”) to participate in distributions of Compass. The phantom units vest over a range of two to three years. Upon vesting, the phantom units will be settled by either cash or the issuance of a Class B Unit to the participant. The accumulated distributions related to the DER will be paid to the participant upon the vesting of the related

phantom unit. Upon termination of a participant, any unvested phantom units or DER's (including accrued distributions) will be forfeited.

In February 2014, Compass issued 83 thousand Class B Units in the limited partnership to its chief executive officer under its

employee incentive plan. The Class B Units have the following features: (i) right to share in gains, losses, deductions, and credits on a pro rata basis; (ii) right to share in distributions on a pro rata basis; (iii) no voting rights; and (iv) are not convertible into Class A Units.

The agreement includes a call-right on behalf of Compass and a put-right on behalf of the participant. The call-right becomes exercisable upon the termination of a participant, and gives Compass the option to repurchase any Class B Units held by the participant. The put-right becomes exercisable during the first designated window period after the participant has held the Class B Unit for a period of six months, and gives the participant the option to cause Compass to repurchase the participant’s Class B Units. The repurchase price under the call-right and put-rights shall be the fair market value as of the date of exercise as determined by Compass.

During the year ended September 30, 2014, the majority of the vested shares were settled in cash resulting in a liability classification in accordance with ASC 718.

As of September 30, 2014, there were 647 thousand awards available for issuance under the Incentive Unit Plan. The grant date fair value of the awards was based on Compass’ determination of the market value, with each determination occurring every six months. A summary of the activity related to the incentive unit plan was as follows (share amounts in thousands):



	Shares		Weighted average grant date fair value per share
Non-vested awards at September 30, 2013	102		$	10.00
Granted	323		7.90
Vested	(137	)	7.88
Terminated	(18	)	8.44
Non-vested awards at September 30, 2014	270		$	8.67

(1) 83 thousand vested units were settled by issuance of Class B Units. All remaining units were settled in cash.