Share-Based Compensation

Stock Plans

In November 2006, we adopted the LifeLock, Inc. 2006 Incentive Compensation Plan, or the 2006 Plan. We reserved 18,426,332 shares of common stock under the 2006 Plan. The 2006 Plan provided for awards in the form of restricted shares, stock units, stock options (which could constitute incentive stock options or non-statutory stock options), and stock appreciation rights. Generally, stock options awarded under the 2006 Plan had a ten-year term and typically vested over a period of four years, with 25% of the grant vesting on the first anniversary of the date of grant and the remainder vesting monthly over the remaining vesting period.

In October 2012, we adopted the LifeLock, Inc. 2012 Incentive Compensation Plan, or the 2012 Plan, which superseded the 2006 Plan. The total remaining shares of 4,902,708 available for issuance under the 2006 Plan were added to the number of shares reserved under the 2012 Plan, and no further awards will be granted under the 2006 Plan. In addition, we reserved an additional 4,200,000 shares of common stock under the 2012 Plan. The 2012 Plan provides for awards in the form of stock options (which may constitute incentive stock options or non-statutory stock options), stock appreciation rights, performance-based stock awards, restricted stock units and restricted stock awards. Generally, stock options awarded under the 2012 Plan have a ten-year term and typically vest over a period of four years, with 25% of the grant vesting on the first anniversary of the date of grant and the remainder vesting monthly over the remaining vesting period. Generally, restricted stock units vest over a period of four years with 25% of the grant vesting on the first anniversary of the date of grant and the remainder vesting quarterly over the remaining period. Restricted stock awards typically vest over a period of four years and vest evenly on a quarterly basis commencing on the first quarter following the date of grant.

The total amount of compensation cost for stock-based payment arrangements recognized in the consolidated statements of operations related to stock options, restricted stock units, restricted stock awards, and performance stock units was $27.2 million, $18.1 million, and $11.1 million for the years ended December 31, 2015, 2014, and 2013, respectively.

As of December 31, 2015, a total of $75.2 million of unrecognized compensation costs related to unvested stock options and unvested restricted stock units and restricted stock awards issued are expected to be recognized over the remaining weighted-average period of 3.0 years.

Employee Stock Purchase Plan

In October 2012, we adopted an employee stock purchase plan, or the ESPP. The ESPP allows substantially all full-time and part-time employees, excluding members of senior management, to acquire shares of our common stock through payroll deductions over six month offering periods. The per share purchase price is equal to the lesser of 85% of the fair market value of a share of our common stock on the grant date or 85% of the fair market value of a share of our common stock on the last day of the offering period. Purchases are limited to 15% of an employee’s salary, up to a maximum of $25,000 of stock value per calendar year. We are authorized to grant up to 2,000,000 shares of our common stock under the ESPP. As of December 31, 2015, 457,409 shares of common stock had been issued under the ESPP. We recognized expense with respect to the ESPP of $0.6 million and $0.6 million for the years ended December 31, 2015 and 2014, respectively.

Stock Options

The following table summarizes information on the activity of stock options, including performance-based options, under the 2006 and 2012 Plans for the years ended December 31:



	2015				2014				2013
	Shares		Weighted Average Exercise Price Per Share		Shares		Weighted Average Exercise Price Per Share		Shares		Weighted Average Exercise Price Per Share
Outstanding at beginning of year	11,073,326		$	10.25	11,384,251		$	7.62	12,273,815		$	4.24
Granted	6,262,501		11.16		2,947,199		17.42		5,494,969		11.57
Exercised	(1,358,761	)	6.86		(2,017,460	)	5.19		(4,489,459	)	3.27
Expired	(193,943	)	15.52		(14,087	)	13.91		(33,951	)	3.22
Forfeited	(1,602,627	)	12.93		(1,226,577	)	10.86		(1,861,123	)	7.40
Outstanding at end of year	14,180,496		$	10.60	11,073,326		$	10.25	11,384,251		$	7.62
Exercisable at end of year	6,181,833		$	8.90	5,025,485		$	7.13	4,235,609		$	4.39

The following table summarizes additional information about stock options, including performance-based options, outstanding and exercisable as of December 31, 2015:



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Shares Under Option	Weighted- Average Remaining Contractual Life	Weighted- Average Exercise Price Per Share		Shares Under Option	Weighted- Average Exercise Price Per Share
$0.01-$3.50	1,243,295	2.79	$	2.22	1,242,922	$	2.22
$3.51 - $7.00	1,490,494	5.51	4.96		1,366,102	4.93
$7.01 - $10.50	4,613,292	8.75	8.74		913,376	8.99
$10.51 - $14.00	3,371,648	7.63	12.40		1,669,645	11.80
$14.01 - $17.50	2,099,517	9.10	15.35		358,076	15.81
$17.51 - $21.00	1,362,250	7.72	18.93		631,712	18.92
	14,180,496				6,181,833

The weighted-average fair value of our outstanding stock options was $4.96, $5.10, and $4.09 for the years ended December 31, 2015, 2014, and 2013, respectively. Such amounts were estimated using the Black-Scholes option pricing model with the following weighted-average assumptions at December 31:



	2015		2014		2013
Expected volatility	44.3	%	46.5	%	49.1	%
Expected dividend yield	—	%	—	%	—	%
Risk-free interest rate	1.7	%	1.8	%	1.3	%
Expected term (years)	6.07		6.05		6.05

We derived the risk-free interest rate assumption from the U.S. Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the awards being valued. We based the assumed dividend yield on our expectation of not paying dividends in the foreseeable future. We estimated forfeitures at the time of grant and revised this estimate, if necessary, in subsequent periods if actual forfeitures differed from those estimates.

The weighted-average fair value of the options granted in the years ended December 31, 2015, 2014, and 2013 was $5.94, $8.12, and $5.72, respectively. The total intrinsic value of options exercised in 2015, 2014, and 2013 was $11.1 million, $24.0 million, and $41.8 million, respectively. As of December 31, 2015, the total intrinsic value of outstanding and exercisable stock options was $61.6 million and $37.1 million, respectively.

Restricted Stock Units and Restricted Stock Awards

The following table summarizes restricted stock units and restricted stock awards activity under the 2012 Plan for the years ended December 31, 2014 and 2015:



	Restricted Stock Units/Awards		Weighted - Average Grant Date Fair Value (per share)
Unvested at December 31, 2013	578,243		$	12.65
Granted	1,131,419		16.41
Vested	(235,354	)	13.79
Forfeited	(451,484	)	14.77
Unvested at December 31, 2014	1,022,824		$	15.61
Granted	4,032,522		12.21
Vested	(623,835	)	13.20
Forfeited	(393,520	)	14.94
Unvested at December 31, 2015	4,037,991		$	12.46