STOCK-BASED COMPENSATION PLANS

On December 31, 2015, we have stock-based employee compensation plans as described below. Our total compensation expense, which includes expense related to restricted stock awards, restricted stock unit awards, restricted performance units awards, stock option awards, and stock options associated with our employee stock purchase plan was $13.8 million in 2015, $11.9 million in 2014 and $21.5 million in 2013.

Retirement of Executive Chairman of the Board of Directors

Our former Executive Chairman of the Board of Directors and Chief Executive Officer, Robert L. Evans, retired effective September 30, 2015. Mr. Evans continues as our non-executive Chairman of the Board. In conjunction with Mr. Evans' retirement, we amended his previous Change in Control, Severance, and Indemnity Agreement and upon his retirement, we accelerated vesting on 29,218 shares of restricted stock which were previously awarded and recognized compensation expense of $1.3 million in 2015 for the acceleration of the restricted stock awards.

Employee Stock Options

We award stock compensation under the Churchill Downs Incorporated 2007 Omnibus Stock Incentive Plan (the "2007 Incentive Plan"). The 2007 Incentive Plan provides that the exercise price of any incentive stock option may not be less than the fair market value of the common stock on the date of grant. Outstanding stock options under the 2007 Incentive Plan have contractual terms of ten years and generally vest ratably on each anniversary of the grant date over a three year period.

Activity for our stock options outstanding is presented below:



(in thousands, except per average exercise price)	Number of Shares Under Option		Weighted Average Exercise Price
Balance as of December 31, 2012	201		$	36.30
Granted	—		$	—
Exercises	(7	)	$	42.94
Canceled/forfeited	(1	)	$	36.12
Balance as of December 31, 2013	193		$	36.04
Granted	—		$	—
Exercises	(182	)	$	35.26
Canceled/forfeited	(1	)	$	49.95
Balance as of December 31, 2014	10		$	48.63
Granted	—		$	—
Exercises	(1	)	$	49.95
Canceled/forfeited	—		$	—
Balance as of December 31, 2015	9		$	48.37

During 2014, Mr. Evans, our non-executive Chairman of the Board of Directors, exercised options for 180,000 shares of our common stock which were granted at $35.19 per share, for common stock prices ranging from $85.00 to $91.33 per share.

On December 31, 2015, all outstanding options were vested and exercisable. The following table summarizes information about stock options outstanding on December 31, 2015:



(in thousands, except contractual life and per share data)	Shares Under Option	Remaining Contractual Life	Average Exercise Price Per Share		Intrinsic Value per Share⁽¹⁾		Aggregate Intrinsic Value
Options exercisable and vested at December 31, 2015	9	2.3	$	48.37	$	93.12	$	800


(1)	Computed based upon the amount by which the fair market value of our common stock on December 31, 2015 of $141.49 per share exceeded the weighted average exercise price.

The total intrinsic value of stock options exercised was $0.1 million in 2015, $9.6 million in 2014 and $0.3 million in 2013. Cash received from stock option exercises totaled $0.1 million in 2015, $6.4 million in 2014 and $0.3 million in 2013.

On December 31, 2014, there were 10 thousand options exercisable with a weighted average exercise price of $48.63.

Restricted Shares and Restricted Stock Units

The 2007 Incentive Plan permits the award of restricted shares or restricted stock units to directors and key employees, including our officers who are from time to time responsible for the management, growth and protection of our business. Restricted shares granted under the 2007 Incentive Plan generally vest in full three years from the date of grant or upon retirement at or after age 60. The fair value of restricted shares under 2007 Incentive Plan is determined by the product of the number of shares granted and the grant date market price of our common stock, discounted to consider the fact that dividends are not paid on these shares.

2015 Awards

On September 22, 2015, the Board of Directors approved the adoption of the Executive Long-Term Incentive Compensation Plan (the "ELTI Plan"), pursuant to which certain named executive officers ("NEOs") and other key executives ("Grantees") may earn variable equity payouts based upon us achieving certain key performance metrics over a 30-month period ending December 31, 2017, and fixed equity payouts over service periods ending December 31, 2016 and December 31, 2017. The ELTI Plan was adopted pursuant to the Churchill Downs Incorporated 2007 Omnibus Stock Incentive Plan (the "New Company LTIP"), which was previously approved by our shareholders. As a way to continue to encourage innovation, an entrepreneurial approach, and careful risk assessment, and in order to retain key executives, the ELTI Plan and New Company LTIP offer long-term incentive compensation to our NEOs and Grantees as further described in our Schedule14A Proxy Statement filed on March 23, 2015.

During 2015, NEOs and Grantees received 22,142 restricted stock units ("RSU") vesting equally over two service periods ending December 31, 2016 and December 31, 2017, and 27,282 performance share units ("PSU") with vesting contingent on financial performance measures at the end of a 30-month performance period ending December 31, 2017. The performance criteria for the PSUs consists of the following financial measures during the performance period: (i) cumulative Adjusted EBITDA; (ii) cumulative free cash flow; and (iii) our relative total shareholder return ("TSR"). Our TSR will be ranked versus the companies in the Russell 2000 index and will be calculated based on our relative placement against the Russell 2000 index. Measurement against these criteria will be determined against a payout curve which provides a maximum number of performance share units of 250% of the original award. The total compensation cost we will recognize under the PSUs will be based upon the results of the two financial measures.

In 2015, we recognized compensation expense of $0.9 million related to the RSU and PSU awards. On December 31, 2015, unrecognized compensation expense attributable to unvested RSU and PSU awards was $2.5 million and $3.8 million, respectively, and the weighted average period over which we expect to recognize the compensation expense approximates 18 months and 24 months, respectively.

Other Awards

In 2015, NEOs, Grantees and certain other employees received approximately 167,800 restricted shares of our common stock vesting over service periods ranging from seven months to three years. In 2015, we recognized $6.2 million of compensation expense related to these awards. On December 31, 2015, unrecognized compensation expense attributable to unvested service period awards was $9.7 million. The weighted average period over which we expect to recognize the remaining compensation expense under the service period awards approximates 23 months.

In 2013, NEOs and the Grantees received 92,000 restricted shares of our common stock vesting over approximately four years and 324,000 restricted shares of common stock with vesting contingent upon the common stock reaching certain closing prices on NASDAQ for twenty consecutive trading days. In 2013, 2014 and 2015, we achieved the twenty consecutive trading days closing price stock requirement for the entire 324,000 contingently vesting restricted shares.

In 2015, we recognized compensation expense of $1.9 million related to the 2013 New Company LTIP, $1.3 million for the accelerated vesting of restricted stock upon the retirement of our prior chief executive officer and $2.9 million for all other stock-based compensation. There is $0.8 million of unrecognized expense under the service period vesting awards and no remaining unrecognized expense under the market condition awards.

Activity for the ELTI Plan, the 2013 New Company LTIP, the 2007 Incentive Plan and awards made outside of stock-based compensation plans is presented below:



	Market Condition & Performance-Based Awards				Service Period Awards				Total
(in thousands, except grant date values)	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value
Balance as of December 31, 2012	60		$	45.90	319		$	42.42	379		$	42.97
Granted	324		$	53.71	287		$	67.55	611		$	60.21
Vested	(60	)	$	45.90	(256	)	$	59.54	(316	)	$	53.90
Canceled/forfeited	—		$	—	(1	)	$	38.75	(1	)	$	38.75
Balance as of December 31, 2013	324		$	53.71	349		$	53.58	673		$	53.64
Granted	—		$	—	26		$	88.58	26		$	88.58
Vested	(239	)	$	53.49	(107	)	$	54.15	(346	)	$	53.70
Canceled/forfeited	—		$	—	(12	)	$	60.41	(12	)	$	60.41
Balance as of December 31, 2014	85		$	54.32	256		$	56.24	341		$	55.77
Granted	27		$	154.90	190		$	102.09	217		$	108.73
Vested	(85	)	$	48.31	(150	)	$	64.87	(235	)	$	58.91
Canceled/forfeited	—		$	—	(9	)	$	93.04	(9	)	$	93.04
Balance as of December 31, 2015	27		$	154.90	287		$	80.90	314		$	87.31

On December 31, 2015, there was $16.0 million of unrecognized stock-based compensation expense related to nonvested restricted share, RSU and PSU awards that we expect to recognize over a weighted average period of 1.9 years.

On December 31, 2015, NEOs and Grantees held 27,282 restricted shares subject to performance-based vesting criteria (all of which are considered performance based restricted shares), which were issued during the year ended December 31, 2015. The number of these shares that vest is based upon established performance-based performance targets that will be assessed on an ongoing basis.

Employee Stock Purchase Plan

Under the Employee Stock Purchase Plan (the "ESP Plan"), we are authorized to sell, pursuant to short-term stock options, shares of our common stock to our full-time and qualifying part-time employees at a discount from our common stock’s fair market value. The ESP Plan operates on the basis of recurring, consecutive one-year periods. Each period commences on August 1 and ends on the following July 31.

Each August 1, we offer eligible employees the opportunity to purchase common stock. Employees who elect to participate for each period have a designated percentage of their after-tax compensation withheld and applied to the purchase of shares of common stock on the last day of the period, July 31. The ESP Plan allows withdrawals, terminations and reductions on the amounts being deducted. The purchase price for the common stock is 85% of the lesser of the fair market value of the common stock on (i) the first day of the period, or (ii) the last day of the period. No employee may purchase common stock under the ESP Plan valued at more than $25 thousand for each calendar year.

In 2015, employees purchased approximately fifteen thousand shares of common stock pursuant to options granted on August 1, 2014, and exercised on July 31, 2015. Because the plan year overlaps our fiscal year, the number of shares to be sold pursuant to options granted on August 1, 2015, can only be estimated because the 2015 plan year is not yet complete. Our estimate of options granted in 2015 under the ESP Plan is based on the number of shares sold to employees under the ESP Plan for the 2014 plan year, adjusted to reflect the change in the number of employees participating in the ESP Plan in 2015. We recognized compensation expense related to the ESP Plan of $0.6 million 2015 and $0.4 million in each of 2014 and 2013.