STOCK-BASED COMPENSATION PLANS

On December 31, 2017, we had stock-based employee compensation plans as described below. Our total compensation expense, which includes expense related to restricted stock awards, restricted stock unit awards, performance share unit awards, stock option awards, and stock options associated with our employee stock purchase plan was $16.0 million in 2017, $13.3 million in 2016, and $12.5 million in 2015. The income tax benefit related to stock-based employee compensation expense was $5.5 million in 2017, $4.9 million in 2016, and $4.5 million in 2015.

2016 Omnibus Stock Incentive Plan

On February 24, 2016, we replaced our previous stock compensation program, the Churchill Downs Incorporated 2007 Omnibus Stock Incentive Plan (the "2007 Incentive Plan") with a new program, the Churchill Downs Incorporated 2016 Omnibus Stock Incentive Plan ("the 2016 Incentive Plan"). The 2016 Incentive Plan is intended to advance our long-term success by encouraging stock ownership among key employees and the Board of Directors. Awards may be in the form of stock options, stock appreciation rights, restricted stock ("RSA"), restricted stock units ("RSU"), performance share units ("PSU"), performance units, or performance cash. The 2016 Incentive Plan has a minimum vesting period of one year for awards granted. During 2017, we granted stock awards under the 2016 Incentive Plan.

Restricted Stock, Restricted Stock Units, and Performance Share Units

The 2016 Incentive Plan and the 2007 Incentive Plan (collectively "the 2016 and 2007 Plans") permit the award of RSAs or RSUs to directors and key employees, including our officers who are from time to time responsible for the management, growth and protection of our business. RSAs and RSUs granted to employees under the 2016 and 2007 Plans generally vest either in full upon three years from the date of grant or on a pro-rata basis over a three year term. RSAs are legally issued common stock at the time of grant, with certain restrictions placed on them. RSUs granted to employees are converted into shares of our common stock at vesting. The RSUs granted to directors under the 2016 and 2007 Plans generally vest in full upon one year from the date of grant. RSUs granted to directors are converted into shares of our common stock at the time of the director's retirement. The fair value of RSAs and RSUs that vest solely based on continued service under the 2016 and 2007 Plans is determined by the product of the number of shares granted and the grant date market price of our common stock.

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 may earn variable equity payouts based upon us achieving certain key performance metrics over a specified period. The ELTI Plan was adopted pursuant to the 2016 and 2007 Plans, which were previously approved by our shareholders.

The vesting criteria for the PSU awards granted in 2015, 2016, and 2017 were based on a three year performance and service period. The two performance criteria were a cumulative Adjusted EBITDA target that was set at the beginning of the plan performance period for the entire three year period, and a cash flow metric that is the aggregate of the cash flow targets for the three individual years that is set annually at the beginning of each year. The cash flow metric is defined as cash flow from operating activities plus distributions of capital from equity investments less capital maintenance expenditures. The Compensation Committee can make adjustments as it may deem appropriate to these metrics. Measurement against these criteria will be determined against a payout curve which provides up to 200% of performance share units based on the original award.

The PSU awards also include a market condition related to 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 within the Russell 2000 index. The PSU awards may be adjusted based on the Company’s TSR, by increasing the PSU awards by 25% if the Company’s TSR is in the top quartile, decreasing the PSU awards by 25% if the Company’s TSR is in the bottom quartile, and providing no change to the PSU awards if the Company’s TSR is in the middle two quartiles. Once applying any TSR adjustment, the maximum number of PSUs that can be earned for a performance period is 250% of the original award.

The total compensation cost we will recognize under the PSUs will be determined using the Monte Carlo valuation methodology, which factors in the value of the TSR market condition when determining the grant date fair value of the PSU. Compensation cost for each PSU is recognized during the performance and service period based on the probable achievement of the two performance criteria. The PSUs are converted into shares of our common stock at the time the PSU award value is finalized.

A summary of the RSUs and PSUs granted to certain NEOs is presented below (units in thousands):



Grant Year	Award Type	Number of Units Awarded⁽¹⁾	Vesting Terms
2015	RSU	23	Majority vest equally over two service periods ending December 31 of 2016 and 2017
2015	PSU	17	Three year performance and service period ending December 31, 2017
2016	RSU	20	Vest equally over three service periods ending December 31 of 2016, 2017, and 2018
2016	PSU	20	Three year performance and service period ending December 31, 2018
2017	RSU	22	Vest equally over three service periods ending December 31 of 2017, 2018, and 2019
2017	PSU	21	Three year performance and service period ending December 31, 2019

(1) PSUs presented are based on the target number of units for the original PSU grant. If both performance criteria do not achieve a minimum of 85% of their respective targets, no units will be awarded for the PSU grant.

A summary of the RSAs granted to certain NEOs and employees and RSUs granted to directors is presented below (shares/units in thousands):



Grant Year	Award Type	Number of Shares/Units Awarded	Vesting Terms
2015	RSA	137	Vest over service periods ranging from seven months to three years
2015	RSU	6	Vest over service period ending in April 2016
2016	RSA	35	Majority vest equally over three service periods ending in January of 2017, 2018, and 2019
2016	RSU	8	Vest over service period ending in April 2017
2017	RSA	29	Vest equally over three service periods ending in February of 2018, 2019, and 2020
2017	RSU	6	Vest over service period ending in April 2018

Activity for our RSAs, RSUs, and PSUs is presented below (shares/units in thousands):



	Market Condition & Performance-Based Awards				Service Period Awards				Total
(in thousands, except grant date values)	Number of Shares/Units		Weighted Average Grant Date Fair Value		Number of Shares/Units		Weighted Average Grant Date Fair Value		Number of Shares/Units		Weighted Average Grant Date Fair Value
Balance as of December 31, 2014	85		$	54.32	264		$	57.07	349		$	56.40
Granted	17		$	153.01	166		$	102.34	183		$	107.06
Vested	(85	)	$	48.31	(157	)	$	65.89	(242	)	$	57.24
Canceled/forfeited	—		$	—	(5	)	$	91.14	(5	)	$	91.14
Balance as of December 31, 2015	17		$	153.01	268		$	71.98	285		$	83.71
Granted	20		$	141.02	63		$	134.04	83		$	135.71
Vested	—		$	—	(167	)	$	67.61	(167	)	$	67.61
Canceled/forfeited	—		$	—	(4	)	$	88.92	(4	)	$	88.92
Balance as of December 31, 2016	37		$	146.57	160		$	110.71	197		$	111.69
Granted	21		$	167.25	58		$	156.92	79		$	159.75
Adjustments⁽¹⁾	15		$	153.01	—		$	—	15		$	153.01
Vested	(32	)	$	153.01	(111	)	$	110.38	(143	)	$	119.94
Canceled/forfeited	—		$	—	(1	)	$	125.75	(1	)	$	125.75
Balance as of December 31, 2017	41		$	154.78	106		$	136.54	147		$	130.75

(1) Adjustments to number of units awarded for PSUs based on achievement of performance and market conditions.

The fair value of shares and units vested was $29.6 million in 2017, $24.3 million in 2016, and $28.4 million in 2015.

A summary of total unrecognized stock-based compensation expense related to RSAs, RSUs, and PSUs (based on current performance estimates), at December 31, 2017 is presented below:



(in millions, except years)	December 31, 2017		Weighted Average Remaining Vesting Period (Years)
Unrecognized RSA expense	$	3.0	1.3
Unrecognized RSU expense	2.0		1.3
Unrecognized PSU expense	3.4		1.7
Total	$	8.4	1.5

Employee Stock Options

All remaining stock options under the 2007 Incentive Plan were exercised during 2017. No stock options have been awarded under the 2016 Incentive Plan.

Activity for our stock options is presented below:



(in thousands, except per average exercise price)	Number of Shares Under Option		Weighted Average Exercise Price
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
Granted	—		$	—
Exercises	(5	)	$	52.58
Canceled/forfeited	—		$	—
Balance as of December 31, 2016	4		$	43.74
Granted	—		$	—
Exercises	(4	)	$	43.74
Canceled/forfeited	—		$	—
Balance as of December 31, 2017	—		$	—

The total intrinsic value of stock options exercised was $0.5 million in 2017, $0.4 million in 2016, and $0.1 million in 2015. Cash received from stock option exercises totaled $0.2 million in 2017, $0.2 million in 2016, and $0.1 million in 2015.

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. Compensation expense related to the ESP Plan was not material for any year included in our accompanying Consolidated Statements of Comprehensive Income.