Note 19—Stock-Based Compensation

Stock-Based Compensation Plan

The 2015 Stock Option and Incentive Plan is intended to provide incentives to officers, employees, directors and consultants of the Company, including stock options, stock appreciation rights, limited rights, deferred stock units, and restricted stock. On December 14, 2016, the Company’s stockholders approved an amendment to the Company’s 2015 Stock Option and Incentive Plan to increase the number of shares of the Company’s Class B common stock available for the grant of awards thereunder by an additional 0.1 million shares. At July 31, 2017, the Company had 0.7 million shares of Class B common stock reserved for award under its 2015 Stock Option and Incentive Plan and 0.1 million shares were available for future grants.

On September 28, 2017, the Company’s Board of Directors amended the 2015 Stock Option and Incentive Plan to increase the number of shares of the Company’s Class B common stock available for the grant of awards thereunder by an additional 0.3 million shares. The amendment is subject to ratification by the Company’s stockholders.

In fiscal 2017, fiscal 2016 and fiscal 2015, there was no income tax benefit resulting from tax deductions in excess of the compensation cost recognized for the Company’s stock-based compensation.

Stock Options

Option awards are generally granted with an exercise price equal to the market price of the Company’s stock on the date of grant. Option awards generally vest on a graded basis over three years of service and have ten-year contractual terms. The fair value of stock options was estimated on the date of the grant using a Black-Scholes valuation model and the assumptions in the following table. No option awards were granted in fiscal 2016. Expected volatility is based on historical volatility of the Company’s Class B common stock and other factors. The Company uses historical data on exercise of stock options, post vesting forfeitures and other factors to estimate the expected term of the stock-based payments granted. The risk free rate is based on the U.S. Treasury yield curve in effect at the time of grant.

Year ended July 31	2017			2015
ASSUMPTIONS
Average risk-free interest rate		1.82	%		1.63	%
Expected dividend yield		5.09	%		—
Expected volatility		40.0	%		51.4	%
Expected term		4.0 years			6.0 years
Weighted-average grant date fair value	$	3.26		$	7.94

A summary of stock option activity for the Company is as follows:

	Number of Options (in thousands)			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at July 31, 2016		360		$	11.98
Granted		1,000			14.93
Exercised		(73	)		11.37
Cancelled / Forfeited		(14	)		17.21
OUTSTANDING AT JULY 31, 2017		1,273		$	14.28		4.9	$	850
EXERCISABLE AT JULY 31, 2017		166		$	13.38		4.4	$	288

The total intrinsic value of options exercised during fiscal 2017, fiscal 2016 and fiscal 2015 was $0.4 million, nil and $1.3 million, respectively. At July 31, 2017, there was $3.4 million of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 1.5 years.

On May 2, 2017, the Company’s Board of Directors and its Compensation and Corporate Governance Committees approved the grant to Howard S. Jonas of options to purchase up to 1.0 million shares of the Company’s Class B common stock at an exercise price of $14.93 per share, the closing price of the Company’s Class B common stock on May 1, 2017. Mr. Jonas, the Company’s Chairman of the Board, controls matters requiring approval by the Company’s stockholders. The options were immediately exercisable and will expire on May 1, 2022. Subject to certain vesting provisions in Mr. Jonas’ employment agreement with the Company, the unexercised portion of the options will terminate should Mr. Jonas cease to provide services as an officer or director of the Company or one or more of its subsidiaries. The Company will have the right to repurchase the Class B common stock issued upon exercise of the options at a purchase price equal to the exercise price of the option should Mr. Jonas cease to provide services as an officer or director of the Company or one or more of its subsidiaries. The Company’s repurchase right will lapse as to 333,333 shares underlying the options on each of May 2, 2018 and 2019 and as to 333,334 shares underlying the option on May 2, 2020. Mr. Jonas will be prohibited from transferring any shares of the Class B common stock issued on exercise of the option that are subject to the Company’s repurchase right. The Company’s repurchase right is essentially a forfeiture provision. The options were not granted under the Company’s 2015 Stock Option and Incentive Plan, but, except to the extent otherwise provided in the related grant agreement, are subject to the terms of the 2015 Stock Option and Incentive Plan. The grant of the options is subject to ratification by the stockholders of the Company. The Company estimated that the fair value of the options on the date of grant was $3.3 million, which will be recognized on a straight-line basis over the requisite three year service period ending in May 2020.

On June 7, 2016, in connection with the Zedge Spin-Off, the Compensation Committee of the Company’s Board of Directors approved a $2.25 reduction in the per share exercise price of all outstanding options to purchase the Company’s Class B common stock. The Company accounted for the reduction in the exercise price of the Company’s outstanding stock options as a modification. The Company determined that there was no incremental value from the modification, and therefore, the Company did not record a stock-based compensation charge.

Restricted Stock

The fair value of restricted shares of the Company’s Class B common stock is determined based on the closing price of the Company’s Class B common stock on the grant date. Share awards generally vest on a graded basis over three years of service.

A summary of the status of the Company’s grants of restricted shares of Class B common stock is presented below:

(in thousands)	Number of Non-vested Shares			Weighted- Average Grant- Date Fair Value
Non-vested shares at July 31, 2016		359		$	17.10
Granted		99			19.17
Vested		(228	)		17.83
Forfeited		(7	)		17.61
NON-VESTED SHARES AT JULY 31, 2017		223		$	18.16

At July 31, 2017, there was $2.4 million of total unrecognized compensation cost related to non-vested stock-based compensation arrangements, which is expected to be recognized over a weighted-average period of 0.7 years. The total grant date fair value of shares vested in fiscal 2017, fiscal 2016 and fiscal 2015 was $4.1 million, $1.3 million and $5.6 million, respectively.