Stock-Based Compensation Expense

Successor Share-Based Compensation

In accordance with the Plan and pursuant to the approval of the Board, the Long-Term Incentive Plan (the "Incentive Plan") became effective as of the Effective Date. The Incentive Plan is intended to, among other things, help attract, motivate and retain key employees and directors and to reward them for making major contributions to the success of the Company. The Incentive Plan permits awards to be made to employees, directors, or consultants of the Company or an affiliate of the Company.

Unless otherwise determined by the Board, the Board's compensation committee will administer the Incentive Plan. The Incentive Plan generally provides for the following types of awards:


•	stock options (including incentive options and nonstatutory options);


•	restricted stock;


•	stock appreciation rights;


•	dividend equivalents;


•	other stock-based awards;


•	performance awards; and


•	cash awards.

The aggregate number of shares of new Class A common stock that were reserved for issuance pursuant to the Incentive Plan was 2,222,223 on a fully diluted basis. Awards can be made under the Incentive Plan for a period of ten years from June 4, 2018, subject to the right of the stockholders and the Board to terminate the Incentive Plan at any time.

On or about the Effective Date and pursuant to the Plan, the Company granted 562,217 restricted stock units ("RSUs") and 562,217 stock options ("Options") under the Incentive Plan and the terms of the relevant restricted stock unit agreements (the "Restricted Stock Unit Agreements") and stock option agreements (the "Option Agreements"), as applicable, to certain employees, including its executive officers (collectively, "Management"), representing an aggregate of 1,124,434 shares of new Class A common stock. The Company granted Management an additional 200,600 RSUs and 10,000 RSUs on February 1, 2019, and May 1, 2019, respectively.

In addition, on or about the Effective Date and pursuant to the Plan, the Company granted each non-employee director 37,814 RSUs and 18,907 Options under the Incentive Plan and the terms of the relevant Restricted Stock Unit Agreements and Option Agreements, as applicable, representing an aggregate of 56,721 shares of new Class A common stock. On April 30, 2019, the Company granted an additional 37,555 RSUs to its non-employee directors.

If an employee's employment is terminated by the Company or its subsidiaries without cause, by the employee for good reason (each, as defined in the award agreement) or by reason of death or disability (as defined in the award agreement), such employee will become vested in an additional tranche of the unvested awards as if the employee's employment continued for one additional year following the qualifying termination date; provided, that with respect to the Chief Executive Officer and Chief Financial Officer, (i) an amount equal to 50% of the unvested components of the awards will accelerate and vest (75% if such termination occurs on or before the first (1st) anniversary of the Effective Date) and (ii) vested Options will remain outstanding until the expiration date of such Option. If an employee's employment is terminated by the Company or its subsidiaries without cause or by the employee for good reason, in either instance at any time within the three month period immediately preceding, or the twelve month period immediately following, a change in control (as defined in the award agreement), such employee will become vested in all unvested awards. We expect to issue common shares held as either treasury stock or issue new shares upon the exercise of stock options or once shares vest pursuant to restricted stock units.

Shares available for grant as of December 31, 2019 and the activity during the year ended December 31, 2019 are as follows:



	Total
Balance as of December 31, 2018	1,041,068
Restricted stock units granted ⁽¹⁾	(248,155	)
Options granted	—
Options forfeited	23,826
Options expired	—
Restricted stock units forfeited ⁽¹⁾	12,352
Balance as of December 31, 2019	829,091

(1) Includes time-based and performance-based RSUs

Stock Options

The Options granted to Management, which have a five year contractual term, will vest 30% on or about each of the first two anniversaries of the issuance date, and 20% will vest on or about each of the third and fourth anniversaries of the issuance date. The vesting of each of the awards to Management is also subject to, among other things, each employee's continued employment with the Company.

The Options granted to each non-employee director, which have a five year contractual term, vest in four equal installments on the last day of each calendar quarter, commencing in the quarter in which the award is granted. The vesting of each of the non-employee director awards are also subject to, among other things, each non-employee director's continued role as a director with the Company. Upon a change in control, all unvested non-employee director awards will fully vest.

The following table summarizes changes in outstanding stock options during the twelve months ended December 31, 2019, as well as stock options that are vested and expected to vest and stock options exercisable as of December 31, 2019:



	Options Outstanding
	Outstanding Stock Options		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value ⁽²⁾
Outstanding as of December 31, 2018	581,124		$	25.47	4.4	$	—
Granted	—		—			—
Exercised	—		—			—
Forfeited	(23,826	)	$	25.70		—
Expired	—		—			—
Outstanding as of December 31, 2019	557,298		$	25.46	3.4	$	—
Exercisable as of December 31, 2019	180,424		$	24.97
Vested and expected to vest as of December 31, 2019	557,298		$	25.46	3.4	$	—

⁽²⁾Amounts represent the difference between the exercise price and the fair value of common stock at each year end for all the "in-the-money" options outstanding based on the fair value per share of common stock as of each respective fiscal year end.

The following table summarizes changes in outstanding options and the related weighted-average exercise price per share for the period from June 4, 2018 to December 31, 2018:



	Options Outstanding
	Outstanding Stock Options	Weighted-Average Exercise Price
Outstanding as of June 4, 2018	—	$	—
Granted	581,124	25.47
Exercised	—	—
Forfeited	—	—
Expired	—	—
Outstanding as of December 31, 2018	581,124	$	25.47
Exercisable as of December 31, 2018	14,180	$	18.75
Vested and expected to vest as of December 31, 2018	581,124	$	25.47

The per-share fair value of each stock option with service conditions only granted on or about the Effective Date was determined on the grant date using the Black-Scholes option pricing model with the following assumptions:



	Period from June 4, 2018 through December 31, 2018
Expected term (in years)	5.0
Risk-free interest rate	2.44	%
Expected volatility	75	%
Expected dividend yield	0	%

The expected term of stock options granted represents the weighted average period that the stock options are expected to remain outstanding. We determined the expected term assumption based on estimates of the expected post-vesting holding period by employees. Expected volatility is based on the historical volatility of comparable guideline companies over the expected term of the award. The risk-free interest rate is based on the implied yield currently available on U.S. Treasury issues with terms approximately equal to the expected life of the option. We currently have no history or expectation of paying cash dividends on our common stock.

As of December 31, 2019, there was $2.2 million of unrecognized compensation cost related to unvested stock options with a weighted-average recognition period of 2.42 years.

RSUs

For restricted stock awards with service conditions only, we utilize the intrinsic value method to determine the fair value. For restricted stock awards with performance conditions, we evaluate the probability of vesting of the awards in each reporting period and adjust compensation expense based on this assessment.

The following table summarizes the activities for our RSUs for the year ended December 31, 2019 and the period June 4, 2018 through December 31, 2018 and the related weighted-average grant date fair value:



	Number of RSUs		Weighted-Average Grant Date Fair Value
Nonvested as of June 4, 2018	—		$	—
Granted	600,031		15.00
Vested	(122,063	)	15.00
Forfeited	—		—
Nonvested as of December 31, 2018	477,968		$	15.00
Granted	248,155		14.16
Vested	(239,053	)	15.22
Forfeited	(12,352	)	14.84
Nonvested as of December 31, 2019	474,718		$	14.46
Expected to vest as of December 31, 2019	474,718		$	14.46

The total fair value of RSUs that vested during the twelve months ended December 31, 2019 and the period from June 4, 2018 through December 31, 2018 was $4.0 million and $1.4 million, respectively, based on the weighted-average fair value on the vesting date, and $3.6 million and $1.8 million, respectively, based on the weighted-average fair value on the date of grant.

As of December 31, 2019, there was $5.5 million of unrecognized compensation cost related to unvested RSUs with a weighted-average recognition period of 1.86 years.

Stock-based compensation expense

The total stock-based compensation expense included in "Corporate expenses" in the accompanying Consolidated Statements of Operations for the year ended December 31, 2019, and period from June 4, 2018 through December 31, 2018 was as follows (dollars in thousands):



	Year Ended December 31, 2019		Period from June 4, 2018 through December 31, 2018
Stock option grants	$	1,326	$	853
Restricted stock unit grants	3,975		2,551
Total expense	$	5,301	$	3,404

The associated tax benefits related to these stock-based compensation awards for the year ended December 31, 2019, and period from June 4, 2018 through December 31, 2018 was $1.4 million and $0.9 million, respectively.

The Company made an accounting policy election to recognize forfeitures of share-based awards as they occur in the period of forfeiture rather than estimating the number of awards expected to be forfeited at the grant date and subsequently adjusting the estimate when awards are actually forfeited.

Predecessor Stock-Based Compensation

Upon adopting ASC 718 for awards with service conditions, the Predecessor Company made an election to recognize stock-based compensation expense on a straight-line basis over the requisite service period for the entire award. In addition, the Predecessor Company made an accounting policy election to recognize forfeitures of share-based awards as they occur in the period of forfeiture rather than estimating the number of awards expected to be forfeited at the grant date and subsequently adjusting the estimate when awards are actually forfeited. For stock options with service conditions only, the Company utilized the Black-Scholes option pricing model to estimate the fair value of options issued. The fair value of stock options was determined by the Company's stock price, historical stock price volatility, the expected term of the awards, risk-free interest rates and expected dividends. If other assumptions were used, the resulting fair value could have differed. For restricted stock awards, the Company utilized the intrinsic value method.

There were no stock option grants awarded during the period from January 1, 2018 through June 4, 2018. In addition, there were no exercises, forfeitures or cancellations of Predecessor Company stock options during the period from January 1, 2018 through June 3, 2018.

The total stock-based compensation expense included in "Corporate expenses" in the accompanying Consolidated Statements of Operations for the period from January 1, 2018 through June 3, 2018 was approximately $231,000. The associated tax benefits related to these stock-based compensation awards for the period from January 1, 2018 through June 3, 2018 was approximately $60,000.

As described in Note 12, "Stockholders' Equity," all of Old Cumulus's equity award agreements under prior incentive plans, and the awards granted pursuant thereto, were extinguished, canceled and discharged and have no further force or effect.