NOTE 15 – COMMON SHARES AND STOCK BASED COMPENSATION

At February 28, 2013 and February 29, 2012, common shares authorized consisted of 187,600,000 Class A and 15,832,968 Class B common shares.

Class A common shares have one vote per share and Class B common shares have ten votes per share. There is no public market for the Class B common shares of the Corporation. Pursuant to the Corporation’s Amended and Restated Articles of Incorporation, a holder of Class B common shares may not transfer such Class B common shares (except to permitted transferees, a group that generally includes members of the holder’s extended family, family trusts and charities) unless such holder first offers such shares to the Corporation for purchase at the most recent closing price for the Corporation’s Class A common shares. While it is the Corporation’s general policy to repurchase Class B common shares whenever they are offered by a holder, if the Corporation does not purchase such Class B common shares, the holder must convert such shares, on a share for share basis, into Class A common shares prior to any transfer, other than to a permitted transferee. Repurchases of Class B common shares were suspended following the Going Private Proposal as defined in Note 16 and referred to in Note 19.

Stock Options

Under the Corporation’s stock option plans, when options to purchase common shares are granted to directors, officers or other key employees, they are granted at the then-current market price. In general, subject to continuing service, options become exercisable commencing twelve months after the date of grant in annual installments and expire over a period of not more than ten years from the date of grant. The Corporation generally issues new shares when options to purchase Class A common shares are exercised and treasury shares when options to purchase Class B common shares are exercised.

Stock option transactions and prices are summarized as follows:


	Number of Class A Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at February 29, 2012		3,597,427		$	20.96		5.2	$	3,375
Exercised		(117,520	)		16.06
Expired		(30,480	)		14.90
Forfeited		(213,474	)		23.40

Outstanding at February 28, 2013		3,235,953		$	21.23		4.3	$	3,352

Exercisable at February 28, 2013		3,235,953		$	21.23		4.3	$	3,352


	Number of Class B Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at February 29, 2012		857,581	$	23.06		4.7	$	420
Exercised		—		—
Expired		—		—
Forfeited		—		—

Outstanding at February 28, 2013		857,581	$	23.06		3.7	$	489

Exercisable at February 28, 2013		821,123	$	22.99		3.6	$	489

The weighted average fair value per share of options granted during 2011 was $10.43. No stock options were granted in 2013 or 2012. The fair value of the options granted was estimated using the Black-Scholes option-pricing model with the following assumptions:


	2011
Risk-free interest rate		1.4	%
Dividend yield		2.3	%
Expected stock volatility		0.81
Expected life in years		2.3

Performance Shares

The performance shares represent the right to receive common shares, at no cost to the employee, upon the achievement of management objectives over the performance period and, if applicable, the satisfaction of service-based vesting requirements. Compensation expense associated with performance shares is recognized on a straight-line basis over the vesting period which begins on the date of award. The expense recognized each period is dependent upon an estimate of the number of shares that will ultimately be issued.

In 2013, the Corporation introduced a performance share program that is designed to reward the Corporation’s officers and certain management employees for the attainment of performance objectives over a three-year measurement period. To transition to this multi-year program, 684,810 Class A and 359,496 Class B performance shares were initially granted and equally divided into three separate tranches.

Each tranche contains specified achievement levels consisting of unit sales and expense efficiency targets over three separate, but sequentially cumulative performance periods as follows:

•

Tranche 1 – performance period March 1, 2012 to February 28, 2013

•

Tranche 2 – performance period March 1, 2012 to February 28, 2014

•

Tranche 3 – performance period March 1, 2012 to February 28, 2015

Achievement of performance criteria may range from 0% to 200% of the initial number of shares awarded in each tranche. As of February 28, 2013, 222,996 Class A and 114,800 Class B performance shares were credited to participants based on the level of achievement of Tranche 1 performance objectives. All shares credited to participants under this program, subject to service-based vesting requirements will vest on February 28, 2015. All of the performance shares granted to Zev Weiss, the Corporation’s Chief Executive Officer and the performance shares granted to Jeffrey Weiss, the Corporation’s President and Chief Operating Officer for the three-year performance period ended February 28, 2015 are conditioned upon the approval of an amendment to the 2007 Omnibus Incentive Compensation Plan to increase the number of Class B common shares available thereunder by an amount that is sufficient to cover the maximum number of shares that may be issued upon vesting of the performance shares. If such shareholder approval is not obtained, the grant of performance shares will automatically terminate, and Zev Weiss and Jeffrey Weiss will have no right to receive the performance shares or any shares subject thereto. However, as a result of the Corporation entering into the Merger Agreement (as defined in Note 19), the Corporation is not seeking an amendment to the 2007 Omnibus Incentive Compensation Plan. If the transaction contemplated by the Merger Agreement is consummated, the performance shares granted to Zev Weiss and Jeffrey Weiss will be cancelled without the payment of any consideration.

In 2010, performance shares were awarded to certain employees, including executive officers. Shares issued under this award were based upon attaining pre-defined annual earnings targets over up to three annual performance periods and completing two years of continuous service thereafter. The required performance objectives were met in each of the first two years of this program. Accordingly, 746,000 and 709,000 performance shares were credited to participants in 2011 and 2010, respectively. As the management objectives for this award were fully satisfied within the first two performance periods, there was no performance period in 2012.

The following table summarizes the activity related to performance shares during 2013:


	Number of Class A Performance Shares			Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Unvested at February 29, 2012		249,000			1.0	$	3,735
Credited		697,055
Vested		(235,209	)
Forfeited		(99,284	)

Unvested at February 28, 2013		611,562			2.2	$	9,907


	Number of Class B Performance Shares			Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Unvested at February 29, 2012		47,000			1.0	$	705
Credited		354,464
Vested		(47,000	)
Forfeited		—

Unvested at February 28, 2013		354,464			2.2	$	5,742

The fair value per share of the performance shares awarded in 2013 and 2011 was $12.72 and $10.20, respectively. The fair value of the performance shares was estimated using the Black-Scholes option-pricing model with the following assumptions:


	2013			2011
Risk-free interest rate		0.38	%		1.62	%
Dividend yield		4.20	%		4.38	%
Expected stock volatility		0.43			0.76
Expected life in years		2.8			2.5

Restricted Stock Units

The Corporation awards restricted stock units to officers and other key employees. The restricted stock units represent the right to receive Class A common shares or Class B common shares, at no cost to the employee, upon the satisfaction of a two or three-year continuous service-based vesting period. The awards have a graded-vesting feature and compensation expense is recognized over the requisite service period for each separately vesting tranche. The expense recognized each period is dependent upon an estimate of the number of stock units that will ultimately vest.

The following table summarizes the activity related to restricted stock units during 2013:


	Number of Class A Restricted Stock Units			Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Unvested at February 29, 2012		291,495			0.6	$	4,372
Granted		358,000
Vested		(173,912	)
Forfeited		(27,885	)

Unvested at February 28, 2013		447,698			0.6	$	7,253


	Number of Class B Restricted Stock Units			Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Unvested at February 29, 2012		74,269			1.0	$	1,114
Granted		72,648
Vested		(29,316	)
Forfeited		—

Unvested at February 28, 2013		117,601			0.9	$	1,905

The weighted average fair value per share of restricted stock unit awards was $14.93, $22.64 and $23.65 in 2013, 2012 and 2011, respectively. The fair value of the restricted stock units is estimated using the Black-Scholes option-pricing model with the following assumptions:


	2013			2012			2011
Risk-free interest rate		0.29	%		0.67	%		1.09	%
Dividend yield		3.79	%		2.60	%		2.30	%
Expected stock volatility		0.42			0.59			0.90
Expected life in years		1.6			1.6			1.6

The risk-free interest rate was based upon the U.S. Treasury yield curve at the time of the grant. Dividend yield was estimated using the Corporation’s annual dividend in the year when the award was granted. Historical information was the primary basis for the estimates of expected stock volatility and expected life of the award.

Total stock-based compensation expense, recognized in “Administrative and general expenses” on the Consolidated Statement of Income, was $10,743, $10,982 and $13,017 in 2013, 2012 and 2011, respectively. As of February 28, 2013, the Corporation had unrecognized compensation expense of approximately $25, $8,887, and $2,901 before taxes, related to stock options, performance shares and restricted stock units, respectively. The unrecognized compensation expense is expected to be recognized over an average period of approximately one and one-half years. Cash received from stock options exercised for the years ended February 28, 2013, February 29, 2012 and February 28, 2011, was $1,259, $13,310, and $18,842, respectively. The total intrinsic value from the exercise of stock-based payment awards was $7,423, $17,117 and $16,666 in 2013, 2012 and 2011, respectively. The actual tax benefit realized from the exercise of stock-based payment awards totaled $2,929, $6,705 and $6,510 for the years ended February 28, 2013, February 29, 2012 and February 28, 2011, respectively.

The number of shares available for future grant at February 28, 2013 is 436,714 Class A common shares and zero Class B common shares.