3. SHARE-BASED COMPENSATION:

Share-based Compensation Plans

The Company has stock option and equity compensation plans for which a total of 26.4 million shares of the Company’s common stock have been reserved for issuance since inception of the plans. These plans provide that the exercise prices of qualified options will be at or above the fair market value of the common stock at the time of the grant. Board policy requires that nonqualified options also be priced at or above the fair market value of the common stock at the time of grant. At December 31, 2014, there were a total of 2.6 million shares available for future grants under the plans.

Stock Option Activity

The Company granted 415,639 stock options in the nine months ended December 31, 2014, exclusive of replacement options granted in connection with the LiveRamp acquisition. The per-share weighted-average fair value of the stock options granted during the nine months ended December 31, 2014 was $8.05. This valuation was determined using a customized binomial lattice approach with the following weighted-average assumptions: dividend yield of 0.0%; risk-free interest rate of 2.5%; expected option life of 4.4 years; expected volatility of 43% and a suboptimal exercise multiple of 1.4. The dividend yield was determined to be 0.0% since Acxiom is currently not paying dividends and there are no plans to pay dividends. The risk-free rate was determined by reference to the U.S. Treasury securities with a term equal to the life of the options. The expected option life is an output of the lattice model. The expected volatility was determined by considering both the historical volatility of Acxiom stock, as well as the implied volatility of traded Acxiom options. The suboptimal exercise multiple was determined using actual historical exercise activity of Acxiom options.

As part of the Company’s acquisition of LiveRamp, the Company issued replacement stock options to LiveRamp employees who had outstanding unvested stock options to purchase LiveRamp stock. The fair value of the replacement options was determined using a customized binomial lattice model with the following assumptions: dividend yield of 0.0% since Acxiom does not currently pay dividends; risk-free interest rates of from 1.57% to 2.54%, based on the rate of U.S. Treasury securities with a term equal to the remaining term of each option; remaining terms of each option of from 6.1 to 9.7 years; expected volatility of 43%, based on both the historical volatility of Acxiom stock, as well as the implied volatility of traded Acxiom options; and a suboptimal exercise multiple of 1.4, based on actual historical exercise activity of Acxiom options.

The number of shares of each replacement option and the exercise price of each replacement option was determined by converting LiveRamp options into equivalent Acxiom options by multiplying the number of shares subject to LiveRamp options by the exchange ratio of .63774 and by dividing the exercise price for each LiveRamp option by the exchange ratio of .63774. Once the value of each replacement option was determined, the percentage of that value which was attributed to employee service prior to the acquisition date was allocated to the purchase price of LiveRamp, and the remaining value will be expensed by the Company over the remaining vesting period of each option. The total included in the purchase price was $7.0 million (see note 5) and the total to be expensed in the future was $23.5 million.

Option activity for the nine months ended December 31, 2014 was as follows:

	Number of shares		Weighted-average exercise price per share		Weighted-average remaining contractual term (in years)	Aggregate intrinsic value (in thousands)
Outstanding at March 31, 2014	4,538,518		$	20.30
Granted	415,639		$	21.01
LiveRamp replacement stock options	1,473,668		$	1.37
Exercised	(91,200	)	$	6.05		$	1,312
Forfeited or cancelled	(652,262	)	$	30.54
Outstanding at December 31, 2014	5,684,363		$	14.49	5.14	$	41,046
Exercisable at December 31, 2014	3,387,728		$	17.74	3.22	$	15,994

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between Acxiom’s closing stock price on the last trading day of the quarter and the exercise price for each in-the-money option) that would have been realized by the option holders had option holders exercised their options on December 31, 2014. This amount changes based upon changes in the fair market value of Acxiom’s common stock.

Following is a summary of stock options outstanding and exercisable as of December 31, 2014:

	Options outstanding				Options exercisable
Range of exercise price per share	Options outstanding	Weighted- average remaining contractual life	Weighted-average exercise price per share		Options exercisable	Weighted-average exercise price per share

$ 0.63 - $ 8.90	1,411,953	7.54 years	$	1.56	272,262	$	2.09
$ 11.08 - $ 14.42	1,715,499	5.52 years	$	13.22	1,192,268	$	13.10
$ 15.10 - $ 19.76	651,390	2.31 years	$	16.38	617,260	$	16.23
$ 20.44 - $ 25.00	1,571,693	4.61 years	$	22.33	986,775	$	22.95
$ 26.33 - $ 35.16	203,007	1.32 years	$	30.86	188,342	$	30.71
$ 41.38 - $ 62.06	130,821	0.64 years	$	41.83	130,821	$	41.83
	5,684,363	5.14 years	$	14.49	3,387,728	$	17.74

Total expense related to stock options for the nine months ended December 31, 2014 and 2013 was approximately $7.0 million and $1.7 million respectively. Future expense for these options is expected to be approximately $23.7 million over the next four years.

Stock Appreciation Right (SAR) Activity

During the nine months ended December 31, 2014, the Company granted 245,404 performance-based SARs with a value at the date of grant of $0.5 million and having an exercise price of $40. All of the performance-based SARs granted in the current period vest subject to attainment of performance criteria established by the compensation committee of the board of directors. The units granted in the current period may vest in a number of SARs up to 100% of the award, based on the attainment of certain revenue targets for the period from April 1, 2014 to March 31, 2017. At vesting, the SARs will be automatically exercised, and the award recipient may receive a number of common stock shares equal to the number of SARs that are being exercised multiplied by the quotient of (a) the final Company stock market value (up to a maximum share value of $70) minus the SAR exercise price, divided by (b) the SAR exercise price. The SARs contain an accelerated exercise provision if the closing market price of the Company’s stock exceeds the $70 maximum share value for 20 consecutive trading days during the performance period. The grant date value of the performance-based SARs is determined using a Monte Carlo simulation model.

Following is a summary of SAR activity for the nine months ended December 31, 2014:

	Number of shares	Weighted-average exercise price per share		Weighted-average remaining contractual term (in years)	Aggregate intrinsic value (in thousands)
Outstanding at March 31, 2014	—	$	—
Granted	245,404	$	40.00
Outstanding at December 31, 2014	245,404	$	40.00	2.25	$	—
Exercisable at December 31, 2014	—	$	—	—	$	—

Total expense related to SARs for the nine months ended December 31, 2014 was $0.1 million. Future expense for these SARs is expected to be approximately $0.4 million over the next three years.

Restricted Stock Unit Activity

During the nine months ended December 31, 2014, the Company granted time-vesting restricted stock units covering 1,650,662 shares of common stock with a value at the date of grant of $35.4 million, of which units covering 1,075,392 shares, with a value at date of grant of $23.7 million, were granted to former LiveRamp employees subsequent to the acquisition of LiveRamp (see note 5). Of the restricted stock units granted in the current period, 673,482 vest in equal annual increments over four years, 928,252 vest in equal annual increments over two years, and 48,928 vest in one year. Valuation of these units is equal to the quoted market price for the shares on the date of grant.

Non-vested time-vesting restricted stock unit activity for the nine-month period ending December 31, 2014 was as follows:

	Number of shares		Weighted average fair value per share at grant date		Weighted-average remaining contractual term (in years)
Outstanding at March 31, 2014	1,078,029		$	18.46	2.17
Granted	1,650,662		$	21.43
Vested	(404,428	)	$	17.94
Forfeited or cancelled	(207,608	)	$	22.02
Outstanding at December 31, 2014	2,116,655		$	21.59	2.21

During the nine months ended December 31, 2014, the Company granted performance-based restricted stock units covering 259,167 shares of common stock with a value at the date of grant of $4.9 million. All of the performance-based restricted stock units granted in the current period vest subject to attainment of performance criteria established by the compensation committee of the board of directors. The units granted in the current period may vest in a number of shares from zero to 200% of the award, based on the attainment of an earnings-per-share target for fiscal 2017, with a modifier based on the total shareholder return of Acxiom stock compared to total shareholder return of a group of peer companies established by the compensation committee of the board of directors for the period from April 1, 2014 to March 31, 2017. The value of the performance units is determined using a Monte Carlo simulation model.

Non-vested performance-based restricted stock unit activity for the nine-month period ending December 31, 2014 was as follows:

	Number of shares		Weighted average fair value per share at grant date		Weighted-average remaining contractual term (in years)
Outstanding at March 31, 2014	1,066,828		$	14.19	0.91
Granted	259,167		$	18.98
Vested	(523,378	)	$	9.64
Forfeited or cancelled	(43,864	)	$	24.87
Outstanding at December 31, 2014	758,753		$	18.57	1.41

Total expense related to all restricted stock units in the nine months ended December 31, 2014 and 2013 was approximately $12.8 million and $8.6 million respectively. Future expense for these restricted stock units is expected to be approximately $39.5 million over the next four years.

Other Performance Unit Activity

During the nine months ended December 31, 2014, the Company granted 201,464 performance-based units with a value at the date of grant of $1.0 million. All of the performance-based units granted in the current period vest subject to attainment of performance criteria established by the compensation committee of the board of directors. The units granted in the current period may vest in a number of units up to 100% of the award, based on the attainment of certain revenue targets for the period from April 1, 2014 to March 31, 2017. At vesting, the award recipient may receive a number of common stock shares equal to the number of units vested multiplied by a share price factor. The share price factor modifies the final number of common shares awarded based on the Company’s stock price on the date of vesting and ranges from 0% at a $40 Company stock price, or below, to 100% at a $70 Company stock price. The units also contain an accelerated exercise provision if the closing market price of the Company’s stock exceeds the $70 maximum share value for 20 consecutive trading days during the performance period. The grant date value of the performance-based units is determined using a Monte Carlo simulation model.

Following is a summary of other performance unit activity for the nine months ended December 31, 2014:

	Number of shares	Weighted average fair value per share at grant date		Weighted-average remaining contractual term (in years)
Outstanding at March 31, 2014	—	$	—
Granted	201,464	$	5.18
Outstanding at December 31, 2014	201,464	$	5.18	2.25

Total expense related to other performance units for the nine months ended December 31, 2014 was $0.2 million. Future expense for these performance units is expected to be approximately $0.8 million over the next three years.