Share Based Payments

The amounts recorded as share based compensation expense consist of stock option and restricted stock grants, common stock issued to employees and directors in lieu of cash payments, and Preferred Stock contributed to the 2012 Retention Plan.

Stock Option Awards

The Company has granted options to purchase its common stock to employees and directors of the Company under various stock option plans at no less than the fair market value of the underlying stock on the date of grant. These options are granted for a term not exceeding 10 years and are forfeited, except in certain circumstances, in the event the employee or director terminates his or her employment or relationship with the Company. Generally, these options either vest annually over 3 years (one-third each year for 3 years), or cliff vest at the end of 3 years. The Company issues new shares upon the exercise of stock options.

The fair value of each option awarded is estimated on the date of grant using a Black-Scholes option-pricing model and expensed on a straight-line basis over the vesting period. Expected volatilities are based on historical volatility of the Company’s stock. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. The Company includes estimated forfeitures in its compensation cost and updates the estimated forfeiture rate through the final vesting date of awards. The risk-free interest rate for periods within the life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The following assumptions were used to calculate the fair value of the Company’s options on the date of grant during the nine months ended November 30, 2014 and 2015:



	Nine Months Ended November 30,
	2014	2015
Risk-Free Interest Rate:	1.2% - 1.5%	1.3% - 1.4%
Expected Dividend Yield:	0%	0%
Expected Life (Years):	4.3	4.3
Expected Volatility:	69.0% - 73.9%	57.2% - 64.6%

The following table presents a summary of the Company’s stock options outstanding at November 30, 2015, and stock option activity during the nine months ended November 30, 2015 (“Price” reflects the weighted average exercise price per share; "Aggregate Intrinsic Value" dollars in thousands):



	Options	Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding, beginning of period	5,724,446	$	1.76
Granted	1,603,719	2.00
Exercised ⁽¹⁾	190,000	0.70
Forfeited	105,000	2.27
Expired	79,463	11.51
Outstanding, end of period	6,953,702	1.73		6.6	$	133
Exercisable, end of period	4,352,115	1.49		5.4	$	133

⁽¹⁾

Cash received from option exercises for the nine months ended November 30, 2014 and 2015 was $0.4 million and $0.1 million, respectively. The Company recorded an income tax benefit relating to the options exercised during the nine months ended November 30, 2014 of $0.1 million. The Company did not record an income tax benefit relating to the options exercised during the nine months ended November 30, 2015.

The weighted average per share grant date fair value of options granted during the nine months ended November 30, 2014 and 2015, was $1.64 and $1.01, respectively.

A summary of the Company’s nonvested options at November 30, 2015, and changes during the nine months ended November 30, 2015, is presented below:



	Options	Weighted Average Grant Date Fair Value
Nonvested, beginning of period	3,167,083	$	1.08
Granted	1,603,719	1.01
Vested	2,064,215	0.90
Forfeited	105,000	1.21
Nonvested, end of period	2,601,587	1.19

There were 2.2 million shares available for future grants under the Company’s various equity plans at November 30, 2015. The vesting dates of outstanding options at November 30, 2015 range from February 2016 to July 2018, and expiration dates range from March 2016 to August 2025.

Restricted Stock Awards

The Company grants restricted stock awards to directors annually, and periodically grants restricted stock to employees in connection with employment agreements. Awards to directors are granted on the date of our annual meeting of shareholders and vest on the earlier of (i) the completion of the director’s 3-year term or (ii) the third anniversary of the date of grant. Restricted stock award grants are granted out of the Company’s 2015 Equity Compensation Plan. The Company may also award, out of the Company’s 2015 Equity Compensation Plan, stock to settle certain bonuses and other compensation that otherwise would be paid in cash. Any restrictions on these shares may be immediately lapsed on the grant date.

The following table presents a summary of the Company’s restricted stock grants outstanding at November 30, 2015, and restricted stock activity during the nine months ended November 30, 2015 (“Price” reflects the weighted average share price at the date of grant):



	Awards	Price
Grants outstanding, beginning of period	677,634	$	2.26
Granted	2,374,687	1.25
Vested (restriction lapsed)	2,125,293	1.30
Forfeited	15,000	1.82
Grants outstanding, end of period	912,028	1.87

The total grant date fair value of shares vested during the nine months ended November 30, 2014 and 2015, was $3.8 million and $2.8 million, respectively.

Preferred Stock and the 2012 Retention Plan

On April 2, 2012, the shareholders of the Company approved the 2012 Retention Plan and Trust Agreement (the “Trust” or the “2012 Retention Plan”) at a special meeting of shareholders. The Company contributed 400,000 shares of its Preferred Stock to the Trust in connection with the approval of the 2012 Retention Plan. Awards granted under the 2012 Retention Plan entitled the participants to receive a distribution two years from the date of shareholder approval of the plan, provided the participant was an employee upon inception of the plan and remained an employee through the vesting date. The Trustee of the plan was Jeffrey H. Smulyan, our Chairman of the Board, President and Chief Executive Officer.

On March 5, 2014, the Board of Directors of the Company approved the exercise of the Company's repurchase option under the Voting and Transfer Restriction Agreement with the Trustee of the 2012 Retention Plan and Trust. Pursuant to the exercise of that option, the Company repurchased 400,000 shares of Preferred Stock from the trustee in exchange for 975,848 shares of the Company's Class A Common Stock. On April 2, 2014, 975,848 shares of Class A Common Stock were distributed to employees who met the vesting requirements of the plan. The Company recognized approximately $0.4 million of compensation expense related to the 2012 Retention Plan during the nine months ended November 30, 2014.

Recognized Non-Cash Compensation Expense

The following table summarizes stock-based compensation expense and related tax benefits recognized by the Company during the three months and nine months ended November 30, 2014 and 2015:



	Three Months Ended November 30,					Nine Months Ended November 30,
	2014			2015		2014			2015
Station operating expenses	$	83		$	365	$	553		$	1,610
Corporate expenses	514			539		1,575			3,059
Stock-based compensation expense included in operating expenses	597			904		2,128			4,669
Tax benefit	(300		)	—		(821		)	—
Recognized stock-based compensation expense, net of tax	$	297		$	904	$	1,307		$	4,669

As of November 30, 2015, there was $2.6 million of unrecognized compensation cost, net of estimated forfeitures, related to nonvested share-based compensation arrangements. The cost is expected to be recognized over a weighted average period of approximately 1.8 years.