9.	EQUITY-BASED COMPENSATION

Through June 30, 2015, certain of the Company’s employees participated in an equity-based incentive compensation plan maintained by GHC for the benefit of certain officers, directors and employees. Equity-based awards issued to employees included non-qualified stock options and restricted stock awards. These compensation costs are recognized within Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income.

Certain Compensation and Benefit Plans.

The Cable One, Inc. 2015 Omnibus Incentive Compensation Plan (the “2015 Plan”) is designed to promote the interests of the Company and its stockholders by providing the employees and directors of the Company with incentives and rewards to encourage them to continue in the service of the Company and with a proprietary interest in pursuing the long-term growth, profitability and financial success of the Company. Any of the directors, officers and employees of the Company and its affiliates are eligible to be granted one or more types of awards permitted under the 2015 Plan. The 2015 Plan includes the authority to grant awards that are intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Internal Revenue Code of 1986, as amended. Unless the 2015 Plan is sooner terminated by the Board, no awards may be granted under the 2015 Plan after the tenth anniversary of its effective date.

The 2015 Plan provides that, subject to certain adjustments for certain corporate events, the maximum number of shares of Company common stock that may be issued under the 2015 Plan is equal to 600,000, and no more than 400,000 shares may be issued pursuant to incentive stock options.

Restricted Stock Awards.

The Company has granted restricted shares of Company common stock subject to service-based vesting conditions under the 2015 Plan to employees of the Company (the “Restricted Shares”). The Restricted Shares generally cliff-vest on the three-year anniversary of the grant date, except in the case of awards made to individuals (i) whose equity awards issued by GHC were forfeited in connection with the spin-off (the “Replacement Shares”), which Replacement Shares are generally scheduled to cliff-vest on December 16, 2016 (with certain exceptions as provided in the applicable award agreement), or (ii) who did not receive an equity award from GHC in 2015 in anticipation of the spin-off (the “Staking Shares”), which Staking Shares are scheduled to cliff-vest on January 2, 2018. The Restricted Shares are also generally subject to the achievement of certain performance goals as defined in the 2015 Plan. For awards granted in 2015, the performance goals, which have been met, related primarily to year over year growth in free cash flow. For performance-based awards granted in 2016, the performance goals relate primarily to year over year growth in Adjusted EBITDA and to capital expenditures as a percentage of total revenues. The Restricted Shares are subject to the terms and conditions of the 2015 Plan and will otherwise be subject to the terms and conditions of the applicable award agreement.

During the three months ended March 31, 2016, the Company granted 6,238 Restricted Shares, with a total value at the grant date of $2.7 million.

The compensation arrangements for the Company’s non-employee directors under the 2015 Plan provide that each non-employee director is entitled to an annual retainer of $150,000, plus an additional annual retainer of $15,000 for each non-employee director who serves as a committee chair or as lead independent director. Each such retainer will be provided in the form of restricted stock units (“RSUs”). Such RSUs will generally be granted on the date of the Company’s annual stockholders’ meeting and will vest on the first anniversary of the grant date, subject to the director’s continued service through such vesting date. Settlement of such RSUs will be in the form of one share of the Company’s common stock and will follow vesting, unless the director has previously elected to defer such settlement until his or her separation from service from the Board.

The Restricted Shares and RSUs are collectively referred to as “restricted stock,” and a summary of the restricted stock is as follows:

			Weighted Average
			Grant Date
	Restricted		Fair Value
	Stock		Per Share
Unvested as of January 1, 2016		39,744	$	383.18
Granted		6,245	$	433.66
Unvested as of March 31, 2016		45,989

Compensation expense associated with unvested restricted stock is recognized on a straight-line basis over the vesting period. The expense recognized each period is dependent upon the Company’s estimate of the number of shares that will ultimately vest. Equity-based compensation expense for restricted stock was $1.9 million for the three months ended March 31, 2016. At March 31, 2016, there was $11.5 million of unrecognized compensation expense related to restricted stock, which is expected to be recognized over a weighted average period of 1.6 years.

Stock Appreciation Rights.

The Company has granted stock appreciation rights (“SARs”) under the 2015 Plan to certain executives and other employees of the Company. The SARs are scheduled to vest in four equal ratable installments beginning on the first anniversary of the grant date (generally subject to the holder’s continued employment with the Company through the applicable vesting date). The SARs are subject to the terms and conditions of the 2015 Plan and will otherwise be subject to the terms and conditions of the applicable award agreement.

A summary of SAR activity is as follows:

	Stock Appreciation Rights		Weighted Average Exercise Price		Weighted Average Fair Value		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term (in years)
Outstanding as of December 31, 2015		135,600	$	422.31	$	87.22	$	-		9.7
Granted		-		-		-		-		-
Outstanding as of March 31, 2016		135,600	$	422.31	$	87.22	$	-		9.4

Vested and exercisable as of March 31, 2016		-	$	-	$	-	$	-		-

The fair value of the SARs was measured based on the Black-Scholes model. The inputs used in the fair value measurement for 2016 were as follows:

	201 6
Expected volatility		24.00	%
Risk-free interest rate		1.75	%
Expected term (in years)		6.25
Expected dividend yield		1.45	%

Compensation expense associated with unvested SARs is recognized on a straight-line basis over the vesting period. The expense recognized each period is dependent upon our estimate of the number of shares that will ultimately vest. Equity-based compensation expense for these SARs was $0.7 million for the three months ended March 31, 2016. At March 31, 2016, there was $10.1 million of unrecognized compensation expense related to the SARs, which is expected to be recognized over a weighted average period of 1.9 years.

Compensation Expense

. Total equity-based compensation expense recognized was $3.0 million and $0.3 million for the three months ended March 31, 2016 and 2015, respectively. The Company recorded an additional income tax benefit of $1.2 million related to the equity-based awards granted through the first quarter of 2016. As of March 31, 2016, the total deferred tax asset related to all outstanding equity-based awards was $3.0 million. Prior to the spin-off, a portion of these charges related to costs allocated to the Company for GHC corporate employees not solely dedicated to the Company. As of March 31, 2016 and 2015, there were 0 and 10,830, respectively, in GHC restricted stock awards outstanding related to the Company’s specific employees. As of March 31, 2016 and 2015, there were 0 and 16,000, respectively, in GHC stock options outstanding related to the Company’s specific employees.

Also, in connection with the spin-off, GHC modified the terms of 10,830 restricted stock awards in the second quarter of 2015 affecting 21 Cable One employees. The modification resulted in the acceleration of the vesting period of 6,324 restricted stock awards and the forfeiture of 4,506 restricted stock awards. The Company recorded incremental stock compensation expense, net of forfeitures, during the three months ended March 31, 2016 amounting to $0.6 million, which is included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income.