I – Stock-Based Compensation

The Company has stock-based compensation plans available to grant non-qualified stock options, incentive stock options and restricted stock to employees, directors and certain advisors of the Company. The stock-based compensation plans being utilized at January 31, 2016 are the Amended and Restated Stock Option Plan and the Amended and Restated Stock Incentive Plan. The Company recorded total stock-based compensation expense for all plans of approximately $1.2 million ($759,000 after tax effects) and $605,000 ($381,000 after tax effects) for the nine months ended January 31, 2016 and 2015, respectively. Tax benefits were recognized for these costs at the Company’s overall effective tax rate.

Stock Options

The Company has options outstanding under two stock option plans approved by the shareholders, the 1997 Stock Option Plan (“1997 Plan”) and the Amended and Restated Stock Option Plan, formerly the 2007 Stock Option Plan (the “2007 Plan”). While previously granted options remain outstanding, no additional option grants may be made under the 1997 Plan. The shareholders of the Company approved the Amended and Restated Stock Option Plan (the “Restated Option Plan”) on August 5, 2015. The Restated Option Plan is an amendment and restatement of the 2007 Plan. The amendment and restatement extended the term of the Restated Option Plan to June 10, 2025 and increased the number of shares of common stock reserved for issuance under the plan by an additional 300,000 shares to 1,800,000 shares. The Restated Option Plan provides for the grant of options to purchase shares of the Company’s common stock to employees, directors and certain advisors of the Company at a price not less than the fair market value of the stock on the date of grant and for periods not to exceed ten years. Options granted under the Company’s stock option plans expire in the calendar years 2016 through 2025.

	1997 Plan		Restated Option Plan
Minimum exercise price as a percentage of fair market value at date of grant		100%		100%
Last expiration date for outstanding options		July 2, 2017		August 5, 2025
Shares available for grant at January 31, 2016		-		298,750

The fair value of options granted is estimated on the date of grant using the Black-Scholes option pricing model based on the assumptions in the table below.

	Nine Months Ended January 31,
	2016			2015
Expected term (years)		5.5			5.4
Risk-free interest rate		1.58	%		1.64	%
Volatility		34	%		34	%
Dividend yield		-			-

The expected term of the options is based on evaluations of historical actual and future expected employee exercise behavior. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at the grant date. Volatility is based on historical volatility of the Company’s common stock. The Company has not historically issued any dividends and does not expect to do so in the foreseeable future.

There were 298,750 options granted during the nine months ended January 31, 2016 and 89,000 options granted during the nine months ended January 31, 2015. The grant-date fair value of options granted during the nine months ended January 31, 2016 and 2015 was $5.2 million and $1.4 million, respectively. The options were granted at fair market value on the date of grant.

Stock option compensation expense on a pre-tax basis was $1.1 million ($710,000 after tax effects) and $511,000 ($321,000 after tax effects) for the nine months ended January 31, 2016 and 2015, respectively. As of January 31, 2016, the Company had approximately $3.9 million of total unrecognized compensation cost related to unvested options that are expected to vest. These unvested outstanding options have a weighted-average remaining vesting period of 3.9 years.

In May 2015, key employees of the Company were granted 104,250 performance based stock options with a five-year performance period ending April 30, 2020. An additional 40,000 such options were granted to key employees of the Company in August 2015. Tiered vesting of these units is based solely on comparing the Company’s net income over the specified performance period to net income at April 30, 2015. As of January 31, 2016, the Company had $1.2 million in unrecognized compensation expense related to 68,750 of these options that are not currently expected to vest.

The Company had the following options exercised for the periods indicated. The impact of these cash receipts is included in financing activities in the accompanying Condensed Consolidated Statements of Cash Flows.

	Nine Months Ended January 31,
(Dollars in thousands)	2016		2015
Options exercised		30,750		153,250
Cash received from option exercises	$	400	$	2,927
Intrinsic value of options exercised	$	943	$	4,026

As of January 31, 2016 there were 904,000 vested and exercisable stock options outstanding with an aggregate intrinsic value of $2.9 million and a weighted average remaining contractual life of 3.7 years and a weighted average exercise price of $23.33.

The aggregate intrinsic value of outstanding options at January 31, 2016 and 2015 was $2.9 million and $30.5 million, respectively.

Stock Incentive Plan

On October 14, 2009, the shareholders of the Company approved an amendment to the Company’s Stock Incentive Plan that increased the number of shares of common stock that may be issued under the Stock Incentive Plan from 150,000 to 350,000. On August 5, 2015, the shareholders of the Company approved the Amended and Restated Stock Incentive Plan, which extended the term of the Stock Incentive Plan to June 10, 2025. For shares issued under the Stock Incentive Plan, the associated compensation expense is generally recognized equally over the vesting periods established at the award date and is subject to the employee’s continued employment by the Company.

There were no restricted shares granted during the first nine months of fiscal 2016 or fiscal 2015. A total of 177,527 shares remained available for award at January 31, 2016. There were 9,500 unvested shares at January 31, 2016 with a weighted average grant date fair value of $52.10.

The Company recorded compensation cost of approximately $74,000 ($47,000 after tax effects) and $68,000 ($43,000 after tax effects) related to the Stock Incentive Plan during the nine months ended January 31, 2016 and 2015, respectively. As of January 31, 2016, the Company had approximately $421,000

of total unrecognized compensation cost related to unvested awards granted under the Stock Incentive Plan, which the Company expects to recognize over a weighted-average remaining period of 4.3 years.

There were no modifications to any of the Company’s outstanding share-based payment awards during fiscal 2015 or during the first nine months of fiscal 2016.