11. Equity Awards

The Company administers the Strategic Education, Inc. 2015 Equity Compensation Plan, the Capella Education Company 2005 Stock Incentive Plan, and the Capella Education Company 2014 Equity Incentive Plan (collectively, the “Plans”). These plans provide for the granting of restricted stock, restricted stock units, stock options intended to qualify as incentive stock options, options that do not qualify as incentive stock options, and other forms of equity compensation and performance-based awards to employees, officers, and directors of the Company, or to a consultant or advisor to the Company, at the discretion of the Board of Directors. Vesting provisions are at the discretion of the Board of Directors. Options may be granted at option prices based at or above the fair market value of the shares at the date of grant. The maximum term of the awards granted under any plan is ten years.

Dividends paid on unvested restricted stock are reimbursed to the Company, and dividend equivalents accumulated on unvested restricted stock units are forfeited, if the recipient forfeits his or her shares as a result of termination of employment prior to vesting in the award, other than as a result of the recipient’s death, disability, or certain qualifying terminations in connection with a change in control of the Company, unless waived by the Company.

Restricted Stock and Restricted Stock Units

The table below sets forth the restricted stock and restricted stock units activity for the nine months ended September 30, 2018:


	Number of shares or units	Weighted- average Grant price
Balance, December 31, 2017	716,128	$	99.65
Grants	154,676		92.20
Awards assumed through acquisition of CEC	136,324		118.29
Vested shares	(226,371)		75.00
Forfeitures	(34,945)		89.13
Balance, September 30, 2018	745,812	$	114.38

Stock Options

The table below sets forth the stock option activity and other stock option information as of and for the nine months ended September 30, 2018:


				Weighted-
				average
		Weighted-		remaining	Aggregate
	Number of	average		contractual	intrinsic value(1)
	shares	exercise price		life (years)	(in thousands)
Balance, December 31, 2017	100,000	$	51.95	3.1	$	3,763
Grants	—		—
Awards assumed through acquisition of CEC	319,846		66.98
Exercises	(138,186)		55.32
Forfeitures/Expirations	—		—
Balance, September 30, 2018	281,660	$	67.36	7.1	$	19,623
Exercisable, September 30, 2018	122,133	$	65.94	6.3	$	8,683

⁽¹⁾

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the respective trading day and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holder had all options been exercised on the respective trading day. The amount of intrinsic value will change based on the fair market value of the Company’s common stock.

The Company received $6.8 million of net cash proceeds related to stock options exercised during the three and nine months ended September 30, 2018. The aggregate intrinsic value of the stock options exercised during the three and nine months ended September 30, 2018 was $9.7 million. No stock options were exercised during the three and nine months ended September 30, 2017.

Valuation and Expense Information under Stock Compensation Topic ASC 718

At September 30, 2018, total stock-based compensation cost which has not yet been recognized was $21.5 million for unvested restricted stock, restricted stock units, and stock option awards. This cost is expected to be recognized over the next 28 months on a weighted-average basis. Awards of approximately 530,000 shares of restricted stock and restricted stock units are subject to performance conditions. The accrual for stock-based compensation for performance awards is based on the Company’s estimates that such performance criteria are probable of being achieved over the respective vesting periods. Such a determination involves judgment surrounding the Company’s ability to maintain regulatory compliance. If the performance targets are not reached during the respective vesting period, or it is determined it is more likely than not that the performance criteria will not be achieved, related compensation expense is adjusted. Restricted stock unit awards of approximately 9,400 shares are required to be settled in cash upon vesting, and are classified as accounts payable and accrued expenses in the unaudited condensed consolidated balance sheet as of September 30, 2018. The value of these awards is marked to market each period based on the fair value of the Company's common stock at the end of the reporting period, and changes in fair value are recorded in earnings.

The following table sets forth the amount of stock-based compensation expense recorded in each of the expense line items for the three and nine months ended September 30, 2017 and 2018 (in thousands):


	For the three months ended				For the nine months ended
	September 30,				September 30,
	2017		2018		2017		2018
Instruction and educational support	$	548	$	695	$	1,363	$	1,813
Marketing		—		278		—		278
Admissions advisory		—		8		—		8
General and administration		2,366		2,591		7,206		7,410
Merger costs		—		2,272		—		2,272
Stock-based compensation expense included in operating expense		2,914		5,844		8,569		11,781
Tax benefit		1,151		1,607		3,384		3,253
Stock-based compensation expense, net of tax	$	1,763	$	4,237	$	5,185	$	8,528

During the nine months ended September 30, 2017 and 2018, the Company recognized a tax windfall related to share-based payment arrangements of approximately $0.6 million and $3.5 million, respectively, which was recorded as an adjustment to the provision for income taxes.