9. Stock Option Plan and Stock Based Compensation

The Company grants stock options and restricted stock to key executives and managerial employees and non-employee directors. At May 31, 2014, the Company had one stock option plan, the 2004 Long-Term Incentive Plan of Ennis, Inc., as amended and restated as of June 30, 2011, formerly the 1998 Option and Restricted Stock Plan amended and restated as of May 14, 2008 (the “Plan”). The Company has 775,767 shares of unissued common stock reserved under the Plan for issuance as of May 31, 2014. The exercise price of each stock option granted under the

Plan equals a referenced price of the Company’s common stock as reported on the New York Stock Exchange on the date of grant, and an option’s maximum term is ten years. Stock options and restricted stock may be granted at different times during the year and vest ratably over various periods, from grant date up to five years. The Company uses treasury stock to satisfy option exercises and restricted stock awards.

The Company recognizes compensation expense for stock options and restricted stock grants on a straight-line basis over the requisite service period. For the three months ended May 31, 2014 and May 31, 2013, the Company included in selling, general and administrative expenses, compensation expense related to share based compensation of $0.4 million ($0.2 million net of tax), and $0.4 million ($0.3 million net of tax), respectively.

Stock Options

The Company had the following stock option activity for the three months ended May 31, 2014:


						Weighted
	Number			Weighted		Average		Aggregate
	of			Average		Remaining		Intrinsic
	Shares			Exercise		Contractual		Value(a)
	*(exact quantity)*			Price		Life *(in years)*		*(in thousands)*
Outstanding at February 28, 2014		369,405		$	15.86		6.0	$	416
Granted		31,418			15.78
Terminated		(20,000	)		16.21
Exercised		(6,000	)		8.94

Outstanding at May 31, 2014		374,823		$	15.95		6.4	$	301

Exercisable at May 31, 2014		295,063		$	16.16		5.8	$	274

(a)	Intrinsic value is measured as the excess fair market value of the Company’s common stock as reported on the New York Stock Exchange over the applicable exercise price.

The following is a summary of the assumptions used and the weighted average grant-date fair value of the stock options granted during the three months ended May 31, 2014 and May 31, 2013:


	May 31,
	2014			2013
Expected volatility		29.25	%		30.41	%
Expected term (years)		3			3
Risk free interest rate		0.91	%		0.35	%
Dividend yield		4.11	%		4.63	%
Weighted average grant-date fair value	$	2.70		$	1.96

A summary of the stock options exercised and tax benefits realized from stock based compensation is presented below (in thousands):


	Three months ended
	May 31,
	2014		2013
Total cash received	$	54	$	—
Income tax benefits		—		—
Total grant-date fair value		9		—
Intrinsic value		36		—

A summary of the status of the Company’s unvested stock options at February 28, 2014, and changes during the three months ended May 31, 2014 is presented below:


				Weighted
				Average
	Number			Grant Date
	of Options			Fair Value
Unvested at February 28, 2014		112,211		$	2.89
New grants		31,418			2.70
Vested		(63,869	)		3.27
Forfeited		—			—

Unvested at May 31, 2014		79,760		$	2.51

As of May 31, 2014, there was $0.2 million of unrecognized compensation cost related to unvested stock options granted under the Plan. The weighted average remaining requisite service period of the unvested stock options was 2.0 years. The total fair value of shares underlying the options vested during the three months ended May 31, 2014 was $1.0 million.

Restricted Stock

The Company had the following restricted stock grant activity for the three months ended May 31, 2014:


				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Outstanding at February 28, 2014		180,902		$	15.77
Granted		85,807			15.78
Terminated		—			—
Vested		(113,061	)		16.42

Outstanding at May 31, 2014		153,648		$	15.30

As of May 31, 2014, the total remaining unrecognized compensation cost related to unvested restricted stock granted under the Plan was approximately $2.2 million. The weighted average remaining requisite service period of the unvested restricted stock awards was 2.2 years. As of May 31, 2014, the Company’s outstanding restricted stock had an underlying fair value at date of grant of $2.4 million.