On March 1, 2013, as permitted under the Plan, the Compensation Committee of the Board adopted the 2013 Equity Incentive Plan (the “Equity Incentive Plan”) for the purpose of granting stock awards to directors, officers and employees of the Company and its subsidiaries. Stock awarded pursuant to the Equity Incentive Plan is limited to five percent of the outstanding Common Stock on a fully diluted basis. There are 5,263,000 shares of Common Stock authorized for issuance under the Equity Incentive Plan. As of June 30, 2015, the Company had 2,152,148 shares of Common Stock available for grant.

The Equity Incentive Plan provides for the granting of non-qualified stock options (“NSOs”), restricted stock units (“RSUs”), performance share units (“PSUs”) and restricted and unrestricted stock awards (collectively “Equity Awards”). Pursuant to ASC Topic 718, the Company measures stock-based compensation costs on the grant date based on the estimated fair value of the award and recognizes compensation costs on a straight-line basis over the requisite service period for the entire award. The Company’s Equity Incentive Plan allows employees to surrender to the Company shares of vested common stock upon vesting of their stock awards or at the time they exercise their NSOs in lieu of their payment of the required withholdings for employee taxes. The Company does not withhold taxes on Equity Awards in excess of minimum required statutory requirements.

Holders of RSUs and PSUs also receive DEUs until the RSUs or PSUs vest. The number of DEUs granted for each RSU or PSU is calculated based on the value of the dividends per share paid on the Company’s Common Stock and the closing price of the Company’s Common Stock on the dividend payment date. The DEUs vest with the underlying RSU or PSU.

NSO and RSU awards generally vest 25% on each anniversary of the date of the grant. Under the Equity Incentive Plan, the exercise price of an NSO award cannot be less than the market price of Common Stock at the time the NSO award is granted and has a maximum contractual term of 10 years. PSU awards cliff vest at the end of the two-year and three-year performance periods, depending on the period specified in each respective PSU agreement. The number of PSUs that ultimately vest depends on the Company’s performance relative to specified financial targets for fiscal years 2015, 2016 and 2017. Additionally, RSUs and PSUs are entitled to dividend equivalents. See Note 11 for further information. Restricted and unrestricted stock awards have been issued to certain members of the Board as compensation for retainer fees and long-term awards. The Company intends to facilitate settlement of all vested awards in Common Stock, with the exception of certain RSUs granted to non-US based employees which the Company expects to settle in cash.

The Company estimates the fair value of NSO awards using the Black-Scholes option-pricing model, which incorporates various assumptions including the expected term of the awards, volatility of the stock price, risk-free rates of return and dividend yield. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility was based on the actual historical volatility of a select peer group of entities operating in similar industry sectors as the Company. The expected dividend yield was based on the Company’s expectation of future dividend payments at the time of grant. Expected life was calculated using the simplified method as described under Staff Accounting Bulletin Topic 14, “Share-Based Payment.”

In connection with the Special Cash Dividend (see Note 11), and pursuant to the terms of the Equity Incentive Plan, the number of the Company’s employees’ outstanding equity awards, and the exercise price of the NSOs, were adjusted to preserve the fair value of the awards immediately before and after the Special Cash Dividend. The Company’s Class A Common Stock began trading ex-dividend on March 23, 2015 (the “Ex-dividend Date”). The conversion ratio (the “Ratio”) used to adjust the awards was based on the ratio of (a) unaffected closing price of Class A Common Stock on the day before the Ex-dividend Date to (b) the opening price of Class A Common Stock on the Ex-dividend Date. As the above adjustments were made pursuant to existing anti-dilution provisions of the Equity Incentive Plan, the Company did not record any incremental compensation expense related to the conversion of the Equity Awards. The Equity Awards continue to vest over the original vesting period, as described above. The combined impact of this award activity is collectively referred to as the “Adjustments.” The Adjustments increased outstanding Equity Awards by 251,537 shares, which are separately included in the line item “Adjustments due to the Special Cash Dividend” in the tables below.

The awards held as of the Ex-dividend Date by Company employees were modified as follows:


•	Non-Qualified Stock Options - The number of NSOs outstanding as of the Ex-dividend Date was increased via the calculated Ratio and the strike price of NSOs was decreased via the Ratio in order to preserve the fair value of NSOs;


•	Restricted Stock Units - The number of outstanding RSUs as of the Ex-dividend Date was increased utilizing the calculated Ratio in order to preserve the fair value of RSUs; and


•	Performance Share Units - The number of outstanding PSUs as of the Ex-dividend Date was increased utilizing the calculated Ratio in order to preserve the fair value of PSUs.

The following table provides the weighted-average assumptions used to determine the fair value of NSO awards granted during the six months ended June 30, 2015:



	Six Months Ended June 30, 2015
Risk-free interest rate	1.71	%
Expected dividend yield (1)	0.16	%
Expected stock price volatility	44.51	%
Expected life (in years)	6.25

(1) Prior to the Board’s approval of quarterly dividends in the second quarter of 2015, the Company utilized a 0% expected dividend yield assumption in its Black-Scholes calculations.

The Company determines the fair value of PSU, RSU and unrestricted and restricted stock awards by reference to the quoted market price of the Common Stock on the date of the grant.

Stock-based compensation expense for the three and six months ended June 30, 2015 totaled $9 million and $17 million, respectively. Stock-based compensation expense for the three and six months ended June 29, 2014, including the expense attributable to Tribune Publishing prior to the Publishing Spin-off, totaled $7 million and $16 million, respectively.

A summary of activity and weighted average exercise prices related to the NSOs is reflected in the table below. For NSOs granted prior to the Ex-dividend Date, the weighted-average exercise prices reflect the historical values without giving effect to the Special Cash Dividend. As noted above, as of the Ex-dividend Date, an adjustment was made to convert the number of outstanding options and the exercise prices to preserve the fair value of the awards.



	Six Months Ended June 30, 2015
	Shares		Weighted Avg. Exercise Price
Outstanding, beginning of period	974,518		$	70.90
Granted	445,770		58.05
Exercised	(3,370	)	49.40
Forfeited	(30,941	)	58.73
Cancelled	(539	)	53.07
Adjustments due to the Special Cash Dividend	145,219		*
Outstanding, end of period (1)	1,530,657		$	60.73
Vested and exercisable, end of period (1)	310,016		$	61.90

* Not meaningful

(1) The weighted average exercise price of options outstanding as of June 30, 2015 reflects the adjustment for the Special Cash Dividend.

A summary of activity and weighted average fair values related to the RSUs is reflected in the table below. For RSUs granted prior to the Ex-dividend Date, the weighted-average fair values reflect the historical values without giving effect to the Special Cash Dividend. As noted above, as of the Ex-dividend Date, an adjustment was made to increase the number of outstanding RSUs to preserve the fair value of the awards.



	Six Months Ended June 30, 2015
	Shares		Weighted Avg. Fair Value
Outstanding, beginning of period	633,182		$	68.76
Granted	414,947		58.04
Dividend equivalent units granted	4,124		54.32
Vested	(192,901	)	65.80
Forfeited	(54,097	)	64.59
Dividend equivalent units forfeited	(34	)	54.32
Adjustments due to the Special Cash Dividend	88,836		*
Outstanding and nonvested, end of period (1)(2)	894,057		$	59.02

* Not meaningful

(1) Includes 6,810 RSUs which were granted to foreign employees and which the Company expects to settle in cash. These RSUs generally vest over a four year period. The fair value of these RSUs at June 30, 2015 was not material.

(2) The weighted average fair value of outstanding RSUs as of June 30, 2015 reflects the adjustment for the Special Cash Dividend.

A summary of activity and weighted average fair values related to the restricted and unrestricted stock awards is as follows:



	Six Months Ended June 30, 2015
	Shares		Weighted Avg. Fair Value
Outstanding, beginning of period	16,670		$	56.80
Granted	11,811		60.07
Vested	(20,146	)	58.72
Forfeited	(1,667	)	56.80
Outstanding and nonvested, end of period	6,668		$	56.80

A summary of activity and weighted average fair values related to the PSUs is reflected in the table below. For PSUs granted prior to the Ex-dividend Date, the weighted-average fair values reflect the historical values without giving effect to the Special Cash Dividend. As noted above, as of the Ex-dividend Date, an adjustment was made to increase the number of outstanding PSUs to preserve the fair value of the awards.



	Six Months Ended June 30, 2015
	Shares	Weighted Avg. Fair Value
Outstanding, beginning of period	43,219	$	74.35
Granted (1)	65,982	68.10
Granted dividend equivalent units	840	54.32
Adjustment due to the Special Cash Dividend (1)	11,575	*
Outstanding and nonvested, end of period (1)(2)	121,616	$	63.74

* Not meaningful

(1) Represents shares of PSUs for which performance targets have been established and which are deemed granted under U.S. GAAP. An additional adjustment of 5,907 PSUs which have not yet been deemed granted under U.S. GAAP is not reflected in the table above.

(2) The weighted average fair value of outstanding PSUs as of June 30, 2015 reflects the adjustment for the Special Cash Dividend.

As of June 30, 2015, the Company had not yet recognized compensation cost on nonvested awards as follows (dollars in thousands):



	Unrecognized Compensation Cost		Weighted Average Remaining Recognition Period
Nonvested awards	$	83,056	2.7