Stock-Based Compensation Plans | 1 0 . Stock - Based Compensation Plans 2014 Performance Incentive Plan On October 23, 2014, the Company’s stockholders approved the 2014 Plan. The 2014 Plan replaced the Resources Connection, Inc. 2004 Performance Incentive Plan and the 1999 Long Term Incentive Plan (the “Prior Stock Plans”). The effective date of the 2014 Plan is September 3, 2014 and, unless terminated earlier by the Board of Directors, will terminate on September 2, 2024. Under the terms of the 2014 Plan, the Company’s board of directors or one or more committees appointed by the board of directors will administer the 2014 Plan. The board of directors has delegated general administrative authority for the 2014 Plan to the Compensation Committee of the board of directors. The administrator of the 2014 Plan has broad authority to, among other things, select participants and determine the type(s) of award(s) that they are to receive, and determine the number of shares that are to be subject to awards and the terms and conditions of awards, including the price (if any) to be paid for the shares or the award. Persons eligible to receive awards under the 2014 Plan include officers or employees of the Company or any of its subsidiaries, directors of the Company, and certain consultants and advisors to the Company or any of its subsidiaries. The maximum number of shares of the Company’s common stock that may be issued or transferred pursuant to awards under the 2014 Plan equals the sum of: (1) 2,400,000 shares, plus (2) the number of shares subject to stock options granted under the Prior Stock Plans and outstanding as of September 3, 2014 (the date at which the Prior Stock Plans terminated), which expire, or for any reason are cancelled or terminated, after that date without being exercised, plus (3) the number of shares subject to restricted stock, restricted stock units and other full-value awards granted under the Prior Stock Plans that were outstanding and unvested as of September 3, 2014, which are forfeited, terminated, cancelled, or otherwise reacquired after that date without having become vested. As of May 27, 2017 , 2,767,000 shares were available for award grant purposes under the 2014 Plan, subject to future increases as described in (2) and (3) above and subject to increase as then-outstanding awards expire or terminate without having become vested or exercised, as applicable. The types of awards that may be granted under the 2014 Plan include stock options, restricted stock, stock bonuses, performance stock, stock units, phantom stock and other forms of awards granted or denominated in the Company’s common stock or units of the Company’s common stock, as well as certain cash bonus awards. Under the terms of the 2014 Plan, the option price for the incentive stock options (“ISOs”) and nonqualified stock options (“NQSO”) may not be less than the fair market value of the shares of the Company’s stock on the date of the grant. For ISOs, the exercise price per share may not be less than 110% of the fair market value of a share of common stock on the grant date for any individual possessing more than 10% of the total outstanding stock of the Company. Stock options granted under the 2014 Plan and the Prior Stock Plans generally become exercisable over periods of one to four years and expire not more than ten years from the date of grant. The Company predominantly grants NQSOs to employees in the U.S. The Company granted 127,720 and 50,354 shares of restricted stock during the fiscal years ended May 27, 2017 and May 28 , 201 6 , respectively. A summary of the share-based award activity under the 2014 Plan and the Prior Stock Plans follows (amounts in thousands, except weighted average exercise price): Share-Based Number of Weighted Weighted Average Awards Shares Average Remaining Aggregate Available Under Exercise Contractual Life Intrinsic for Grant Option Price (in years) Value Options outstanding at May 28, 2016 3,206 7,347 $ 16.08 5.41 $ 10,109 Granted, at fair market value (1,212) 1,212 14.52 Restricted stock (1) (319) - - Exercised - (305) 12.59 Forfeited (2) 267 (265) 14.18 Expired 825 (825) 29.77 Options outstanding at May 27, 2017 2,767 7,164 $ 15.08 5.56 $ 1,696 Exercisable at May 27, 2017 4,608 $ 15.59 4.04 $ 1,173 Vested and expected to vest at May 27, 2017 (3) 6,962 $ 15.09 5.46 $ 1,696 (1) Amounts represent restricted shares granted. Share-based awards available for grant are reduced by 2.5 shares for each share awarded as stock grants from the 2014 Plan. (2) Amounts represent both stock options and restricted share awards forfeited. (3) The expected to vest options are the result of applying the pre-vesting forfeiture rate assumptions to options not yet vested. . The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $12.65 as of May 2 6 , 201 7 (the last actual trading day of fiscal 201 7 ), which would have been received by the option holders had all option holders exercised their options as of that date. The total pre-tax intrinsic value related to stock options exercised during the years ended May 27, 2017 , May 28 , 201 6 and May 30 , 201 5 was $1.1 million, $1.8 million and $1.2 million , respectively. The total estimated fair value of stock options that vested during the years ended May 27, 2017 , May 28 , 201 6 and May 30 , 201 5 was $3.6 million, $4.0 million and $3.8 million, respectively. Valuation and Expense Information for Stock Based Compensation Plans The following table summarizes the impact of the Company’s stock-based compensation plans. Stock-based compensation expense is included in selling, general and administrative expenses and consists of stock-based compensation expense related to employee stock options, ESPP stock purchase rights and restricted stock (in thousands, except per share amounts): For the Years Ended May 27, May 28, May 30, 2017 2016 2015 Income before income taxes $ (6,068) $ (6,280) $ (5,989) Net income $ (3,962) $ (4,159) $ (3,823) Net income per share: Basic $ (0.12) $ (0.11) $ (0.10) Diluted $ (0.12) $ (0.11) $ (0.10) The weighted average estimated fair value per share of employee stock options granted during the years ended May 27, 2017 , May 28 , 201 6 and May 30 , 201 5 was $3.61 , $4.54 and $3.93 , respectively, using the Black-Scholes model with the following assumptions: For the Years Ended May 27, 2017 May 28, 2016 May 30, 2015 Expected volatility 34.6% - 38.4% 35% - 40.5% 36.2% - 42.1% Risk-free interest rate 1.3% - 1.6% 1.7% - 2.0% 1.7% - 2.2% Expected dividends 3.0% 2.2% 1.9% - 2.1% Expected life 5.6 - 8.1 years 5.6 - 7.7 years 5.5 - 7.5 years As of May 27, 2017 , there was $7.0 million of total unrecognized compensation cost related to non-vested employee stock options granted. That cost is expected to be recognized over a weighted-average period of 31 months. Stock-based compensation expense included in selling, general and administrative expenses for the years ended May 27, 2017 , May 28 , 201 6 and May 30 , 201 5 was $ 6. 1 million, $6. 3 million and $ 6.0 million, respectively; this consisted of stock-based compensation expense related to employee stock options, employee stock purchases made via the Company’s ESPP and issuances of restricted stock. Also included in the stock-based compensation expense for the year ended May 28, 2016 was approximately $900,000 related to the accelerated vesting of options held by Donald Murray in connection with his transition from Executive Chairman to Chairman. Stock-based compensation expense in the tables above includes compensation for restricted shares of $802,000 , $598,000 and $515,000 for the years ended May 27, 2017 , May 28 , 201 6 and May 30 , 201 5 , respectively. The Company granted 127,720 , 50,354 and 49,840 shares of restricted stock for the years ended May 27, 2017 , May 28 , 201 6 and May 30 , 201 5 , respectively. There were 43,261 and 41,796 restricted shares that vested in fiscal 201 7 and 201 6 , respectively. There were 189,015 , 105,925 and 97,938 unvested restricted shares as of May 27, 2017 , May 28 , 201 6 and May 30 , 201 5 , respectively. At May 27, 2017 , there was approximately $2.7 million of total unrecognized compensation cost related to restricted shares, which is expected to be recognized over a weighted-average period of 32 months . Excess tax benefits related to stock-based compensation expense are recognized as an increase to additional paid-in capital and tax shortfalls are recognized as income tax expense unless there are excess tax benefits from previous equity awards to which the shortfall can be offset. On the adoption date of the required accounting for stock-based compensation expense, the Company calculated the amount of eligible excess tax benefits available to offset future tax shortfalls in accordance with the long-form method. The Company recognizes compensation expense for only the portion of stock options and restricted stock units that are expected to vest, rather than recording forfeitures when they occur. If the actual number of forfeitures differs from that estimated by management, additional adjustments to compensation expense may be required in future periods. Employee Stock Purchase Plan On October 23, 2014, the Company’s stockholders approved an amendment to the ESPP to extend the term of the ESPP through October 16, 2024, and to increase the maximum number of shares of the Company’s common stock authorized for issuance under the ESPP by an additional 1.5 million shares. The Company’s ESPP allows qualified employees (as defined in the ESPP) to purchase designated shares of the Company’s common stock at a price equal to 85% of the lesser of the fair market value of common stock at the beginning or end of each semi-annual stock purchase period. After approval of the amendment, a total of 5.9 million shares of common stock may be issued under the ESPP. The Company issued 359,000 , 325,000 and 337,000 shares of common stock pursuant to the ESPP for the years ended May 27, 2017 , May 28 , 201 6 and May 30 , 201 5 , respectively. There are 918,000 shares of common stock available for issuance under the ESPP as of May 27, 2017 . |