Stock-Based Compensation Plans

We have a 2014 Omnibus Equity, Performance Award, and Incentive Compensation Plan (as amended, the "Plan") in place as approved by shareholders, which allows us to grant or issue non-qualified stock options, incentive stock options, share awards, and other equity compensation to key employees and to non-employee directors.

No more than 3.6 million shares of common stock may be issued under the Plan, and no more than 3.6 million of those shares may be used for awards other than stock options or stock appreciation rights. Shares subject to awards that are forfeited or terminated, expire unexercised, are cancelled and settled in cash in lieu of common stock or are exchanged for awards that do not involve common stock, shall be added back to the limits and again immediately become available for awards.

The term of any options granted under the Plan may not exceed ten years from the date of the grant. Stock options are granted at the closing market price on the date of grant. Options issued to key employees generally vest over a three-year period in equal annual installments, beginning one year after the date of grant, with immediate vesting upon a change of control (as defined in the Plan), if earlier.

Share awards generally vest over a three-year period in equal annual installments with continued employment, beginning one year after the date of grant, with immediate vesting upon retirement for awards made prior to October 2016 or upon a change of control (collectively, "time-based") or upon attainment of established goals. Share awards that are not time-based typically vest at the end of a one-year or three-year incentive period based upon the achievement of company goals ("performance-based"). The value of time-based restricted share awards is based on the number of shares granted and the closing price of our common stock on the date of grant. The value of performance-based restricted share awards is based upon the terms of the plan, the closing price of our common stock on the date of grant, and an assessment of the probability of reaching the established performance targets. Historically, the terms of these plans linked the incentive payment to a percentage of base salary compensation, and if the established goals are met, shares of the appropriate value are then granted.

Our Employee Stock Purchase Plan ("ESPP"), as approved by the shareholders at the December 12, 2017 annual meeting, permits employees to purchase our common stock at a 15% discount from the market price at the end of semi-annual purchase periods and is compensatory. Employees are required to hold the common stock purchased for one year. In Fiscal 2018, 2,760 shares were purchased through the ESPP. At August 25, 2018, plan participants had accumulated $0.1 million to purchase our common stock pursuant to this plan.

Total stock-based compensation expense for the past three fiscal years consisted of the following components:



	Year Ended
(In thousands)	August 25, 2018		August 26, 2017		August 27, 2016
Share awards:
Performance-based	$	2,525	$	69	$	807
Time-based	4,152		2,606		2,326
Stock options	502		164		11
Other⁽¹⁾	255		138		149
Total stock-based compensation	$	7,434	$	2,977	$	3,293


(1)	Includes stock-based compensation expense related to Board of Directors stock unit expense and ESPP expense. Directors may elect to defer all or part of their annual retainer into a deferred compensation plan. The plan allows them to defer into either money units or stock units and is more fully described in the Proxy Statement.

Share Awards - Performance-Based

Long-Term Incentive Plan

In each fiscal year presented, the Human Resources Committee of our Board of Directors established a three year incentive compensation plan to serve as an incentive to our senior management team to achieve certain company-performance targets. If the targets are met, restricted stock is awarded subsequent to the end of each three year period with a one year restriction on sale upon award (except for shares we agree to repurchase in lieu of executives' payment of payroll taxes). In the event that we do not achieve the required targets, no restricted stock will be granted. If it becomes probable that certain of the performance targets will be achieved, the corresponding estimated cost of the grant will be recorded as stock-based compensation expense over the performance period. The probability of reaching the targets is evaluated each reporting period. If it becomes probable that certain of the target performance levels will be achieved, a cumulative adjustment will be recorded and future stock-based-compensation expense will increase based on the then projected performance levels. If we later determine that it is not probable that the minimum performance threshold for the grants will be met, no further stock-based compensation cost will be recognized and any previously recognized stock-based compensation cost related to these plans will be reversed.

Annual Incentive Plan

The Human Resources Committee of our Board of Directors establishes annual incentive plans for the officers. The Fiscal 2018 and Fiscal 2017 Annual Incentive Plans were paid entirely in cash, while the Fiscal 2016 Annual Incentive Plan was paid in 2/3 cash and 1/3 restricted stock (stock must be held for one year from date of grant except for shares we agree to repurchase in lieu of executives' payment of payroll taxes). On October 11, 2016, 17,532 restricted shares were awarded related to the Fiscal 2016 Annual Incentive Plan.

Share Awards - Time-Based

A summary of share award activity for Fiscal 2018, 2017 and 2016 is as follows:



	Year Ended
	August 25, 2018				August 26, 2017				August 27, 2016
	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Beginning of year	243,769		$	23.61	283,881		$	20.45	163,420		$	20.83
Granted	167,781		42.54		156,801		28.13		240,270		19.72
Vested	(100,648	)	23.96		(159,979	)	22.66		(110,283	)	19.44
Cancelled	(25,711	)	29.64		(36,934	)	22.61		(9,526	)	20.28
End of year	285,191		$	34.08	243,769		$	23.61	283,881		$	20.45

The aggregate intrinsic value of awards outstanding at August 25, 2018 was $10.6 million. As of August 25, 2018, there was $5.6 million of unrecognized compensation expense related to restricted stock awards that is expected to be recognized over a weighted average period of 1.2 years. The total fair value of awards vested during Fiscal 2018, 2017 and 2016 was $7.1 million, $4.9 million, and $2.2 million, respectively.

On October 15, 2018, the Board of Directors granted 77,869 restricted stock units under the Plan valued at $2.5 million to our key management group (approximately 40 employees). The Board of Directors also granted 23,975 restricted stock units valued at $0.8 million to the non-management members of the Board. The value of the restricted stock units is based on the closing price of our common stock on the date of grant, which was $31.70. The fair value of this award is amortized on a straight-line basis over the requisite service period of three years for employees and one year for non-management members of the Board. Estimated non-cash stock compensation expense based on this grant is expected to be approximately $1.6 million for Fiscal 2019.

Stock Options

A summary of stock option activity for Fiscal 2018, 2017 and 2016 is as follows:



	Year Ended
	August 25, 2018			August 26, 2017				August 27, 2016
	Shares	Wtd. Avg. Exercise Price/Share		Shares		Wtd. Avg. Exercise Price/Share		Shares		Wtd. Avg. Exercise Price/Share
Outstanding at beginning of year	65,800	$	28.15	10,000		$	16.67	167,394		$	28.30
Options granted	72,710	44.40		63,800		29.92		10,000		16.67
Options cancelled	—	—		(8,000	)	27.89		(167,394	)	28.30
Outstanding at end of year	138,510	$	36.68	65,800		$	28.15	10,000		$	16.67

Exercisable at end of year	25,263	$	26.64	3,333		$	16.67	—		$	—
Vested and expected to vest at end of year	138,510	$	36.68	65,800		$	28.15	10,000		$	16.67

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average valuation assumptions:



Valuation Assumptions⁽¹⁾	Fiscal 2018			Fiscal 2017			Fiscal 2016
Expected dividend yield	0.90		%	1.35		%	2.40		%
Risk-free interest rate ⁽²⁾	1.99		%	1.47		%	1.49		%
Expected life (in years) ⁽³⁾	5			5			5
Expected volatility ⁽⁴⁾	38.08		%	39.34		%	43.52		%
Weighted average fair value of options granted		$14.78			$9.58			$5.31


(1)	Forfeitures are recorded when they occur.


(2)	Risk-free interest rate is based on Treasury Securities constant maturity interest rate whose term is consistent with the expected life of the stock options.


(3)	Expected life of stock options is based on historical experience.


(4)	Expected stock price volatility is based on historical experience over a term consistent with the expected life of the stock options.

The weighted average remaining contractual life for options outstanding at August 25, 2018 was 8.6 years. Aggregate intrinsic value for options outstanding at August 25, 2018 was $0.6 million. As of August 25, 2018, there was $1.0 million of unrecognized compensation expense related to option awards that is expected to be recognized over a weighted average period of 1.8 years.

On October 15, 2018, the Board of Directors granted 114,635 stock options to our officers.