12. Share-Based Compensation

The Company issues equity grants to certain employees and directors of the Company at the discretion of the Company’s Compensation Committee. The Company has two equity plans, one adopted in Fiscal 2008, the Michael Kors (USA), Inc. Stock Option Plan (as amended and restated, the “2008 Plan”), and the other adopted in the third fiscal quarter of Fiscal 2012, the Michael Kors Holdings Limited Omnibus Incentive Plan (the “2012 Plan”). The 2008 Plan only provided for grants of share options and was authorized to issue up to 23,980,823 ordinary shares. As of June 27, 2015, there were no shares available to grant equity awards under the 2008 Plan. The 2012 Plan allows for grants of share options, restricted shares and restricted share units, and other equity awards, and authorizes a total issuance of up to 15,246,000 ordinary shares. At June 27, 2015, there were 9,170,884 ordinary shares available for future grants of equity awards under the 2012 Plan. Option grants issued from the 2008 Plan generally expire ten years from the date of the grant, and those issued under the 2012 Plan generally expire seven years from the date of the grant.

Share Options

Share options are generally exercisable at no less than the fair market value on the date of grant. The Company has issued two types of option grants, those that vest based on the attainment of a performance target and those that vest based on the passage of time. Performance-based share options may vest based upon the attainment of one of two performance measures. One performance measure is an individual performance target, which is based upon certain performance targets unique to the individual grantee, and the other measure is a company-wide performance target, which is based on a cumulative minimum growth requirement in consolidated net equity. The individual performance target vests 20% of the total option grant each year the target is satisfied. The individual has ten years in which to achieve five individual performance vesting tranches. The company-wide performance target must be achieved over the ten-year term. Performance is measured at the end of the term, and any unvested options vest if the target is achieved. The Company-wide performance target is established at the time of the grant. The target metrics underlying individual performance vesting requirements are established for each recipient each year up until such time as the grant is fully vested. Options subject to time-based vesting requirements become vested in four equal increments on each of the first, second, third and fourth anniversaries of the date on which such options were awarded.

The following table summarizes the share option activity during the three months ended June 27, 2015:


	Number of Options			Weighted Average Exercise price
Outstanding at March 28, 2015		7,187,003		$	23.14
Granted		511,281		$	47.12
Exercised		(706,343	)	$	6.79
Canceled/forfeited		(22,955	)	$	49.27

Outstanding at June 27, 2015		6,968,986		$	26.47

The weighted average grant date fair value for options granted during the three months ended June 27, 2015 and June 28, 2014 was $14.37 and $29.20 respectively. The following table represents assumptions used to estimate the fair value of options:


	Three Months Ended
	June 27, 2015			June 28, 2014
Expected dividend yield		0.0	%		0.0	%
Volatility factor		31.1	%		33.3	%
Weighted average risk-free interest rate		1.6	%		1.5	%
Expected life of option		4.75 years			4.75 years

Restricted Shares and Restricted Share Units

The Company grants restricted shares and restricted share units at the fair market value on the date of the grant. Expense for restricted share awards is based on the closing market price of the Company’s shares on the date of grant and is recognized ratably over the vesting period, which is generally three to four years from the date of the grant, net of expected forfeitures.

Restricted share grants generally vest in equal increments on each of the four anniversaries of the date of grant. In addition, the Company grants two types of restricted share unit (“RSU”) awards: time-based RSUs and performance-based RSUs. Time-based RSUs generally vest in full either on the first anniversary of the date of the grant, or in equal increments on each of the four anniversaries of the date of grant. Performance-based RSUs vest in full on the three-year anniversary of the date of grant, subject to the employee’s continued employment during the vesting period and only if certain pre-established cumulative performance targets are met at the end of the three-year performance period. Expense related to performance-based RSUs is recognized ratably over the three-year performance period, net of forfeitures, based on the probability of attainment of the related performance targets. The potential number of shares that may be earned ranges between 0%, if the minimum level of performance is not attained, and 150%, if the level of performance is at or above the pre-determined maximum achievement level.

The following table summarizes the restricted share activity during the three months ended June 27, 2015:


	Restricted Shares
	Number of Unvested Restricted Shares			Weighted Average Grant Date Fair Value
Unvested at March 28, 2015		770,592		$	68.77
Granted		—		$	—
Vested		(132,565	)	$	80.64
Canceled/forfeited		(8,252	)	$	77.29

Unvested at June 27, 2015		629,775		$	66.16

The following table summarizes the restricted share unit activity during the three months ended June 27, 2015:


	Service-based					Performance-based
	Number of Restricted Share Units			Weighted Average Grant Date Fair Value		Number of Restricted Share Units		Weighted Average Grant Date Fair Value
Unvested at March 28, 2015		35,940		$	66.26		317,201	$	76.69
Granted		801,751		$	47.57		287,476	$	47.10
Vested		—		$	—		—	$	—
Canceled/forfeited		(318	)	$	47.10		—	$	—

Unvested at June 27, 2015		837,373		$	48.37		604,677	$	62.62

Compensation expense attributable to share-based compensation for the three months ended June 27, 2015 and June 28, 2014 was $12.5 million and $8.2 million, respectively. The associated tax benefits recognized during the three months ended June 27, 2015 and June 28, 2014 were $5.0 million and $3.0 million, respectively. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company estimates forfeitures based on its historical forfeiture rate to date. The estimated value of future forfeitures for equity grants as of June 27, 2015 is approximately $2.6 million.