11. Stock Compensation Plans

On July 28, 2005, the Company’s Board of Directors approved the Cal-Maine Foods, Inc. 2005 Incentive Stock Option Plan (the "ISO Plan") and reserved 500,000 shares for issuance upon exercise of options granted under the ISO Plan. Options issued pursuant to the ISO Plan may be granted to any of the Company’s employees. The options may have a term of up to ten years and generally will vest ratably over five years. On August 17, 2005, the Company issued 360,000 options with an exercise price of $5.93. The options have ten-year terms and vest over five years beginning from the date of grant. The ISO Plan was ratified by the Company’s shareholders at the annual meeting of shareholders on October 13, 2005.

On July 28, 2005, the Company’s Board of Directors approved the Cal-Maine Foods, Inc. Stock Appreciation Rights Plan (the "Rights Plan"). The Rights Plan covers 1,000,000 shares of Common Stock of the Company. Stock Appreciation Rights ("SARs") may be granted to any employee or non-employee member of the Board of Directors. Upon exercise of a SAR, the holder will receive cash equal to the difference between the fair market value of a single share of Common Stock at the time of exercise and the strike price which is equal to the fair market value of a single share of Common Stock on the date of the grant. The SARs have a ten-year term and vest over five years. On August 17, 2005, the Company issued 592,500 SARs under the Rights Plan with a strike price of $5.93 and, on August 26, 2005, the Company issued 22,500 SARs with a strike price of $6.71. On August 24, 2006, the Company issued 15,000 SARs with a strike price of $6.93. The Rights Plan was ratified by the Company’s shareholders at the annual meeting of shareholders on October 13, 2005.

On October 5, 2012, shareholders approved the Cal-Maine Foods, Inc. 2012 Omnibus Long-Term Incentive Plan (“2012 Plan”). The purpose of the 2012 Plan is to assist us and our subsidiaries in attracting and retaining selected individuals who, serving as our employees, outside directors and consultants, are expected to contribute to our success and to achieve long-term objectives which will benefit our shareholders through the additional incentives inherent in the awards under the 2012 Plan. The maximum number of shares of common stock that are available for awards under the 2012 Plan is 500,000 shares issuable from the Company’s treasury stock. Awards may be granted under the 2012 Plan to any employee, any non-employee member of the Company’s Board of Directors, and any consultant who is a natural person and provides services to us or one of our subsidiaries (except for incentive stock options which may be granted only to our employees).

On January 15, 2013 and January 15, 2014, the Company granted restricted shares from treasury in the amounts of 63,000 and 63,600, respectively. The restricted shares vest three years from the grant date, or upon death or disability, change in control, or retirement (subject to certain requirements). The restricted shares contain no other service or performance conditions. Restricted stock is awarded in the name of the recipient and except for the right of disposal, constitutes issued and outstanding shares of the Company’s common stock for all corporate purposes during the period of restriction including the right to receive dividends. Compensation expense is a fixed amount based on the grant date closing price and is amortized over the vesting period. Our unrecognized compensation expense as a result of non-vested shares at May 31, 2014 and June 1, 2013 was $4.3 million and $2.0 million, respectively. The unrecognized compensation expense will be amortized to stock compensation expense over a period of 2.14 years.

The Company recognized stock compensation expense of $1.3 million for equity awards and $521,000 for liability awards in fiscal 2014. In fiscal 2013, the Company recognized stock compensation expense of $291,000 for equity awards and $312,000 for liability awards. In fiscal 2012, the Company recognized no stock compensation expense for equity awards and $502,000 for liability awards.

A summary of our equity award activity and related information for our stock options is as follows:



					Weighted
			Weighted		Average
	Number		Exercise		Remaining		Aggregate
	of		Price		Contractual		Intrinsic
	Options		Per Share		Life (in Years)		Value
Outstanding, June 2, 2012		43,000	$	5.93
Granted		-		-
Exercised		-		-
Forfeited		-		-
Outstanding, June 1, 2013		43,000	$	5.93
Granted		-		-
Exercised		(20,000)		5.93
Forfeited		-		-
Outstanding, May 31, 2014		23,000	$	5.93		1.21	$	1,468
Exercisable, May 31, 2014		23,000	$	5.93		1.21	$	1,468

The intrinsic value of stock options exercised totaled $911,000, zero and $1.8 million in fiscal years 2014, 2013, and 2012, respectively.

A summary of our equity award activity and related information for our restricted stock is as follows:



			Weighted
	Number		Average
	of		Grant Date
	Shares		Fair Value
Outstanding, June 1, 2013		63,000	$	41.08
Granted		63,600		53.53
Vested		(2,970)		45.69
Forfeited		(1,030)		41.08
Outstanding, May 31, 2014		122,600	$	47.43

A summary of our liability award activity and related information is as follows:



					Weighted
			Weighted		Average
	Number		Average		Remaining		Aggregate
	Of		Strike Price		Contractual		Intrinsic
	Rights		Per Right		Life (in Years)		Value
Outstanding, June 2, 2012		31,600	$	6.31
Granted		-		-
Exercised		(5,100)		5.93
Forfeited		-		-
Outstanding, June 1, 2013		26,500	$	6.38
Granted		-		-
Exercised		(8,200)		5.93
Forfeited		-		-
Outstanding, May 31, 2014		18,300	$	6.59		1.88	$	1,156
Exercisable, May 31, 2014		18,300	$	6.59		1.88	$	1,156

We determined the fair value of our obligation related to unexercised liability awards as of May 31, 2014 and June 1, 2013 was $1.1 million and $986,000, respectively. Total payments for liability awards exercised totaled $373,000, $192,000, and $1.2 million for fiscal 2014, 2013 and 2012, respectively.

The fair value of liability awards was estimated as of May 31, 2014, June 1, 2013, and June 2, 2012 using a Black-Scholes option pricing model using the following weighted-average assumptions:


	May 31, 2014	June 1, 2013	June 2, 2012
Risk-free interest rate	0.10%	0.13%	0.17%
Dividend yield	1.66%	2.66%	3.35%
Volatility factor of the expected
market price of our stock	37.36%	23.65%	14.70%
Weighted-avg. expected life of the rights	1 yr.	1 yr.	1 yr.