Share-Based Compensation Plans

Shared-based Employee Compensation: The Stock Compensation Topic of the FASB ASC 718 ("ASC 718") requires that we measure the cost of employee services received in exchange for an equity award, such as stock options, restricted stock awards and restricted stock units, based on the estimated fair value of the award on the grant date. The cost is recognized in the income statement over the vesting period of the award on a straight-line basis with the exception of compensation cost related to awards for retirement eligible employees, which are recognized immediately upon grant. Compensation cost recognized is based on the grant date fair value estimated in accordance with ASC 718.

On September 13, 2010, our stockholders approved the Bob Evans Farms, Inc. 2010 Equity and Cash Incentive Plan (the “2010 Plan”). Upon approval, the 2010 Plan became our primary plan under which new stock-based compensation can be granted.

The types of awards that may be granted under the 2010 Plan include: stock options, stock appreciation rights, restricted stock, restricted stock units, cash incentive awards, performance shares, performance units, and other awards. The Compensation Committee of the Board of Directors administers the 2010 Plan, including establishing the terms and conditions of the awards. The 2010 Plan allows the Compensation Committee to make awards to any of our employees, consultants, or nonemployee directors. The 2010 Plan imposes various restrictions on awards, including a maximum life of 10 years for stock options and stock appreciation rights and a minimum exercise price equal to the grant date stock price for stock options and stock appreciation rights. The remaining shares available for issue under the 2006 Equity and Cash Incentive Plan (the “2006 Plan”) became available for issuance under the 2010 Plan effective September 13, 2010.

In fiscal 2017, we granted market-based performance share units ("PSUs") and restricted stock units ("RSUs"). The PSUs granted under the 2010 Plan have market-based vesting conditions, while RSUs granted under the 2010 Plan vest ratably over three years for employees, and one year for non-employee directors of the Company. The PSUs awarded in the first quarter of fiscal 2017 were designed to vest at the end of a three-year performance period if they achieved the market-based vesting conditions. The PSUs were valued using a Monte Carlo simulation with the number of shares that ultimately vest dependent on the Company's total stockholder return, measured against the total stockholder return of a select group of peer companies over a three-year period. During fiscal years 2017, 2016 and 2015, we issued treasury shares to satisfy the vesting of restricted awards and stock option exercises.

In the third quarter of fiscal 2017, in accordance with the authority and power granted to the Compensation Committee under the terms of the 2010 Plan, the Compensation Committee approved acceleration of the vesting of all unvested RSUs, RSAs and PSUs then outstanding, contingent upon and effective at the time of the closing of the Restaurants Transaction. The Compensation Committee further determined that the performance criteria applicable to each PSU was deemed satisfied, upon the closing of the Restaurants Transaction and delivery by the participant of a written agreement with the Company containing a general release of claims and certain restrictive covenants. The Compensation Committee’s decision applied to all of the Company’s outstanding RSUs, RSAs and PSUs granted to employees that were unvested at the time of the modification.

The Compensation Committee's decision resulted in a Type III modification, defined as a change from improbable to probable vesting conditions as per ASC 718, for certain employees terminated during fiscal 2017 and for employees that left the Company as part of the Restaurants Transaction. For Type III modified stock awards, we recalculated the fair value on the modification date (January 24, 2017), and accelerated the associated unrecognized stock compensation expense. RSAs and RSUs are valued based on the stock closing price on the grant date. Total stock-based compensation expense from continuing operations in fiscal years 2017, 2016 and 2015, was $7,269, $2,958 and $1,600 respectively. The related tax benefit recognized was $2,762, $1,124 and $608 in fiscal years 2017, 2016 and 2015, respectively. Expense associated with stock-based compensation is primarily reflected in S,G&A expense.

Stock Options

The following table summarizes option-related activity for fiscal 2017:



Options	Shares Subject to Options		Weighted-Average Exercise Price
Outstanding, Beginning of Year	38,040		$	33.26
Granted	—		—
Exercised	(15,150	)	34.16
Forfeited or expired	—		—
Outstanding, End of Year	22,890		$	32.67



	Shares	Weighted-Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Options outstanding	22,890	$	32.67	1.59	$	780
Options exercisable	22,890	$	32.37	1.59	$	780

As of April 28, 2017, there was no remaining unrecognized compensation cost related to outstanding stock options. The total intrinsic value of options exercised during fiscal years 2017, 2016 and 2015 was $333, $195 and $567, respectively. Cash received from the exercise of options was $518, $214 and $534 for fiscal years 2017, 2016 and 2015, respectively.

Cash flows resulting from the tax benefits of tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) are classified as financing cash flows. In fiscal years 2017, 2016 and 2015, excess tax (expense) benefits of $(499), $1,661 and $228, respectively, were classified as financing cash flows in the Consolidated Statements of Cash Flows.

Restricted Stock

A summary of the status of our non-vested restricted stock awards and restricted stock units as of April 28, 2017, and changes during fiscal 2017 is presented below:



Restricted Stock Awards	Shares		Weighted-Average Grant Date Fair Value
Non-vested, Beginning of Year	89,655		$	40.93
Granted	—		—
Vested	(85,222	)	41.25
Forfeited	(4,433	)	34.74
Non-vested, End of Year	—		$	—



Restricted Stock Units	Shares		Weighted-Average Grant Date Fair Value
Non-vested, Beginning of Year	145,118		$	45.51
Granted	97,862		39.25
Vested	(211,743	)	43.55
Forfeited	(7,418	)	43.33
Non-vested, End of Year	23,819		$	37.91

At April 28, 2017, there was $291 of unrecognized compensation cost related to non-vested restricted stock units for our Board of Directors. This cost is expected to be recognized over a weighted-average period of 0.33 years. The total fair value of RSAs and RSUs granted during fiscal years 2017, 2016 and 2015 was $3,841, $6,092 and $4,649, respectively. The total fair value of RSAs and RSUs that vested during fiscal years 2017, 2016 and 2015 was $9,221, $5,601 and $10,136, respectively.

In addition to the shares subject to outstanding options and unvested restricted stock units and performance share units, approximately 2.9 million shares were available for grant under the 2010 Plan at April 28, 2017.

Performance Share Units



Performance Share Units	Shares		Weighted-Average Grant Date Fair Value
Non-vested, Beginning of Year	61,746		$	54.76
Granted	142,124		34.08
Vested	(189,959	)	40.19
Forfeited	(13,911	)	42.46
Non-vested, End of Year	—		$	—

At April 28, 2017, there was no unrecognized stock compensation expense. The total fair value of PSU awards granted during fiscal 2017 was $4,844. The total fair value of PSU awards vested during fiscal 2017 was $7,634. The weighted-average assumptions used for PSUs in the Monte Carlo simulation during fiscal 2017 were as follows:



	Fiscal 2017 PSU grants
Grant date market price	$	39.69
Fair value	$	34.08
Assumptions:
Price volatility	30.9		%
Risk-free interest rate	0.92		%
Average volatility of peer companies	36.2		%
Average correlation coefficient of peer companies	0.774