Share-based Compensation

The Company adopted a stock incentive plan (the “1996 Plan”) in November 1996 and reserved 1,500,000 shares of Common Stock for issuance under the 1996 Plan. The 1996 Plan provided for the issuance of stock options and stock appreciation rights (collectively referred to as “Share-Based Awards”). The Company ceased granting new awards under the 1996 Plan as of January 21, 2011, and the 1996 Plan expired in accordance with its terms on January 8, 2012. The Company adopted a stock incentive plan (the “2010 Plan”) in October 2010 and reserved 600,000 shares of Common Stock for issuance under the 2010 Plan. The 2010 Plan replaced the Company’s 1996 Plan. The 2010 Plan permits the award of incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, performance shares, dividend equivalent rights and cash-based awards. No awards may be made under the 2010 Plan after January 11, 2021. On October 27, 2014, the Board of Directors, subject to the approval of the Company’s shareholders, which was received at the 2015 annual meeting of shareholders, adopted an amendment to the 2010 Plan to, among other matters, reserve for issuance an additional 750,000 shares and extend to 2025 the time period awards may be granted under the 2010 Plan. As of August 26, 2017, the number of remaining shares available for future grants under the 2010 Plan was 694,870. Share-based compensation, which includes expense related to Share-Based Awards and unrestricted and restricted stock grants, has been recorded in the accompanying Consolidated Statements of Income in selling and administrative expenses.

All Share-Based Awards issued to management were recommended to the Board of Directors by the Compensation Committee and approved by the Board of Directors. All Share-Based Awards and shares of unrestricted stock issued to the Company’s non-employee members of the Board of Directors (the “Directors”) under the 2010 Plan were recommended to the Board of Directors by the Compensation Committee and approved by the Board of Directors. Share-Based Awards and shares of unrestricted stock granted to non-employee Directors are granted on the third business day following the annual shareholders’ meeting.

In fiscal 2017, 2016 and 2015, a total of 735, 885 and 1,096 shares of fully vested unrestricted stock, respectively, were granted to certain non-employee Directors of the Company. Accordingly, compensation expense related to the 2017, 2016 and 2015 unrestricted stock was recognized on the date of grant.

In fiscal 2017, 2016 and 2015, the Company granted a total of 4,940, 6,675 and 4,875 stock appreciation rights, respectively, under the 2010 Plan to the Company’s non-employee Directors. Such stock appreciation rights were fully vested upon grant, expire on the earlier of the eighth anniversary of the grant date or the second anniversary of the date that the Director ceases to be a member of the Board of Directors and must be settled in stock at the time of exercise. Accordingly, compensation expense related to the stock appreciation rights was recognized on the date of grant.

All Share-Based Awards issued to employees were granted with an exercise price equal to the fair market value of the Company’s Common Stock on the date of grant and are subject to a five-year cliff-vesting schedule under which the awards become fully vested or exercisable after five years from the date of grant and expire ten years after the grant date. Share-Based Awards and shares of unrestricted stock granted to the Company’s non-employee Directors were fully vested as of the date of grant. Prior to fiscal 2009, non-employee Director Share-Based Award grants expired ten years from the grant date. Beginning in fiscal 2009, non-employee Director Share-Based Award grants expire on the earlier of the eighth anniversary of the grant date or the second anniversary of the date that the Director ceases to be a member of the Board of Directors.

On April 21, 2016, the Company entered into a Restricted Stock Award Agreement (the “Award Agreement”) with Mr. Croatti pursuant to which the Company granted 140,000 shares (the “Performance Restricted Shares”) of restricted Common Stock to Mr. Croatti. The number of Performance Restricted Shares earned under the Award Agreement depends on whether and the extent to which the Company achieves certain consolidated revenues and adjusted operating margins as set forth in the Award Agreement during certain performance periods set forth in such agreement, including performance periods relating to the second half of fiscal year 2016 and fiscal years 2017 and 2018 (collectively, the “Performance Criteria”). The threshold, target and maximum numbers of Performance Restricted Shares eligible to be earned under the Award Agreement were 100,000, 120,000 and 140,000, respectively. The Performance Restricted Shares earned upon achievement of the Performance Criteria vested in two equal amounts on the third and fourth anniversaries of the grant date provided that Mr. Croatti continued to be employed by the Company on each such date. Upon Mr. Croatti’s death, all of the Performance Restricted Shares that had been or will be earned upon achievement of the Performance Criteria through the end of fiscal 2017 became fully vested.

Upon the death of Mr. Croatti in the third quarter of fiscal 2017, 46,666 Performance Restricted Shares of Common Stock were forfeited and 46,667 Restricted Shares of Class B Common Stock earned in the performance period for the second half of fiscal 2016 became immediately vested. Additionally, the remaining 24,334 and 22,333 Restricted Shares of Class B Common Stock and Common Stock, respectively, were earned in the performance period for fiscal 2017. During fiscal 2017, the Company recognized expense on the Award Agreement of $8.8 million, of which $5.4 million was due to the accelerated vesting upon Mr. Croatti's death.

The fair value of the Performance Restricted Shares was the closing price on April 21, 2016, which was $111.13.

As of August 26, 2017, the total compensation cost not yet recognized related to non-vested Share-Based Awards was approximately $6.7 million. The weighted average period over which compensation cost for Share-Based Awards will be recognized is 2.1 years.

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



Fiscal year ended August	2017		2016		2015
Risk-free interest rate	1.58	%	1.76	%	1.92	%
Expected dividend yield	0.21	%	0.25	%	0.27	%
Expected life in years	7.43		7.40		7.44
Expected volatility	24.0	%	29.3	%	32.2	%

The weighted average fair values of Share-Based Awards granted during fiscal years 2017, 2016 and 2015 were $34.74, $35.81 and $40.06, respectively.

The following table summarizes the Share-Based Award activity for fiscal 2017:



	Number of Shares		Weighted Average Exercise Price
Outstanding, August 27, 2016	610,691		$	83.17

Granted	100,340		119.83
Exercised	(102,225	)	50.33
Forfeited	(8,200	)	76.14

Outstanding, August 26, 2017	600,606		$	94.98

Exercisable, August 26, 2017	116,456		$	72.13