STOCK AND EMPLOYEE BENEFIT PLANS

Stock-Based Compensation

We account for stock-based compensation under ASC 718, “Compensation-Stock Compensation.” The stock option compensation cost calculated under the fair value approach is recognized over the vesting period of the stock options (generally over four years). All stock option grants are subject to graded vesting as services are rendered. The fair value for granted options is estimated at the time of the grant using the Black-Scholes option-pricing model. Expected volatilities are based on historical volatilities, and we use historical data to estimate option exercise behavior. The expected term represents an estimate of the period of time we expect the options to remain outstanding based on historical exercise and post-vesting termination data. The dividend yield equals the most recent dividend payment over the market price of the stock at the beginning of the period. The risk-free interest rate is the rate at the date of grant for a zero-coupon U.S. Treasury bond with a term that approximates the expected term of the option. The following weighted average assumptions were used in the Black-Scholes option-pricing model for awards issued during the respective periods:



	Fiscal Years
	2017		2016		2015
Dividend yield	0.0	%	0.0	%	0.0	%
Expected volatility	29.7	%	34.2	%	36.2	%
Risk-free interest rate	0.9	%	1.6	%	1.7	%
Expected term (in years)	5.0		5.0		5.0

For the last three fiscal years, we recognized the following stock-based compensation expense:



	Fiscal Years
(dollars in millions)	2017		2016		2015
Direct costs related	$	4.7	$	4.7	$	4.4
Selling, general and administrative related	17.4		15.4		13.5
Total stock-based compensation	$	22.1	$	20.1	$	17.9

For Fiscal Years 2017, 2016, and 2015, the tax benefit related to stock compensation expense that we recognized was $7.1 million, $6.5 million, and $5.6 million, respectively. As of June 30, 2017, unearned stock-based compensation expense related to unvested awards (stock options and restricted stock) was approximately $41.6 million, which will be recognized over a weighted-average period of 2.2 years.

Stock Options

The Compensation Committee of the Board of Directors is responsible for the administration of our stock option plans and determines the term of each option, the option exercise price, the number of option shares granted, and the rate at which options become exercisable.

On December 3, 2015, the shareholders approved a new share-based compensation plan, the 2015 Stock Incentive Plan (the “2015 Plan”). The 2015 Plan allows for the issuance of up to the sum of (i) 3.0 million shares of PAREXEL common stock plus (ii) up to an additional 3.4 million shares of PAREXEL common stock from awards under the Existing Plans (as defined below), which expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company. We stopped making awards under the Existing Plans upon approval of the 2015 Plan by our shareholders. The term “Existing Plans” refers collectively to the Company’s 2005 Stock Incentive Plan, 2007 Stock Incentive Plan and 2010 Stock Incentive Plan.

The 2015 Plan allows for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards, which are referred to collectively as “Awards.” The 2015 Plan became effective upon approval by our shareholders. No Awards may be made under the 2015 Plan after December 3, 2025.

We adopted stock incentive plans in December 2010, December 2007, and September 2005, each of which provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based award grants of up to 9.0 million shares in aggregate to employees, officers, directors, consultants, and advisors. The granting of awards under these plans is discretionary, including the individuals who may become participants and receive awards under these plans and the number of shares they may acquire.

In September 2001, we adopted the 2001 Stock Incentive Plan, which provides for the grant of incentive and non-qualified stock options for the purchase of up to an aggregate of 2.0 million shares of common stock to our employees, officers, directors, consultants, and advisors (and any individuals who have accepted an offer for employment).

Options under all our stock incentive plans described above expire no more than ten years from the date of grant and the expiration date and vesting period may vary at the Board of Directors’ discretion.

The following table summarizes information related to stock option activity for the respective periods:



	Fiscal Years
(dollars in millions, except per share data)	2017	2016	2015
Weighted-average fair value of options granted per share	$20.12	$22.18	$20.16
Intrinsic value of options exercised	$30.3	$20.9	$33.8

Stock option activity for the Fiscal Year was as follows:



	Number of Options		Weighted-Average Exercise Price		Weighted- Average Remaining Contractual Life in Years	Aggregate Intrinsic Value (in Millions)
Balance at June 30, 2016	3,332,803		$	48.58	5.6	$	52.2
Granted	166,525		$	68.73
Exercised	(892,122	)	$	36.79
Canceled	(231,848	)	$	60.01
Balance at June 30, 2017	2,375,358		$	53.31	5.1	$	79.8
Exercisable at June 30, 2017	1,111,925		$	42.87	4.1	$	49.0
Expected to vest at June 30, 2017	1,260,308		$	62.49	6.0	$	30.8

Restricted Stock

We use restricted stock awards (“RSAs”) and restricted stock units (“RSUs”), granted under the plans described above, as a component of compensation for executive officers, non-employee members of the Board of Directors, and other employees. In general, we granted RSAs and RSUs that will vest at the end of a three-year service period for employees or one-year service period for non-employee members of the Board. The fair values of restricted stock awards and restricted stock units were based upon the closing stock prices on the day of the grants. For Fiscal Year 2017, 2016, and 2015, the fair value of restricted stock awards vested was $5.9 million, $5.3 million, and $3.9 million, respectively. Restricted stock activity for Fiscal Year 2017 was:



	Shares		Weighted-Average Grant- Date Fair Value
Unvested Balance at June 30, 2016	286,637		$	58.58
Granted	400,564		$	65.70
Vested	(113,156	)	$	51.95
Forfeited	(28,990	)	$	62.96
Unvested Balance at June 30, 2017	545,055		$	64.95

Employee Stock Purchase Plan

We sponsor an employee stock purchase plan (the “Purchase Plan”). The Purchase Plan allows eligible employees to purchase common stock at 95% of the fair market value of the stock on the last day of each purchase period (as defined by the Purchase Plan). The Purchase Plan also includes the automatic enrollment of contributions whereby an eligible employee’s compensation would be reduced and automatic enrollment contributions made on his/her behalf unless an affirmative election not to do so was made. The Purchase Plan is non-compensatory, and as such, no stock based compensation is recorded. An aggregate of approximately 1.8 million shares may be issued under the Purchase Plan.

The following table summarizes the purchases under the Purchase Plan for the last three fiscal years:



	Shares Purchased	Average Purchase Price
Fiscal Year 2017	54,571	$	64.32
Fiscal Year 2016	58,479	$	62.05
Fiscal Year 2015	57,557	$	59.09

Savings Plan

We sponsor an employee savings plan (“the Plan”) as defined by Section 401(k) of the Internal Revenue Code of 1986, as amended. The Plan covers substantially all employees in the U.S. who elect to participate. Participants have the opportunity to invest on a pre-tax basis in a variety of mutual fund options and our stock. We match 100% of each participant’s voluntary contributions up to 3% of gross salary per payroll period subject to an annual cap of $3,000. Our contributions vest to the participants in 20% increments for each year of employment and become fully vested after five years of continuous employment. Our contributions to the Plan were approximately $11.6 million, $10.8 million, and $10.7 million for the Fiscal Years 2017, 2016, and 2015, respectively.