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Employee Share Plans

12 Months Ended

Dec. 31, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Note 14. Employee Share Plans

Employee Stock Purchase Plan - The 2007 Employee Stock Purchase Plan (“ESPP”), which has a termination date of June 30, 2022, allows qualified employees to purchase shares of common stock through payroll deductions up to a limit of $25,000 of stock per calendar year. The price an employee pays for shares is 85% of the fair market value of our common stock on the last day of the purchase period. Purchase periods begin on the sixteenth day of the month and end on the fifteenth day of the subsequent month. Other than a one-year holding period from the date of purchase, there are no vesting or other restrictions on the stock purchased by employees under the ESPP. The total number of shares of common stock that can be purchased under the ESPP shall not exceed two million shares.

Stock Awards – Effective May 9, 2019, the CBIZ shareholders approved CBIZ, Inc. 2019 Stock Omnibus Incentive Plan (“2019 Plan”), which amended and restated the CBIZ, Inc. 2014 Stock Incentive Plan (“2014 Plan”), of which we have granted various stock-based awards through the year ended December 31,2019. The terms and vesting schedules for the share-based awards vary by type and date of grant. At December 31, 2019, approximately 2.2 million shares were available for future grant under the 2014 Plan. Effective January 1, 2020, the 2019 Plan will replace and, for future grants, supersede the 2014 Plan. The operating terms of the 2019 Plan are substantially similar to those of the 2014 Plan. Under the 2019 Plan, which expires in 2029, a maximum of 3.1 million stock options, restricted stock or other stock based

compensation awards may be granted. Shares subject to award under the 2019 Plan may be either authorized but unissued shares of our common stock or treasury shares.

During the years ended December 31, 2019, 2018 and 2017, we recognized compensation expense (before income tax expense) for these awards as follows (in thousands):

	2019		2018		2017
Stock options	$	1,848	$	2,609	$	2,105
Restricted stock awards		4,375		4,257		3,600
Performance share units		1,031		—		—
Total share-based compensation expense	$	7,254	$	6,866	$	5,705

Stock Options - Stock options granted during the years ended December 31, 2018 and 2017 were generally subject to a 25% incremental vesting schedule over a four-year period commencing from the date of grant. Stock options expire six years from the date of grant and are awarded with an exercise price equal to the market value of our common stock on the date of grant. At the discretion of the Compensation Committee of the Board of Directors, options awarded under the 2014 Plan may vest in a time period shorter than four years. Under the 2014 Plan, stock options awarded to non-employee directors have generally been granted with immediate vesting. Stock options may be granted alone or in addition to other awards and may be of two types: incentive stock options and nonqualified stock options. Stock option activity during the year ended December 31, 2019 was as follows (number of options in thousands):

	Number of Options			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (in millions)
Outstanding at December 31, 2018		3,622		$	11.97
Granted		—		$	—
Exercised		(1,210	)	$	8.77
Expired or canceled		—		$	—
Outstanding at December 31, 2019		2,412		$	13.58	2.75 years	$	32.3
Vested and exercisable at December 31, 2019		1,456		$	11.54	2.13 years	$	22.4

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The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2018 and 2017 was $3.0 million and $2.3 million, respectively.

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The aggregate intrinsic value of stock options exercised during each of the years ended December 31, 2019, 2018 and 2017 was $18.8 million, $10.9 million and $9.4 million, respectively. The intrinsic value is calculated as the difference between our stock price on the exercise date and the exercise price of each option exercised.

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At December 31, 2019, we had unrecognized compensation cost for non-vested stock options of $3.8 million to be recognized over a weighted average period of approximately 1.03 years.

We utilized the Black-Scholes-Merton option-pricing model to determine the fair value of stock options on the date of grant. The fair value of stock options granted during the years ended December 31, 2018, and 2017 were $4.73 and $3.49, respectively. We didn’t grant any stock options during the year ended December 31, 2019. The following weighted average assumptions were utilized:

	2018			2017
Expected volatility (1)		22.04	%		22.22	%
Expected option life (years) (2)		4.62			4.61
Risk-free interest rate (3)		2.80	%		1.85	%
Expected dividend yield (4)		0	%		0	%

(1)	The expected volatility assumption was determined based upon the historical volatility of our stock price, using daily price intervals.

(2)	The expected option life was determined based upon our historical data using a midpoint scenario, which assumes all options are exercised halfway between the expiration date and the weighted average time it takes the option to vest.

(3)	The risk-free interest rate assumption was upon zero-coupon U.S. Treasury bonds with a term approximating the expected life of the respective options.

(4)	The expected dividend yield assumption was determined in view of our historical and estimated dividend payouts. We do not expect to change our dividend payout policy in the foreseeable future.

Restricted Stock Awards - Under the 2014 Plan, certain employees and non-employee directors were granted restricted stock awards. Restricted stock awards are independent of option grants and vest at no cost to the recipients. The awards are subject to forfeiture if employment terminates prior to the release of restrictions, generally one to four years from the date of grant. Recipients of restricted stock awards are entitled to the same dividend and voting rights as holders of other CBIZ common stock, subject to certain restrictions during the vesting period, and the awards are considered to be issued and outstanding from the date of grant. Shares granted under the 2014 Plan cannot be sold, pledged, transferred or assigned during the vesting period.

Restricted stock award activity during the year ended December 31, 2019 was as follows:

	Number of Shares (in thousands)			Weighted Average Grant-Date Fair Value (1)
Non-vested at December 31, 2018		632		$	15.35
Granted		227		$	19.78
Vested		(282	)	$	13.76
Forfeited		—		$	—
Non-vested at December 31, 2019		577		$	17.87

(1)	Represents weighted average market value of the shares as the awards are granted at no cost to the recipients.

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At December 31, 2019, we had unrecognized compensation cost for restricted stock awards of $10.3 million to be recognized over a weighted average period of approximately 1.02 years.

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The total fair value of shares vested during the years ended December 31, 2019, 2018 and 2017 was approximately $3.9 million, $4.1 million and $3.4 million, respectively.

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The market value of shares awarded during the years ended December 31, 2019, 2018 and 2017 was $4.5 million, $5.1 million and $4.4 million, respectively. This market value was recorded as unearned compensation and is recognized as expense ratably over the periods which the restrictions lapse.

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Awards outstanding at December 31, 2019 will be released from restrictions at dates ranging from February 2020 through May 2022.

Performance Share Units (“PSUs”) – PSUs are earned based on our financial performance over a contractual term of three years and the associated expense is recognized over that period based on the fair value of the award. A three-year cliff vesting schedule of the PSUs is dependent upon the Company’s performance relative to pre-established goals based on earnings per share target (weighted 70%) and total growth in revenue (weighted 30%). The fair value of PSUs is calculated using the market value of our common stock on the date of grant. For performance achieved above specified levels, the recipient may earn additional shares of stock, not to exceed 200% of the number of PSUs initially granted.

The following table presents our PSU award activity during the twelve months ended December 31, 2019 (in thousands, except per share data):

	Number of PSUs (in thousands)		Grant-Date Fair Value Per Unit
Outstanding at beginning of year		—	$	—
Granted		173	$	19.82
Vested		—	$	—
Adjustments for performance results		27	$	19.82
Expired or cancelled		—	$	—
Outstanding at December 31, 2019		200	$	19.82