10. Stock-Based Compensation Plans

General

Executive officers and employees, as well as non-employee directors of the Company and certain consultants and advisors to the Company, are eligible to participate in the Company’s 2014 Performance Incentive Plan ("2014 Plan"). The 2014 Plan was approved by stockholders on October 23, 2014 and replaced and succeeded in its entirety the Resources Connection, Inc. 2004 Performance Incentive Plan and the 1999 Long Term Incentive Plan. As of February 22, 2020, 1,197,000 shares were available for award grant purposes under the 2014 Plan, subject to future increases as described in the 2014 Plan.

Awards under the 2014 Plan may include, but are not limited to, stock options, restricted stock units and restricted stock grants, including restricted stock units under the Company’s Directors Deferred Compensation Plan. Stock option grants generally vest in equal annual installments over four years and terminate ten years from the date of grant. Restricted stock award vesting is determined on an individual grant basis. Awards of restricted stock under the 2014 Plan will be counted against the available share limit as two and a half shares for every one share actually issued in connection with the award. The Company’s policy is to issue shares from its authorized shares upon the exercise of stock options.

Stock Options and Restricted Stock

The following table summarizes the stock option activity for the nine months ended February 22, 2020 (number of shares under option and aggregate intrinsic value in thousands):



	Number of Shares Under Option	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Outstanding at May 25, 2019	6,029	$	15.95	6.06	$	5,482
Granted, at fair market value	1,318		17.37
Exercised	(376)		13.63
Forfeited	(409)		17.38
Expired	(551)		17.11
Outstanding at February 22, 2020	6,011	$	16.12	6.52	$	1,982
Exercisable at February 22, 2020	3,452	$	15.13	4.71	$	1,982
Vested and expected to vest at February 22, 2020	5,744	$	16.04	6.33	$	1,982

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, which is the difference between the Company’s closing stock price on the last trading day of the third quarter of fiscal 2020 and the exercise price multiplied by the number of shares that would have been received by the option holders if they had exercised their “in the money” options on February 22, 2020. This amount will change based on changes in the fair market value of the Company’s common stock. The total pre-tax intrinsic value related to stock options exercised during the three months ended February 22, 2020 and February 23, 2019 was $0.4 million and $1.9 million, respectively, and during the nine months ended February 22, 2020 and February 23, 2019 was $1.2 million and $5.0 million, respectively. As of February 22, 2020, there was $11.7 million of total unrecognized compensation cost related to unvested employee stock options granted. That cost is expected to be recognized over a weighted-average period of 1.9 years.

The Company granted 28,372 and 21,537 shares of restricted stock during the nine months ended February 22, 2020 and February 23, 2019, respectively. As of February 22, 2020, there were 177,002 unvested restricted shares, including restricted stock units under the Directors Deferred Compensation Plan, with approximately $2.5 million of remaining unrecognized compensation cost.

Stock-Based Compensation Expense

Stock-based compensation expense included in selling, general and administrative expenses was $1.5 million and $1.9 million for the three months ended February 22, 2020 and February 23, 2019, respectively, and $4.6 million and $5.0 million for the nine months ended February 22, 2020 and February 23, 2019, respectively. These amounts consisted of stock-based compensation expense related to employee stock options, employee stock purchases made via the ESPP, restricted stock awards and stock units credited under the Directors Deferred Compensation Plan. The Company recognizes compensation expense for only the portion of stock options and restricted stock that is expected to vest, rather than recording forfeitures when they occur. If the actual number of forfeitures differs from that estimated by management, additional adjustments to compensation expense may be required in future periods. There were no capitalized share-based compensation costs during the nine months ended February 22, 2020 or February 23, 2019.

Employee Stock Purchase Plan

On October 15, 2019, the Company’s stockholders approved the 2019 ESPP which supersedes the 2014 ESPP. The maximum number of shares of the Company’s common stock that were authorized for issuance under the 2019 ESPP is 1,825,000. All unissued shares under the 2014 ESPP are no longer available.

The ESPP allows qualified employees (as defined in the ESPP) to purchase designated shares of the Company’s common stock at a price equal to 85% of the lesser of the fair market value of common stock at the beginning or end of each semi-annual stock purchase period. The ESPP’s term expires July 16, 2029. The Company issued 399,000 and 358,000 shares of common stock pursuant to the ESPP during the nine months ended February 22, 2020 and the year ended May 25, 2019, respectively. There were 1,641,000 shares of common stock available for issuance under the ESPP as of February 22, 2020.