3. Stock-Based Compensation

Equity Incentive Plan Description

On September 16, 2015, our shareholders approved an equity incentive plan entitled the Culp, Inc. 2015 Equity Incentive Plan (the “2015 Plan”). The 2015 Plan updated and replaced our 2007 Equity Incentive Plan (the “2007 Plan”) as the vehicle for granting new equity based awards substantially similar to those authorized under the 2007 Plan. In general, the 2015 Plan authorizes the grant of stock options intended to qualify as incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, and other equity and cash related awards as determined by our Compensation Committee. An aggregate of 1,200,000 shares of common stock were authorized for issuance under the 2015 Plan, with certain sub-limits that would apply with respect to specific types of awards that may be issued as defined in the 2015 Plan. In connection with the approval of the 2015 Plan, no further awards will be granted under the 2007 Plan, but outstanding awards under the 2007 Plan will be settled in accordance with their terms.

At July 30, 2017, there were 895,623 shares available for future equity based grants under our 2015 plan.

Incentive Stock Option Awards

We did not grant any incentive stock option awards through the through the first quarter of fiscal 2018.

At July 30, 2017, options to purchase 15,000 shares of common stock were outstanding and exercisable, had a weighted average exercise price of $7.08 per share, and a weighted average contractual term of 0.9 years. At July 30, 2017, the aggregate intrinsic value for options outstanding and exercisable was $354,000

The aggregate intrinsic value for options exercised for the three months ending July 30, 2017 and July 31, 2016, was $14,000 and $43,000, respectively.

At July 30, 2017, there were no unvested incentive stock option awards. Therefore, there was no unrecognized compensation cost related to incentive stock option awards at July 30, 2017.

No compensation expense was recorded for incentive stock options for the three months ended July 30, 2017 and July 31, 2016, respectively.

Performance Based Restricted Stock Units

We have granted performance based restricted stock units to certain key members of management and a non-employee which could earn up to a certain number of shares of common stock if certain performance targets are met as defined in the related restricted stock unit agreements. Our performance based restricted stock units granted to key members of management were measured based on the fair market value (the closing price of our common stock) on the date of grant. Our performance based restricted stock units granted to a non-employee were measured based on the fair market value (the closing price of our common stock) at the earlier date of when the performance criteria are met or the end of the reporting period.

The following table summarizes information related to our grants of performance based restricted stock units associated with key members of management that are currently unvested:

	(1) Restricted Stock	(2) Price Per	Vesting
Date of Grant	Units Awarded	Share	Period
July 13, 2017	122,195	$32.50	3 years
July 14, 2016	107,880	$28.00	3 years
July 15, 2015	107,554	$32.23	3 years

(1) Amounts represent the maximum number of common stock shares that could be earned if certain performance targets are met as defined in the related restricted stock unit agreements.

(2) Price per share represents the closing price of our common stock on the date of grant.

The following table summarizes information related to our grants of performance based restricted stock units associated with a non-employee for that are currently unvested:

Date of Grant	(1) Restricted Stock Units Awarded	Price Per Share	Vesting Period
July 13, 2017	10,200	$30.65 (2)	3 years
July 14, 2016	11,549	$30.65 (2)	3 years
July 15, 2015	10,364	$30.65 (2)	3 years

(1) Amounts represent the maximum number of common stock shares that could be earned if certain performance targets are met as defined in the related restricted stock unit agreements.

(2) The respective grant was unvested at the end of our reporting period. Accordingly, the price per share represents the closing price of our common stock on July 30, 2017, the end of our reporting period.

The following table summarizes information related to our performance based restricted stock units that vested during the three month periods ending July 30, 2017 and July 31, 2016:

Fiscal Year	Common Stock Shares Vested		(1) Weighted Average Fair Value		Price Per Share
Fiscal 2018 – Management		102,845	$	1,820	$	17.70	(2)
Fiscal 2018 – Non-employee		16,000	$	520	$	32.50	(3)
Fiscal 2017 - Management		37,192	$	637	$	17.12	(2)
Fiscal 2017 - Non-Employee		12,000	$	345	$	28.77	(3)

(1) Dollar amounts are in thousands.

(2) Price per share represents the closing price of our common stock on the date of grant.

(3) The respective grant vested during the first quarter of fiscal 2018 or 2017, respectively. Accordingly, the price per share represents the closing price of our common stock on the date the award vested.

Overall

We recorded compensation expense of $751,000 and $761,000 within selling, general, and administrative expense associated with our performance based restricted stock units for the three months ending July 30, 2017 and July 31, 2016, respectively. Compensation cost is recorded based on an assessment each reporting period of the probability that certain performance goals will be met during the vesting period. If performance goals are not probable of occurrence, no compensation cost will be recognized and any recognized compensation cost would be reversed.

At July 30, 2017, the remaining unrecognized compensation cost related to the performance based restricted stock units was $5.3 million, which is expected to be recognized over a weighted average vesting period of 2.1 years.

Time Vested Restricted Stock Units

Fiscal 2018 Grant

On July 13, 2017, an employee was granted 1,200 shares of time vested restricted stock units which vested over the requisite service period of 11 months. This award was measured at its fair market value, which was $32.50 per share, and represented the closing price of our common stock on the date of grant.

Fiscal 2017 Grant

On July 14, 2016, an employee was granted 1,200 shares of time vested restricted stock units which vested over the requisite service period of 11 months. This award was measured at its fair market value, which was $28 per share, and represented the closing price of our common stock on the date of grant.

During the first quarter of fiscal 2018, 1,200 shares of common stock associated with this grant vested and had a weighted average fair value of $34,000 or $28 per share.

Overall

We recorded compensation expense of $6,000 within selling, general, and administrative expense associated with our time vested restricted stock unit awards for the three months ending July 30, 2017. Compensation expense for the three months ending July 31, 2016 was immaterial.

At July 30, 2017, the remaining unrecognized compensation cost related to unvested time vested restricted stock awards was $37,000, which is expected to be recognized over the next 10.5 months.