Share-Based Compensation

We have two active share based stock plans, the Luby's Incentive Stock Plan, as amended and restated effective December 5, 2015 (the "Employee Stock Plan") and the Nonemployee Director Stock Plan, as amended and restated effective February 9, 2018. Both plans authorize the granting of stock options, restricted stock, and other types of awards consistent with the purpose of the plans.

Of the aggregate 2.1 million shares approved for issuance under the Nonemployee Director Stock Plan, as amended, 1.4 million options, restricted stock units and restricted stock awards have been granted to date, and 0.1 million options were canceled or expired and added back into the plan, since the plan’s inception. Approximately 0.8 million shares remain available for future issuance as of March 13, 2019. Compensation costs for share-based payment arrangements under the Nonemployee Director Stock Plan, recognized in selling, general and administrative expenses for the two quarters ended March 13, 2019 and March 14, 2018 was approximately $289 thousand and $321 thousand, respectively and approximately $168 thousand and $169 thousand, respectively, for the quarters ended March 13, 2019 and March 14, 2018.

Of the aggregate 4.1 million shares approved for issuance under the Employee Stock Plan, as amended, 7.3 million options and restricted stock units have been granted to date, and 4.1 million options and restricted stock units were canceled or expired and added back into the plan, since the plan’s inception in 2005. Approximately 0.9 million shares remain available for future issuance as of March 13, 2019. Compensation costs for share-based payment arrangements under the Employee Stock Plan, recognized in selling, general and administrative expenses for the quarters ended ended March 13, 2019 and March 14, 2018 was approximately $113 thousand and $167 thousand, respectively and approximately $296 thousand and $455 thousand, respectively, for the two quarters ended March 13, 2019 and March 14, 2018, respectively.

Stock Options

Stock options granted under either the Employee Stock Plan or the Nonemployee Director Stock Plan have exercise prices equal to the market price of the Company’s common stock at the date of the grant.

Option awards under the Nonemployee Director Stock Plan generally vest 100% on the first anniversary of the grant date and expire ten years from the grant date. No options were granted under the Nonemployee Director Stock Plan in the two quarters ended March 13, 2019. No options to purchase shares were outstanding under this plan as of March 13, 2019.

Options granted under the Employee Stock Plan generally vest 50% on the first anniversary date of the grant date, 25% on the second anniversary of the grant date and 25% on the third anniversary of the grant date, with all options expiring ten years from the grant date. No options were granted in the two quarters ended March 13, 2019. Options to purchase 1,464,010 shares at option prices of $2.82 to $5.95 per share remain outstanding as of March 13, 2019.

A summary of the Company’s stock option activity for the two quarters ended March 13, 2019 is presented in the following table:



	Shares Under Fixed Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
			(Per share)		(In years)	(In thousands)
Outstanding at August 29, 2018	1,653,414		$	4.10	6.5	$	—
Forfeited	(102,102	)	4.10		—	—
Expired	(87,302	)	5.54		—	—
Outstanding at March 13, 2019	1,464,010		$	4.01	6.3	$	—
Exercisable at March 13, 2019	1,217,957		$	4.19	5.8	$	—

The intrinsic value for stock options is defined as the difference between the current market value, or closing price on March 13, 2019, and the grant price on the measurement dates in the table above.

At March 13, 2019, there was approximately $0.2 million of total unrecognized compensation cost related to unvested options that are expected to be recognized over a weighted-average period of 1.5 years.

Restricted Stock Units

Grants of restricted stock units consist of the Company’s common stock and generally vest after three years. All restricted stock units are cliff-vested. Restricted stock units are valued at the closing market price of the Company’s common stock at the date of grant.

A summary of the Company’s restricted stock unit activity during the two quarters ended March 13, 2019 is presented in the following table:



	Restricted Stock Units		Weighted Average Fair Value		Weighted- Average Remaining Contractual Term
			(Per share)		(In years)
Unvested at August 29, 2018	517,291		$	3.79	1.8
Vested	(153,757	)	4.66		—
Forfeited	(22,491	)	3.60		—
Unvested at March 13, 2019	341,043		$	3.41	1.5

At March 13, 2019, there was approximately $0.5 million of total unrecognized compensation cost related to unvested restricted stock units that is expected to be recognized over a weighted-average period of 1.5 years.

Performance Based Incentive Plan

For fiscal years 2015 - 2018, the Company approved a Total Shareholder Return ("TSR") Performance Based Incentive Plan (“Plan”). Each Plan’s award value varies from 0% to 200% of a base amount, as a result of the Company’s TSR performance in comparison to its peers over the respective measurement period. Each Plan’s vesting period is three years.

The Plans for fiscal years 2015 - 2017 provides for a right to receive an unspecified number of shares of common stock under the Employee Stock Plan based on the total shareholder return ranking compared to a selection of peer companies over the three-year vesting period, for each plan year. The number of shares at the end of the three-year period will be determined as the award value divided by the closing stock price on the last day of each fiscal year. Each three-year measurement period is designated a plan year name based on year one of the measurement period. Since the plans provide for an undeterminable number of awards, the plans are accounted for as liability based plans. The liability valuation estimate for each plan year has been determined based on a Monte Carlo simulation model. Based on this estimate, management accrues expense ratably over the three-year service periods. A valuation estimate of the future liability associated with each fiscal year's performance award plan is performed periodically with adjustments made to the outstanding liability at each reporting period to properly state the outstanding liability for all plan years in the aggregate as of the respective balance sheet date. As of March 13, 2019, the valuation estimate which represents the fair value of the performance awards liability for the 2017 plan year, resulted in an approximate $21 thousand decrease in the aggregate liability. The 2015 TSR Plan vested for each active participant on August 30, 2017 and a total of 187,883 shares were awarded, in the fiscal quarter ended December 20, 2017, under the Plan at 50% of the original target. The fair value of the 2015 Plan's liability in the amount of $496 thousand was converted to equity and the number of shares awarded for the 2015 TSR Plan was based on the Company's stock price at closing on the last day of fiscal 2017. The fair value of the 2016 TSR Plan was zero at the end of the three-year measurement period and at August 29, 2018 the 2016 TSR Plan was terminated with no shares vested due to the relative ranking of the Company's stock performance. The number of shares at the end of each plan's three-year periods will be determined as the award value divided by the Company's closing stock price on the last day of the plan's fiscal year.

The 2018 TSR Performance Based Incentive Plan provides for a specified number of shares of common stock under the Employee Stock Plan based on the total shareholder return ranking compared to a selection of peer companies over a three-year cycle. The Fair Value of the 2018 TSR Plan has been determined based on a Monte Carlo simulation model for the three-year period. The target number of shares for distribution at 100% of the plan was 373,294 on the grant date. The 2018 TSR Plan is accounted for as an equity award since the Plan provides for a specified number of shares. The expense for this Plan year is amortized over the three-year period based on 100% target award.

Non-cash compensation expense related to the Company's TSR Performance Based Incentive Plans, recorded in Selling, general and administrative expenses, was approximately $237 thousand and $72 thousand in the two quarters ended March 13, 2019 and March 14, 2018, respectively, and approximately $118 thousand and $(44) thousand for the quarters ended March 13, 2019 and March 14, 2018.

A summary of the Company’s restricted stock Performance Based Incentive Plan activity during the two quarters ended March 13, 2019 is presented in the following table:



	Units		Weighted Average Fair Value
			(Per share)
Unvested at August 29, 2018	373,294		$	3.68
Forfeited	(19,864	)	3.68
Unvested at March 13, 2019	353,430		$	3.68

At March 13, 2019, there was approximately $0.7 million of total unrecognized compensation cost related to 2018 TSR Performance Based Incentive Plan that is expected to be recognized over a weighted-average period of 1.4 years.

Restricted Stock Awards

Under the Nonemployee Director Stock Plan, directors are granted restricted stock in lieu of cash payments, for all or a portion of their compensation as directors. Directors may receive a 20% premium of additional restricted stock by opting to receive stock over a minimum required amount of stock, in lieu of cash. The number of shares granted is valued at the average of the high and low price of the Company’s stock at the date of the grant. Restricted stock awards vest when granted because they are granted in lieu of a cash payment. However, directors are restricted from selling their shares until after the third anniversary of the date of the grant.