SHARE-BASED PAYMENTS

In accordance with stockholder-approved plans, we issue share-based payments under various stock-based compensation arrangements, including stock options, restricted stock units, cash-settled restricted stock units, performance shares, and other share-based awards. The shares to be delivered under the plan may consist, in whole or part, of treasury stock or authorized but unissued stock, not reserved for any other purpose.

On September 19, 2014, the stockholders approved the Conagra Brands 2014 Stock Plan (the "Plan"), which was amended on December 11, 2017. As amended, the Plan authorized the issuance of up to 40.3 million shares of Conagra Brands common stock as well as certain shares of stock subject to outstanding awards under predecessor stock plans that expire, lapse, are cancelled, terminated, forfeited, or otherwise become unexercisable. At May 27, 2018, approximately 42.5 million shares were reserved for granting additional options, restricted stock units, cash-settled restricted stock units, performance shares, or other share-based awards.

All amounts below are of continuing and discontinued operations.

Share Unit Plans

In accordance with stockholder-approved plans, we issue stock under various stock-based compensation arrangements, including restricted stock units, cash-settled restricted stock units, and other share-based awards ("share units"). These awards generally have requisite service periods of three years. Under each arrangement, stock is issued without direct cost to the employee. We estimate the fair value of the share units based upon the market price of our stock at the date of grant. Certain share unit grants do not provide for the payment of dividend equivalents to the participant during the requisite service period (vesting period). For those grants, the value of the grants is reduced by the net present value of the foregone dividend equivalent payments. We recognize compensation expense for share unit awards on a straight-line basis over the requisite service period, accounting for forfeitures as they occur. All cash-settled restricted stock units are marked-to-market and presented within other current and noncurrent liabilities in our Consolidated Balance Sheets. The compensation expense for our stock-settled share unit awards totaled $21.8 million, $18.2 million, and $25.1 million for fiscal 2018, 2017, and 2016, respectively, including discontinued operations of $1.4 million and $3.9 million for fiscal 2017 and 2016, respectively. The tax benefit related to the stock-settled share unit award compensation expense for fiscal 2018, 2017, and 2016 was $7.2 million, $7.0 million, and $9.6 million, respectively. The compensation expense for our cash-settled share unit awards totaled $5.8 million, $20.9 million, and $33.9 million for fiscal 2018, 2017, and 2016, respectively, including discontinued operations of $2.6 million and $7.4 million for fiscal 2017 and 2016, respectively. The tax benefit related to the cash-settled share unit award compensation expense for fiscal 2018, 2017, and 2016 was $1.9 million, $8.0 million, and $13.0 million, respectively. No cash-settled share unit awards were granted in fiscal 2018.

The following table summarizes the nonvested share units as of May 27, 2018 and changes during the fiscal year then ended:



	Stock-settled				Cash-settled
Share Units	Share Units (in Millions)		Weighted Average Grant-Date Fair Value		Share Units (in Millions)		Weighted Average Grant-Date Fair Value
Nonvested share units at May 28, 2017	1.56		$	31.59	1.21		$	30.52
Granted	0.87		$	34.16	—		$	—
Vested/Issued	(0.53	)	$	26.58	(0.42	)	$	22.86
Forfeited	(0.12	)	$	33.77	(0.08	)	$	34.60
Nonvested share units at May 27, 2018	1.78		$	34.20	0.71		$	34.58

During fiscal 2018, 2017, and 2016, we granted 0.9 million, 0.6 million, and 1.0 million stock-settled share units, respectively, with a weighted average grant date value of $34.16, $46.79, and $43.64, respectively. During fiscal 2017 and 2016, we granted 0.4 million and 0.8 million cash-settled share units, respectively, with a weighted average grant date value of $48.07 and $44.48, respectively.

The total intrinsic value of stock-settled share units vested was $18.5 million, $27.0 million, and $48.8 million during fiscal 2018, 2017, and 2016, respectively. The total intrinsic value of cash-settled share units vested was $14.2 million, $24.0 million, and $44.9 million during fiscal 2018, 2017, and 2016, respectively.

At May 27, 2018, we had $22.8 million and $5.2 million of total unrecognized compensation expense that will be recognized over a weighted average period of 1.8 years and 1.0 year, related to stock-settled share unit awards and cash-settled share unit awards, respectively.

Performance-Based Share Plan

Performance shares are granted to selected executives and other key employees with vesting contingent upon meeting various Company-wide performance goals. The performance goal for one-third of the target number of performance shares for the three-year performance period ending in fiscal 2018 (the "2018 performance period") is based on our fiscal 2016 EBITDA return on capital, subject to certain adjustments. Another one-third of the target number of performance shares granted for the 2018 performance period is based on our fiscal 2017 EBITDA return on capital, subject to certain adjustments. The fiscal 2017 EBITDA return on capital target, when set, excluded the results of Lamb Weston. The performance goal for the last one-third of the target number of performance shares granted for the 2018 performance period is based on our fiscal 2018 diluted earnings per share ("EPS") compound annual growth rate ("CAGR"), subject to certain adjustments. In addition, for certain participants, all performance shares for the 2018 performance period are subject to an overarching EPS goal that must be met in each fiscal year of the 2018 performance period before any pay out can be made to such participants on the performance shares.

The performance goal for one-third of the target number of performance shares for the three-year performance period ending in fiscal 2019 (the "2019 performance period") is based on our fiscal 2017 EBITDA return on capital, subject to certain adjustments. The fiscal 2017 EBITDA return on capital target, when set, excluded the results of Lamb Weston. The performance goal for the final two-thirds of the target number of performance shares granted for the 2019 performance period is based on our diluted EPS CAGR, subject to certain adjustments, measured over the two-year period ending in fiscal 2019. In addition, for certain participants, all performance shares for the 2019 performance period are subject to an overarching EPS goal that must be met in each fiscal year of the 2019 performance period before any pay out can be made to such participants on the performance shares.

The performance goal for the three-year performance period ending in fiscal 2020 is based on our diluted EPS CAGR, subject to certain adjustments, measured over the defined performance period. In addition, for certain participants, all performance shares for the 2020 performance period are subject to an overarching EPS goal that must be met in each fiscal year of the 2020 performance period before any pay out can be made to such participants on the performance shares.

Awards, if earned, will be paid in shares of our common stock. Subject to limited exceptions set forth in the performance share plan, any shares earned will be distributed after the end of the performance period, and only if the participant continues to be employed with the Company through the date of distribution. For awards where performance against the performance target has not been certified, the value of the performance shares is adjusted based upon the market price of our common stock and current forecasted performance against the performance targets at the end of each reporting period and amortized as compensation expense over the vesting period. Forfeitures are accounted for as they occur.

A summary of the activity for performance share awards as of May 27, 2018 and changes during the fiscal year then ended is presented below:



Performance Shares	Share Units (in Millions)		Weighted Average Grant-Date Fair Value
Nonvested performance shares at May 28, 2017	0.86		$	29.23
Granted	0.48		$	33.82
Adjustments for performance results attained and dividend equivalents	0.01		$	22.98
Vested/Issued	(0.33	)	$	24.08
Forfeited	(0.02	)	$	33.69
Nonvested performance shares at May 27, 2018	1.00		$	33.40

The compensation expense for our performance share awards totaled $11.8 million, $13.3 million, and $14.2 million for fiscal 2018, 2017, and 2016, respectively. The tax benefit related to the compensation expense for fiscal 2018, 2017, and 2016 was $3.9 million, $5.1 million, and $5.4 million, respectively.

The total intrinsic value of share units vested (including shares paid in lieu of dividends) during fiscal 2018, 2017, and 2016 was $11.2 million, $2.8 million, and $12.7 million, respectively.

Based on estimates at May 27, 2018, the Company had $15.6 million of total unrecognized compensation expense related to performance shares that will be recognized over a weighted average period of 1.8 years.

Stock Option Plan

We have stockholder-approved stock option plans that provide for granting of options to employees for the purchase of common stock at prices equal to the fair value at the date of grant. Options become exercisable under various vesting schedules (typically three years) and generally expire seven to ten years after the date of grant. No options were granted in fiscal 2018.

The fair value of each option is estimated on the date of grant using a Black-Scholes option-pricing model with the following weighted average assumptions for stock options granted:



	2017	2016
Expected volatility (%)	19.15	17.88
Dividend yield (%)	2.33	2.74
Risk-free interest rates (%)	1.03	1.60
Expected life of stock option (years)	4.94	4.96

The expected volatility is based on the historical market volatility of our stock over the expected life of the stock options granted. The expected life represents the period of time that the awards are expected to be outstanding and is based on the contractual term of each instrument, taking into account employees' historical exercise and termination behavior.

A summary of the option activity as of May 27, 2018 and changes during the fiscal year then ended is presented below:



Options	Number of Options (in Millions)		Weighted Average Exercise Price		Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in Millions)
Outstanding at May 28, 2017	6.3		$	27.12
Exercised	(1.1	)	$	22.28		$	15.8
Forfeited	(0.1	)	$	34.78
Outstanding at May 27, 2018	5.1		$	28.11	5.76	$	47.6
Exercisable at May 27, 2018	4.0		$	26.34	5.14	$	44.4

We recognize compensation expense using the straight-line method over the requisite service period, accounting for forfeitures as they occur. During fiscal 2017 and 2016, the Company granted 1.1 million options and 1.6 million options, respectively, with a weighted average grant date value of $6.12 and $5.08, respectively. The total intrinsic value of options exercised was $15.8 million, $29.8 million, and $165.6 million for fiscal 2018, 2017, and 2016, respectively. The closing market price of our common stock on the last trading day of fiscal 2018 was $37.41 per share.

Compensation expense for stock option awards totaled $4.2 million, $6.2 million, and $9.4 million for fiscal 2018, 2017, and 2016, respectively, including discontinued operations of $0.2 million and $0.8 million for fiscal 2017 and 2016, respectively. Included in the compensation expense for stock option awards for fiscal 2018, 2017, and 2016 was $0.4 million, $0.9 million, and $1.0 million, respectively, related to stock options granted by a subsidiary in the subsidiary's shares to the subsidiary's employees. The tax benefit related to the stock option expense for fiscal 2018, 2017, and 2016 was $1.4 million, $2.4 million, and $3.6 million, respectively.

At May 27, 2018, we had $2.3 million of total unrecognized compensation expense related to stock options that will be recognized over a weighted average period of 0.9 years.

Cash received from option exercises for the fiscal years ended May 27, 2018, May 28, 2017, and May 29, 2016 was $25.1 million, $84.4 million, and $228.7 million, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $5.3 million, $19.5 million, and $57.3 million for fiscal 2018, 2017, and 2016, respectively.