Benefit Plans

Share-based Compensation Plans: The Plexus Corp. 2016 Omnibus Incentive Plan (the "2016 Plan"), which was approved by shareholders, is a stock and cash-based incentive plan, and includes provisions by which the Company may grant executive officers, employees and directors stock options, stock appreciation rights ("SARs"), restricted stock (including restricted stock units ("RSUs"), performance stock awards (including performance stock units ("PSUs"), other stock awards and cash incentive awards. Similar awards were offered under its predecessor, the 2008 Long-Term Incentive Plan (the "2008 Plan"), which is no longer being used for grants; however, outstanding awards granted under the 2008 Plan and its predecessors continue in accordance with their terms.

The maximum number of shares of Plexus common stock that may be issued pursuant to the 2016 Plan is 3.2 million shares; in addition, cash incentive awards of up to $4.0 million per employee may be granted annually. The exercise price of each stock option and SAR granted must not be less than the fair market value on the date of grant. The Compensation and Leadership Development Committee (the "Committee") of the Board of Directors may establish a term and vesting period for awards under the 2016 Plan as well as accelerate the vesting of such awards. Generally, stock options vest in two annual installments and have a term of ten years. SARs vest in two annual installments and have a term of seven years. RSUs granted to executive officers, other officers and key employees generally vest on the third anniversary of the grant date (assuming continued employment), which is also the date as of which the underlying shares will be issued. Beginning for fiscal 2017 grants, 50% of PSUs vest based on the relative total shareholder return ("TSR") of the Company's common stock as compared to the companies in the Russell 3000 Index, a market condition, and the remaining 50% vest based upon a three-point annual average of the Company's absolute economic return, a performance condition, each during a three-year performance period. The PSUs granted in fiscal 2016 and prior years vest based solely on the relative TSR of the Company's common stock as compared to companies in the Russell 3000 Index during a three-year performance period. The Committee also grants RSUs to non-employee directors, which generally fully vest on the first anniversary of the grant date, which is also the date the underlying shares are issued (unless further deferred).

The Company recognized $17.4 million, $19.3 million and $13.3 million of compensation expense associated with share-based awards in fiscal 2017, 2016 and 2015, respectively. No deferred tax benefits related to equity awards were recognized in fiscal 2017, 2016 or 2015.

A summary of the Company’s stock option and SAR activity follows:



	Number of Options/SARs (in thousands)		Weighted Average Exercise Price		Aggregate Intrinsic Value (in thousands)
Outstanding as of September 27, 2014	2,270		$	31.65
Granted	221		39.53
Canceled	(25	)	36.50
Exercised	(549	)	28.93
Outstanding as of October 3, 2015	1,917		$	33.27
Granted	229		39.52
Canceled	(66	)	41.48
Exercised	(619	)	31.59
Outstanding as of October 1, 2016	1,461		$	34.59
Granted	36		45.45
Canceled	(4	)	30.88
Exercised	(521	)	32.29
Outstanding as of September 30, 2017	972		$	36.23	$	19,283



	Number of Options/SARs (in thousands)	Weighted Average Exercise Price		Weighted Average Remaining Life (years)	Aggregate Intrinsic Value (in thousands)
Exercisable as of:
October 3, 2015	1,560	$	31.67
October 1, 2016	1,125	$	33.11
September 30, 2017	865	$	35.62	4.21	$	17,692

The following table summarizes outstanding stock option and SAR information as of September 30, 2017 (Options/SARs in thousands):



Range of Exercise Prices	Number of Options/SARs Outstanding (in thousands)	Weighted Average Exercise Price		Weighted Average Remaining Life (years)	Number of Options / SARs Exercisable (in thousands)	Weighted Average Exercise Price
$14.17 - $31.70	244	$	26.27	3.40	244	$	26.27
$31.71 - $37.12	279	$	35.56	5.00	243	$	35.72
$37.13 - $41.84	270	$	40.11	4.92	252	$	39.99
$41.85 - $45.45	179	$	44.99	5.68	126	$	44.81
$14.17 - $45.45	972	$	36.23	4.70	865	$	35.62

The Company uses the Black-Scholes valuation model to value options and SARs. The Company used its historical stock prices as the basis for its volatility assumptions. The assumed risk-free rates were based on U.S. Treasury rates in effect at the time of grant with a term consistent with the expected option and SAR lives. The expected options and SARs lives represent the period of time that the options and SARs granted are expected to be outstanding and were based on historical experience.

The weighted average fair value per share of options and SARs granted for fiscal 2017, 2016 and 2015 were $15.66, $12.82 and $14.55, respectively. The fair value of each option and SAR grant was estimated at the date of grant using the Black-Scholes option-pricing model based on the assumption ranges below:



	2017	2016	2015
Expected life (years)	5.70	5.70	4.50 - 5.70
Risk-free interest rate	1.50%	1.23 - 1.87%	1.52 - 1.64%
Expected volatility	34%	35 - 37%	37 - 38%
Dividend yield	—	—	—

The fair value of options and SARs vested for fiscal 2017, 2016 and 2015 was $3.5 million, $3.6 million and $5.5 million, respectively.

For fiscal 2017, 2016 and 2015, the total intrinsic value of options and SARs exercised was $10.2 million, $7.4 million and $7.7 million, respectively.

As of September 30, 2017, there was $0.7 million of unrecognized compensation expense related to non-vested options and SARs that is expected to be recognized over a weighted average period of 0.7 years.

A summary of the Company’s PSU and RSU activity follows:



	Number of Shares (in thousands)		Weighted Average Fair Value at Date of Grant		Aggregate Intrinsic Value (in thousands)
Units outstanding as of September 27, 2014	730		$	31.97
Granted	325		41.46
Canceled	(43	)	35.15
Vested	(216	)	37.52
Units outstanding as of October 3, 2015	796		$	38.18
Granted	499		39.68
Canceled	(29	)	36.84
Vested	(244	)	27.77
Units outstanding as of October 1, 2016	1,022		$	41.49
Granted	397		54.21
Canceled	(22	)	41.17
Vested	(329	)	43.76
Units outstanding as of September 30, 2017	1,068		$	45.97	$	59,905

The Company uses the fair value at the date of grant to value RSUs. As of September 30, 2017, there was $16.6 million of unrecognized compensation expense related to RSUs that is expected to be recognized over a weighted average period of 1.5 years.

The Company uses the Monte Carlo valuation model to determine the fair value of PSUs at the date of grant. Vesting of all PSUs granted in fiscal 2016 and prior years is based on the relative TSR of Plexus stock as compared to the TSR of companies in the Russell 3000 Index during a three-year performance period. Beginning in fiscal 2017, 50% of the PSUs will vest based on relative TSR performance, with the other 50% vesting based on a three-point annual average of the Company's absolute economic return, each during a three-year performance period. The vesting and payout of awards will range between 0% and 200% of the shares granted based upon performance on the metrics during the performance period. Payout at target, 100% of the shares granted, will occur if the TSR of Plexus stock is at the 50th percentile of companies in the Russell 3000 Index during the performance period and if a 2.5% average economic return is achieved over the three-year performance period. The number of shares that may be issued pursuant to PSUs ranges from zero to 0.4 million.

The Company recognizes share-based compensation expense over the vesting period of PSUs. During the fiscal year ended September 30, 2017, the 0.1 million PSUs granted in fiscal 2014 vested at a 98% payout based upon the TSR performance achieved during the performance period. There were 0.1 million PSUs granted during each of fiscal years 2017, 2016 and 2015.

As of September 30, 2017, at the target achievement level, there was $4.4 million of unrecognized compensation expense related to PSUs that is expected to be recognized over a weighted average period of 2.1 years.

401(k) Savings Plan: The Company’s 401(k) Retirement Plan covers all eligible U.S. employees. The Company matches employee contributions up to 4.0% of eligible earnings. The Company’s contributions for fiscal 2017, 2016 and 2015 totaled $7.5 million, $7.4 million and $7.2 million, respectively.

Deferred Compensation Arrangements: The Company has agreements with certain former executive officers to provide nonqualified deferred compensation. Under these agreements, the Company agrees to pay these former executives, or their designated beneficiaries upon such executives’ deaths, certain amounts annually for the first 15 years subsequent to their retirement. As of September 30, 2017 and October 1, 2016, the related deferred compensation liability associated with these arrangements totaled $0.3 million and $0.6 million, respectively.

The Company maintains investments in a trust account to fund required payments under the deferred compensation plan. As of September 30, 2017 and October 1, 2016, the total value of the assets held by the trust totaled $9.7 million and $9.3 million, respectively, and was recorded at fair value on a recurring basis. These assets were classified as Level 2 in the fair value hierarchy discussed in Note 1, "Description of Business and Significant Accounting Policies." During fiscal 2017, 2016 and 2015, the Company made payments to the participants in the amount of $0.4 million, $0.8 million and $0.9 million, respectively.

Supplemental Executive Retirement Plan: The Company also maintains a supplemental executive retirement plan (the "SERP") as an additional deferred compensation plan for executive officers. Under the SERP, a covered executive may elect to defer some or all of the participant’s compensation into the plan, and the Company may credit the participant’s account with a discretionary employer contribution. Participants are entitled to payment of deferred amounts and any related earnings upon termination or retirement from Plexus.

The SERP allows investment of deferred compensation into individual accounts and, within these accounts, into one or more designated investments. Investment choices do not include Plexus stock. During fiscal 2017, 2016 and 2015, the Company made contributions to the participants’ SERP accounts in the amount of $1.2 million, $0.5 million and $0.5 million, respectively.

In March 2017, the Company changed the trustee of the SERP. The change resulted in a settlement and re-investment of $10.3 million, with no actual cash received or distributed by the Company.

As of September 30, 2017 and October 1, 2016, the SERP assets held in the trust totaled $12.0 million and $9.5 million, respectively, and the related liability to the participants totaled approximately $12.0 million and $9.8 million, respectively. As of September 30, 2017 and October 1, 2016, the SERP assets held in the trust were recorded at fair value on a recurring basis, and were classified as Level 2 in the fair value hierarchy discussed in Note 1, "Description of Business and Significant Accounting Policies."

The trust assets are subject to the claims of the Company’s creditors. The deferred compensation and trust assets and the related liabilities to the participants are included in non-current "Other assets" and non-current "Other liabilities," respectively, in the accompanying Consolidated Balance Sheets.