The authorized capital stock of Nanometrics consists of 47,000,000 shares of common stock, par value $0.001 per share, and 3,000,000 shares of preferred stock, par value $0.001 per share.

On November 15, 2017 the Company’s Board of Directors authorized the repurchase of up to $50.0 million of its common stock. This plan is referred to as the Stock Repurchase Plan. The Stock Repurchase Plan was completed in February 2018.

Shares repurchased and retired in the years ended December 29, 2018 and December 30, 2017 under the Stock Repurchase Plan, with the associated cost of repurchase and amount available for repurchase were as follows (in thousands, except number of shares and weighted average price per share):

Under the 2003 Employee Stock Purchase Plan (“ESPP”), eligible employees can elect to have salary withholdings of up to 10% of their base compensation to purchase shares of common stock at a price equal to 85% of the lower of the market value of the stock at the beginning or end of each six-month offering period, subject to an annual statutory limitation. As of December 29, 2018, the Company had 443,694 shares remaining for issuance under the ESPP. Shares purchased under the ESPP were 70,214 shares, 122,298 shares and 212,619 shares in 2018, 2017 and 2016 at a weighted average price of $21.46, $21.19 and $14.29, respectively.

The Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors including employee stock options, restricted stock units and employee stock purchases related to the Employee Stock Purchase Plan (collectively “Employee Stock Purchases”) based on estimated fair values. The fair value of share-based payment awards is estimated on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company's consolidated statement of operations.

The fair value of stock-based awards to employees is calculated using the Black-Scholes option pricing model, which requires subjective assumptions, including future stock price volatility and expected time to exercise. The expected life was calculated using the simplified method allowed by the SAB 107. The risk-free rates were based on the U.S Treasury rates in effect during the corresponding period. The expected volatility was based on the historical volatility of the Company's stock price. The dividend yield reflects that the Company has not paid any cash dividends since inception and does not intend to pay any cash dividends in the foreseeable future. Forfeitures are recognized upon occurrence. These factors could change in the future, which would affect the stock-based compensation expense in future periods.

The weighted-average fair value of stock-based compensation to employees is based on the single option valuation approach. The estimated fair value of stock-based compensation awards to employees is amortized over the vesting period. The weighted-average fair value calculations are based on the following average assumptions:

	Fiscal Year 2018	Fiscal Year 2017	Fiscal Year 2016
Employee Stock Purchase Plan:
Expected life	0.5 years	0.5 years	0.5 years
Volatility	52.46%	37.2%	38.7%
Risk free interest rate	2.14%	0.91%	0.44%
Dividends	—	—	—

No stock options were granted in fiscal years 2018, 2017 and 2016. A summary of activity of stock options is as follows:

	Number of Shares Outstanding (Options)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in Thousands)
Options
Outstanding at December 31, 2016		440,545		$	15.06		2.12	$	4,405
Exercised		(223,364	)		13.35
Cancelled/Forfeited		(855	)		16.63
Outstanding at December 30, 2017		216,326			16.82		1.76	$	1,752
Exercised		(132,932	)		17.46
Cancelled/Forfeited		-			-
Outstanding at December 29, 2018		83,394		$	15.80		1.19	$	988
Exercisable at December 29, 2018		83,394		$	15.80		1.19	$	988

The aggregate intrinsic value in the above table represents the total pretax intrinsic value, based on the Company’s closing stock price of $27.65 as of December 29, 2018, which would have been received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of options exercised during 2018, 2017 and 2016 was $2.5 million, $3.1 million and $2.7 million, respectively. The fair value of options vested during 2018 was negligible and during 2017 and 2016 was $0.3 million and $0.7 million, respectively.

The following table summarizes ranges of outstanding and exercisable options as of December 29, 2018.

	Options Outstanding						Options Exercisable
Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$12.98 - $14.59		1,694		1.58	$	14.03		1,694	$	14.03
$14.95 - $14.95		1,025		1.49		14.95		1,025		14.95
$15.00 - $15.00		10,000		0.62		15.00		10,000		15.00
$15.61 - $15.61		2,500		1.09		15.61		2,500		15.61
$15.65 - $15.65		3,375		1.21		15.65		3,375		15.65
$15.85 - $15.85		60,000		1.20		15.85		60,000		15.85
$16.00 - $16.00		100		1.72		16.00		100		16.00
$17.33 - $17.33		2,500		1.87		17.33		2,500		17.33
$18.22 - $18.22		1,200		2.16		18.22		1,200		18.22
$18.79 - $18.79		1,000		2.24		18.79		1,000		18.79
		83,394						83,394

As of December 29, 2018, the total unrecognized compensation costs related to unvested stock options was negligible.

Each RSU counts against the Company’s “2005 Equity Incentive Plan” at a ratio of one and seven tenths shares for each unit granted but represents an amount equal to the fair value of one share of the Company’s common stock. The Company granted 484,087 and 454,600 RSUs during the years ended December 29, 2018 and December 30, 2017, respectively, to key employees with vesting periods up to three years.

Summary of activity for RSUs	Number of RSUs			Weighted Average Fair Value
Outstanding RSUs as of December 31, 2016		819,785		$	16.79
Granted		454,600			27.12
Released		(387,592	)		16.81
Cancelled		(96,494	)		19.01
Outstanding RSUs as of December 30, 2017		790,299			22.46
Granted		484,087			36.57
Released		(362,762	)		20.79
Cancelled		(142,621	)		26.44
Outstanding RSUs as of December 29, 2018		769,003		$	31.39

As of December 29, 2018, the total unrecognized compensation costs related to RSU's was $12.5 million and is expected to be recognized as an expense over a weighted average remaining amortization period of 1.75 years.

In addition to granting RSUs that vest on the passage of time only, the Company granted PSUs to certain executives. The PSUs will vest in tranches over one, two, and three years based on the relative performance of the Company’s stock during those periods, compared to the performance of a peer group over the same period. If target stock price performance is achieved, 66.7% of the shares of the Company’s stock subject to the PSUs will vest, and up to a maximum of 100% of the shares subject to the PSUs will vest if the maximum stock price performance is achieved for each tranche. For certain shares granted in fiscal 2018, 62,500 shares are the cumulative maximum number of shares that may vest for all measurement periods.

Summary of activity for PSUs	Number of PSUs			Weighted Average Fair Value
Outstanding PSUs as of December 31, 2016		107,500		$	9.94
Granted		122,050			20.51
Released		(38,500	)		10.41
Cancelled		(61,100	)		19.41
Outstanding PSUs as of December 30, 2017		129,950			15.60
Granted		63,133			24.45
Released		(47,929	)		12.10
Cancelled		(32,991	)		24.52
Outstanding PSUs as of December 29, 2018		112,163		$	22.37

On the date of grant, the Company estimated the fair value of PSUs using a Monte Carlo simulation model. The assumptions for the valuation of PSUs are summarized as follows:

The number of RSUs granted during fiscal year 2018 was 484,087, which counted as 822,948 shares against the 2005 Equity Incentive Plan, and the number of PSUs granted during fiscal year 2018 was 63,133, which counted as 107,327 shares against the 2005 Equity Incentive Plan. The number of RSUs cancelled during fiscal year 2018 was 142,621, which counted as 242,456 shares against the 2005 Equity Incentive Plan, and the number of PSUs cancelled during fiscal 2018 was 32,991, which counted as 56,085 shares against the 2005 Equity Incentive Plan.

The number of RSUs granted during fiscal year 2017 was 454,600, which counted as 772,820 shares, and PSUs granted during fiscal year 2017 was 122,050, which counted as 207,485 against the 2005 Equity Incentive Plan. The number of RSUs cancelled during fiscal year 2017 was 96,494, which counted as 164,040 shares, and PSUs cancelled during fiscal year 2017 was 61,100, which counted as 103,870, against the 2005 Equity Incentive Plan. Each RSU represents an amount equal to the fair value of one share of the Company's common stock.

A summary of activity under the Company’s stock option plans including options, RSUs and PSUs during fiscal year 2018, 2017 and 2016 and shares available for grant as of the respective period end dates, is as follows:

	Fiscal Year 2018			Fiscal Year 2017			Fiscal Year 2016
Shares available for grant at beginning of fiscal year		1,874,765			1,334,581			1,916,589
Additional Shares Authorized		—			1,000,000			—
Options - cancelled		—			855			176,587
Options - expired plan shares		—			—			(116,192	)
RSUs - granted		(822,948	)		(772,820	)		(810,334	)
RSUs - cancelled		242,456			164,040			92,230
RSUs - shares issued to satisfy tax withholding obligations		-			251,724			179,117
PSUs - granted		(107,327	)		(207,485	)		(114,750	)
PSUs - cancelled		56,085			103,870			11,334.00
Shares available for grant at end of fiscal year		1,243,031			1,874,765			1,334,581

Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Effective January 1, 2017, because of the adoption of ASU No. 2016-09 “Improvements to Employee Share-Based Payment Accounting”, the Company has elected to account for forfeitures as they occur. Refer to Note 2. Recent Accounting Pronouncements for further discussion on the adoption. As such, for fiscal year ended December 30, 2017, stock-based compensation expense is recognized in the consolidated statement of operations, net of actual forfeitures during the period. Prior to the adoption of ASU No. 2016-09, the Company estimated forfeitures at the time of grant, based on historical forfeiture experience, and revised if necessary in subsequent periods if actual forfeitures differed from estimates. Stock-based compensation expense recognized in the consolidated statement of operations for the year ended December 31, 2016, has been reduced for estimated forfeitures.

Tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options are required to be separately classified in the consolidated statements of cash flows. The Company recognized $1.0 million of excess tax benefits in fiscal year 2016, and immaterial amounts in both fiscal years 2018 and 2017, respectively.

Stock-based compensation expense for all share-based payment awards made to the Company’s employees and directors pursuant to the employee stock option and employee stock purchase plans by function were as follows (in thousands):

	Fiscal Year 2018		Fiscal Year 2017		Fiscal Year 2016
Cost of products	$	704	$	842	$	403
Cost of service		772		616		509
Research and development		2,450		1,720		1,408
Selling		2,786		2,323		2,046
General and administrative		4,670		3,318		3,300
Total stock-based compensation expense related to employee stock options and employee stock purchases	$	11,382	$	8,819	$	7,666