Stock Plans

At October 31, 2018, Cooper had the following share-based compensation plans:

2006 Long-Term Incentive Plan for Non-Employee Directors (2006 Directors Plan)

In March 2006, we received stockholder approval of the 2006 Directors Plan. The 2006 Directors Plan was subsequently amended and restated, and approved by stockholders, in March 2009 and again in March 2011. The Board of Directors further amended the Second Amended and Restated 2006 Directors Plan in October 2011, October 2012, October 2013 and October 2016.

The Second Amended and Restated 2006 Directors Plan, as amended, authorizes either Cooper's Board of Directors or a designated committee thereof composed of two or more Non-Employee Directors to grant to Non-Employee Directors during the period ending March 21, 2019, equity awards for up to 950,000 shares of common stock, subject to adjustment for future stock splits, stock dividends, expirations, forfeitures and similar events.

As amended, the Second Amended and Restated 2006 Directors Plan provides for annual equity award grants to Non-Employee Directors on November 15 of each fiscal year which subsequently vest on the first anniversary of the date of grant. Grants may be awarded in the form of stock options, restricted stock, restricted stock units (RSUs), or a combination of award types. Awards will have a total grant value of $270,000, or $285,500 in the case of the Lead Director and $297,000 in the case of the Chairman of the Board.

Under the 2006 Directors Plan, grants of stock options will have an exercise price equal to 100% of fair market value on the date of grant and shall expire no more than 10 years after the grant date. Awards of restricted stock provide the right to purchase shares for $0.10 per share, subject to restrictions on sale or transfer which lapse on the first anniversary of the date of grant. Restricted shares retain dividend and voting rights. RSUs entitle the recipient to receive shares of common stock, without any payment in cash or property. Legal ownership of the shares is not transferred until the unit vests and RSUs have no dividend or voting rights prior to vesting.

As of October 31, 2018, 130,494 shares remained available under the Second Amended and Restated 2006 Directors' Plan for future grants.

2007 Long-Term Incentive Plan (2007 LTIP)

In March 2007, we received stockholder approval of the 2007 LTIP. The 2007 LTIP was subsequently amended and restated, and granted stockholder approval in March 2009, March 2011, and March 2016.

The Third Amended and Restated 2007 LTIP is designed to increase our stockholder value by attracting, retaining and motivating key employees and consultants who directly influence our profitability. The Third Amended and Restated 2007 LTIP authorizes either our Board of Directors, or a designated committee thereof composed of two or more Non-Employee Directors, to grant to eligible individuals during the period ending December 31, 2026, up to 6,930,000 shares in the form of specified equity awards including stock option, restricted stock unit and performance share awards, subject to adjustment for future stock splits, stock dividends, expirations, forfeitures and similar events.

During fiscal 2018, we granted stock options, restricted stock units (RSUs) and performance share awards to employees under the Third Amended and Restated 2007 LTIP. All stock options are granted at 100% of fair market value on the date of grant and expire no more than 10 years after the grant date. RSUs are nontransferable awards entitling the recipient to receive shares of common stock, without any payment in cash or property, in one or more installments at a future date or dates as determined by the Board of Directors or its authorized committee. For RSUs, legal ownership of the shares is not transferred to the employee until the unit vests, which is generally over a specified time period and RSUs have no dividend or voting rights prior to vesting. Performance share awards are nontransferable awards entitling the recipient to receive a variable number of shares of common stock, without any payment in cash or property, in one or more installments at a future date or dates as determined by the Board of Directors or its authorized committee. Legal ownership of the shares is not transferred to the recipient until the award vests, and the number of shares distributed is dependent upon the achievement of certain performance targets over a specified period of time.

As of October 31, 2018, 1,441,896 shares remained available under the Third Amended and Restated 2007 LTIP for future grants. The amount of available shares includes shares which may be distributed under performance share awards.

Share-Based Compensation

The compensation cost and related tax benefit recognized in our consolidated financial statements for share-based awards were as follows:



October 31,
(In millions)	2018		2017		2016
Selling, general and administrative expense	$	37.6	$	33.1	$	26.2
Cost of sales	3.6		2.8		2.6
Research and development expense	2.0		1.3		1.1
Total compensation expense	$	43.2	$	37.2	$	29.9
Related income tax benefit	$	8.8	$	11.4	$	9.0

Stock Options

The fair value of each stock option award granted is estimated on the date of grant using the Black-Scholes option valuation model and assumptions noted in the following table. The expected life of the awards is based on the observed and expected time to post-vesting forfeiture and/or exercise. Groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. In determining the expected volatility, management considers implied volatility from publicly-traded options on our common stock at the date of grant, historical volatility and other factors. The risk-free interest rate is based on the continuous rates provided by the United States Treasury with a term equal to the expected life of the option. The dividend yield is based on the projected annual dividend payment per share, divided by the stock price at the date of grant.



Years Ended October 31,	2018		2017		2016
Expected life	5.4 years		5.5 years		4.8 - 5.5 years
Expected volatility	23.0	%	24.5%		27.6% - 27.7%
Risk-free interest rate	2.0	%	1.2	%	1.3% - 1.5%
Dividend yield	0.03	%	0.03	%	0.04	%

The activity and status of our stock option plans are summarized below:



	Number of Shares	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at October 31, 2017	1,064,466	$	129.33
Granted	256,639	$	229.49
Exercised	234,107	$	95.26
Forfeited or expired	—	$	—
Outstanding at October 31, 2018	1,086,998	$	160.31	7.17
Vested and expected to vest at October 31, 2018	1,055,266	$	159.19	7.13	$	104,596,614
Vested and exercisable at October 31, 2018	379,113	$	127.11	5.71	$	49,741,332

The weighted-average fair value of each option granted during fiscal 2018, estimated as of the grant date using the Black-Scholes option pricing model, for the 2007 LTIP was $57.86. No options were granted under the 2006 Directors Plan in fiscal 2018. The expected requisite service period for options granted to employees in fiscal 2018 ranged from approximately 35 months to 60 months. The total intrinsic value of options exercised during the fiscal year ended October 31, 2018 was $35.0 million.

The weighted-average fair value of each option granted during fiscal 2017, estimated as of the grant date using the Black-Scholes option pricing model, for the 2007 LTIP was $44.00. No options were granted under the 2006 Directors Plan in fiscal 2017.

Stock awards outstanding under our current plans have been granted at prices which are either equal to or above the market value of the common stock on the date of grant. Options granted under the 2007 LTIP generally vest over a range of three to five years based on service conditions and expire no later than ten years after the grant date. Options granted under the 2006 Directors Plan generally vest in one year and expire no later than ten years after the grant date. We generally recognize compensation expense ratably over the vesting period. However, Directors' options grants would have been expensed on the date of grant as the 2006 Directors Plan did not contain a substantive future requisite service period. As of October 31, 2018, there was $14.8 million of total unrecognized compensation cost related to nonvested options, which is expected to be recognized over a remaining weighted-average vesting period of 3.2 years.

Restricted Stock Units

RSUs granted under the 2007 LTIP generally vest over three to five years. The fair value of restricted stock units is estimated on the date of grant based on the market price of our common stock. We recognize compensation expense ratably over the vesting period. As of October 31, 2018, there was $63.3 million of total unrecognized compensation cost related to nonvested RSUs, which is expected to be recognized over a remaining weighted-average vesting period of 3.2 years.

The status of our non-vested RSUs is summarized below:



	Number of Shares	Weighted- Average Grant Date Fair Value Per Share
Non-vested RSUs at October 31, 2017	533,852	$	149.93
Granted	162,121	$	230.06
Vested and issued	184,121	$	139.07
Forfeited or expired	24,538	$	169.71
Non-vested RSUs at October 31, 2018	487,314	$	179.70

Performance Units

Performance units are granted to selected key employees with vesting contingent upon meeting future reported earnings per share goals over a defined performance cycle, usually three years. Performance units, if earned, may be paid in cash or shares of common stock. The performance shares actually earned will range from zero to 150% of the target number of performance shares for performance periods ending in fiscal 2018 through fiscal 2020. Subject to limited exceptions set forth in the performance share plan, any shares earned will be distributed in the subsequent fiscal year after the performance period. The fair value of performance unit awards is estimated on the date of grant based on the current market price of our common stock and the estimate of probability of award achievement. This estimate is reviewed each fiscal quarter and adjustments are recorded if it is determined that the estimate of probability of award achievement has changed.

We recognize compensation expense ratably over the vesting period. As of October 31, 2018, there was $1.1 million of total unrecognized compensation cost related to non-vested performance units, which is expected to be recognized over a remaining weighted-average vesting period of 1.6 years.

Performance units granted on January 29, 2016 completed their performance period on October 31, 2018 and met 100% of the target. We also granted performance unit awards on February 1, 2017 and December 12, 2017 with specific performance goals for each period ending on October 31, 2019 and October 31, 2020, respectively.