NOTE 7 - SHARE-BASED COMPENSATION

In March 2016, shareholders approved a new equity incentive compensation plan (the “Plan”), under which incentive stock options, non-qualified stock options, stock grants, stock-based awards, restricted stock, restricted stock units, stock appreciation rights, performance units, performance stock, and other stock or cash awards may be granted. Shares to be issued under the Plan may be authorized and unissued shares, issued shares that have been reacquired by us (in the open-market or in private transactions), shares that are being held in the treasury, or a combination thereof. The maximum number of shares of common stock approved that may be issued under the Plan is four million shares. Awards may be granted to officers, employees, directors, consultants, advisors, and independent contractors of Photronics or its subsidiaries. In the event of a change in control (as defined in the Plan), the vesting of awards may be accelerated. The Plan, aspects of which are more fully described below, prohibits further awards from being issued under prior plans. We incurred total share-based compensation expenses of $0.9 million in each of the three month periods ended January 28, 2018 and January 29, 2017, and we received cash from option exercises of $0.7 million and $1.0 million during those respective periods. No share-based compensation cost was capitalized as part of an asset and no related income tax benefits were recorded during the periods presented.

Stock Options

Option awards generally vest in one-to-four years and have a ten-year contractual term. All incentive and non-qualified stock option grants have an exercise price no less than the market value of the underlying common stock on the date of grant. The grant date fair values of options are based on closing prices of our common stock on the dates of grant using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility of our common stock. We use historical option exercise behavior and employee termination data to estimate expected term, which represents the period of time that the options granted are expected to remain outstanding. The risk-free rate of return for the estimated term of the option is based on the U.S. Treasury yield curve in effect at the date of grant.

The weighted-average inputs and risk-free rates of return used to calculate the grant date fair value of options issued during the three month periods ended January 28, 2018 and January 29, 2017, are presented in the following table.

	Three Months Ended
	January 28, 2018		January 29, 2017


Volatility		31.6%		32.2%

Risk free rate of return		2.2%		1.9%

Dividend yield		0.0%		0.0%

Expected term	5.0 years		5.0 years

Information on outstanding and exercisable option awards as of January 28, 2018, is presented below.

Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value

Outstanding at January 28, 2018		3,304,820	$	7.98	5.1 years	$	4,468

Exercisable at January 28, 2018		2,421,655	$	7.19	3.8 years	$	4,441

There were 252,000 share options granted during the three month period ended January 28, 2018, with a weighted-average grant date fair value of $2.74 per share, and there were 338,750 share options granted during the three month period ended January 29, 2017, with a weighted-average grant date fair value of $3.60 per share. As of January 28, 2018, the total unrecognized compensation cost related to unvested option awards was approximately $2.4 million. That cost is expected to be recognized over a weighted-average amortization period of 2.3 years.

Restricted Stock

We periodically grant restricted stock awards, the restrictions on which typically lapse over a service period of one-to-four years. The fair value of the awards is determined on the date of grant, based on the closing price of our common stock. There were 280,000 restricted stock awards issued during the three month period ended January 28, 2018, with a weighted-average grant date fair value of $8.63 per share, and there were 260,000 restricted stock awards issued during the three month period ended January 29, 2017, with a weighted-average grant date fair value of $11.35 per share. As of January 28, 2018, the total compensation cost not yet recognized related to unvested restricted stock awards was approximately $4.1 million. That cost is expected to be recognized over a weighted-average amortization period of 3.0 years. As of January 28, 2018, there were 488,673 shares of restricted stock outstanding.