NOTE 6 – STOCK-BASED COMPENSATION:

The Amended and Restated 2000 Graham Corporation Incentive Plan to Increase Shareholder Value, as approved by the Company’s stockholders at the Annual Meeting on July 28, 2016, provides for the issuance of up to 1,375 shares of common stock in connection with grants of incentive stock options, non-qualified stock options, stock awards and performance awards to officers, key employees and outside directors: provided, however, that no more than 467 shares of common stock may be used for awards other than stock options.  Stock options may be granted at prices not less than the fair market value at the date of grant and expire no later than ten years after the date of grant.

No restricted stock awards were granted in the three-month periods ended September 30, 2018 and 2017.  Restricted stock awards granted in the six-month periods ended September 30, 2018 and 2017 were 53 and 59, respectively.  Restricted shares of 27 and 30 granted to officers in the first six months of fiscal 2019 and fiscal 2018, respectively, vest 100% on the third anniversary of the grant date subject to the satisfaction of the performance metrics for the applicable three-year period.  Restricted shares of 20 and 22 granted to officers and key employees in the first six months of fiscal 2019 and fiscal 2018, respectively, vest 33⅓% per year over a three-year term.  Restricted shares of 6 and 7 granted to directors in the first six months of fiscal 2019 and fiscal 2018, respectively, vest 100% on the first year anniversary of the grant date.  No stock option awards were granted in the three-month or six-month periods ended September 30, 2018 and 2017.  

During the three months ended September 30, 2018 and 2017, the Company recognized stock-based compensation costs related to stock option and restricted stock awards of $274 and $216, respectively.  The income tax benefit recognized related to stock-based compensation was $60 and $76 for the three months ended September 30, 2018 and 2017, respectively.  During the six months ended September 30, 2018 and 2017, the Company recognized stock-based compensation costs related to stock option and restricted stock awards of $534 and $149, respectively.  The income tax benefit recognized related to stock-based compensation was $118 and $53 for the six months ended September 30, 2018 and 2017, respectively.

The Company has an Employee Stock Purchase Plan (the "ESPP"), which allows eligible employees to purchase shares of the Company's common stock at a discount of up to 15% of its fair market value on the (i) last, (ii) first or (iii) lower of the last or first day of the six-month offering period.  A total of 200 shares of common stock may be purchased under the ESPP.  During each of the three months and six months ended September 30, 2018 and 2017, no stock-based compensation costs were recognized related to the ESPP.