EMPLOYEE STOCK PLANS

Employee Stock Plans

Prior to the separation and distribution, the Company’s employees participated in Varian's stock-based compensation plans, which provided for the grants of stock options, restricted stock units and performance shares among other types of awards under Varian’s Third Amended and Restated 2005 Omnibus 2005 Stock Plan (the “Third Amended 2005 Plan”). The expense associated with the Company’s employees who participated in the Third Amended 2005 Plan is included in the accompanying condensed consolidated statements of earnings. Subsequent to the separation and distribution, the Company's employees participate in Varex's 2017 Omnibus Stock Plan and 2017 Employee Stock Purchase Plan.

Share-Based Compensation Expense

As share-based compensation expense recognized in the condensed consolidated statements of earnings is based on awards ultimately expected to vest. Share-based compensation expense includes expenses related to the Company’s direct employees. Prior to the separation, Varian also charged the Company for the allocated share-based compensation costs of certain employees of Varian who provided selling, general and administrative services on the Company’s behalf.

The table below summarizes the effect of recording share-based compensation expense and for the option component of the employee stock purchase plan shares:



	Three Months Ended
(In millions)	December 29, 2017		December 30, 2016(1)
Cost of revenues	$	0.2	$	0.2
Research and development	0.4		0.4
Selling, general and administrative	1.5		1.7
Total share-based compensation expense	$	2.1	$	2.3

(1) Includes allocated share-based compensation of $0.8 million for the three months ended December 30, 2016, charged by Varian to the Company for certain Varian employees who provided general and administrative services on the Company’s behalf.

Stock Option Activity

The following table summarizes the activity for stock options under Varex’s employee incentive plans for the Company’s employees:



	Options Outstanding
(In thousands, except per share amounts and the remaining term)	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Term (in years)	Aggregate Intrinsic Value (1)
Balance at September 29, 2017	1,926		$	29.11
Granted	8		37.60
Canceled, expired or forfeited	—		—
Exercised	(69	)	26.32
Balance at December 29, 2017	1,865		$	29.25	5.1	$	20,353

Exercisable at December 29, 2017	679		$	26.82	3.5	$	9,068

(1) The aggregate intrinsic value represents the total pre-tax intrinsic value, which is computed based on the difference between the exercise price and the closing price of Varex common stock of $40.17 as of December 29, 2017, the last trading date of the Company's first quarter, and which represents the amount that would have been received by the option holders had all option holders exercised their options and sold the shares received upon exercise as of that date.

Restricted Stock Units

The following table summarizes the activity for restricted stock units under Varex’s employee incentive plans for the Company’s employees:



(In thousands, except per share amounts)	Number of Shares	Weighted Average Grant-Date Fair Value
Balance at September 29, 2017	525	$	29.76
Granted	3	37.60
Vested	—	—
Canceled or expired	—	—
Balance at December 29, 2017	528	$	29.82