3.	EQUITY INCENTIVE PLAN

In March 2008, we adopted the Hurco Companies, Inc. 2008 Equity Incentive Plan, or the 2008 Plan, which allows us to grant awards of stock options, Stock Appreciation Rights settled in stock (SARs), restricted shares, performance shares and performance units. The 2008 Plan replaced the 1997 Stock Option and Incentive Plan, which expired in March 2007. The Compensation Committee of the Board of Directors has authority to determine the officers, directors and key employees who will be granted awards; designate the number of shares subject to each award; determine the terms and conditions upon which awards will be granted; and prescribe the form and terms of award agreements. We have granted stock options under both plans which are currently outstanding and restricted shares under the 2008 Plan which are outstanding. No stock option may be exercised more than ten years after the date of grant or such shorter period as the Compensation Committee may determine at the date of grant. The total number of shares of our common stock that may be issued as awards under the 2008 Plan is 750,000. The market value of a share of our common stock, for purposes of the 2008 Plan, is the closing sale price as reported by the Nasdaq Global Select Market on the date in question or, if not a trading day, on the last preceding trading date.

A summary of stock option activity for the three-month period ended January 31, 2014, is as follows:

			Weighted
			Average
	Stock		Exercise
	Options		Price

Outstanding at October 31, 2013		168,712	$	20.73

Options granted		-		-
Options exercised		-		-
Options cancelled		-		-

Outstanding at January 31, 2014		168,712	$	20.73

Summarized information about outstanding stock options as of January 31, 2014, that have already vested and those that are expected to vest, as well as stock options that are currently exercisable, are as follows:

	Options already vested and expected to vest		Options currently exercisable

Number of outstanding options		168,712		129,983

Weighted average remaining contractual life (years)		6.41		4.81
Weighted average exercise price per share	$	20.73	$	20.63

Intrinsic value of outstanding options	$	988,000	$	800,000

The intrinsic value of an outstanding stock option is calculated as the difference between the stock price as of January 31, 2014 and the exercise price of the option.

On January 10, 2014, the Compensation Committee approved a long-term incentive compensation arrangement for our executive officers in the form of restricted shares and performance shares awarded under the 2008 Plan. The awards were 25% time-based vesting and 75% performance-based vesting. The three-year performance period will be fiscal 2014 through fiscal 2016.

The Compensation Committee granted a total of 12,182 shares of time-based restricted shares to our executive officers. The restricted shares vest in thirds over three years from the date of grant provided the recipient remains employed through that date. The grant date fair value of the restricted shares was based upon the closing sales price of our common stock on the date of grant.

The Compensation Committee also granted a total of 16,948 performance shares to our executive officers designated as "Performance Shares - TSR". The shares were weighted as 40% of the overall long-term incentive compensation arrangement and will vest and be paid based upon our total shareholder return over a three-year period, relative to the total shareholder return over that period of the companies in a specified peer group. Participants will have the ability to earn between 50% of the target number of shares for achieving threshold performance and 200% of the target number of shares for achieving maximum performance. The fair value of the market-based performance shares is calculated using the Monte Carlo approach.

The Compensation Committee also granted a total of 17,056 performance shares to our executive officers designated as "Performance Shares - ROIC". These shares were weighted as 35% of the overall long-term incentive compensation arrangement and will vest and be paid based upon the achievement of pre-established goals related to our average return on invested capital over the three-year period. Participants will have the ability to earn between 50% of the target number of shares for achieving threshold performance and 200% of the target number of shares for achieving maximum performance. The grant date fair value of the ROIC performance shares was based on the closing sales price of our common stock on the grant date.

A reconciliation of the activity relating to outstanding restricted share awards made under the 2008 Plan and related information is as follows:

	Number of Shares			Weighted Average Grant Date Fair Value
Unvested at October 31, 2013		68,456		$	23.01
Shares granted		46,186			24.90
Shares vested		(17,290	)		(23.10	)
Shares withheld		(7,710	)		(23.10	)
Unvested at January 31, 2014		89,642		$	23.96

During the first three months of fiscal 2014 and 2013, we recorded $246,000 and $248,000, respectively, as stock-based compensation expense attributable to grants of stock options and shares of restricted stock. As of January 31, 2014, there was $1.8 million of total unrecognized stock-based compensation expense that we expect to recognize by the end of the first quarter of fiscal 2017.