Note 8

– Stock-Based Compensation

Under the Company

’s 2012 Long-Term Incentive Plan, as amended (2012 Plan), the Company has the ability to grant stock options, stock appreciation rights (SARs), restricted stock, stock units, other stock-based awards and cash incentive awards. Awards under the 2012 Plan have a maximum term of ten years from the date of grant. The compensation committee may provide that the vesting or payment of any award will be subject to the attainment of specified performance measures in addition to the satisfaction of any continued service requirements and the compensation committee will determine whether such measures have been achieved. The per-share exercise price of stock options and SARs granted under the 2012 Plan generally may not be less than the fair market value of a share of our common stock on the date of the grant.

Employee Stock Purchase Plan

The Company

’s 2012 Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase a variable number of shares of the Company’s common stock each offering period at a discount through payroll deductions of up to 15 percent of their eligible compensation, subject to plan limitations. The ESPP provides for six-month offering periods with a single purchase period ending May 15 and November 15, respectively. At the end of each offering period, employees are able to purchase shares at 85 percent of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last trading day of the offering period.

Stock-Based Compensation Expense

Stock-based compensation expense was $

1.7 million and $1.6 million for the three months ended September 30, 2016 and 2015, respectively, and $5.3 million and $4.5 million for the nine months ended September 30, 2016 and 2015, respectively.

Stock Options

The following table summarizes stock

option activity during the nine months ended September 30, 2016:

	Stock Options			Weighted- Average Exercise Price
Options outstanding at December 31, 2015		766,042		$	36.52
Granted		113,645			58.12
Exercised		(173,781	)		18.42
Forfeited		(69,965	)		61.37
Options outstanding at September 30, 2016		635,941		$	42.59

Exercisable at September 30, 2016		368,052		$	31.13

The outstanding options generally have a term of ten years. For employees, options granted become exercisable ratably over the vesting period, which is generally a five-year period beginning on the first anniversary of the grant date, subject to the employee

’s continuing service to the Company. For directors, options generally become exercisable in full on the first anniversary of the grant date.

The weighted-average grant date fair value of options

that were granted during the nine months ended September 30, 2016 was $26.62.

The following table provides the assumptions used in the Black-Scholes pricing model val

uation of options during the nine months ended September 30, 2016 and 2015, respectively:

	Nine Months Ended September 30,
	2016			2015
Risk-free interest rate	1.53	-	1.68%	1.69	-	1.77%
Expected life (years)		6.50		5.50	-	6.50
Expected volatility	44.38	-	45.93%	46.80	-	47.23%
Expected dividend yield		0%			0%

As of September 30, 2016, there was

$6.2 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 3.2 years.

Restricted Stock

Restricted stock awards

are share-settled awards and restrictions lapse ratably over the vesting period, which is generally a five-year period, beginning on the first anniversary of the grant date, subject to the employee's continuing service to the Company. For directors, restrictions generally lapse in full on the first anniversary of the grant date.

The following table summarizes restricted

stock activity during the nine months ended September 30, 2016:

				Weighted-
				Average
				Grant Date
	Restricted			Fair Value
	Stock			Per Share
Restricted stock at December 31, 2015		124,393		$	68.97
Granted		159,705			59.43
Restrictions lapsed		(40,779	)		67.85
Forfeited		(19,645	)		63.99
Restricted stock at September 30, 2016		223,674		$	62.80

As of September 30, 2016, there was $

12.3 million of unrecognized compensation expense related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of 3.9 years.

Employee Stock Purchase Plan

The following table presents the assumptions used to estimate the fair

value of the ESPP during the nine months ended September 30, 2016 and 2015, respectively:

	Nine Months Ended September 30,
	2016			2015
Risk-free interest rate	0.39	-	0.56%	0.08	-	0.10%
Expected life (months)		6.00			6.00
Expected volatility	29.41	-	49.13%	33.68	-	37.64%
Expected dividend yield		0%			0%