We have three stock-based compensation plans that are administered by the Compensation Committee of the Board of Directors. We have an Employee Stock Incentive Plan for officers, other employees, consultants and independent contractors under which we have granted options and restricted stock units to officers and other employees, an Employee Stock Purchase Plan under which shares of our common stock may be acquired by employees at discounted prices, and a Non-Employee Director Stock Plan that provides for automatic grants of shares of our common stock to non-employee directors. New shares of our common stock are issued upon stock option exercises, vesting of restricted stock units, issuances of shares to board members and issuances of shares under our the Employee Stock Purchase Plan.

As of December 31, 2017, there are 327,839 shares of common stock reserved in the aggregate for issuance pursuant to future awards under our Employee Stock Incentive Plan and 602,737 shares of common stock reserved in the aggregate for issuance pursuant to outstanding awards under our Employee Stock Incentive Plan. Although our Compensation Committee has authority to issue options, restricted stock, restricted stock units, share grants and other share based benefits under our Employee Stock Incentive Plan, to date only restricted stock units and stock options have been granted under the plan. Options have been granted at an option price per share equal to the market value of our common stock on the date of grant, vest over a four year period and expire seven years after the date of grant. Restricted stock units vest over a four year period and entitle the holders to one share of our common stock for each restricted stock unit. Reserved shares underlying outstanding awards, including options and restricted shares, that are forfeited are available under the Employee Stock Incentive Plan for future grant.

As of December 31, 2017, there were 68,000 shares of common stock reserved in the aggregate for issuance pursuant to future awards under our Non-Employee Director Stock Plan and 16,000 shares of common stock reserved in the aggregate for issuance pursuant to outstanding stock option awards under our Non-Employee Director Stock Plan. Under the terms of the plan, each non-employee director will be automatically be granted 2,000 shares of our common stock on the date of each annual meeting at which such director is elected to serve on the board (beginning with our May 2016 annual meeting). At our May 11, 2017 annual meeting, our shareholders, upon recommendation of the Board of Directors, approved amendments to the Non-Employee Director Stock Plan that eliminated annual stock option grants for non-employee directors and retained share grants under the Non-Employee Director Stock Plan which will now vest in four equal quarterly installments during the year after the grant date provided the non-employee director is still serving as a director on the applicable vesting date.

Pursuant to the plan, on the date of our 2017 annual meeting, we issued a total of 8,000 shares of our common stock to our non-employee directors. The shares had an aggregate fair market value on the date of grant equal to $167,000 (grant date fair value of $20.90 per share).

Pursuant to the original plan, on the date of our 2016 annual meeting, we issued a total of 8,000 shares of our common stock and stock options to acquire 16,000 shares of our common stock to our non-employee directors. Both the shares and the options were fully vested on the date of grant. The shares had an aggregate fair market value on the date of grant equal to $136,000 (grant date fair value of $16.97 per share) and the options had an aggregate fair market value on the date of grant using the Black-Scholes model equal to $139,000 (grant date fair value of $8.71 per option to acquire one share of our common stock).


	Options Outstanding		Weighted Average Exercise Price Per Share
Outstanding, December 31, 2016	547,625		$	9.39
Granted	77,900		15.40
Exercised	(57,000	)	9.18
Expired	—		—
Forfeited	—		—
Outstanding, December 31, 2017	568,525		$	10.24
Exercisable, December 31, 2017	308,063		$	8.66

The intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds the option's exercise price. For options outstanding at December 31, 2017, the weighted average remaining contractual term of all outstanding options was 4.4 years and their aggregate intrinsic value was $3.2 million. At December 31, 2017, the weighted average remaining contractual term of options that were exercisable was 3.8 years and their aggregate intrinsic value was $2.1 million. The aggregate intrinsic value of stock options exercised was $782,000 in 2017, $720,000 in 2016 and $182,000 in 2015. We received proceeds from stock option exercises of $378,000 in 2017, $474,000 in 2016 and $458,000 in 2015. The aggregate fair value of options that vested was $443,000 in 2017, $495,000 in 2016 and $264,000 in 2015.

The fair value of stock options granted to our employees and non-employee directors was estimated on the date of grant using the Black-Scholes model. The Black-Scholes valuation model incorporates ranges of assumptions that are disclosed in the table below. The risk-free interest rate is based on the United States Treasury yield curve at the time of grant with a remaining term equal to the expected life of the awards. We used historical experience to estimate the expected term, representing the length of time in years, that the options are expected to be outstanding. Expected volatility was computed based on historical fluctuations in the daily price of our common stock.

For stock options granted in the three year period ended December 31, 2017, we utilized the fair value of our common stock on the date of grant and employed the following key assumptions in computing fair value using the Black-Scholes option-pricing model:


	2017	2016	2015
Risk-free interest rates	2.14%- 2.15%	1.24% - 1.89%	1.56%
Expected life in years	5.00 - 5.29	5.09 - 7.50	5.01 - 5.11
Expected volatility	52.30% - 52.86%	42.22% - 46.67%	40.82%
Dividend yield	0.00%	0.00%	0.00%
Weighted average fair value on grant date	$7.36	$9.88	$2.73

Restricted shares are granted under our Non-Employee Director Stock Plan. Restricted stock units are granted under our Employee Stock Incentive Plan. There were 32,200 restricted shares and restricted stock units granted in 2017 (weighted average grant date fair value of $16.77 each), 10,700 restricted stock units granted in 2016 (weighted average grant date fair value of $26.40 each) and 18,250 restricted stock units granted in 2015 (weighted average grant date fair value of $7.18 each). The aggregate fair value of outstanding restricted shares and restricted stock units based on the closing share price of our common stock as of December 31, 2017 was $813,000. The aggregate fair value of restricted shares and stock units that vested, based on the closing share price of our common stock on the vesting date, was $453,000 in 2017, $394,000 in 2016 and $129,000 in 2015.

The following is a summary of activity in restricted shares and restricted stock units for 2017:

Non-vested restricted stock units	Shares		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2016	45,549		$	11.93
Granted	32,200		16.77
Vested	(23,537	)	11.79
Forfeited	—		—
Non-vested at December 31, 2017	54,212		$	14.86

We have an Employee Stock Purchase Plan available to eligible U.S. employees. Under terms of the plan, eligible employees may designate from 1% to 10% of their compensation to be withheld through payroll deductions, up to a maximum of $6,500 in each plan year, for the purchase of common stock at 85% of the lower of the market price on the first or last day of the offering period. Purchases under this plan were 18,404 shares in 2017, 36,481 shares in 2016 and 35,845 shares in 2015. As of December 31, 2017, 40,872 shares remain available for future issuance under this plan.

Previously, we had a stock grant plan for non-employee directors that provided for automatic grants of 1,000 shares of our common stock to each of our non-employee directors upon their re-election to the Board of Directors. This plan was terminated and our non-employee directors did not receive any share grants under this plan on the date of our 2016 annual meeting at which our shareholders approved the Non-Employee Director Stock Plan. There were 4,000 shares issued under this plan in 2015 with a fair market value on the date of grant equal to $41,000 (weighted average grant date fair value of $10.36).

Pre-tax stock-based compensation expense for 2017 includes $667,000 for stock options and restricted stock units, $121,000 for our employee stock purchase plan, and $107,000 for 8,000 restricted shares issued to board members for compensation purposes. Pre-tax stock-based compensation expense for 2016 includes $648,000 for stock options and restricted stock units, $79,000 for our employee stock purchase plan, and $136,000 for shares issued to board members for compensation purposes.

At December 31, 2017, the total unrecognized compensation cost related to non-vested stock-based compensation arrangements was $2.0 million and the related weighted average period over which such cost is expected to be recognized is 1.56 years.

In 2017, we recognized a $421,000 income tax benefit from the exercise of stock options and vesting of share based payments, including $227,000 of excess tax benefits. In 2016 and 2015, no tax benefits were realized from the exercise of stock options or vesting of share-based payments and no amounts were credited to additional paid-in capital.

See Note 2 for additional information related to our adoption of Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting.