Stockholders’ Equity


(a)	Employee Stock Options

On June 15, 2016, at the Company's 2016 Annual Meeting of Stockholders, the stockholders of the Company approved the 2016 Equity and Incentive Plan (2016 Plan). The 2016 Plan authorizes the Company to issue up to 3,000 shares of common stock (plus an additional 1,690 shares intended to roll over into the 2016 Plan shares subject to awards outstanding on June 15, 2016 under earlier plans that may be forfeited, canceled, reacquired by the Company or terminated) pursuant to stock options, restricted stock awards and other stock-based awards.

Options are generally granted with an exercise price equal to the fair market value of the common stock on the date of grant and generally vest in equal annual amounts over four years beginning on the first anniversary of the date of the grant. No options are exercisable for periods of more than five years after date of grant. Under the 2016 Plan, each share issued under awards other than options and stock appreciation rights will reduce the number of shares reserved for issuance by two shares. Shares issued under options or stock appreciation rights will reduce the shares reserved for issuance on a share-for-share basis. The 2016 Plan and earlier equity compensation plans, pursuant to which 12,415 shares of the Company’s common stock were reserved for issuance, were all approved by the Company's shareholders. As of December 31, 2016, 2,895 shares were available for future grants. The Compensation Committee of the Board of Directors administers the equity compensation plans, approves the individuals to whom awards will be granted and determines the number of shares and other terms of each award. Outstanding options under the Company's equity compensation plans at December 31, 2016 expire from February 2017 through November 2021. None of the Company’s outstanding options includes performance-based or market-based vesting conditions as of December 31, 2016.

The Company has estimated the fair value of each option grant on the date of grant using the Black-Scholes option-pricing model. The expected volatility assumption is based on the historical daily price data of the Company’s common stock over a period equivalent to the weighted average expected life of the Company’s options. The expected term of options granted is derived using assumed exercise rates based on historical exercise patterns and represents the period of time the options granted are expected to be outstanding. The risk-free interest rate is based on the actual U.S. Treasury zero-coupon rates for bonds matching the expected term of the option as of the option grant date. The dividend yield of zero is based upon the fact that the Company has not historically declared or paid cash dividends, and does not expect to declare or pay dividends in the foreseeable future.

The per share weighted-average fair values of stock options granted during 2016, 2015, and 2014 were $2.77, $4.39, and $4.71, respectively. The weighted-average assumptions used to value options as of their grant date were as follows:



	Year Ended December 31,
	2016		2015		2014
Risk-free interest rate	1.43	%	1.55	%	1.52	%
Expected volatility	38.2	%	43.3	%	46.5	%
Expected life (in years)	4.18		4.17		4.21
Forfeiture rate	5.00	%	5.00	%	5.00	%
Dividend yield	0	%	0	%	0	%

The changes in outstanding stock options for the year ended December 31, 2016 are as follows:



	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2015	1,177		$	11.60
Granted	75		$	8.90
Exercised	(269	)	$	9.06
Expired, canceled or forfeited	(297	)	$	13.68
Outstanding at December 31, 2016	686		$	11.41	2.23	$	681
Exercisable at December 31, 2016	379		$	11.39	1.50	$	382
Options vested or expected to vest at December 31, 2016	674		$	11.42	2.04	$	662

The total aggregate intrinsic value of options exercised was $484, $50, and $232 in 2016, 2015, and 2014, respectively. The total aggregate intrinsic value of options outstanding at December 31, 2015 and 2014 was $123 and $1,814, respectively. The total aggregate intrinsic value of options exercisable at December 31, 2015 and 2014 was $122 and $761, respectively.

As of December 31, 2015 and 2014, the number of options exercisable was 687 and 490, respectively, and the weighted average exercise price of those options was $11.60 and $11.87 per share, respectively. The weighted average remaining contractual term for options exercisable at December 31, 2015 and 2014 was 2.00 and 1.76 years, respectively. The weighted average remaining contractual term for options outstanding at December 31, 2015 and 2014 was 2.04 and 2.72 years, respectively.

As of December 31, 2016, there was $790 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 1.94 years. In 2016, 2015, and 2014, the Company recorded compensation charges of $702, $1,229, and $1,368, respectively, related to stock options. Compensation costs for options subject only to service conditions that vest ratably are recognized on a straight-line basis over the requisite service period for the entire award. During 2016, 2015, and 2014, cash received under stock option plans for exercises was $2,438, $90 and $471, respectively.


(b)	Restricted Stock

The Company granted 424, 203, and 265 restricted stock awards to employees under the terms of the 2016 Plan or the Amended and Restated 2006 Stock Incentive Plan (2006 Plan) for the years ended December 31, 2016, 2015, and 2014, respectively. The restricted stock awards generally vest annually over four years from the date of grant subject to the recipient remaining an employee through the applicable vesting dates. Compensation expense for restricted stock awards is measured at fair value on the date of grant based on the number of shares granted and the quoted market closing price of the Company’s common stock. Such value is recognized as expense over the vesting period of the award, net of estimated forfeitures. The weighted-average grant-date fair value of restricted stock granted during 2016, 2015, and 2014 was $8.68, $12.43, and $13.57 per share, respectively.

As of December 31, 2016, there was $4,344 of total unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted-average period of 2.32 years. Compensation costs for awards subject only to service conditions that vest ratably are recognized on a straight-line basis over the requisite service period for the entire award. Compensation cost for awards initially subject to certain performance conditions are recognized on a ratable basis over the requisite service period for the entire award. In 2016, 2015, and 2014, the Company recorded compensation charges of $2,938, $2,422, and $2,317, respectively, related to restricted stock awards.

Restricted stock activity under the 2006 Plan and the 2016 Plan for 2016 is as follows:



	Number of Shares		Weighted- average grant date fair value
Outstanding at December 31, 2015, unvested	458		$	13.22
Granted	424		8.68
Vested	(186	)	12.82
Forfeited	(52	)	10.39
Outstanding at December 31, 2016, unvested	644		$	10.58


(c)	Employee Stock Purchase Plan

On June 15, 2016, at the Company's 2016 Annual Meeting of Stockholders, the stockholders of the Company also approved amendments to the Company's Amended and Restated 1996 Employee Stock Purchase Plan (ESPP) that, among other things, increased the number of shares of common stock reserved for issuance by 1,000 to a total of 1,650, of which 1,000 shares remain available as of December 31, 2016.

The ESPP covers all of the Company’s employees. Under the terms of the ESPP, eligible employees can elect to have up to six percent of their pre-tax compensation withheld to purchase shares of the Company’s common stock on a semi-annual basis. Before the amendment to the plan, the ESPP allowed eligible employees the right to purchase the Company’s common stock on a semi-annual basis at 85% of the market price at the end of each purchase period. Under the amendment, the ESPP now allows eligible employees the right to purchase the Company's common stock on a semi-annual basis at 85% of the market price on the first or last day of each purchase period, whichever is lower. During 2016, 2015, and 2014, shares issued under this plan were 18, 28, and 12 shares, respectively. The Company utilizes the Black-Scholes option-pricing model to calculate the fair value of these discounted purchases. The fair value of the 15% discount is recognized as compensation expense over the purchase period. The Company applies a graded vesting approach because the ESPP provides for multiple purchase periods and is, in substance, a series of linked awards. In 2016, 2015, and 2014, the Company recorded compensation charges of $11, $58, and $55, respectively, related to the ESPP. During 2016, 2015, and 2014, cash received under the ESPP was $146, $291, and $138, respectively.


(d)	Stock- Based Compensation Expense

The following presents stock-based compensation expense in the Company's consolidated statements of operations for the years ended December 31, 2016, 2015, and 2014.



	2016		2015		2014
Cost of product sales	$	321	$	317	$	384
Cost of service sales	1		—		1
Research and development	690		619		695
Sales, marketing and support	1,027		927		926
General and administrative	1,612		1,871		1,765
	$	3,651	$	3,734	$	3,771