Stock-Based Compensation Plans

In 2006, our stockholders approved the VSE Corporation 2006 Restricted Stock Plan for its directors, officers and other employees (the "2006 Plan"). In May 2014, the stockholders approved amendments to the 2006 Plan extending its term until May 6, 2021 and authorizing an additional 500,000 shares of our common stock for issuance under the 2006 Plan. Under the 2006 Plan, we are authorized to issue up to 1,000,000 shares of our common stock and, as of December 31, 2017, 436,532 shares remained available for issuance under the 2006 Plan. The Compensation Committee is responsible for the administration of the 2006 Plan, and determines each recipient of an award under the 2006 Plan, the number of restricted shares of common stock subject to such award and the period of continued employment required for the vesting of such award. These terms are included in award agreements between VSE and the recipients of the award.

During 2017, 2016 and 2015, non-employee directors were awarded 16,100, 17,600 and 18,000 shares of restricted stock, respectively, under the 2006 Plan. The weighted average grant-date fair value of these restricted stock grants was $39.85 per share, $30.89 per share, and $34.29 per share for the shares awarded in 2017, 2016 and 2015, respectively. The shares issued vested immediately and, without the Compensation Committee's approval, cannot be sold, transferred, pledged or assigned before the second anniversary of the grant date. Compensation expense related to these grants was approximately $642 thousand, $544 thousand and $617 thousand during 2017, 2016 and 2015, respectively.

In January of every year since 2007, we have notified certain employees that they are eligible to receive awards of VSE stock under our 2006 Plan, based on our financial performance for the respective fiscal years. These restricted stock awards are expensed and a corresponding liability is recorded on an accelerated basis over the vesting period of approximately three years. Upon issuance of shares on each vesting date, the liability is reduced and additional paid-in capital is increased. The date of award determination is expected to be in March 2018 for the 2017 awards. The date of award determination for the 2016 awards and the 2015 awards was March 1, 2017 and 2016, respectively. On each vesting date, 100% of the vested award is paid in our shares. The number of shares issued is based on the fair market value of our common stock on the vesting date. The earned amount is expensed on an accelerated basis over the vesting period of approximately three years. On March 1, 2017, the employees eligible for the 2016 awards, 2015 awards and 2014 awards received a total of 23,508 shares of common stock. The grant-date fair value of these awards was $40.14 per share.

The total stock-based compensation expense related to restricted stock awards for the years ended December 31, are as follows (in thousands):



	2017		2016		2015
Employees	$	2,416	$	1,555	$	1,423
Non-employee Directors	642		544		617
Total	$	3,058	$	2,099	$	2,040

Employees are permitted to use a certain number of shares of restricted stock to cover their personal tax liability for restricted stock awards. We paid approximately $500 thousand, $499 thousand and $342 thousand, to cover this liability in the years ended December 31, 2017, 2016 and 2015, respectively. These payments are classified as financing cash flows on the consolidated statements of cash flows. The total compensation cost related to non-vested awards not yet recognized was approximately $2.3 million with a weighted average amortization period of 1.7 years and $1.1 million with a weighted average amortization period of 1.9 years as of December 31, 2017 and 2016, respectively.

Stock-based compensation consisting of restricted stock awards was included in costs and operating expenses and provision for income taxes on the accompanying statements of income for the years ended December 31, 2017, 2016 and 2015 (in thousands):



	2017			2016			2015
Stock-based compensation included in costs and operating expenses	$	3,068		$	2,109		$	2,081
Income tax benefit recognized for stock-based compensation	(1,180		)	(811		)	(800		)
Stock-based compensation expense, net of income tax benefit	$	1,888		$	1,298		$	1,281