SHARE-BASED COMPENSATION AND EMPLOYEE BENEFIT PLANS

We have a 2008 Equity Incentive Plan (the “Plan”), which reserved 900,000 shares of common stock for issuance pursuant to the terms of the Plan plus 274,298 shares that remained available for future issuance under prior plans on the effective date of the Plan, which was May 5, 2008. An Amended and Restated Plan was approved by our board of directors and stockholders at our annual meeting of stockholders in May 2014, which authorized an additional 500,000 shares of common stock for issuance. At our annual meeting of stockholders in June 2016, the board of directors and stockholders authorized another 250,000 shares of common stock for issuance under the Amended and Restated Plan. As of December 31, 2016, there were 330,378 shares available for future grant under the Plan. Our plan is administered by the Compensation Committee (the "Committee") of the Board of Directors. The types of awards that may be granted under the Plan include stock options, stock appreciation rights, restricted stock, restricted stock units, performance units or other stock-based awards. The terms of the awards granted under the Plan will expire no later than ten years from the grant date. The Committee determines the vesting conditions of awards; however, subject to certain exceptions, an award that is not subject to the satisfaction of performance measures may not fully vest or become fully exercisable earlier than three years from the grant date, and the performance period for an award subject to performance measures may not be shorter than one year.

At the beginning of each quarter, members of the board of directors, at their option, may elect to receive as compensation 1) stock options to purchase shares of common stock with a fair value equivalent of $22,500 (calculated using the Black-Scholes pricing model), 2) shares of common stock with a grant date fair value of $22,500, 3) deferred stock units with a fair value equivalent of $22,500 (calculated using the Black-Scholes pricing model), with ownership of the common stock vesting immediately or over a period determined by the Committee and stated in the award or 4) any combination of options and common stock. Upon the date of grant, the members of the board of directors are immediately vested in the stock options or common stock.

Stock Options

A summary of stock option activity under the Plan is as follows:



	Shares		Weighted Average Exercise Price		Weighted-Average Remaining Contractual Term (in yrs)
Outstanding as of January 1, 2016	2,417,541		$	4.74
Granted	336,740		4.64
Exercised	(63,704	)	3.34
Forfeited/expired	(179,879	)	6.21
Expired	(13,500	)	14.33
Outstanding as of December 31, 2016	2,497,198		$	4.61	6.48
Vested and exercisable as of December 31, 2016	1,834,861		$	4.23	5.76

The weighted-average grant date fair value of options granted during the years ended December 31, 2016, 2015, and 2014 was $2.82, $3.76, and $4.79, respectively. The total fair value of shares vested during the years ended December 31, 2016, 2015, and 2014 was $1,875, $655, and $752, respectively.

The assumptions used to determine the value of our stock-based awards under the Black-Scholes method are summarized below:



	2016	2015	2014
Risk-free interest rate	1.27% - 2.26%	1.71% - 2.4%	1.90% - 3.0%
Dividend yield	—%	—%	—%
Expected volatility	50.0% - 61.9%	59.9% - 66.9%	60.6% - 67.1%
Expected life in years	8.2	7.6	7.0

The risk-free interest rate is based on the U.S. Treasury strip yield in effect at the time of grant with a term equal to the expected term of the stock option granted. Average expected life and volatilities are based on historical experience, which we believe will be indicative of future experience.

Stock Grants and Deferred Stock Units

Pursuant to the board of directors' compensation program, 0, 2,319 and 12,670 shares of stock were granted in the years ended December 2016, 2015 and 2014 respectively. The total fair value of stock grants made in the years ended December 2016, 2015 and 2014 respectively was $0, $22 and $90. Deferred stock units of 20,187 and 12,893 were granted to members of the board of directors during 2016 and 2015 respectively. The total fair value of deferred stock units granted in the years ended December 31, 2016, and 2015 was $90 and $65. Deferred stock units are fully vested upon issuance and are settled in shares of common stock upon the director’s termination of service. The fair value of stock grants and deferred stock units is calculated based on the closing price of our common stock on the date of grant.

Share-based Compensation Expense

The compensation expense that has been charged against income for December 31, 2016, 2015 and 2014 was $1,722, $1,469, and $1,625, respectively, and is included in selling, general and administrative expense. As of December 31, 2016, there was $863 of total unrecognized compensation expense related to nonvested stock options, which is expected to be recognized over a weighted-average period of 1.86 years.

Employee Stock Purchase Plan

Under the terms of our employee stock purchase plan ("ESPP"), eligible employees may authorize payroll deductions up to 10% of their base pay to purchase shares of our common stock at a price equal to 85% of the lower of the closing price at the beginning or end of each quarterly stock purchase period. A total of 400,000 shares were authorized under the original ESPP Plan; an Amended and Restated Plan was approved by our board of directors and stockholders at our annual meeting of stockholders in June 2016, which authorized an additional 100,000 shares of common stock for issuance. As of December 31, 2016, 93,440 shares were available for issuance.

During the years ended December 31, 2016, 2015, and 2014, 48,414, 46,227, and 19,394 shares were purchased under this plan at an average price of $3.87, $3.92, and $6.07, respectively. Total expense recognized related to the ESPP during the years ended December 31, 2016, 2015, and 2014 was $55, $50, and $27, respectively. The assumptions used to value the shares under the ESPP using the Black-Scholes method were as follows:



	2016	2015	2014
Risk-free interest rate	0.21% - 0.51%	0.00% - 0.16%	0.02% - 0.05%
Dividend yield	—%	—%	—%
Expected volatility	37.6% - 68.1%	21.9% - 78.9%	20.7% - 23.5%
Expected life in years	3 months	3 months	3 months

The weighted average grant date fair value of these shares was $1.13, and $1.09, and $1.38 per share during the years ended December 31, 2016, 2015, and 2014, respectively.

401(k) Plan

We have a safe harbor 401(k) plan that allows participation by all eligible employees as of the first day of the month following their hire date. Eligible employees may contribute up to the maximum limit determined by the Internal Revenue Code. Participants receive a matching contribution after completing one year of service. We match 100% of the participant’s contribution for the first 3% and 50% of the participant’s contribution for the next 2%. Company matching contributions to the 401(k) plan totaled $582, $493, and $316 for the years ended December 31, 2016, 2015, and 2014, respectively.

Philippines Pension Plan

The Company sponsors a non-contributory defined benefit pension plan (the “Pension Plan”) for its covered

employees in the Philippines. The Pension Plan provides defined benefits based on years of service and final salary.

All permanent employees meeting the minimum service requirement are eligible to participate in the Pension Plan. Remeasurement changes are reflected in Accumulated Other Comprehensive Income (AOCI). As of December 31, 2016, the Pension Plan was unfunded. The Company doesn't expect to make any cash contributions to the Pension Plan. As of December 31, 2016, the defined benefit obligation of $550 was included in other long term liabilities in the Consolidated Balance Sheets.