CAPITAL STOCK

Stock Option Plans

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option- pricing model with the following weighted average assumptions for options granted in the three and nine months ended September 30, 2015 and 2016.



	Three Months Ended September 30,		Nine Months Ended September 30,
	2015	2016	2015	2016
Risk-free interest rate	1.15%	1.14%	1.16%	1.19%
Expected lives	3.4 years	4.5 years	3.4 years	4.5 years
Expected volatility	40%	40%	42%	41%
Expected dividend yield	0%	0%	0%	0%

A summary of our stock option plans, excluding options to purchase fractional shares resulting from our December 2010 1-for-10 reverse stock split, is as follows:



	Year Ended December 31,				Nine months ended September 30, 2016
	2015				2016
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Outstanding at beginning of period	1,074,251		$	10.110	940,610		$	14.163
Granted at Market	146,446		$	36.904	19,855		$	39.467
Canceled	(28,440	)	$	10.080	(463	)	$	14.881
Exercised	(251,647	)	$	10.559	(107,995	)	$	13.528
Outstanding at end of period	940,610		$	14.163	852,007		$	14.833
Exercisable at end of period	621,559		$	10.269	631,884		$	11.560

The total estimated fair value of stock options granted during the three months ended September 30, 2015 and September 30, 2016 were computed to be approximately $51 thousand and $9 thousand, respectively. The total estimated fair value of stock options granted during the nine months ended September 30, 2015 and 2016 were computed to be approximately $309 thousand and $277 thousand, respectively. The amounts are amortized ratably over the vesting periods of the options. The weighted average estimated fair value of options granted during the nine months ended September 30, 2015 and 2016 was computed to be approximately $9.00 and $13.96, respectively. The total intrinsic value of options exercised during the nine months ended September 30, 2015 and 2016 was $3.1 million and $2.8 million, respectively. The cash proceeds from options exercised during the nine months ended September 30, 2015 and 2016 was $1.4 million and $740 thousand, respectively.

The following table summarizes information about stock options outstanding and exercisable at September 30, 2016, excluding outstanding options to purchase an aggregate of 3.5 fractional shares resulting from our December 2010 1-for-10 reverse stock split with a weighted average remaining contractual life of 0.2 years, a weighted average exercise price of $17.93 and exercise prices ranging from $17.17 - $22.50. We intend to issue whole shares only from option exercises.



	Options Outstanding				Options Exercisable
Exercise Prices	Number of Options Outstanding at September 30, 2016	Weighted Average Remaining Contractual Life in Years	Weighted Average Exercise Price		Number of Options Exercisable at September 30, 2016	Weighted Average Exercise Price
$ 4.40 - $ 6.90	216,095	4.13	$	5.597	214,595	$	5.593
$ 6.91 - $ 7.36	181,584	7.14	$	7.360	127,298	$	7.360
$ 7.37 - $15.80	150,463	6.02	$	9.391	137,259	$	9.350
$15.81 - $28.41	167,360	6.09	$	19.823	112,489	$	20.490
$28.42 - $54.68	136,505	9.28	$	39.274	40,243	$	39.235
$ 4.40 - $54.68	852,007	6.32	$	14.833	631,884	$	11.560

As of September 30, 2016, there was approximately $1.8 million in total unrecognized compensation cost related to outstanding stock options. That cost is expected to be recognized over a weighted average period of 1.40 years, with approximately $242 thousand to be recognized in the three months ending December 31, 2016 and all cost to be recognized as of September 2020, assuming all options vest according to the vesting schedules in place at September 30, 2016. As of September 30, 2016, the aggregate intrinsic value of outstanding options was approximately $33.7 million and the aggregate intrinsic value of exercisable options was approximately $27.1 million.

Employee Stock Purchase Plan (the "ESPP")

For the nine months ended September 30, 2015 and 2016, we issued 11,475 and 13,965 shares under the ESPP, respectively.

For the three and nine months ended September 30, 2015 and 2016, we estimated the fair values of stock purchase rights granted under the ESPP using the Black-Scholes pricing model. The weighted average assumptions used for the periods presented were as follows:



	Three Months Ended September 30,		Nine Months Ended September 30,
	2015	2016	2015	2016
Risk-free interest rate	0.26%	0.57%	0.25%	0.54%
Expected lives	1.2 years	1.2 years	1.2 years	1.2 years
Expected volatility	36%	44%	36%	43%
Expected dividend yield	0%	0%	0%	0%

For the nine months ended September 30, 2015 and 2016, the weighted-average fair value of the purchase rights granted was $5.77 and $7.64 per share, respectively. For the three months ended September 30, 2015 and 2016, the weighted-average fair value of the purchase rights granted was $5.89 and $9.87 per share, respectively.

Restricted Stock Issuance

On March 17, 2015, the Company issued unvested shares to certain Executive Officers related to performance-based restricted stock grants (the "Performance Grants") and performance-based restricted stock grants related to the Company's 2015 Management Incentive Plan (the "2015 MIP Grants"). The Company issued 52,956 shares under the Performance Grants and 24,649 shares under 2015 MIP Grants. The Performance Grants have met the underlying performance condition based on the Company's 2015 financial performance and are to cliff vest on March 17, 2018, subject to other vesting provisions in the underlying restricted stock grant agreement. The 2015 MIP Grants were subject to the Company’s achievement of certain financial goals and other vesting provisions in the underlying restricted stock grant agreement. On March 2, 2016, the Company vested 14,364 shares related to the 2015 MIP Grant based on the respective performance criteria, including 4,788 shares withheld for tax, and canceled the remaining 10,285 shares.

On March 2, 2016, the Company issued 15,000 unvested shares to certain Executive Officers related to performance-based restricted stock grants as part of the Company’s 2016 Management Incentive Plan (the "2016 MIP Grants"). The 2016 MIP Grants are scheduled to vest on the date MIP Payouts are to be made under the 2016 Management Incentive Plan and are subject to the Company’s achievement of certain financial goals and other vesting provisions in the underlying restricted stock grant agreement.

On March 26, 2016, 27,500 shares originally issued to Mr. Wilson on March 26, 2014 pursuant to an employment agreement between Mr. Wilson and the Company effective as of March 26, 2014 (the "Wilson Employment Agreement") vested pursuant to the Wilson Employment Agreement.

Restrictions on the transfer of Company stock

The Company's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), places restrictions (the "Transfer Restrictions") on the transfer of the Company's stock that could adversely affect the Company's ability to utilize its domestic Federal Net Operating Loss Position. In particular, the Transfer Restrictions prevent the transfer of shares without the approval of the Company's Board of Directors if, as a consequence of such transfer, an individual, entity or groups of individuals or entities would become a 5-percent holder under Section 382 of the Internal Revenue Code of 1986, as amended, and the related Treasury regulations, and also prevents any existing 5-percent holder from increasing his or her ownership position in the Company without the approval of the Company's Board of Directors. Any transfer of shares in violation of the Transfer Restrictions (a "Transfer Violation") shall be void ab initio under the Certificate of Incorporation, and the Company's Board of Directors has procedures under the Certificate of Incorporation to remedy a Transfer Violation including requiring the shares causing such Transfer Violation to be sold and any profit resulting from such sale to be transferred to a charitable entity chosen by the Company's Board of Directors in specified circumstances.