NOTE 6 – STOCK BASED COMPENSATION

At December 31, 2016, we had the following incentive stock plans:

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the 2014 Incentive Stock Plan, which our stockholders approved in May 2014;

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the 2011 Incentive Stock Plan, which our stockholders approved in May 2011;

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the 2008 Incentive Stock Plan, which our stockholders approved in May 2008;

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the 2005 Incentive Stock Plan, which our stockholders approved in April 2005;

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the 2000 Non-statutory Stock Option Plan, which expired in February 2010;

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the Employee Stock Purchase Plan ("ESPP"), which our stockholders approved in May 2001.

At December 31, 2016, we have reserved a total of 8,054,670 shares for issuance under these plans.

In terms of the stock options authorized, the 2014 Plan, 2011 Plan, 2008 Plan, and the 2005 Plan provide for the grant of non-statutory stock options ("NSOs"), incentive stock options ("ISOs"), and Restricted Stock Units (“RSUs”) intended to qualify under section 422 of the Internal Revenue Code; and the 2000 Plan provides for the grant of NSOs.

The 2014, 2011, 2008 and 2005 Plans authorize awards to our officers, employees and consultants, and following the expiration of the Directors Plan in May 2006, to our directors; and the 2000 Plan authorized awards to our employees and consultants but not to our officers and directors.

The exercise price per share of an option granted under any of our stock option plans may not be less than the closing price of a share of our common stock on the date of grant. The maximum term of an option granted under any plan may not exceed 8 or 10 years. An option may be exercised only when it is vested and, in the case of an option granted to an employee (including an officer), only while he or she remains an employee and for a limited period following the termination of his or her employment. New shares are issued upon exercise of stock options.

Employee Stock Purchase Plan:

In October 2000, our Board of Directors adopted the Employee Stock Purchase Plan ("ESPP"), which our stock holders approved in May 2001, and was made effective as of July 1, 2001. The ESPP authorizes 1,000,000 shares of our common stock, which substantially most employees may purchase through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning or the end of the six-month offering periods. An employee's payroll deductions, and stock purchase, may not exceed $5,000 during any offering period. During 2016, 2015 and 2014, 89,100 shares, 68,039 shares, and 60,189 shares respectively, were issued through the ESPP. At December 31, 2016, we had 202,364 shares available for issuance under the ESPP plan.

Stock Based Compensation Expense:

During 2016, there were no changes to our stock compensation plans or modifications to outstanding stock-based awards which would change the value of any awards outstanding.

The following table presents the total stock-based compensation expense resulting from stock option awards, RSUs, and the ESPP included on the Consolidated Statements of Income:

In thousands
	Years Ended December 31,
	2016		2015		2014
Cost of revenues - stock option plan	$	63	$	92	$	52
Selling, general and administrative - stock option plan		17,344		18,541		15,214
Selling, general and administrative - RSUs		896		1,484		1,267
Selling, general and administrative - ESPP		2,152		1,633		1,240
Total pre-tax expense	$	20,455	$	21,750	$	17,773

Stock Options:

Options granted to directors vest in one year and options granted to officers and employees generally vest over five years. Expense related to options with graded vesting is recognized using the straight-line method over the vesting period.

Stock option activity for the year ended December 31, 2016, is summarized as follows:

	Number of Options			Weighted Average Exercise Price per Share
Outstanding at beginning of year		5,334,803		$	92.02
Granted		1,100,492			110.26
Exercised		(573,799	)		65.71
Forfeited		(339,889	)		115.07
Canceled or expired		(52,875	)		104.98
Outstanding at December 31, 2016		5,468,732		$	96.90
Exercisable at December 31, 2016		2,999,940		$	83.60

At December 31, 2016, there was $38.0 million of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 2.88 years.

The following table sets forth the intrinsic value of options exercised for the years ended December 31:

In thousands
	2016		2015		2014
Total exercise intrinsic value of options exercised	$	25,974	$	62,625	$	65,884

The exercise intrinsic value represents the total pre-tax intrinsic value (the difference between the fair value on the trading day the option was exercised and the exercise price associated with the respective option).

The following table sets forth the information related to outstanding and exercisable options for the years ended December 31:

	2016		2015		2014
Weighted average remaining contractual life of outstanding options (in years)		5.25		5.70		6.10
Total aggregate intrinsic value of outstanding options (in thousands)	$	25,100	$	162,400	$	269,900
Weighted average remaining contractual life of exercisable options (in years)		4.40		4.70		5.10
Total aggregate intrinsic value of exercisable options (in thousands)	$	25,100	$	130,600	$	178,300

The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between our closing stock price on the last day of trading for the year ended December 31, 2016 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders assuming all option holders had exercised their options on December 31, 2016.

Options outstanding and exercisable at December 31, 2016 by price range are presented below:

	Options Outstanding						Options Exercisable
Range of Exercise Price	Shares		Outstanding Average Remaining Life in Years		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
$38.57 - $51.55		688,413		2.54	$	49.22		688,413	$	49.22
$52.05 - $85.00		790,945		3.37		74.35		776,730		74.21
$85.02 - $87.04		547,178		5.04		86.25		406,676		86.26
$87.26 - $95.74		112,302		4.98		90.15		98,496		89.79
$95.87 - $95.87		651,362		6.07		95.87		357,219		95.87
$96.11 - $110.14		96,758		7.57		101.37		20,460		101.12
$111.12 - $111.12		847,751		7.10		111.12		325		111.12
$111.20 - $115.54		135,502		6.48		112.19		99,661		112.25
$115.69 - $115.69		660,918		5.12		115.69		268,217		115.69
$115.82 - $141.56		937,603		6.42		129.90		283,743		129.58
$38.57 - $141.56		5,468,732		5.25	$	96.90		2,999,940	$	83.60

The Company uses historical data to estimate expected life and volatility. The estimated fair value of stock options at the time of the grant using the Black-Scholes model option pricing model was as follows:

	Years Ended December 31,
	2016			2015			2014
Stock options granted (shares)		1,100,492			1,056,490			981,583
Weighted average fair value at grant date	$	20.16		$	22.90		$	21.31
Assumptions:
Expected term (in years)		4.77			4.79			4.76
Expected volatility		18.28	%		16.71	%		17.23	%
Expected dividend yield		—	%		—	%		—	%
Risk free interest rate		1.21	%		1.47	%		1.53	%

Restricted Stock Units:

The fair value of RSUs is based on the closing price of the Company's common stock on the date of grant and is amortized to expense over the service period. RSUs vest at the end of three or five years. Our 2008, 2011 and 2014 Plans include a share reserve related to RSUs granted at a 2-1 ratio.

The following table sets forth the information related to RSUs for the years ended December 31:

	2016		2015		2014
Total aggregate intrinsic value of outstanding units (in thousands)	$	8,847	$	8,441	$	8,337
Per share fair value of units granted		106.01		114.27		115.67

A summary of the status of our non-vested RSUs and changes during the year ended December 31, 2016, are as follows:

	Number of Units			Weighted Average Grant Date Fair Value
Non-vested at beginning of year		71,451		$	101.29
Granted		78,237			106.01
Forfeited		(34,850	)		102.25
Non-vested at December 31, 2016		114,838			104.22

At December 31, 2016, there was $7.4 million of total unrecognized compensation expense related to RSUs, which is expected to be recognized over a weighted average period of 2.86 years. There were no units that vested during the years ended December 31, 2016 and 2015. The fair value of units that vested during the year ended December 31, 2014 was $2.0 million.