We maintain the Universal Stainless & Alloy Products, Inc. 2017 Equity Incentive Plan (the “2017 Plan”), which was approved by our stockholders in May 2017. The 2017 Plan permits the issuance of stock options, restricted stock, restricted stock units, other share-based awards and performance awards to officers, employees, non-employee directors, and consultants and advisors to the Company. At inception, there were 568,357 shares authorized for issuance under the 2017 Plan.

When adopted, the 2017 Plan replaced the Omnibus Incentive Plan (“OIP”). Any awards outstanding under the OIP will remain subject to and be paid under the OIP. No new awards will be granted under the OIP. Any shares subject to outstanding awards under the OIP that cease to be subject to such awards after the adoption of the 2017 Plan will increase the shares authorized under the 2017 Plan. At December 31, 2018, there were 544,959 shares available for grant under the 2017 Plan.

We maintain the OIP which was approved by our stockholders in May 2012. The OIP permitted the issuance of stock options, restricted stock, restricted stock units and other share-based awards to non-employee directors, other than those directors owning more than 5% of our outstanding common stock, consultants, officers and other key employees who were expected to contribute to our future growth and success. With the adoption of the 2017 Plan, no shares of common stock were available for grant at December 31, 2018 under OIP.

The price for options granted under the both the 2017 Plan and OIP is equal to the fair market value of the common stock at the date of grant. Options granted to non-employee directors vest over a three-year period, and options granted to employees vest over a four-year period. All options under both the 2017 Plan and OIP will expire no later than ten years after the grant date. Forfeited options may be reissued and are included in the amount available for grants.

A summary of stock option activity as of and for the year ended December 31, 2018 is presented below:

	Non-vested stock					Stock options
	options outstanding					outstanding
				Weighted-					Weighted-		Weighted-
				average					average		average
	Number			grant-date		Number			exercise		contractual
	of shares			fair value		of shares			price		term (years)
Outstanding at December 31, 2017		247,200		$	7.94		884,050		$	23.53
Stock options granted		131,350			10.33		131,350			21.34
Stock options exercised		-			-		(48,075	)		14.89
Stock options vested		(101,142	)		8.28		-			-
Stock options forfeited		(13,625	)		7.27		(105,300	)		32.69
Outstanding at December 31, 2018		263,783		$	9.04		862,025		$	22.56		6.0
Exercisable at December 31, 2018							598,242		$	24.38		4.6

Proceeds from stock option exercises totaled $0.7 million and $0.3 million for the years ended December 31, 2018 and 2017, respectively. There were no stock option exercises in 2016. Shares issued in connection with stock option exercises are issued from available authorized shares.

Based upon the closing stock price of $16.21 at December 31, 2018, the aggregate intrinsic value of outstanding and exercisable stock options was $1.0 million and $0.7 million, respectively. Intrinsic value of stock options is calculated as the amount by which the market price of our common stock exceeds the exercise price of the options. The aggregate intrinsic value of stock options exercised for the years ended December 31, 2018 and 2017 was $0.6 million and $0.1 million, respectively. The total fair value of stock option awards vested during the years ended December 31, 2018, 2017 and 2016 was $0.8 million, $1.2 million and $1.2 million, respectively.

Share-based compensation to employees and directors is recognized as compensation expense in the consolidated statements of operations based on the stock options fair value on the measurement date, which is the date of the grant. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods. The compensation expense recognized and its related tax effects are included in additional paid-in capital.

Share-based compensation expense related to stock options totaled $0.8 million, $1.2 million and $1.3 million for the years ended December 31, 2018, 2017 and 2016, respectively. Share-based compensation expense is recognized ratably over the requisite service period for all stock option awards. Unrecognized share-based compensation expense related to non-vested stock option awards totaled $2.2 million at December 31, 2018, and the weighted-average period over which this unrecognized expense was expected to be recognized was 2.8 years.

The fair value of our stock options granted is estimated on the measurement date, which is the date of grant. We use the Black-Scholes option-pricing model. Our determination of fair value of stock option awards on the date of grant is affected by our stock price as well as assumptions regarding our expected stock price volatility over the term of the awards, and actual and projected stock option exercise behaviors. The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2018, 2017 and 2016 was $10.12, $9.60 and $5.85, respectively.

The assumptions used to determine the fair value of stock options granted are detailed in the table below:

	2018			2017			2016
Risk-free interest rate	2.63% to 3.10%			1.92% to 2.29%			1.42% to 2.39%
Dividend yield		0.0	%		0.0	%		0.0	%
Expected market price volatility	45% to 52%			45% to 53%			51% to 53%
Weighted-average expected market price volatility		49.1	%		47.4	%		51.0	%
Expected term	4.7 to 6.8 years			5.6 to 7.5 years			5.6 to 7.5 years

The risk-free interest rate was developed using the U.S. Treasury yield curve for periods equal to the expected life of the stock options at the grant date. No dividend yield was assumed because we do not pay cash dividends on common stock and currently have no plans to pay a dividend. Expected volatility is based on the long-term historical volatility (estimated over a period equal to the expected term of the stock options) of our common stock. In estimating the fair value of stock options under the Black-Scholes option-pricing model, separate groups of employees that have similar historical exercise behavior are considered separately. The expected term of options granted represents the period of time that options granted are expected to be outstanding.

A summary of restricted stock activity for the years ended December 31, 2018 and 2017 is presented below:

					Weighted-
					average
	Number				grant-date
	of shares				fair value
Balance, December 31, 2016		95,000		$		14.75
Restricted stock granted in May		6,780				18.00
Restricted stock granted in November		7,500				20.29
Restricted stock forfeited		(27,000	)			14.96

Balance, December 31, 2017		82,280				15.45
Restricted stock granted in February		9,530				26.23
Restricted stock granted in May		5,136				24.20
Restricted stock vested in May		(2,260	)			18.00
Restricted stock granted in November		10,666				19.46
Restricted stock vested in December		(25,000	)			14.75

Balance, December 31, 2018		80,352		$		17.97

Share-based compensation expense related to restricted stock totaled $0.5 million, $0.4 million, and $0.1 million for the years ended December 31, 2018, 2017 and 2016, respectively.

During the years ended December 31, 2018 and 2017, we granted 25,332 and 14,280 time-based restricted stock units to certain employees and directors, respectively. The restricted stock units typically vest over four years for employees and three years for directors. The fair value of the non-vested time-based restricted common stock awards was calculated using the market value of the stock on the date of issuance.

As of December 31, 2018, total unrecognized compensation cost related to non-vested time-based restricted stock units was $1.0 million. That cost is expected to be recognized over a weighted-average period of 2.4 years.

Under the 1996 Employee Stock Purchase Plan, as amended (the “Plan”), the Company is authorized to issue up to 300,000 shares of common stock to its full-time employees, nearly all of whom are eligible to participate. Under the terms of the Plan, employees can choose as of January 1 and July 1 of each year to have up to 10% of their total earnings withheld to purchase up to 100 shares of our common stock each six-month period. The purchase price of the stock is 85% of the lower of its beginning-of-the-period or end-of-the-period market prices. At December 31, 2018, we have issued 219,991 shares of common stock since the Plan’s inception.