
17.	Share-Based Compensation

We have four plans under which we have awarded share-based compensation grants: The 1997 Non-Employee Directors Option Plan ("1997 Plan"), which provided for stock option grants to our non-employee Directors, the 2007 Stock Incentive Plan (“2007 Plan”), the Amended and Restated 2010 Stock Incentive Plan, as Amended (“2010 Plan”) and the 2017 Stock Incentive Plan ("2017 Plan"), which were adopted as a continuing step toward aggregating our equity compensation programs to reduce the complexity of our equity compensation programs.

The 2010 Plan, originally approved by our shareholders on April 28, 2010 and amended and restated by our shareholders on April 25, 2012, terminated our rights to grant awards under the 2007 Plan; however, any awards granted under the 2007 or 2010 Plans that do not result in the issuance of shares of Common Stock may again be used for an award under the 2010 Plan. The 2010 Plan was amended and restated by our shareholders on April 24, 2013, increasing the number of shares available under the amended 2010 Plan from 1,500,000 shares to 2,600,000 shares.

The 2017 Plan approved by our shareholders on April 26, 2017 terminated our rights to grant awards under previous plans; however, any awards granted under previous plans that do not result in the issuance of shares of Common Stock may again be used for an award under the 2017 Plan. There were 1,200,000 shares made available under the approved 2017 Plan.

As of December 31, 2017, there were 742,873 shares reserved for issuance under the 2007 Plan and the 2010 Plan for outstanding compensation awards. There were 1,155,110 shares available for issuance under the 2017 Plan for current and future equity awards as of December 31, 2017. The Compensation Committee of the Board of Directors determines the number of shares awarded and the grant date, subject to the terms of our equity award policy.

We recognized total Share-Based Compensation Expense of $5,891, $3,875 and $8,222, respectively, during the years ended 2017, 2016 and 2015. The total excess tax benefit recognized for share-based compensation arrangements during the years ended 2017, 2016 and 2015 was $1,168, $686 and $859, respectively.

Stock Option Awards

We determined the fair value of our stock option awards using the Black-Scholes valuation model that uses the assumptions noted in the table below. The expected life selected for stock options granted during the year represents the period of time that the stock options are expected to be outstanding based on historical data of stock option holder exercise and termination behavior of similar grants. The risk-free interest rate for periods within the contractual life of the stock option is based on the U.S. Treasury rate over the expected life at the time of grant. Expected volatilities are based upon historical volatility of our stock over a period equal to the expected life of each stock option grant. Dividend yield is estimated over the expected life based on our dividend policy and historical dividends paid. To determine the amount of compensation cost to be recognized in each period, we account for forfeitures as they occur.

The following table illustrates the valuation assumptions used for the 2017, 2016 and 2015 grants:



	2017	2016	2015
Expected volatility	25 - 26%	29 - 32%	32 - 36%
Weighted-average expected volatility	26%	32%	36%
Expected dividend yield	1.2 - 1.3%	1.3 - 1.5%	1.1 - 1.2%
Weighted-average expected dividend yield	1.3%	1.3%	1.2%
Expected term, in years	5	5	5
Risk-free interest rate	1.7 - 2.0%	1.1 - 1.4%	1.4 - 1.6%

New stock option awards granted vest one-third each year over a three year period and have a ten year contractual term. Compensation expense equal to the grant date fair value is recognized for these awards on a straight-line basis over the awards vesting period. Stock options granted to employees are subject to accelerated expensing if the option holder meets the retirements definition set forth in the 2010 Plan.

In addition to stock options, we also occasionally grant cash-settled stock appreciation rights (“SARs”) to employees in certain foreign locations. There were no outstanding SARs as of December 31, 2017 and no SARs were granted during 2017, 2016 or 2015.

The following table summarizes the activity during the year ended December 31, 2017 for stock option awards:



	Shares		Weighted-Average Exercise Price
Outstanding at beginning of year	1,113,382		$	42.34
Granted	224,985		72.85
Exercised	(159,792	)	44.04
Forfeited	(42,586	)	63.98
Expired	(381	)	65.12
Outstanding at end of year	1,135,608		$	47.47
Exercisable at end of year	766,583		$	39.15

The weighted-average grant date fair value of stock options granted during the years ended December 31, 2017, 2016 and 2015 was $16.39, $13.61 and $20.08, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2017, 2016 and 2015 was $4,450, $3,408 and $1,702, respectively. The aggregate intrinsic value of options outstanding and exercisable at December 31, 2017 was $28,711 and $25,702, respectively. The weighted-average remaining contractual life for options outstanding and exercisable as of December 31, 2017, was 5.6 years and 4.2 years, respectively. As of December 31, 2017, there was unrecognized compensation cost for nonvested options of $2,064, which is expected to be recognized over a weighted-average period of 1.4 years.

Restricted Share Awards

Restricted share awards for employees generally have a three year vesting period from the effective date of the grant. Restricted share awards to non-employee directors vest upon a change of control or upon termination of service as a director occurring at least six months after grant date of the award so long as termination is for one of the following reasons: death; disability; retirement in accordance with Tennant policy (e.g., age, term limits, etc.); resignation at request of Board (other than for gross misconduct); resignation following at least six months’ advance notice; failure to be renominated (unless due to unwillingness to serve) or reelected by shareholders; or removal by shareholders. We use the closing share price the day before the grant date to determine the fair value of our restricted share awards. Expenses on these awards are recognized over the vesting period.

The following table summarizes the activity during the year ended December 31, 2017 for nonvested restricted share awards:



	Shares		Weighted-Average Grant Date Fair Value
Nonvested at beginning of year	117,234		$	47.62
Granted	20,284		73.06
Vested	(32,990	)	44.36
Forfeited	(4,739	)	63.43
Nonvested at end of year	99,789		$	53.11

The total fair value of shares vested during the years ended December 31, 2017, 2016 and 2015 was $1,463, $1,970 and $1,054, respectively. As of December 31, 2017, there was $1,585 of total unrecognized compensation cost related to nonvested shares which is expected to be recognized over a weighted-average period of 1.8 years.

Performance Share Awards

We grant performance share awards to key employees as a part of our long-term management compensation program. These awards are earned based upon achievement of certain financial performance targets over a three year period. The number of shares of common stock a participant receives will be increased (up to 200 percent of target levels) or reduced (down to zero) based on the level of achievement of the financial performance targets. We use the closing share price the day before the grant date to determine the fair value of our performance share awards. Expenses on these awards are recognized over a three year performance period. Performance shares are granted in restricted stock units. They are payable in stock and vest solely upon achievement of certain financial performance targets during this three year period.

The following table summarizes the activity during the year ended December 31, 2017 for nonvested performance share awards:



	Shares		Weighted-Average Grant Date Fair Value
Nonvested at beginning of year	129,096		$	59.30
Granted	45,792		72.84
Vested	(20,060	)	61.80
Forfeited	(31,804	)	62.55
Nonvested at end of year	123,024		$	63.09

The total fair value of shares vested during the year ended December 31, 2017, 2016 and 2015 was $1,240, $1,703 and $1,713, respectively. As of December 31, 2017, we expect to recognize $1,400 of total compensation costs over a weighted-average period of 2.0 years.

Restricted Stock Units

We grant restricted stock units to employees, which generally vest within three years from the date of the grant. Vested restricted stock units are paid out in stock. We use the closing share price the day before the grant date to determine the fair value our restricted stock units. Expenses on these awards are recognized on a straight line basis over the vesting period of the award.

The following table summarizes the activity during the year ended December 31, 2017 for nonvested restricted stock units:



	Shares		Weighted-Average Grant Date Fair Value
Nonvested at beginning of year	31,038		$	60.47
Granted	30,750		68.92
Vested	(14,638	)	65.74
Forfeited	(4,025	)	60.82
Nonvested at end of year	43,125		$	64.67

The total fair value of shares vested during the years ended December 31, 2017 and 2016 was $962 and $907, respectively. As of December 31, 2017, there was $1,743 of total unrecognized compensation cost related to nonvested shares which is expected to be recognized over a weighted-average period of 1.3 years.

Share-Based Liabilities

As of December 31, 2017 and 2016, we had $175 and $155 in total share-based liabilities recorded on our Consolidated Balance Sheets, respectively. During the years ended December 31, 2017, 2016 and 2015, we paid out $45, $62 and $53 related to share-based liability awards, respectively.