Stock-Based Compensation

Restricted Stock

On June 18, 2014, at our annual meeting of shareholders, our shareholders approved a proposed amendment to the 2009 Restricted Stock/Unit Plan (the "Plan") to add additional 500,000 shares of common stock to the Plan, thereby authorizing the issuance of up to 800,000 shares of common stock under the Plan. In accordance with the Company's employment agreement with Stephen Taylor, the Company's Chief Executive Officer, the Compensation Committee reviewed his performance in determining the issuance of restricted common stock. Based on this review which included consideration of the Company's 2015 performance, Mr. Taylor, was awarded 75,915 restricted shares on January 6, 2016, which vest over two years, in equal installments beginning January 6, 2017. On April 6, 2016, the Compensation Committee awarded 20,000 shares of restricted common stock each to G. Larry Lawrence, our CFO, and James Hazlett, our Vice President of Technical Services. The restricted shares to Messrs. Hazlett and Lawrence vest over two years, in equal installments, beginning April 6, 2017. We also awarded and issued 23,536 shares of restricted common stock to our Board of Directors as partial payment for 2016 directors' fees. The restricted stock issued to our directors vests over one year, in quarterly installments, beginning March 31, 2017. Compensation expense related to the restricted shares was approximately $1,793,000, $2,944,000 and $2,818,000 for the years ended December 31, 2016, 2015, and 2014, respectively. As of December 31, 2016, there was a total of approximately $1,638,000 of unrecognized compensation expense related to the nonvested portion of these restricted shares. This expense is expected to be recognized over two years. As of December 31, 2016, 268,005 shares were still available for issuance under the Plan.

A summary of all restricted stock activity as of December 31, 2016 and changes during the year then ended is presented below.



	Number of Shares		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2015	145,558		$	19.17	9.07	$	3,246
Granted	139,451		21.34		—	3,007
Vested	(145,558	)	19.17		—	2,963
Canceled/Forfeited	—		—		—	—
Outstanding, December 31, 2016	139,451		$	21.34	9.13	$	4,483

Stock Option Plan

Our Stock Option Plan which is stockholder approved, permits the granting of stock options to its employees for up to 550,000 shares of common stock. On June 16, 2009, at our annual meeting of shareholders, our shareholders approved to add an additional 200,000 shares of common stock to the Stock Option Plan. On June 16, 2016, at our annual meeting of shareholders, our shareholders approved a proposed amendment to the Stock Option Plan to add an additional 250,000 shares of common stock ot the Stock Option Plan, thereby authorizing the issuance of up to 1.0 million shares of common stock under the Stock Option Plan. We believe that such awards better align the interests of our employees with our stockholders. Option awards are generally granted with an exercise price equal to the market price of our stock at the date of grant; those option awards generally vest based on three years of continuous service and have ten-year contractual terms. Certain option and share awards provide for accelerated vesting if there is a change in control of the Company (as defined in the Stock Option Plan). The last date that grants can be made under the Stock Option Plan is February 28, 2026. As of December 31, 2016, 345,919 shares were still available for issue under the Stock Option Plan.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected life of options granted is based on the vesting period and historical exercise and post-vesting employment termination behavior for similar grants. We use historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes.



Weighted average Black -Scholes fair value assumption during the years ended December 31, are as follows:	2015		2014
Risk free rate	1.56	%	1.96	%
Expected life	6 years		6 years
Expected volatility	45.07	%	58.44	%
Expected dividend yield	—		—

A summary of all option activity as of December 31, 2016 and changes during the year then ended is presented below.



	Number of Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2015	414,769		$	19.07	5.08	$	1,814
Granted	—		—
Exercised	(62,083	)	16.79			625
Canceled/Forfeited	(2,500	)	22.90			—
Expired	—		—
Outstanding, December 31, 2016	350,186		$	19.45	4.25	$	4,453
Exercisable, December 31, 2016	299,353		$	18.41	3.63	$	4,118

The weighted average grant date fair value of options granted during the years 2015 and 2014 was $10.33 and $16.56, respectively. The total intrinsic value, or the difference between the exercise price and the market price on the date of exercise, of options exercised during the years ended December 31, 2016, 2015, and 2014 was approximately $625,000, $481,000, and $48,000 respectively. Cash received from stock options exercised during the years ended December 31, 2016, 2015, and 2014 was approximately $1,042,000, $776,000, and $59,000, respectively.

The following table summarizes information about our stock options outstanding at December 31, 2016:



Range of Exercise Prices	Options Outstanding				Options Exercisable
Range of Exercise Prices	Shares	Weighted Average Remaining Contractual Life (years)	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
$0.01-15.70	67,352	2.62	$	9.94	67,352	$	9.94
$15.71-17.81	72,750	2.79	$	17.53	72,750	$	17.53
$17.82-20.48	107,250	2.92	$	19.68	107,250	$	19.68
$20.49-33.36	102,834	7.74	$	26.80	52,001	$	27.98
	350,186	4.25	$	19.45	299,353	$	18.41

The summary of the status of our unvested stock options as of December 31, 2016 and changes during the year then ended is presented below.



Unvested stock options:	Shares		Weighted Average Grant Date Fair Value
Unvested at December 31, 2015	101,836		$	12.67
Granted	—		$	—
Vested	(49,336	)	$	12.74
Cancelled/Forfeited	(1,667	)	$	10.33
Unvested at December 31, 2016	50,833		$	12.67

We recognized stock compensation expense from stock options vesting of $506,000, $601,000, and $426,000 for the years ended December 31, 2016, 2015 and 2014, respectively. As of December 31, 2016, there was approximately $262,000 of total unamortized compensation cost related to unvested stock options. We expect to recognize such cost over a weighted-average period of 2.0 years.