

12.	STOCK-BASED COMPENSATION:

The Company recognizes in the statements of income the grant-date fair value of equity based awards such as shares issued under employee stock purchase plans, restricted stock awards, restricted stock units, performance unit awards issued to employees and directors.

The grant-date fair value of stock awards is based on the closing price of the stock on the date of grant. The fair value of share-based awards is recognized as compensation expense on a straight-line basis over the requisite service period, net of forfeitures. The Company issues new shares upon the respective grant, exercise or vesting of the share-based payment awards, as applicable.

Performance unit awards are subject to either a performance-based or market-based vesting requirement. For performance-based vesting, the grant-date fair value of the award, based on fair value of the Company's common stock, is recognized over the service period, based on an assessment of the likelihood that the applicable performance goals will be achieved and compensation expense is periodically adjusted based on actual and expected performance. Compensation expense for performance unit awards with market-based vesting is calculated based on the estimated fair value as of the grant date utilizing a Monte Carlo simulation model and is recognized over the service period on a straight-line basis.

Equity Compensation Plan

In 1995, the Board of Directors of the Company adopted a stock option plan, which was amended and restated in 2003 and is now called the Equity Compensation Plan. The Equity Compensation Plan provides for the granting of incentive and nonqualified stock options, shares of common stock, stock appreciation rights and performance units to employees, directors and consultants of the Company. Stock options are exercisable over periods determined by the Compensation Committee, but for no longer than 10 years from the grant date. Through December 31, 2014, the Company’s shareholders have approved increases in the number of shares reserved for issuance under the Equity Compensation Plan to 10,500,000 and have extended the term of the plan through 2024. At December 31, 2014, there were 3,724,140 shares that remained available to be granted under the Equity Compensation Plan. See the Company's Form 8-K filed on June 20, 2014 for more information regarding changes to the Equity Compensation Plan.

Stock Options

The following table summarizes the stock option activity during the year ended December 31, 2014 for all grants under the Equity Compensation Plan:



	Options		Weighted Average Exercise Price
Outstanding at January 1, 2014	570,483		$	10.43
Granted	—		—
Exercised	(184,798	)	10.25
Forfeited	—		—
Cancelled	(1,250	)	9.88
Outstanding at December 31, 2014	384,435		10.52
Vested and expected to vest	384,435		10.52
Exercisable at December 31, 2014	384,435		$	10.52

No stock options were granted during the years ended December 31, 2014, 2013 or 2012.

A summary of stock options outstanding and exercisable by price range at December 31, 2014 is as follows (in thousands, except share and per share data):



	Outstanding and Exercisable
	Number of Options Outstanding at December 31,	Weighted Average Remaining Contractual	Weighted Average Exercise		Aggregate Intrinsic
Exercise Price	2014	Life (Years)	Price		Value ^(A)
$8.14-$10.04	94,365	0.1	$	8.33	$	1,832
$10.51-$10.68	238,800	1.0	$	10.52	$	4,116
$12.04-$18.34	51,270	1.72	$	14.58	$	675
Total	384,435	0.88	$	10.52	$	6,623

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(A) The difference between the stock option’s exercise price and the closing price of the common stock at December 31, 2014.

The total intrinsic value of stock awards exercised during the years ended December 31, 2014, 2013 and 2012 was $3.7 million, $4.9 million and $7.5 million, respectively. There was no compensation expense recognized for the years ended December 31, 2014, 2013 and 2012.

During the years ended December 31, 2014, 2013 and 2012, none, 20,768 and 5,878 shares of common stock, with fair values of none, $1.0 million and $245,000, respectively, were tendered to net share settle the exercise of options. In connection with the exercise of options during the years ended December 31, 2014, 2013 and 2012, none, 7,599 and 15,066 shares, with fair values of none, $274,000 and $628,000, respectively, were withheld in satisfaction of tax withholding obligations.

Stock Awards

The following table summarizes the activity related to restricted stock unit share based payment awards:



	Number of Shares		Weighted- Average Grant-Date Fair Value
Unvested, January 1, 2014	205,578		$	34.40
Granted	100,827		31.76
Vested	(92,306	)	34.91
Forfeited	(5,986	)	33.20
Unvested, December 31, 2014	208,113		$	32.93

The weighted average grant-date fair value of restricted stock unit share based payment awards granted was $31.76, $32.80 and $36.28 during the years ended December 31, 2014, 2013 and 2012, respectively.

The following table summarizes the activity related to restricted stock award share based payment awards:



	Number of Shares		Weighted- Average Grant-Date Fair Value
Unvested, January 1, 2014	321,018		$	22.35
Granted	31,412		33.40
Vested	(165,559	)	22.03
Forfeited	(400	)	31.11
Unvested, December 31, 2014	186,471		$	24.47

The weighted average grant-date fair value of restricted stock award share based payment awards granted was $33.40, $32.54 and $38.76 during the years ended December 31, 2014, 2013 and 2012, respectively.

Restricted Stock Awards and Units

The Company has issued restricted stock awards and units to employees and non-employee members of the Scientific Advisory Board with vesting terms of one to six years. The fair value is equal to the market price of the Company’s common stock on the date of grant for awards granted to employees and equal to the market price at the end of the reporting period for unvested non-employee awards or upon the date of vesting for vested non-employee awards. Expense for restricted stock awards and units is amortized ratably over the vesting period for the awards issued to employees and using a graded vesting method for the awards issued to non-employee members of the Scientific Advisory Board.

For the years ended December 31, 2014, 2013 and 2012, the Company recorded, as compensation charges related to restricted stock awards and units issued to employees and non-employees, selling, general and administrative expense of $3.7 million, $3.8 million and $2.9 million, respectively, and research and development expense of $2.0 million, $1.9 million and $1.3 million, respectively.

In connection with the vesting of restricted stock awards and units during the years ended December 31, 2014, 2013 and 2012, respectively, shares were withheld in satisfaction of tax withholding obligations.

Board of Directors Compensation

The Company has granted restricted stock units to non-employee members of the Board of Directors with vesting terms of approximately one year. The fair value is equal to the market price of the Company's common stock on the date of grant. The restricted stock units are issued and expense is recognized ratably over the vesting period. For the years ended December 31, 2014, 2013 and 2012, the Company recorded, compensation charges for services performed, related to all restricted stock units granted to non-employee members of the Board of Directors, selling, general and administrative expense of $797,000, $525,000 and $532,000, respectively. Restricted stock issued during 2014, 2013 and 2012 was 23,750, 20,000, and 20,000 shares, respectively.

Fully Vested Stock Grants

For the years ended December 31, 2014, 2013 and 2012, respectively, the Company granted to employees and non-employees none, 123 and 1,755 shares of restricted stock, which shares fully vested as of the date of grant. The Company recorded research and development expense of none, $3,000 and $67,000 for the years ended December 31, 2014, 2013 and 2012, respectively, for the fair value of these awards.

Performance Unit Awards

The following table summarizes the activity related to performance unit awards:



	Number of Shares	Weighted- Average Grant-Date Fair Value
Unvested, January 1, 2014	35,776	$	40.17
Granted	36,092	38.67
Vested	—	—
Forfeited	—	—
Unvested, December 31, 2014	71,868	$	39.42

During the years ended December 31, 2014 and 2013, respectively, the Company granted 36,092 and 35,776 performance units, of which 18,044 and 17,888 are subject to a performance-based vesting requirements and 18,048 and 17,888 are subject to a market-based vesting requirements, and will vest over the terms described below. The weighted average grant date fair value of the performance unit awards granted was $38.67 and $40.17 during the years ended December 31, 2014 and 2013, respectively, as determined by the Company's common stock on date of grant for the units with performance-based vesting and a Monte-Carlo simulation for the units with market-based vesting.

Each performance unit award is subject to both a performance-vesting requirement (either performance-based or market-based) and a service-vesting requirement. The performance-based vesting requirement is tied to the Company's cumulative revenue growth compared to the cumulative revenue growth of companies comprising the Nasdaq Electronics Components Index, as measured over a specific performance period. The market-based vesting requirement is tied to the Company's total shareholder return relative to the total shareholder return of companies comprising the Nasdaq Electronics Components Index, as measured over a specific performance period. The maximum number of performance units that may vest based on performance is two times the shares granted. Further, if the Company's total shareholder return is negative, the performance units may not vest above the shares granted.

For the years ended December 31, 2014 and 2013, the Company recorded, as compensation charges related to all performance stock units, selling, general and administrative expenses of $1.4 million and $453,000, respectively, and research and development expenses of $408,000 and $137,000, respectively.

Employee Stock Purchase Plan

On April 7, 2009, the Board of Directors of the Company adopted an Employee Stock Purchase Plan (ESPP). The ESPP was approved by the Company’s shareholders and became effective on June 25, 2009. The Company has reserved 1,000,000 shares of common stock for issuance under the ESPP. Unless sooner terminated by the Board of Directors, the ESPP will expire when all reserved shares have been issued.

Eligible employees may elect to contribute to the ESPP through payroll deductions during consecutive three-month purchase periods, the first of which began on July 1, 2009. Each employee who elects to participate will be deemed to have been granted an option to purchase shares of the Company’s common stock on the first day of the purchase period. Unless the employee opts out during the purchase period, the option will automatically be exercised on the last day of the period, which is the purchase date, based on the employee’s accumulated contributions to the ESPP. The purchase price will equal 85% of the lesser of the price per share of common stock on the first day of the period or the last day of the period.

Employees may allocate up to 10% of their base compensation to purchase shares of common stock under the ESPP; however, each employee may purchase no more than 12,500 shares on a given purchase date, and no employee may purchase more than $25,000 of common stock under the ESPP during a given calendar year.

For years ended December 31, 2014, 2013 and 2012, the Company issued 12,373, 14,366 and 11,667 shares, respectively, of its common stock under the ESPP, resulting in proceeds of $328,000, $343,000 and $321,000, respectively. For the years ended December 31, 2014, 2013 and 2012, the Company recorded charges of $44,000, $36,000 and $26,000, respectively, to selling, general and administrative expense and $52,000, $71,000 and $78,000, respectively, to research and development expense, related to the ESPP equal to the amount of the discount and the value of the look-back feature.