17. Stock Option Plans and Warrants

The Company recognizes the cost of all employee stock options on a straight-line attribution basis over their respective vesting periods, net of estimated forfeitures.

The Company’s 2007 Stock Incentive Plan (“Incentive Plan”) provides for the grant of stock options, stock appreciation rights, restricted stock and restricted stock units to directors, executives, and other employees (“employees”) of the Company and to non-employee service providers of the Company. Following a shareholder resolution in April 2003 and the stock splits of May 2003, May 2004 and June 2006, the Incentive Plan authorizes, and the Company has reserved for future issuance, up to 1,397,333 shares of Common Stock (subject to an anti-dilution adjustment in the event of a stock split, re-capitalization, or similar transaction). The Compensation Committee of the Board of Directors of the Company administers the Incentive Plan.

The option exercise price for stock options granted under the Incentive Plan may not be less than fair market value but in some cases may be in excess of the closing price of the Common Stock on the date of grant. The Company uses the stock option price based on the closing price of the Common Stock on the day before the date of grant if such price is not materially different than the opening price of the Common Stock on the day of the grant. Stock options may be exercised up to 10 years after the date of grant except as otherwise provided in the particular stock option agreement. Payment for the shares must be in cash, which must be received by the Company prior to any shares being issued. Stock options granted to directors and officers as part of an employee employment contract vest after 2 years. Stock options granted to general employees as part of a loyalty program vest after three years. The Incentive Plan was approved by CEDC shareholders during the annual shareholders meeting on April 30, 2007 to replace the Company’s 1997 Stock Incentive Plan (the “Old Stock Incentive Plan”), which expired in November 2007. The Stock Incentive Plan will expire in November 2017. The terms and conditions of the Stock Incentive Plan are substantially similar to those of the Old Stock Incentive Plan.

A summary of the Company’s stock option and restricted stock units activity, and related information for the twelve month periods ended December 31, 2011, 2010 and 2009 is as follows:


Total Options	Number of Options			Weighted- Average Exercise Price
Outstanding at January 1, 2009		1,350,252		$	28.65
Granted		200,625		$	19.94
Exercised		(59,827	)	$	14.27
Forfeited		(9,500	)	$	60.92

Outstanding at December 31, 2009		1,481,550		$	27.85
Exercisable at December 31, 2009		1,051,550		$	23.18

Outstanding at January 1, 2010		1,481,550		$	27.85
Granted		82,000		$	28.70
Exercised		(194,650	)	$	18.83
Forfeited		(28,500	)	$	38.60
Expired		(40,000	)	$	26.25


Total Options	Number of Options			Weighted- Average Exercise Price
Outstanding at December 31, 2010		1,300,400		$	29.06
Exercisable at December 31, 2010		970,450		$	30.78

Outstanding at January 1, 2011		1,300,400		$	29.06
Granted		161,250		$	17.14
Exercised		(18,125	)	$	3.93
Forfeited		(27,833	)	$	28.80
Expired		(93,325	)	$	26.85

Outstanding at December 31, 2011		1,322,367		$	27.81
Exercisable at December 31, 2011		1,044,125		$	29.27


Nonvested restricted stock units	Number of Restricted Stock Units			Weighted- Average Grant Date Fair Value
Nonvested at January 1, 2009		68,555		$	51.42
Granted		25,009		$	24.89
Vested		(2,740	)	$	34.51
Forfeited		(11,750	)	$	45.00

Nonvested at December 31, 2009		79,074		$	44.63

Nonvested at January 1, 2010		79,074		$	44.63
Granted		49,752		$	27.34
Vested		(22,100	)	$	34.66
Forfeited		(27,576	)	$	46.81

Nonvested at December 31, 2010		79,150		$	35.82

Nonvested at January 1, 2011		79,150		$	35.82
Granted		125,678		$	9.82
Vested		(31,267	)	$	43.20
Forfeited		(10,604	)	$	16.61

Nonvested at December 31, 2011		162,957		$	15.15


Nonvested restricted stock	Number of Restricted Stock			Weighted- Average Grant Date Fair Value
Nonvested at January 1, 2010		0		$	0.00
Granted		46,001		$	29.84
Vested		0		$	0.00
Forfeited		0		$	0.00

Nonvested at December 31, 2010		46,001		$	29.84

Nonvested at January 1, 2011		46,001		$	29.84
Granted		47,618		$	21.01
Vested		(1,000	)	$	35.01
Forfeited		(7,501	)	$	29.73

Nonvested at December 31, 2011		85,118		$	24.85

During the year ended December 31, 2011, the range of exercise prices for outstanding options was $2.00 to $60.92. During 2011, the weighted average remaining contractual life of options outstanding was 5.3 years. Exercise prices for options exercisable as of December 31, 2011 ranged from $2.00 to $60.92.

The Company has issued stock options to employees under stock based compensation plans. Stock options are issued at the current market price, subject to a vesting period, which varies from one to three years. As of December 31, 2011, the Company has not changed the terms of any outstanding awards.

During the year ended December 31, 2011, the Company recognized compensation cost of $2.6 million and a related deferred tax asset of $0.5 million.

As of December 31, 2011, there was $2.5 million of total unrecognized compensation cost related to non-vested stock options, restricted stock and restricted stock units granted under the Plan. The costs are expected to be recognized over a weighted average period of 12 months between 2012 and 2015.

Total cash received from exercise of options during the year ended December 31, 2011 amounted to $72 thousand.

For the year period ended December 31, 2011, the compensation expense related to all options was calculated based on the fair value of each option grant using the binomial distribution model. The Company has never paid cash dividends and does not currently have plans to pay cash dividends, and thus has assumed a 0% dividend yield. Expected volatilities are based on average of implied and historical volatility projected over the remaining term of the options. The expected life of stock options is estimated based on historical data on exercise of stock options, post-vesting forfeitures and other factors to estimate the expected term of the stock options granted. The risk-free interest rates are derived from the U.S. Treasury yield curve in effect on the date of grant for instruments with a remaining term similar to the expected life of the options. In addition, the Company applies an expected forfeiture rate when amortizing stock-based compensation expenses. The estimate of the forfeiture rates is based primarily upon historical experience of employee turnover. As individual grant awards become fully vested, stock-based compensation expense is adjusted to recognize actual forfeitures. The following weighted-average assumptions were used in the calculation of fair value:


	2011			2010
Fair Value	$	7.60		$	12.57
Dividend Yield		0	%		0	%
Expected Volatility		66.1	%		68.2	%
Weighted Average Volatility		66.1	%		68.2	%
Risk Free Interest Rate		3	%		3% - 5%
Expected Life of Options from Grant		3.2			3.2