Share-Based Compensation and Employee Benefit Plans:

Share-Based Compensation Plans

The Company’s share-based compensation plans are intended to attract and retain employees and to provide an incentive for them to assist the Company to achieve long-range performance goals and to enable them to participate in long-term growth of the Company. The Company settles stock option exercises and restricted stock awards with newly issued common shares.

The Company established the 2009 Stock Plan (the “2009 Plan”) effective November 1, 2009. The 2009 Plan provides for the grant of 3,300 stock options and stock purchase rights to employees, directors and consultants at an exercise price equal to or greater than the fair market value of the common stock on the date of grant. Shares of common stock available for future grants of 753 from a previous stock plan were carried forward into the allocated balance of the 2009 Plan. Options granted under the 2009 Plan typically grade vest over a five-year period and expire ten years from the date of grant. Restricted stock units granted under the 2009 Plan typically vest over a five-year period for employees and one year for directors. Restricted stock units granted to employees have time based vesting or performance and time based vesting. As of December 31, 2011 and 2012, there were 3,057 and 2,472, respectively shares of common stock available for issuance pursuant to future grants under the 2009 Plan.

The following table reflects share-based compensation expense by type of award:



	Year Ended December 31,
	2010			2011			2012
Share-based compensation expense:
Stock options	$	618		$	404		$	282
Restricted stock units	4,821			4,398			3,719
Total share-based compensation	5,439			4,802			4,001
Tax effect on share-based compensation	2,230			1,902			1,551
Net effect on net income	$	3,209		$	2,900		$	2,450
Tax effect on:
Cash flows from financing activities	$	242		$	528		$	211
Effect on earnings per share—basic	$	(0.10	)	$	(0.09	)	$	(0.08	)
Effect on earnings per share—diluted	$	(0.10	)	$	(0.09	)	$	(0.07	)

Valuation Assumptions for Stock Options

For the years ended December 31, 2010, 2011 and 2012 there were 10, 0 and 165 employee stock options granted, respectively. The fair value of each option granted to employees was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:



	Year Ended December 31,
	2010			2011	2012
Expected life (years)	5.0			0.0	5.0
Expected volatility	85.5		%	—	85.2		%
Expected dividend yield	—		%	—	—		%
Risk-free interest rate	2.1		%	—	0.8		%
Weighted average fair value per option	$	5.07		—	$	7.88

Non-Employee Options

At December 31, 2012, the fair value of options granted to non-employees was $337.

Stock Option Activity

A summary of the Company’s stock option activity with respect to the years ended December 31, 2010, 2011 and 2012 follows:



	Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding at December 31, 2009	2,188		$	19.75
Granted	10		7.47
Exercised	(22	)	5.20
Expired	(225	)	25.86
Forfeited	(1	)	14.46
Outstanding at December 31, 2010	1,950		19.14
Granted	—		—
Exercised	(7	)	10.27
Expired	(515	)	32.35
Forfeited	—		—
Outstanding at December 31, 2011	1,428		14.42
Granted	195		11.90
Exercised	(6	)	10.16
Expired	(130	)	14.00
Forfeited	—		—
Outstanding at December 31, 2012	1,487		$	14.15	3.7	$	3,122
Vested or expected to vest at December 31, 2012	1,456		$	14.21	3.6	$	3,058
Exercisable at December 31, 2012	1,211		$	15.00	2.5	$	2,289

The total intrinsic value of the stock options exercised during 2010, 2011 and 2012 was $68, $14 and $14, respectively.

The options outstanding and exercisable at December 31, 2012 were in the following exercise price ranges:



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Shares	Weighted Average Remaining Contractual Life (years)	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
$6.80 - $7.86	399	6.5	$	6.90	318	$	6.91
$8.60 - $14.81	439	5.5	$	12.65	244	$	13.26
$15.04 - $18.20	374	0.6	$	16.31	374	$	16.31
$18.39 - $29.85	275	1.0	$	24.09	275	$	24.09
$6.80 - $29.85	1,487	3.7	$	14.15	1,211	$	15.00

As of December 31, 2012, there was $1,813 of total unrecognized compensation cost related to stock options granted under the plans. That cost is expected to be recognized over a weighted average remaining period of 4.0 years.

Restricted Stock Unit Activity

A summary of the Company’s restricted stock unit activity with respect to the years ended December 31, 2010, 2011 and 2012 follows:



	Number of Shares		Weighted Average Grant Date Fair Value
Nonvested at December 31, 2009	1,372		$	7.72
Granted	487		$	7.58
Vested	(377	)	$	9.23
Forfeited	(27	)	$	7.97
Nonvested at December 31, 2010	1,455		$	7.28
Granted	535		$	10.25
Vested	(436	)	$	8.46
Forfeited	(89	)	$	7.26
Nonvested at December 31, 2011	1,465		$	8.01
Granted	409		$	9.81
Vested	(457	)	$	8.53
Forfeited	(37	)	$	8.16
Nonvested at December 31, 2012	1,380		$	8.37

As of December 31, 2012, there was $5,906 of total unrecognized compensation cost related to restricted stock units granted under the plans. That cost is expected to be recognized over a weighted average period of 2.0 years.

Employee Stock Purchase Plan

The Company established an Employee Stock Purchase Plan (the “ESPP”) effective November 1, 2009. The Company’s prior employee stock purchase plan, effective August 31, 1999, expired in the fourth quarter of 2010. Under the terms of the ESPP, eligible employees may have up to 15% of eligible compensation deducted from their pay and applied to the purchase of shares of Company common stock. The price the employee must pay for each share of stock will be 95% of the fair market value of Company common stock at the end of the applicable six-month purchase period. The ESPP is intended to qualify under Section 423 of the Internal Revenue Code and is a non-compensatory plan as defined by FASB Accounting Standards Codification (ASC) 718, Stock Compensation. No stock-based compensation expense for the ESPP was recorded for the years ended December 31, 2010, 2011 and 2012. As of December 31, 2011 and 2012, there were 558 and 837 shares available for issuance under the ESPP, respectively.

401(k) Savings Plan

The Company has a 401(k) savings plan that allows employees to contribute up to 100% of their annual compensation to the Plan on a pre-tax or after tax basis, limited to a maximum annual amount as set periodically by the Internal Revenue Service. The plan provides a 50% match of all employee contributions up to 6 percent of the employee’s salary. Company matching contributions to the plan totaled $817, $838 and $880 for the years ended December 31, 2010, 2011 and 2012, respectively.

Profit Sharing Program

The Company has a profit sharing program, wherein a percentage of pre-tax profits, at the discretion of the Board of Directors, is provided to all employees who have completed a stipulated employment period. The Company did not make contributions to this program for the years ended December 31, 2010, 2011 and 2012.