10.

Share-Based Compensation

The following table sets forth information with regard to the income statement recognition of share-based compensation for the three-month periods ended March 31, 2013, and 2012 (in thousands):


	Three-Month Period Ended March 31, 2013		Three-Month Period Ended March 31, 2012
Cost of revenue	$	55	$	146
Selling, general and administrative		2,118		1,922
Research and development		76		100

Share-based compensation	$	2,249	$	2,168

No share-based compensation cost was capitalized during the three-month periods ended March 31, 2013, and 2012.

Stock Options

Stock options awarded to employees under the Company’s 2008 Equity Compensation Plan (“2008 Plan”) generally vest annually over a three-year period, have a 10-year term and have an exercise price equal to the fair market value of the Company’s common stock at the date of grant. Compensation expense for stock options is recognized on a straight-line basis over the vesting period using the fair value of each stock option estimated as of the grant date.

For the three-month period ended March 31, 2013, no stock options were granted. For the three-month period ended March 31, 2012, the number of stock options granted was 93,955, and the weighted-average exercise price for those stock options granted was $33.87.

As of March 31, 2013, there was $2.5 million in total unrecognized compensation cost related to unvested stock options. This aggregate unrecognized cost is expected to be recognized over a weighted-average remaining period of 1.9 years. The weighted-average exercise price and weighted-average remaining contractual term for outstanding stock options as of March 31, 2013, were $33.69 and 5.6 years, respectively.

Service and Performance Award Units

Service award units to employees. The Company granted service award units under the 2008 Plan. These service award units (i) were issued at the fair market value of the Company’s common stock on the date of grant, (ii) generally vest in equal annual installments over four years beginning on the first anniversary date of the grant, except for service award units granted to the Company’s executives since December 30, 2012, which vest in 12 equal quarterly installments following the date of the grant for the CEO and 16 equal quarterly installments following the date of grant for the Company’s other executives, and (iii) for any unvested units, expire without vesting if the employee is no longer employed by the Company.

Service award units to Board of Directors (“Board”). For 2012, the Board members had the right to elect to receive all or a portion of their annual compensation as Board service award units. These Board service award units (i) were issued at the fair market value of the Company’s common stock on the date of grant, and (ii) vest on the anniversary date of the grant.

Compensation expense for service award units is recognized on a straight-line basis over the vesting period using the fair market value of the Company’s common stock on the date of grant. As of March 31, 2013, there was $8.1 million of total unrecognized compensation cost related to unvested service award units. This aggregate unrecognized cost for service award units is expected to be recognized over a weighted-average period of approximately 3.5 years.

Additional information for the three-month periods ended March 31, 2013, and 2012, is noted in the following table (dollars in thousands, except per share amounts):


Total Service Award Units Granted	Three-Month Period Ended March 31, 2013		Three-Month Period Ended March 31, 2012
Number of service award units granted during the period		114,705		—
Weighted average grant-date fair value per share granted during the period	$	46.79		—
Fair value of service award shares vested during the period	$	392	$	448

Performance award units. During the three-month period ended March 31, 2013, the Company did not grant any performance award units. During the three-month period ended March 31, 2012, the Company granted performance award units under the 2008 Plan. These performance award units (i) were issued at the fair market value of the Company’s common stock on the date of grant, (ii) will vest in four equal annual installments beginning with the first anniversary date of the grant, and (iii) for any unvested units, expire without vesting if the recipient is no longer employed by the Company. The performance goal for these performance award units was met.

Compensation expense for performance award units is recognized (i) using the fair market value of the Company’s common stock on the date of grant, and (ii) on a graded basis, which is accelerated as compared to a straight-line expense attribution method. As of March 31, 2013, there was $1.1 million of total unrecognized compensation cost related to unvested performance award units. This aggregate unrecognized cost is expected to be recognized over a weighted-average period of 2.3 years.

Additional information for the three-month periods ended March 31, 2013, and 2012, is noted in the following table (dollars in thousands, except per share amounts):


Total Performance Award Units Granted	Three-Month Period Ended March 31, 2013		Three-Month Period Ended March 31, 2012
Number of performance award units granted during the period		—		34,229
Weighted average grant-date fair value per share granted during the period		—	$	33.87
Fair value of performance award shares vested during the period	$	1,086	$	522

Deferred Stock Units

Service DSU grants to former CEO. Prior to 2013, the Company granted service-based deferred stock unit awards (“Service DSUs”) under the 2008 Plan to its then current CEO, whose employment with the Company ended during the first quarter of 2013. These Service DSUs were granted at the fair market value of the Company’s stock on the date of grant, and generally vest annually over a four-year period on each anniversary date of the grant. Service DSUs also include dividend equivalent DSUs, which vest immediately upon the date of grant.

Compensation expense for Service DSUs was recognized on a straight-line basis over the vesting period using the fair market value of the Company’s common stock on the date of grant. The Service DSUs provide for accelerated vesting upon termination without cause or the former CEO’s retirement as defined in his employment agreement. As of March 31, 2013, there was no unrecognized compensation cost related to Service DSUs.

The Service DSUs are convertible into shares of the Company’s common stock, following the holder’s termination of employment, in accordance with the former CEO’s employment agreement. Additional information for the three-month periods ended March 31, 2013, and 2012, is noted in the following table (dollars in thousands, except per share amounts):


Service DSU’s Granted to former CEO	Three-Month Period Ended March 31, 2013		Three-Month Period Ended March 31, 2012
Number of shares granted during the period		—		1,283
Weighted-average grant date fair value per share granted during the period		—	$	34.03
Number of Service DSUs converted to common stock shares during the period		47,189		—
Fair value of shares vested during the period	$	707	$	572

Performance DSU grant to former CEO. Prior to 2013, the Company granted performance-based deferred stock unit awards (“Performance DSUs”) under the 2008 Plan to its then current CEO, whose employment with the Company ended during the first quarter of 2013. These Performance DSUs (i) were issued at the fair market value of the Company’s common stock on the date of grant, (ii) will vest in four equal annual installments beginning on the first anniversary date of the grant, and (iii) provide for accelerated vesting upon termination without cause or the former CEO’s retirement as defined in his employment agreement. These Performance DSUs are convertible into shares of the Company’s common stock, subsequent to termination of employment, in accordance with the former CEO’s employment agreement.

Compensation expense for Performance DSUs was recognized (i) using the fair market value of the Company’s common stock on the date of grant, and (ii) on a graded basis, which is accelerated as compared to a straight-line expense attribution method. As of March 31, 2013, there was no unrecognized compensation cost related to Performance DSUs granted to the Company’s former CEO.

Additional information for the three-month periods ended March 31, 2013, and 2012, is noted in the following table (dollars in thousands, except per share amounts):


Performance DSU’s Granted to former CEO	Three-Month Period Ended March 31, 2013		Three-Month Period Ended March 31, 2012
Number of shares granted during the period		—		59,049
Weighted-average grant date fair value per share granted during the period		—	$	33.87
Number of Performance DSUs converted to common shares of Company stock during period		44,078		—
Fair value of shares vested during the period	$	1,244	$	396

Deferred Stock Unit Awards for service on Board of Directors (“Board”). The Company issues deferred stock units to its Board of Directors (“Board DSUs”) under the 2008 Plan. These Board DSUs (i) were issued at the fair market value of the Company’s common stock on the date of grant and (ii) if vested, will be convertible to shares of the Company’s common stock subsequent to termination of service as a director. For 2012, the Board members had the right to elect to receive all or a portion of their annual compensation as Board DSUs that vest completely on the first anniversary date of the grant. For 2011 and 2010, annual grants were issued to the Board as Board DSUs that vest annually in three equal installments over three-year periods.

During the three-month period ended March 31, 2012, the Board members had the right to elect to receive all or a portion of their retainer and meeting attendance fees as Board DSUs, which vest immediately. Board DSUs are only granted to nonemployee Directors. Board DSUs also include dividend equivalent DSUs, which vest immediately upon the date of grant.

Compensation expense for Board DSUs is recognized on a straight-line basis over the vesting period using the fair market value of the Company’s common stock on the date of grant. As of March 31, 2013, there was $0.5 million of total unrecognized compensation cost related to Board DSUs granted to nonemployee directors. This aggregate unrecognized cost is expected to be recognized over the weighted-average period of less than 1.0 year.

Additional information for the three-month periods ended March 31, 2013, and 2012, is noted in the following table (dollars in thousands, except per share amounts):


Board DSUs	Three-Month Period Ended March 31, 2013		Three-Month Period Ended March 31, 2012
Number of shares granted during the period		771		1,286
Weighted-average grant date fair value per share granted during the period	$	46.98	$	36.74
Fair value of shares vested during the period	$	107	$	102