10.

Share-Based Compensation

The following table sets forth information with regard to the income statement recognition of share-based compensation for the three- and six-month periods ended June 30, 2013, and 2012 (in thousands):


	Three Months Ended June 30, 2013		Three Months Ended June 30 2012		Six Months Ended June 30, 2013		Six Months Ended June 30, 2012
Cost of revenue	$	194	$	97	$	249	$	243
Selling, general and administrative		1,345		2,018		3,464		3,940
Research and development		115		94		190		194


Share-based compensation	$	1,654	$	2,209	$	3,903	$	4,377

No share-based compensation cost was capitalized during the six-month periods ended June 30, 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 June 30, 2013, no stock options were granted. For the three-month period ended June 30, 2012, the number of stock options granted was 12,511, and the weighted-average exercise price for those stock options granted was $35.46.

For the six-month period ended June 30, 2013, no stock options were granted. For the six-month period ended June 30, 2012, the number of stock options granted was 106,466, and the weighted-average exercise price for those stock options granted was $34.06.

As of June 30, 2013, there was $2.1 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 1.7 years. The weighted-average exercise price and weighted-average remaining contractual term for outstanding stock options as of June 30, 2013, were $33.49 and 5.6 years, respectively.

Service and Performance Award Units

Service award units. The Company granted service award units under the 2008 Plan to certain employees. These employee 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.

For 2013 and 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 completely on the first 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 June 30, 2013, there was $7.6 million of total unrecognized compensation cost related to unvested service award units granted to certain Board members and employees. This aggregate unrecognized cost for service award units is expected to be recognized over a weighted-average period of approximately 3.2 years.

Additional information for the three- and six-month periods ended June 30, 2013, and 2012, is noted in the following table (dollars in thousands, except per share amounts):


Total Service Award Units Granted to Board and Employees	Three Months Ended June 30, 2013		Three Months Ended June 30, 2012		Six Months Ended June 30, 2013		Six Months Ended June 30, 2012
Number of service award units granted during the period		6,408		10,223		121,113		10,223

Weighted average grant-date fair value per share granted during the period	$	46.82	$	35.46	$	46.80	$	35.46

Fair value of service award shares vested during the period	$	2,104	$	1,292	$	2,497	$	1,740

Performance award units. During the six-month period ended June 30, 2013, the Company did not grant any performance award units. During the six-month period ended June 30, 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 June 30, 2013, there was $0.8 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 2.1 years.

Additional information for the three- and six-month periods ended June 30, 2013, and 2012, is noted in the following table (dollars in thousands, except per share amounts):


Total Performance Award Units Granted	Three Months Ended June 30, 2013		Three Months Ended June 30, 2012		Six Months Ended June 30, 2013		Six Months Ended June 30, 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	$	422	$	325	$	1,508	$	847

Deferred Stock Units

Board DSUs. 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 2013 and 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 six-month period ended June 30, 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 June 30, 2013, there was $0.9 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.

Former CEO DSUs. Prior to 2013, the Company granted deferred stock unit awards under the 2008 Plan to its then current CEO (“Former CEO DSUs”), whose employment with the Company ended during the first quarter of 2013. These Former CEO DSUs (i) were granted at the fair market value of the Company’s stock on the date of grant, (ii) generally vest annually over a four-year period on each anniversary date of the grant, (iii) provide for accelerated vesting upon termination without cause or the former CEO’s retirement as defined in his employment agreement, and (iv) 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. As of June 30, 2013, there was no unrecognized compensation cost related to these Former CEO DSUs.

Additional information related to both Board DSUs and Former CEO DSUs for the three- and six-month periods ended June 30, 2013, and 2012, is noted in the following table (dollars in thousands, except per share amounts):


Board DSUs and Former CEO DSUs	Three Months Ended June 30, 2013		Three Months Ended June 30, 2012		Six Months Ended June 30, 2013		Six Months Ended June 30, 2012
Number of shares granted during the period		15,410		21,179		16,181		82,798

Number of DSUs converted to common stock shares during the period		—		—		47,189		—

Weighted-average grant date fair value per share granted during the period	$	46.82	$	35.41	$	46.83	$	34.31

Fair value of shares vested during the period	$	1,221	$	554	$	1,328	$	1,624