Stock Plans

6 Months Ended

Jun. 30, 2011

Stock Plans

Stock Plans

Note 6 – Stock Plans

The Company has two active stock-based compensation plans as of June 30, 2011: the 2004 Employee Stock Purchase Plan and the 2005 Omnibus Equity Incentive Plan under which incentive stock options, non-qualified stock options, restricted stock awards and restricted stock units can be granted to employees and non-employee directors.

Stock Options

Compensation expense recognized from employee stock options for the three months ended June 30, 2011 and 2010 was $336,000 and $384,000, respectively, and $815,000 and $800,000 for the six months ended June 30, 2011 and 2010, respectively. No stock options were granted during the six months ended June 30, 2011. During the three and six months ended June 30, 2010, the Company granted 5,000 and 200,650 employee stock options, respectively, with an average grant date fair value per share of $7.70 and $9.09, respectively. The fair value of stock options was estimated on the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions:

	Three Months Ended June 30, 2010			Six Months Ended June 30, 2010
Expected dividends		—			—
Expected volatility		69.2	%		69.4	%
Average risk-free interest rate		2.3	%		2.7	%
Expected term/life (in years)		4.8			4.8

Restricted Stock Awards

During the three months ended June 30, 2011 and 2010, the Company granted 2,900 and 4,384 shares, respectively, subject to restricted stock awards with an average grant date fair value per share of $16.46 and $11.40, respectively. During the six months ended June 30, 2011 and 2010, the Company granted 215,916 and 32,000 shares, respectively, subject to restricted stock awards with an average grant date fair value per share of $18.94 and $15.71, respectively. The following table summarizes the amount of compensation expense recognized for restricted stock awards for the three and six months ended June 30, 2011 and 2010 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Service based restricted stock	$	234	$	224	$	465	$	391
Performance based restricted stock		90		70		150		(12	)
Total compensation expense recognized for restricted stock awards	$	324	$	294	$	615	$	379

Restricted Stock Units

During the six months ended June 30, 2011, non-employee directors of the Company were granted a total of 22,036 restricted stock units, with an average grant date fair value per share of $19.06, which vest one year from the date of grant, as part of their annual retainer compensation. No restricted stock units were granted during the three months ended June 30, 2011. During the three and six months ended June 30, 2010, non-employee directors of the Company were granted a total of 4,384 and 8,416 restricted stock units, respectively, with an average grant date fair value per share of $11.40 and $11.87, respectively, which were fully vested on the date of grant, in payment of their quarterly retainer fees. As of January 1, 2011, the Company began paying the quarterly retainer in cash instead of restricted stock units.

Total compensation expense recognized for service-based restricted stock unit awards was $105,000 and $50,000 during the three months ended June 30, 2011 and 2010, respectively, and $163,000 and $100,000 for the six months ended June 30, 2011 and 2010, respectively.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan ("ESPP") permits substantially all employees to purchase common stock through payroll deductions, at 85% of the lower of the trading price of the stock at the beginning or at the end of each six month offering period commencing on January 1 and July 1. The number of shares purchased is based on participants' contributions made during the offering period.

Compensation expense recognized for the ESPP for the three months ended June 30, 2011 and 2010 was $24,000 and $15,000, respectively, and $113,000 and $87,000 for the six months ended June 30, 2011 and 2010, respectively. The fair value of the ESPP shares issued during the offering period is estimated using the Black-Scholes valuation model for a call and a put option, and by using the following assumptions:

	For the offering period beginning January 1 and ending June 30,
	2011			2010
Expected dividends	$	—		$	—
Market price		18.89			17.84
Expected volatility		48.1	%		53.3	%
Average risk-free interest rate		0.19	%		0.20	%
Expected life/term (in years)		0.5			0.5
Fair value per share	$	5.51		$	5.35

Stock-based Compensation Expense

Compensation cost for restricted stock, restricted stock units, employee stock options and the ESPP included in cost of revenue; selling, general and administrative expense; and research and development expense is as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Cost of revenue	$	84	$	89	$	203	$	205
Selling, general and administrative		597		575		1,242		1,068
Research and development		108		79		261		93
Total stock-based compensation expense	$	789	$	743	$	1,706	$	1,366