Share-Based Awards

Employee Stock Option and Incentive Plans

In October 2005, our shareholders approved a stock option and incentive plan (the “2005 Plan”) under which 4,800,000 shares of common stock were reserved for the issuance of awards, including incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock, unrestricted stock, restricted stock units, performance shares, performance units (including performance options) and other share-based awards. The 2005 Plan provides that our employees and directors may, at the discretion of the Board of Directors or a duly designated compensation committee, be granted certain share-based awards. In the case of option awards granted under the 2005 Plan, the exercise price of each option is determined based on the date of grant and expire no later than 10 years from the date of grant. Awards granted pursuant to the 2005 Plan are subject to the vesting schedule or performance metrics set forth in the agreements pursuant to which they are granted. Upon a change of control of our Company, as such term is defined in the 2005 Plan, awards under the 2005 Plan will fully vest under certain circumstances. The 2005 Plan expired on May 25, 2015. As of June 30, 2015, there were 1,923,876 outstanding options and 66,139 outstanding shares of restricted stock, restricted stock units and performance based restricted stock under the 2005 Plan.

A summary of stock option transactions during the three months ended June 30, 2015 follows:



	Number of Shares		Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contractual Life (years)	Aggregate Intrinsic Value (in thousands)
Outstanding, April 1, 2015	1,636,176		$	24.82	5.5
Granted	414,000		16.64		7.9
Exercised	(300	)	15.99		6.9	$	—
Forfeited/Canceled	(126,000	)	24.38		6.0
Outstanding, June 30, 2015	1,923,876		$	22.84	5.7	$	243
Vested and expected to vest, June 30, 2015	1,805,714		$	23.35	5.7	$	222
Exercisable, June 30, 2015	795,236		$	28.85	4.4	$	46

We utilize the Black-Scholes valuation model for estimating the fair value of share-based compensation with the following assumptions:



	Three Months Ended June 30, 2015	Three Months Ended June 30, 2014
Expected term	3.8 Years	4.8 years
Expected volatility	38.3%	36.6%
Expected dividends	4.1%	4.3%
Risk-free rate	1.6%	1.7%

The weighted-average grant date fair value of stock options granted during the three months ended June 30, 2015 and 2014 was $3.67 and $3.50 per share, respectively.

During the three months ended June 30, 2015, a total of 414,000 options to purchase shares of common stock were granted under the 2005 Plan at an exercise price equal to the market price of our common stock on the date of grant. A summary of stock options granted under the 2005 Plan during fiscal years 2016 and 2015 is as follows:



Option Grant Date	Number of Shares	Exercise Price		Vesting Terms (1)	Expires
May 22, 2015	414,000	$	16.64	Five years	May 22, 2023
Fiscal year 2016 option grants	414,000

March 11, 2015	10,000	$	15.84	Five years	March 11, 2023
September 2, 2014	20,000	$	15.63	Five years	September 2, 2022
June 3, 2014	439,650	$	15.99	Five years	June 3, 2022
Fiscal year 2015 option grants	469,650

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(1) Options vest in equal annual installments on each grant anniversary date commencing one year following the date of grant.

Employee Share Purchase Plan

On August 11, 2014, our shareholders approved an Employee Share Purchase Plan (the “Purchase Plan”) under which 4,000,000 shares of common stock were reserved for future grant. The Purchase Plan allows eligible employees to purchase shares through payroll deductions of up to 15% of total base salary at a price equal to 90% of the lower of the fair market values of the shares as of the beginning or the end of the corresponding offering period. Any shares purchased under the Purchase Plan are subject to a six-month holding period. Employees are limited to purchasing no more than 1,500 shares on any single purchase date and no more than $25,000 in total fair market value of shares during any one calendar year. As of June 30, 2015, we have issued 52,909 shares under the Purchase Plan and 3,947,091 shares are available for future issuance. The amount of share-based compensation expense recorded for this plan was not significant for the three months ended June 30, 2015.

Performance-Based Awards

On May 14, 2015, the Compensation Committee approved our fiscal year 2016 Executive Compensation Program (the "Program") for our named executive officers for fiscal year 2016, on May 20, 2015, our Compensation Committee approved the Program for our Interim Chief Financial Officer, and on June 3, 2015, our Compensation Committee approved the Program for our Chief Executive Officer (effective July 1, 2015). Under the incentive portion of the Program, the executive officers are eligible to receive cash bonuses based on meeting certain target increases in revenue and non-GAAP earnings per share for fiscal year 2016 and certain equity incentive awards, including a potential award of up to an aggregate of 320,000 restricted performance shares of our common stock vesting over a three year period based on the achievement of target average daily share prices for the thirty calendar day period ending April 30th of each of the subsequent three fiscal years. In addition, under the Program, a target pool of up to 400,000 options is available for new hires, promotions, and for certain high-performing, non-executive employees based on achievement in performance targets.

Share-based compensation expense associated with the restricted performance shares with market conditions under the Program is based on the grant date fair value measured at the underlying closing share price on the date of grant using a Monte Carlo-based valuation model.

Share-based compensation expense associated with the target pool of options under our equity incentive programs are initially based on the number of options expected to vest after assessing the probability that the performance criteria will be met. Cumulative adjustments are recorded quarterly to reflect subsequent changes in the estimated outcome of performance-related conditions. We utilize the Black-Scholes option valuation model with the assumptions in the table below to calculate the share-based compensation expense related to the options.

Share-based compensation expense recorded for our performance-based awards was $35 for the three months ended June 30, 2015 and $104 for the three months ended June 30, 2014.



	Three Months Ended June 30, 2015	Three Months Ended June 30, 2014
Expected term	3.9 years	4.8 years
Expected volatility	37.7%	36.5%
Expected dividends	4.1%	4.3%
Risk-free rate	1.6%	1.6%

Non-vested stock option award activity, including employee stock options and performance-based awards, during the three months ended June 30, 2015 is summarized as follows:



	Non-Vested Number of Shares		Weighted- Average Grant-Date Fair Value per Share
Outstanding, April 1, 2015	1,068,290		$	5.81
Granted	414,000		3.67
Vested	(249,050	)	6.65
Forfeited/Canceled	(104,600	)	5.86
Outstanding, June 30, 2015	1,128,640		$	4.77

As of June 30, 2015, $4,682 of total unrecognized compensation costs related to stock options is expected to be recognized over a weighted-average period of 3.7 years. This amount does not include the cost of new options that may be granted in future periods or any changes in our forfeiture percentage. The total fair value of options vested during the three months ended June 30, 2015 and 2014 was $1,657 and $1,645, respectively.

Director Awards

On May 20, 2015, the Board of Directors approved our 2016 Director Compensation Program, pursuant to which each non-employee director is to be granted shares of restricted stock upon election or re-election to the Board of Directors. The shares of restricted stock will be granted promptly following shareholder approval and registration of our 2015 Equity Incentive Plan. The shares of restricted stock will be issued according to a standard form of restricted stock award agreement and pursuant to our 2015 Equity Incentive Plan, will carry a restriction requiring that the restricted stock vest in two equal installments over two consecutive years with the vesting dates being the next two meeting dates of our annual shareholders’ meeting following election or re-election to the Board of Directors.

We recorded compensation expense related to restricted stock of approximately $198 and $174 for the three months ended June 30, 2015 and 2014, respectively. Restricted stock activity for the three months ended June 30, 2015 is summarized as follows:



	Number of Shares		Weighted- Average Grant-Date Fair Value per Share
Outstanding, April 1, 2015	78,205		$	17.94
Vested	(10,566	)	20.79
Canceled	(1,500	)	17.95
Outstanding, June 30, 2015	66,139		$	17.86

The weighted-average grant date fair value for the restricted stock was estimated using the market price of the common stock on the date of grant. The fair value of the restricted stock is amortized on a straight-line basis over the vesting period.

As of June 30, 2015, $535 of total unrecognized compensation costs related to restricted stock is expected to be recognized over a weighted-average period of 0.9 years. This amount does not include the cost of new restricted stock that may be granted in future periods.