Stock-Based Compensation and Other Incentive Compensation

We offer stock-based compensation through the use of stock options and RSUs. We also offer an ESPP.

We grant stock options to employees and directors under our equity-based compensation plans with exercise prices that are not less than the fair market value of our common stock on the date of grant. The terms of the stock option and RSU awards, including the vesting schedule of such awards, are determined at our discretion subject to the terms of the applicable equity-based compensation plan. Options granted over the last several years have generally been exercisable in four or five equal installments beginning on the first anniversary of the date of grant with a maximum term of ten years. RSUs typically vest in four or five equal installments beginning on the first anniversary of the date of grant or when certain performance targets are met. There are 13,500 shares of common stock authorized for awards under our 2003 Incentive Compensation Plan plus available shares from a preexisting equity-based compensation plan, which plans were approved by our stockholders. There are approximately 6,117 shares of common stock authorized for awards to current WMS employees under WMS's equity compensation plan, which we assumed in connection with the WMS acquisition. We record compensation expense for stock options and RSUs based on the fair value at the grant date.

The Company may grant certain awards the vesting of which is contingent upon the Company achieving certain performance targets. Upon determining that the performance target is probable, the fair value of the award is recognized over the service period, subject to potential adjustment.

In 2013, the Compensation Committee of the Board of Directors of the Company approved a change in the method of payment of the annual incentive compensation for 2013 under which senior executives of the Company will be paid all or a portion of any bonus earned by them for 2013 in the form of RSUs in lieu of cash. In particular, 100% of any 2013 bonus earned by A. Lorne Weil, our Chairman and Chief Executive Officer, 50% of any 2013 bonus earned by each of the Company's other named executive officers and 25% of any 2013 bonus of certain other executives, will be paid in the form of RSUs. Any such RSUs will vest over two years, subject to forfeiture in the event of a voluntary termination by the executive prior to the end of the term of the executive's employment agreement or termination of the executive by the Company for "cause." The RSUs will be subject to accelerated vesting in the event of other termination events (e.g., an involuntary termination).

We recorded stock-based compensation expense related to this modification for the three and nine months ended September 30, 2013 of approximately $210 and $675, respectively.

Stock Options

A summary of the changes in stock options outstanding during the nine months ended September 30, 2013 is presented below:



	Number of Options		Weighted Average Remaining Contract Term (Years)	Weighted Average Exercise Price Per Share	Aggregate Intrinsic Value
Options outstanding as of December 31, 2012	3,461		7.8	9.34	659
Granted	—			—	—
Exercised	—			—	—
Canceled	—			—	—
Options outstanding as of March 31, 2013	3,461		7.6	9.34	744
Granted	—			—	—
Exercised	—			—	—
Canceled	(21	)		8.9	—
Options outstanding as of June 30, 2013	3,440		7.3	9.34	7,912
Granted	—			—	—
Exercised	(89	)		9.43	468
Canceled	—			—	—
Options outstanding as of September 30, 2013	3,351		7.1	9.34	23,612
Options exercisable as of September 30, 2013	1,243		6.9	10.31	8,010

No options were granted during the nine months ended September 30, 2013. For the three and nine months ended September 30, 2013, we recognized stock-based compensation expense of approximately $900 and $2,700 respectively, related to the vesting of stock options and the related tax benefit of approximately $360 and $1,070, respectively, prior to consideration of any valuation allowance recorded against the tax benefit. For the three and nine months ended September 30, 2012, we recognized stock-based compensation expense of approximately $900 and $2,900, respectively, related to the vesting of stock options and the related tax benefit of approximately $340 and $1,100, respectively, prior to consideration of any valuation allowance recorded against the tax benefit.

As of September 30, 2013, we had unrecognized compensation expense of approximately $4,800 relating to stock option awards that will be amortized over a weighted-average period of approximately two years.

Restricted Stock Units

A summary of the changes in RSUs outstanding during the nine months ended September 30, 2013 is presented below:



	Number of RSUs		Weighted Average Grant Date Fair Value Per RSU
Unvested units as of December 31, 2012	4,815		$	10.53
Granted	1,354		8.86
Vested	(918	)	12.36
Canceled	(3	)	10.76
Unvested units as of March 31, 2013	5,248		$	10.05
Granted	85		10.48
Vested	(70	)	9.94
Canceled	(119	)	11.51
Unvested units as of June 30, 2013	5,144		$	9.95
Granted	29		12.23
Vested	(41	)	13.48
Canceled	(41	)	9.56
Unvested units as of September 30, 2013	5,091		$	9.96

For the three and nine months ended September 30, 2013, we recognized stock-based compensation expense of approximately $4,600 and $13,900, respectively, related to the vesting of RSUs and the related tax benefit of approximately $1,760 and $5,240, respectively, prior to consideration of any valuation allowance recorded against the tax benefit. For the three and nine months ended September 30, 2012, we recognized stock-based compensation expense of approximately $4,900 and $14,500 related to the vesting of RSUs and the related tax benefit of approximately $1,860 and $5,520, respectively, prior to consideration of any valuation allowance recorded against the tax benefit.

As of September 30, 2013, we had unrecognized compensation expense of approximately $34,800 relating to RSUs that will be amortized over a weighted-average period of approximately two years.