The 2009 Equity Incentive Plan, the 2011 Equity Incentive Plan and the 2013 Equity Incentive Plan

On September 10, 2009, our stockholders approved the 2009 Equity Incentive Plan, or the 2009 Plan, under which 900,000 shares of our common stock are reserved for the grant of stock options and other equity incentives. On September 16, 2011, our stockholders approved the 2011 Equity Incentive Plan, or the 2011 Plan, under which 600,000 shares of our common stock are reserved for the grant of stock options and other equity incentives. On August 30, 2013, our stockholders approved the 2013 Equity Incentive Plan, or the 2013 Plan, under which 2,000,000 shares of our common stock are reserved for the grant of stock options and other equity incentives. The 2009 Plan, the 2011 Plan and the 2013 Plan are referred to as the Plans.

Under the Plans, nonqualified and incentive stock options may be granted to employees, consultants and non-employee directors. Generally, the per share exercise price shall not be less than 100% of the fair market value of a share on the grant date. The Board of Directors has the full power to determine the provisions of each option issued under the Plans. While we may grant options that become exercisable at different times or within different periods, we have primarily granted options that vest over four years. The options, once granted, expire ten years from the date of grant.

Stock awards, denominated restricted stock under the 2009 Plan and the 2011 Plan, may be granted to any employee, director or consultant under the Plans. Pursuant to a stock award, we will issue shares of common stock. Shares that are subject to restriction will be released from restriction if certain requirements, including continued performance of services, are met.

Awards of stock appreciation rights, or SARs, may be granted to employees, consultants and nonemployee directors pursuant to the Plans. A SAR is payable on the difference between the market price at the time of exercise and the exercise price at the date of grant. In any event, the exercise price of a SAR shall not be less than 100% of the fair market value of a share on the grant date and shall expire no later than ten years from the grant date. Upon exercise, the holder of a SAR shall be entitled to receive payment either in cash or a number of shares by dividing such cash amount by the fair market value of a share on the exercise date.

Restricted stock units, denominated performance units in the 2009 Plan, may be granted to employees, consultants and nonemployee directors under the Plans. Each restricted stock unit shall have a value equal to the fair market value of one share. After the applicable performance period has ended, the holder will be entitled to receive a payment, either in cash or in the form of shares, based on the number of restricted stock units earned over the performance period, to be determined as a function of the extent to which the corresponding performance goals or other vesting provisions have been achieved.

The Board of Directors has approved the Amended and Restated 1999 Employee Stock Purchase Plan, or the Purchase Plan, and reserved a total of 1,550,000 shares of common stock for issuance under the Purchase Plan. Under the Purchase Plan, all eligible employees may purchase our common stock at a price equal to 85% of the lower of the fair market value at the beginning of the offer period or the semi-annual purchase date. Stock purchases are limited to 15% of an employee's eligible compensation. During the three months ended June 30, 2014, there were 50,417 shares purchased under the Purchase Plan, leaving approximately 37,073 shares available for purchase under the plan in the future, pending stockholder approval of additional shares at the upcoming annual meeting.

The following table summarizes the effects of stock-based compensation charges (in thousands):

	Three Months Ended June 30,
Statement of Operations Classifications		2014		2013

	(unaudited)
Cost of goods sold	$	108	$	166
Research, development and engineering		189		208
Selling, general and administrative expenses		384		297
Stock-based compensation effect in income before taxes		681		671
Provision for income taxes (1)		211		208
Net stock-based compensation effects in net income	$	470	$	463
________________
(1) Estimated at a statutory income tax rate of 31% in fiscal year 2015 and 2014, respectively.

During the three months ended June 30, 2014, the unaudited condensed consolidated statements of operations and cash flows do not reflect any tax benefit for the tax deduction from option exercises and other awards. As of June 30, 2014, approximately $5.1 million in stock-based compensation is to be recognized for unvested stock options granted under our equity incentive plans. The unrecognized compensation cost is expected to be recognized over a weighted average period of 2.5 years.

The Black-Scholes option pricing model is used to estimate the fair value of options granted under our equity incentive plans and rights to acquire stock granted under our stock purchase plan. The weighted average estimated fair values of employee stock option grants and rights granted under the 1999 Employee Stock Purchase Plan, as well as the weighted average assumptions that were used in calculating such values during the three months ended June 30, 2014 and 2013, were based on estimates at the date of grant as follows:

		Stock Options (1)				Purchase Plan
		Three Months				Three Months
		Ended June 30,				Ended June 30,
		2014		2013		2014		2013
		(unaudited)				(unaudited)
Weighted average estimated fair		(unaudited)				(unaudited)
	value of grant per share	$	na	$	na	$	2.90	$	2.60
Risk-free interest rate			na		na		0.1%		0.1%
Expected term in years			na		na		0.5		0.5
Volatility			na		na		34.5%		38.5%
Dividend yield			na		na		1.06%		0%


(1) No stock options were granted during the quarters ended June 30, 2014 and 2013.

Activity with respect to outstanding stock options for the three months ended June 30, 2014 was as follows:

			Weighted Average
		Number of	Exercise Price			Intrinsic Value (000) (1)
		Shares	Per Share			Intrinsic Value (000) (1)
			(unaudited)
Balance at March 31, 2014		5,201,635	$	10.22
	Options granted	-	$	-
	Options exercised	(33,750)	$	9.67	$	77
	Options cancelled	(56,250)	$	11.13
	Options expired	(5,000)	$	8.36
Balance at June 30, 2014		5,106,635	$	10.21

Exercisable at June 30, 2014		3,970,885	$	10.03
Exercisable at March 31, 2014		3,865,885	$	10.00


(1) Represents the difference between the exercise price and the value of our common stock at the time of exercise.