Note 7—Share-Based Compensation

As of December 31, 2011, we had five share-based compensation plans which are described below: the 2002 Stock Option Plan, the 1995 Incentive and Non-Qualified Stock Option Plan for key employees, the 1996 Non-Employee Director's Stock Option Plan (collectively the "Stock Option Plans"), the 2000 Employee Stock Purchase Plan (the "ESPP") and the Supplemental Executive Retirement Plan (the "SERP").

In the years ended December 31, 2011, 2010 and 2009 we recorded share-based compensation of $282,000, $317,000 and $393,000, respectively resulting from our ESPP. With respect to our SERP, we recorded share-based compensation of $444,000, $400,000 and $315,000 (representing the company's 25% match of participants' deferrals) for the years ended December 31, 2011, 2010 and 2009, respectively. Additionally in 2011, 2010 and 2009, we recorded share-based compensation expense from our issuance of stock options, from the 2002 Stock Option Plan, of $1,870,000, $1,015,000 and $681,000, respectively.

Stock Option Plans

The Nominating, Compensation and Stock Option Committee of the Board of Directors is responsible for determining the individuals who will be granted options, the number of options each individual will receive, the option price per share (in accordance with the terms of our option plans), and the exercise period of each option.

Incentive Stock Options

As of December 31, 2011, 3,444,000 shares of common stock were reserved for issuance under our stock option plans, including 1,349,000 shares which are available for future grant. The incentive stock option price will not be less than the fair market value of the common stock on the date the option is granted. No option grant will have a term in excess of ten years. The options are exercisable over a five to ten year period. The options granted in 2011, 2010 and 2009 become vested and exercisable ratably over a five year period on each yearly anniversary date of the option grant.

A summary of incentive stock option activity is as follows:


	2011					2010					2009
	Weighted Average price		Number of Shares			Weighted Average price		Number of Shares			Weighted Average price		Number of Shares
Beginning of period	$	10.24		1,974,000		$	8.48		1,904,000		$	7.55		1,532,000
Granted		16.11		432,000			14.31		514,000			10.39		591,000
Cancelled		12.49		(84,000	)		9.29		(33,000	)		12.35		(46,000	)
Exercised		6.72		(227,000	)		7.27		(411,000	)		5.70		(173,000	)

End of period	$	11.73		2,095,000		$	10.24		1,974,000		$	8.48		1,904,000

The weighted average grant-date fair value of incentive stock options granted during 2011, 2010 and 2009 was $3.26, $3.98 and $2.76 per common share, respectively.

The following table summarizes information about incentive stock options outstanding at December 31, 2011.


	Options Outstanding						Options Exercisable
Exercise Price Range	Number Outstanding		Average Remaining Contractual Life		Weighted Average Exercise price		Number Exercisable		Weighted Average Exercise Price
$2.41 — 2.50		86,000		0.94	$	2.45		86,000	$	2.45
3.68		191,000		1.97		3.68		191,000		3.68
6.07		136,000		2.99		6.07		136,000		6.07
10.39		475,000		6.95		10.39		171,000		10.39
$13.93 — 16.11		1,207,000		7.80		14.83		265,000		14.05

		2,095,000		6.48	$	11.73		849,000	$	8.53

Non-Qualified Options

As of December 31, 2011, 1,325,000 shares of common stock were reserved for issuance under our non-qualified stock option plans, including 509,000 shares which are available for future grant. The non-qualified options were granted at option prices which were not less than the fair market value of the common stock on the date the options were granted. The options granted in 2011, 2010 and 2009 become vested and exercisable ratably over a five year period on each yearly anniversary date of the option grant.

A summary of non-qualified stock option activity is as follows.


	2011					2010					2009
	Weighted Average price		Number of Shares			Weighted Average price		Number of Shares			Weighted Average price		Number of Shares
Beginning of period	$	7.04		1,028,000		$	6.05		1,173,000		$	5.85		1,317,000
Granted		16.11		78,000			14.31		156,000			10.39		41,000
Cancelled		13.93		(12,000	)		9.20		(8,000	)		10.76		(3,000	)
Exercised		3.47		(277,000	)		6.87		(293,000	)		5.49		(182,000	)

End of period	$	9.02		817,000		$	7.04		1,028,000		$	6.05		1,173,000

The weighted average grant-date fair value of non-qualified stock options granted during 2011, 2010 and 2009 was $3.26, $3.98 and $2.76 per common share, respectively.

The following table summarizes information about non-qualified stock options outstanding at December 31, 2011.


	Options Outstanding						Options Exercisable
Exercise Price Range	Number Outstanding		Average Remaining Contractual Life		Weighted Average Exercise price		Number Exercisable		Weighted Average Exercise Price
$2.50		98,000		0.95	$	2.50		98,000	$	2.50
3.68		167,000		1.99		3.68		167,000		3.68
6.07		164,000		2.99		6.07		164,000		6.07
10.39		35,000		7.01		10.39		12,000		10.39
$13.93 — 16.11		353,000		7.55		14.58		100,000		14.04

		817,000		4.69	$	9.02		541,000	$	6.26

Fair Value Valuation Estimates

The fair value of options granted during 2011, 2010 and 2009 is estimated on the date of grant using the Black-Scholes-Merton option pricing model based on the following assumptions:


	2011	2010	2009
Risk-free interest rate	2.60%	2.50%	2.49%
Weighted average expected life in years — Incentive Options	7.4 years	4.5 years	4.5 years
Non-Qualified options	7.4 years	4.5 years	4.5 years
Expected volatility	27.4%	42.1%	41.0%
Dividend yield	3.66%	3.45%	3.64%
Forfeiture rate	3.81%	3.88%	5.80%

Other Information

Other information pertaining to activity of our Stock Option Plans during the years ended December 31, 2011, 2010 and 2009 was as follows:


	2011		2010		2009
Aggregate intrinsic value of stock options exercised	$	5,059,000	$	5,613,000	$	2,434,000
Aggregate intrinsic value of outstanding stock options	$	19,570,000	$	21,393,000	$	20,759,000
Total grant-date fair value of stock options granted	$	1,477,000	$	2,176,000	$	1,545,000
Total fair value of options vested during period	$	1,551,000	$	579,000	$	372,000

As of December 31, 2011, the unrecognized compensation related to stock options was approximately $3,547,000. This cost is expected to be expensed over a four year period.

Employee Stock Purchase Plan

Since January 1, 2000, we have had a non-compensatory ESPP for all eligible employees. All full-time and certain part-time employees who have completed two years of continuous service with us are eligible to participate. The ESPP was implemented through five annual offerings. On January 1, 2000, the first annual offering commenced. On February 12, 2004 (effective January 1, 2004), our Board of Directors extended the ESPP for an additional eight annual offerings. On April 12, 2011, the Board of Directors extended the ESPP for an additional five offerings through 2016. Annual offerings commence and terminate on the respective year's first and last calendar day. Under the ESPP, we are authorized to issue up to 4,050,000 shares of our common stock to our employees. Pursuant to such authorization, we have 2,620,000 shares available for future grant at December 31, 2011. Furthermore, under the terms of the ESPP, eligible employees can choose each year to have up to $25,000 of their annual earnings withheld to purchase our Common Stock. The purchase price of the stock is 85% of the lower of its beginning or end of the plan year market price.

The following table summarizes information about our ESPP annual offerings for the years ended December 31, 2011, 2010 and 2009:


	ESPP Annual Offering
	2011	2010	2009
Common shares purchased	71,000	75,000	74,000
Per common share purchase Price	$13.83	$12.07	$9.01
Amount expensed under ESPP	$282,000	$317,000	$393,000
Common shares date of issue	Jan. 4, 2012	Jan. 6, 2011	Jan. 4, 2010

Deferred Compensation Plan

Since January 1, 2000, we have had a SERP for certain key executives and employees. The SERP is not qualified under Section 401 of the Internal Revenue Code. Effective in Plan year 2010, the Plan was amended to allow participants to defer up to 25% of their earned income on a pre-tax basis. Prior to the amendment, participants were eligible to defer up to 15% of their earned income on a pre-tax basis. As of the last day of each plan year, each participant will receive a 25% match of up to 15% of their deferral in the form of our Common Stock based on the then current market value. The 2010 amendment increased the deferral amount to 25% of their earned income on a pre-tax basis, but the 25% match is still limited to a maximum of 15% of eligible participants' deferral. SERP participants fully vest in our matching contribution three years from the first day of the initial year of participation. The income deferred and our matching contributions are unsecured and subject to the claims of our general creditors. Under the SERP, we are authorized to issue up to 675,000 shares of our common stock to our employees. Pursuant to such authorization, we have 486,000 shares available for future grant at December 31, 2011 (after deducting the 2011 funding of 26,000 shares delivered in 2012). In the aggregate, since initiation of the SERP, the Company's 25% match has resulted in 528,000 shares (including the 2011 funding of shares delivered in 2012) being issued to the trustee. At the time of issuance, such shares were accounted for at cost, as treasury stock. At December 31, 2011, approximately 257,000 of such shares are vested and remain in the respective active participants' accounts. The following table summarizes information about our SERP for the plan years ended December 31, 2011, 2010 and 2009:


	SERP Plan Year
	2011			2010			2009
Amount of company match expensed under SERP	$	444,000		$	400,000		$	315,000
Treasury shares issued to fund SERP expense		26,000			25,000			15,000
SERP trust account balance at December 31	$	18,942,000	⁽¹⁾	$	16,534,000	⁽¹⁾	$	14,591,000	⁽¹⁾
Unrealized gain (loss) recorded in SERP liability account	$	(104,000	)	$	1,325,000		$	1,797,000

⁽¹⁾

SERP trust account investments are recorded at their fair value which is based on quoted market prices. Differences between such amounts in the table above and the deferred compensation funding asset reported on our Consolidated Balance Sheets represent the value of our Common Stock held in the Plan's participants' trust account and reported by us as treasury stock in our Consolidated Balance Sheets.