NOTE 15 — CAPITAL STOCK AND STOCK COMPENSATION:

The 2004 Stock Incentive Plan

The Company’s 2004 Stock Incentive Plan, as amended and restated as of June 2010 (the “2004 Plan”), enables the Company to grant stock-based awards, including stock options, stock appreciation rights, restricted stock and performance awards to employees, consultants and non-employee directors. A total of 1,780,524 shares of the Company’s stock may be issued or used as the basis for awards under the 2004 Plan as of December 31, 2012.

Restricted Stock Units

The Company granted a total of 45,000, 45,192 and 30,444 restricted stock units during the years ended December 31, 2012, 2011 and 2010, respectively, to certain of its non-employee directors. At the date of the awards the fair market value of the Company’s stock was $10.00 (2012), $26.55 (2011) and $39.41 (2010) per share. Each restricted stock unit represents a contingent right to receive one share of common stock upon the non-executive director’s termination of service as a board member. Such restricted stock units vest ratably over a four-year period, which period may be accelerated provided that the director has served until the earlier of (a) the first anniversary of the grant date or (b) the next annual meeting of the Company’s stockholders. The restricted stock units have no voting rights and may not be transferred or otherwise disposed of while the non-employee director is a director. The non-employee director is entitled to dividends in the form of additional restricted stock units at the same time dividends are paid on the Company’s common stock in an amount equal to the result obtained by dividing (i) the product of (x) the amount of units owned by the non-employee director on the record date for the dividend times (y) the dividend per share by (ii) the closing price of a share of the Company’s common stock on the payment date, which restricted units vest immediately on the payment date for the dividend.

Restricted Common Stock, Performance Related Grants and Options

During the three years ended December 31, 2012, the Company awarded a total of 401,409 (2012), 82,544 (2011) and 71,008 (2010) shares of restricted common stock at no cost to certain of its employees, including senior officers. Restrictions limit the sale or transfer of these shares until they vest, which occurs over a four or five-year period. During the restriction period, the shares will have voting rights and cash dividends will be paid if declared. The weighted average fair values of the restricted stock issued during the three years ended December 31, 2012 were $10.09 (2012), $34.90 (2011) and $43.40 (2010) per share.

During the year ended December 31, 2012, the Company granted certain of its senior officers performance awards valued at an aggregate of approximately $1,307 on the grant date. Each performance award represents a contingent right to receive cash or, at the Company’s option, shares of common stock of the Company, based upon certain market related performance goals being met and the covered employees being continuously employed through the end of the three-year period over which the performance goals are measured. The performance related grants were valued using a Monte Carlo pricing model that takes into account the market related performance goals described in the grants. It is the Company’s intention (but not an obligation) to settle the awards in shares of the Company’s common stock to the extent such shares are available for issuance under the 2004 Plan on the settlement date. To the extent sufficient shares are not available for issuance under the 2004 Plan or the Compensation Committee of the Board of Directors determines not to settle the awards in shares, the awards shall be paid in cash. As a result of the current and expected availability of shares under the 2004 Plan and the Company’s intent to settle these awards in shares of the Company’s common stock if such shares are available, these cash based performance awards are being accounted for as equity awards. The Company will evaluate at each reporting date, the sufficiency of shares available under the 2004 Plan to settle the awards in shares. If at any reporting date in the future the shares available under the 2004 Plan are not sufficient, these awards would be bifurcated into the portion that can be settled in shares and the portion that would have to be settled in cash, with the latter portion being classified as a liability award.

During the three years ended December 31, 2012, the Company granted a total of 0 (2012), 232,107 (2011) and 44,142 (2010) performance related restricted stock units to certain of its employees, including senior officers. Each performance stock unit represents a contingent right to receive shares of common stock of the Company based upon certain market related performance goals being met and the covered employees being continuously employed through the end of the period over which the performance goals are measured. The performance stock units have no voting rights and may not be transferred or otherwise disposed of until they vest. Dividends will be paid when the performance period expires and are conditioned upon the attainment of the performance goals. The estimated weighted average grant-date fair value of performance stock units awarded during 2011 and 2010 was $17.43 and $52.43. The performance related grants in 2011 and 2010 were valued using a Monte Carlo pricing model that takes into account the market related performance goals described in the grants. There were no such grants made during 2012.

On December 31, 2011, a total of 47,289 performance related restricted stock units and 146,270 performance related options were forfeited since the related market related performance goals were not met. No performance related restricted stock units vested during the three years ended December 31, 2012, since the market related performance goals were not met.

Compensation expense is recognized over the vesting period, contingent or otherwise, applicable to each grant, using the straight-line method. Compensation expense as a result of all of these grants of restricted stock, restricted stock units and performance related awards was $6,115, $6,959 and $7,700 during each of the years ended December 31, 2012, 2011 and 2010, respectively.

Activity with respect to restricted common stock and restricted stock units is summarized as follows:

Nonvested Shares Outstanding at December 31, 2009			362,229
Granted			145,594
Vested ($35.46 to $64.92 per share)			(140,292)
Forfeited			(15,836)
Nonvested Shares Outstanding at December 31, 2010			351,695
Granted			359,843
Vested ($39.41 to $64.92 per share)			(127,391)
Forfeited			(75,087)
Nonvested Shares Outstanding at December 31, 2011			509,060
Granted			446,409
Vested ($10.09 to $64.92 per share)			(159,530)
Forfeited			(15,345)
Nonvested Shares Outstanding at December 31, 2012			780,594

Stock Options

Options covering 2,071,668 shares are outstanding under the 2004 Plan with exercise prices ranging from $12.50 to $64.92 per share (equal to or greater than the market prices at dates of grant). Options granted under the 2004 Plan expire ten years from the date of grant.

Options covering 102,113 shares are outstanding under the 1998 stock option plan with exercise prices ranging from $18.16 to $35.70 per share (the market prices at dates of grant). Options granted under the 1998 stock option plan vested and became exercisable over a three-year period and expire ten years from the date of grant. No further options may be granted under this plan.

Options covering 31,000 shares are outstanding under the 1999 non-employee director stock option plan with exercise prices ranging from $16.35 to $44.47 per share (the market prices at dates of grant). The plan provided for the grant of an initial option for 7,500 shares and an annual option for 1,000 shares thereafter to each non-employee director at an exercise price equal to market value at the date of the grant. Initial options vested and became exercisable over a three-year period; annual options vested and became exercisable one year from the date of the grant. All options expire ten years from the date of grant. No further options may be granted under this plan.

Stock option activity under all plans is summarized as follows:

Options Outstanding at December 31, 2009			1,473,981
Granted			141,988
Forfeited			(53,763)
Exercised ($23.25 to $29.67 per share)			(19,000)
Options Outstanding at December 31, 2010			1,543,206
Granted			626,312
Forfeited			(300,831)
Exercised			-
Options Outstanding at December 31, 2011			1,868,687
Granted			377,653
Forfeited			(41,559)
Exercised			-
Options Outstanding at December 31, 2012			2,204,781
Options Exercisable at December 31, 2012			1,234,359

The weighted average remaining contractual life of the outstanding stock options at December 31, 2012 was 6.4 years. The range of exercise prices of the stock options outstanding at December 31, 2012 was $12.50 to $64.92 per share. The weighted average exercise prices of the stock options outstanding at December 31, 2012 and 2011 were $36.54 and $41.53 per share, respectively. None of the stock options outstanding and exercisable at December 31, 2012 or that vested over the three years ended December 31, 2012 were “in-the-money.”

The fair values of the options granted were estimated on the dates of grant using the Black-Scholes option pricing model with the following weighted average assumptions for 2012, 2011 and 2010: risk free interest rates of 1.2%, 2.2% and 2.8%, dividend yields of 1.9%, 4.1% and 4.1%, expected stock price volatility factors of .54, .45 and .45, and expected lives of 6.0, 8.1 and 6.0 years. The weighted average grant-date fair values of options granted in 2012, 2011 and 2010 were $3.83, $5.72 and $13.53, respectively. The total intrinsic value of options exercised amounted to $359 in 2010. There were no options exercised during 2012 or 2011.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Since the Company’s stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options.

Compensation expense as a result of the grants of stock options described above was $1,764, $2,748 and $4,164 during each of the years ended December 31, 2012, 2011, and 2010, respectively.

As of December 31, 2012, there was $10,641 of unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 2.5 years.