NOTE 6 - Shareholders' Equity and Stock Options

Share Repurchase Program and Treasury Shares Held (Common Stock)

On December 7, 2011, HMEC’s Board of Directors (the “Board”) authorized a share repurchase program allowing repurchases of up to $50,000. The share repurchase program authorizes the opportunistic repurchase of HMEC’s common shares in open market or privately negotiated transactions, from time to time, depending on market conditions. The share repurchase program does not have an expiration date and may be limited or terminated at any time without notice.

From December 7, 2011 through December 31, 2011, the Company repurchased 154,708 shares of its common stock, or 0.4% of the outstanding shares on December 31, 2010, at an aggregate cost of $2,047, or an average price of $13.21 per share, under this share repurchase program. During 2012, the Company repurchased 915,895 shares of its common stock, or 2.3% of the outstanding shares on December 31, 2011, at an aggregate cost of $15,735, or an average price of $17.16 per share, under this share repurchase program. During 2013, the Company repurchased 173,629 shares of its common stock, or 0.4% of the outstanding shares on December 31, 2012, at an aggregate cost of $3,889, or an average price of $22.38 per share, under this share repurchase program. In total and through December 31, 2013, 1,244,232 shares have been repurchased under the $50,000 program at an average price of $17.40 per share. The repurchase of shares was financed through use of cash. As of December 31, 2013, $28,354 remained authorized for future share repurchases.

In accordance with the terms of the Company’s incentive compensation plans, in 2011 HMEC received 60,126 shares of its common stock in connection with the conversion of restricted stock units. The shares were received in satisfaction of withholding taxes due on the distributions.

At December 31, 2013, the Company held 23,117,554 shares in treasury.

Authorization of Preferred Stock

In 1996, the shareholders of HMEC approved authorization of 1,000,000 shares of $0.001 par value preferred stock. The Board of Directors is authorized to (1) direct the issuance of the preferred stock in one or more series, (2) fix the dividend rate, conversion or exchange rights, redemption price and liquidation preference, of any series of the preferred stock, (3) fix the number of shares for any series and (4) increase or decrease the number of shares of any series. No shares of preferred stock were outstanding at December 31, 2013 and 2012.

2010 Comprehensive Executive Compensation Plan

In 2010, the shareholders of HMEC approved the 2010 Comprehensive Executive Compensation Plan (the “Comprehensive Plan”). The purpose of the Comprehensive Plan is to aid the Company in attracting, retaining, motivating and rewarding employees and non-employee Directors; to provide for equitable and competitive compensation opportunities, including deferral opportunities; to encourage long-term service; to recognize individual contributions and reward achievement of Company goals; and to promote the creation of long-term value for the Company’s shareholders by closely aligning the interests of plan participants with those of shareholders. The Comprehensive Plan authorizes share-based and cash-based incentives for plan participants. In 2012, the shareholders of HMEC approved the implementation of a fungible share pool under which grants of full value shares will count against the share limit as two and one half shares for every share subject to a full value award. As of December 31, 2013, approximately 1.8 million shares were available for grant under the Comprehensive Plan. Shares of common stock issued under the Comprehensive Plan may be either authorized and unissued shares of HMEC or shares that have been reacquired by HMEC; however, new shares have been issued historically.

As further described in the paragraphs below, outstanding stock units and stock options under the Comprehensive Plan were as follows:

	December 31,
	2013	2012	2011

Common stock units related to deferred compensation for Directors	118,062	111,928	113,502
Common stock units related to deferred compensation for employees	111,981	116,174	115,087
Stock options	956,814	1,882,939	2,600,583
Restricted common stock units related to incentive compensation	1,663,190	1,423,611	1,135,840
Total	2,850,047	3,534,652	3,965,012

Director Common Stock Units

Deferred compensation of directors is in the form of common stock units, which represent an equal number of common shares to be issued in the future. The outstanding units of directors serving on the Board accrue dividends at the same rate as dividends paid to HMEC’s shareholders; outstanding units of retired directors do not accrue dividends. These dividends are reinvested into additional common stock units.

Employee Common Stock Units

Deferred compensation of employees is in the form of common stock units, which represent an equal number of common shares to be issued in the future. Distributions of employee deferred compensation are allowed to be either in common shares or cash. Through December 31, 2013, all distributions have been in cash. The outstanding units accrue dividends at the same rate as dividends paid to HMEC’s shareholders. These dividends are reinvested into additional common stock units.

Stock Options

Options to purchase shares of HMEC common stock may be granted to executive officers, other employees and directors. The options become exercisable in installments based on service generally beginning in the first year from the date of grant and generally become fully vested 4 years from the date of grant. The options generally expire 7 years from the date of grant. The exercise price of the option is equal to the market price of HMEC’s common stock on the date of grant resulting in a grant date intrinsic value of $0.

Changes in outstanding options were as follows:

	Weighted Average			Range of		Options
	Option Price			Option Prices				Vested and
	per Share			per Share		Outstanding		Exercisable

December 31, 2012		$	14.73		$ 6.91-$20.23		1,882,939		1,161,703

Granted		$	20.97		$20.60-$30.24		245,424		-
Vested		$	13.94		$ 6.91-$20.60		-		324,291
Exercised		$	13.77		$ 6.91-$20.23		(1,158,537)		(1,158,537)
Forfeited		$	17.02		$13.83-$20.60		(3,962)		(3,962)
Expired		$	18.17		$18.17		(9,050)		(9,050)

December 31, 2013		$	17.49		$ 6.91-$30.24		956,814		314,445

Option information segregated by ranges of exercise prices was as follows:

	December 31, 2013
		Total Outstanding Options					Vested and Exercisable Options
					Weighted	Weighted				Weighted	Weighted
	Range of				Average	Average				Average	Average
	Option Prices				Option Price	Remaining				Option Price	Remaining
	per Share	Options			per Share	Term	Options			per Share	Term

	$ 6.91-$13.83		178,858	$	13.58	3.1 years		119,543	$	13.45	3.1 years
	$16.81-$18.20		527,437	$	17.17	4.6 years		187,955	$	17.10	4.2 years
	$20.23-$30.24		250,519	$	20.95	6.1 years		6,947	$	20.24	0.3 years
Total	$ 6.91-$30.24		956,814	$	17.49	4.7 years		314,445	$	15.78	3.7 years

The weighted average exercise prices of vested and exercisable options as of December 31, 2012 and 2011 were $14.28 and $15.57, respectively.

As of December 31, 2013, based on a closing stock price of $31.54 per share, the aggregate intrinsic (in-the-money) values of vested options and all options outstanding were $4,908 and $13,397, respectively.

Restricted Common Stock Units

Restricted common stock units may be granted to executive officers, other employees and directors and represent an equal number of common shares to be issued in the future. The restricted common stock units vest in installments based on service or attainment of performance criteria generally beginning in the first year from the date of grant and generally become fully vested 1 to 5 years from the date of grant. On the date of grant, the fair value of restricted common stock units is equal to the market price of HMEC’s common stock on that date. The outstanding units accrue dividends at the same rate as dividends paid to HMEC’s shareholders. These dividends are reinvested into additional restricted common stock units.

Changes in outstanding restricted common stock units were as follows:

	Total Outstanding Units					Vested Units
			Weighted Average					Weighted Average
			Grant Date Fair					Grant Date Fair
	Units		Value per Unit			Units		Value per Unit

December 31, 2012		1,423,611		$	15.93		311,407		$	13.15

Granted (1)		484,552		$	25.13		-			-
Vested		-			-		282,680		$	13.50
Forfeited		(24,507)		$	15.62		-			-
Distributed (2)		(220,466)		$	9.87		(220,466)		$	9.87

December 31, 2013		1,663,190		$	19.41		373,621		$	15.34

(1)

Includes dividends reinvested into additional restricted common stock units.

(2)

Includes distributed units which were utilized to satisfy withholding taxes due on the distribution.