Stock-Based Compensation

The Company’s 2007 Long-Term Equity Incentive Plan, as amended, approved in May 2008 (the “2007 Plan”) authorizes the issuance of up to 4,500,000 shares of the Company’s common stock. Upon approval of the 2007 Plan, the Company ceased making awards under its prior equity plans, including the Company’s 2001 Long-Term Equity Incentive Plan. Unused shares previously authorized under prior plans have been rolled over into the 2007 Plan and increased the total number of shares authorized for issuance under the 2007 Plan by 707,500 shares in 2012.

The Company’s outstanding unvested stock options have maximum contractual terms of up to six years, principally vest ratably over four years and were granted at exercise prices equal to the market price of the Company’s common stock on the date of grant. The Company’s outstanding stock options are exercisable into shares of the Company’s common stock. The Company’s outstanding restricted share units (“RSUs”) principally vest ratably over four years. Upon vesting, RSUs convert into shares of the Company’s common stock. The Company currently issues authorized shares of common stock upon vesting of restricted shares or the exercise of other equity awards. The Company’s restricted shares were assumed in connection with its acquisition of Nashua Corporation and all of which expired in 2011. The Company has no outstanding stock appreciation rights.

The Company measures the cost of employee services received in exchange for an award of equity instruments, including grants of employee stock options and RSUs, based on the fair value of the award at the date of grant in accordance with the modified prospective method. The Company uses the Black-Scholes model for purposes of determining the fair value of stock options granted and recognizes compensation costs ratably over the requisite service period for each separately vesting portion of the award, net of estimated forfeitures. The Black-Scholes model has limitations on its effectiveness including that it was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable and that the model requires the use of parameters, such as stock price volatility that must be estimated from historical data. The Company’s stock option awards to employees have characteristics significantly different from those of traded options and parameter estimation methodologies can materially affect fair value estimates.

Total share-based compensation expense recognized in selling, general and administrative expenses in the Company’s consolidated statements of operations was $5.3 million, $8.7 million and $10.9 million for the years ended 2012, 2011 and 2010, respectively. Income tax benefit related to the Company’s stock-based compensation expense was $1.2 million, $1.5 million and $2.1 million for the years ended 2012, 2011 and 2010, respectively.

As of the year ended 2012, there was approximately $5.3 million of total unrecognized compensation cost related to unvested share-based compensation grants, which is expected to be amortized over the remaining weighted-average period of 1.6 years.

Stock Options

A summary of the Company’s outstanding stock options as of and for the years ended 2012, 2011 and 2010 are as follows:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value (a) (in thousands)
Outstanding as of the year ended 2009	3,917,851		$	11.73	3.7	$	5,513
Granted	660,000		7.02
Exercised	(179,773	)	4.73			$	418
Forfeited	(592,854	)	15.23
Outstanding as of the year ended 2010	3,805,224		$	10.70	3.1	$	1,075
Granted	590,000		5.62
Exercised	(70,598	)	4.04			$	141
Forfeited	(131,646	)	6.89
Outstanding as of the year ended 2011	4,192,980		$	10.21	2.5	$	—
Granted	—		—
Exercised	—		—			$	—
Forfeited	(1,966,980	)	13.00
Outstanding as of the year ended 2012	2,226,000		$	7.75	2.7	$	—


Exercisable as of the year ended 2010	2,371,974		$	13.27	2.2	$	334
Exercisable as of the year ended 2011	2,761,230		$	12.59	1.6	$	—
Exercisable as of the year ended 2012	1,405,125		$	8.94	2.3	$	—

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(a)	Intrinsic value for purposes of this table represents the amount by which the fair value of the underlying stock, based on the respective market prices as of the years ended 2012, 2011 and 2010 or, if exercised, the exercise dates, exceeds the exercise prices of the respective options.

There were no stock option grants in 2012. The weighted-average grant date fair value of stock options granted in 2011, were at exercise prices equal to the market price of the stock on the grant dates, as calculated under the Black-Scholes Model with the weighted-average assumptions are as follows:



	2011
Weighted average fair value of option grants during the year	$	2.28
Assumptions:
Expected option life in years	4.25
Risk-free interest rate	1.46		%
Expected volatility	49.1		%
Expected dividend yield	0.0		%

The risk-free interest rate represents the United States Treasury Bond constant maturity yield approximating the expected option life of stock options granted during the period. The expected option life represents the period of time that the stock options granted during the period are expected to be outstanding, based on the mid-point between the vesting date and contractual expiration date of the option. The expected volatility is based on the historical market price volatility of the Company’s common stock for the expected term of the options, adjusted for expected mean reversion.

Restricted Shares and RSUs

A summary of the Company’s non-vested restricted shares and RSUs as of and for the three years ended 2012, 2011 and 2010 is as follows:



	Restricted Shares		Weighted Average Grant Date Fair Value		RSUs		Weighted Average Grant Date Fair Value
Unvested as of the year ended 2009	161,144		$	6.53	1,896,585		$	9.72
Granted	—		—		756,924		7.02
Vested	(1,447	)	6.53		(904,710	)	10.48
Forfeited	(134,397	)	6.53		(28,125	)	9.49
Unvested as of the year ended 2010	25,300		$	6.53	1,720,674		$	8.13
Granted	—		—		806,084		5.62
Vested	—		—		(745,674	)	9.42
Forfeited	(25,300	)	6.53		(26,250	)	6.57
Unvested as of the year ended 2011	—		$	—	1,754,834		$	6.46
Granted	—		—		136,840		1.90
Vested	—		—		(795,459	)	7.02
Forfeited	—		—		(21,875	)	7.32
Unvested as of the year ended 2012	—		$	—	1,074,340		$	5.44

The total fair value of RSUs which vested during 2012, 2011 and 2010 was $2.0 million, $3.7 million and $5.6 million, respectively, as of the respective vesting dates.