9.	*Stock Plans and Other Incentives*

The Company has adopted certain incentive plans for the purpose of attracting and retaining the Company’s directors, officers and employees by having the ability to issue options, restricted stock units (“RSUs”), or stock awards. Awards granted under the Company’s incentive plans expire ten years from the date of grant and vest over periods ranging generally from three to five years for employees.

Option Awards

The following table presents option activity and other plan data for the nine months ended September 30, 2014 and 2013:


	For the Nine Months Ended September 30,
	2014				2013
	Options		Weighted- Average Exercise Price		Options		Weighted- Average Exercise Price

Outstanding at beginning of period		627,724	$	9.05		645,448	$	8.94
Granted		20,000	$	18.52		—	$	—
Exercised		(35,000)	$	(9.57)		—	$	—
Cancelled through cash settlement		(8,862)	$	(4.09)		—	$	—
Forfeited/cancelled/expired		—	$	—		—	$	—

Outstanding at end of period		603,862	$	9.40		645,448	$	8.94

Options exercisable at end of period		583,862	$	9.09		645,448	$	8.94

Options exercisable which can be settled in cash		8,862	$	4.09		35,448	$	4.67

Certain outstanding options allow the option holder to receive from the Company, in cancellation of the holder’s option, a cash payment with respect to each cancelled option equal to the amount, if any, by which the fair market value of the share of stock underlying the option exceeds the exercise price of such option. The Company accounts for these options as liability awards. This liability is adjusted at the end of each reporting period to reflect: (1) the net cash payments to option holders made during each period; (2) the impact of the exercise and expiration of options; and (3) changes in the market price of the Company’s common stock. Changes in the settlement value of option awards treated under the liability method are reflected as income or expense in the statements of operations.

In May 2014, the Company granted 20,000 options to one employee. These options, which are accounted for as an equity award, vest 20% per year over a five-year period and have an exercise price of $18.52 per option, based upon the closing price of the Company’s common stock on the date of grant. For expense purposes, the Company estimated the fair value of each option granted on the date of grant using the Black-Scholes option-pricing model at $7.64 per option.

At September 30, 2014, the liability for option cancellations was approximately $173,000 based upon the difference in the closing stock price of the Company’s common stock at September 30, 2014 of $23.59 per share and the exercise price of the outstanding 8,862 “in-the-money” options that were accounted for as a liability award at that date. At December 31, 2013, the liability for option cancellations was approximately $268,000 based upon the difference in the closing stock price of the Company at December 31, 2013 of $19.23 per share and the exercise price of the outstanding 17,724 “in-the-money” options that were accounted for as a liability award at that date. The Company recorded compensation expense of approximately $22,000 and a compensation benefit of approximately $83,000 for the three months ended September 30, 2014 and 2013, respectively, and compensation expense of $36,000 and $111,000 for the nine months ended September 30, 2014 and 2013, respectively, in general and administrative expenses in the consolidated statements of operations related to the respective changes in the amount of the liability for option cancellations.

RSU Awards

The following table presents the changes in RSUs outstanding for the nine months ended September 30, 2014 and 2013:


	For the Nine Months Ended September 30,
	2014		2013

Outstanding at beginning of period		365,686		469,848
Granted		96,771		100,328
Common stock delivered (A)		(185,224)		(205,075)
Forfeited		(7,345)		(2,263)

Outstanding at end of period		269,888		362,838

Intrinsic value (B)	$	6,367,000	$	5,860,000



(A) In the 2014 period, all of the vested RSUs were issued as shares. The 2013 period includes 80,139 shares which were used to settle minimum employee withholding tax obligations for 16 employees of approximately $1,280,000 in the nine months ended September 30, 2013. A net of 124,936 shares of common stock were delivered in the nine months ended September 30, 2013.
(B) For purposes of this calculation, the Company’s closing stock prices were $23.59 and $16.15 per share on September 30, 2014 and 2013, respectively.

In February 2014, an aggregate of 91,431 RSUs were granted to employees, which RSUs vest one-third a year over three years and had a grant date fair value of $18.13 per RSU (which was determined based on the closing stock price of the Company’s common stock on the applicable date of grant). In February 2013, an aggregate of 91,356 RSUs were granted to employees, which RSUs vest one-third a year over three years and had a grant date fair value of $16.20 per RSU (which was determined based on the closing stock price of the Company’s common stock on the applicable date of grant). The awards granted to employees in the first quarter of 2014 and 2013 are treated as equity awards and the grant date fair value is charged to compensation expense at the corporate level on a straight-line basis over the vesting periods. Dividends are not paid or accrued on unvested employee RSUs.

During the nine months ended September 30, 2014, an aggregate of 5,340 RSUs were granted to non-employee directors (with an average grant date fair value of $19.37 per RSU) related to the equity component of their compensation. During the nine months ended September 30, 2013, an aggregate of 8,972 RSUs were granted to non-employee directors (with an average grant date fair value of $15.37 per RSU) related to the equity component of their compensation. In each case, the grant date fair value was

determined as of the last trading day of the quarter for which the RSUs were being received as compensation. The RSUs are immediately vested, but are not deliverable to non-employee directors until six months after termination of their service as a director. Dividends are paid on RSUs granted to non-employee directors.

Option and RSU Expense Information

The Company recorded non-cash compensation expense of approximately $415,000 and $412,000, including $34,500 and $46,000 related to non-employee director equity compensation, for the three months ended September 30, 2014 and 2013, respectively, related to all stock options and RSUs accounted for as equity awards, as a component of general and administrative expenses in the statements of operations. For the nine months ended September 30, 2014 and 2013, the Company recorded non-cash compensation expense of approximately $1,271,000 and $1,451,000, respectively, including $103,500 and $138,000, respectively, related to non-employee director equity compensation.