(

)

SHARE-BASED COMPENSATION

We measure and recognize compensation expense for all share-based payments based on the grant-date fair value of those awards. All of our existing stock option awards and unvested stock awards have been determined to be equity-classified awards. We account for forfeitures as they occur.

Our

2001

Equity Incentive Plan provided for the granting of stock options, stock appreciation rights, restricted stock, performance shares and other share-based awards and benefits up to an aggregate of

1,800,000

shares of our Common stock. Stock options granted could have been either nonqualified or incentive stock options. Stock options vest over

one

five

years following the date of grant and option terms are generally

five

ten

years following the date of grant. Due to the expiration of the

2001

Equity Incentive Plan at

December 31, 2015,

there were

shares of stock available for future grants.

Our

2004

Non-Employee Director Stock Plan, as amended (the

“2004

Director Plan”), is a nonqualified plan that provides for the granting of options with respect to

3,000,000

shares of our Common Stock. The

2004

Director Plan provides for grants of nonqualified stock options to each of our directors who we do

not

employ. Beginning in

2018,

on the date of each annual meeting of shareholders, options to purchase shares of Common Stock equal to an aggregate grant date fair value of

$100,000

are granted to each non-employee director that is elected or retained as a director at each such meeting. Stock options vest approximately

one

year following the date of grant and option terms are generally the earlier of

ten

years following the date of grant, or

three

years from the termination of the outside director’s service.

Our

2006

Equity Incentive Plan (the

“2006

Equity Incentive Plan”), as amended, provides for the granting of stock options, stock appreciation rights, restricted stock, performance shares and other share-based awards and benefits up to an aggregate of

1,800,000

shares of our Common Stock. Stock options granted

may

be either incentive stock options or nonqualified stock options. Vesting terms vary with each grant and option terms are generally

five

ten

years following the date of grant.

During the

three

months ended

March 31, 2020

and

2019,

we granted options to purchase

48,934

and

73,331

shares of Common Stock, respectively. Options to purchase shares of common stock are typically granted with exercise prices equal to the fair value of the common stock on the date of grant. We do, in certain limited situations, grant options with exercise prices that exceed the fair value of the common shares on the date of grant. The fair value of stock options granted was estimated using a Black-Scholes valuation model with the following weighted average assumptions:

	2020			2019
Expected dividend yield at date of grant		1.83	%		2.85	%
Expected stock price volatility		33.79	%		34.05	%
Risk-free interest rate		1.74	%		2.48	%
Expected life of options (in years)		8			8

The risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of the grant. The expected volatility was based on historical monthly price changes of our stock based on the expected life of the options at the date of grant. The expected life of options is the average number of years we estimate that options will be outstanding. We consider groups of associates that have similar historical exercise behavior separately for valuation purposes.

The following table summarizes stock option activity under the

2001

and

2006

Equity Incentive Plans and the

2004

Director Plan for the

three

-month period ended

March 31, 2020:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value (In thousands)
Outstanding at December 31, 2019		1,245,922		$	18.08		4.45	$	59,631
Granted		48,934		$	65.80
Exercised		(260,481	)	$	12.08			$	12,059
Forfeited		--		$	--
Outstanding at March 31, 2020		1,034,375		$	21.85		5.36	$	25,579
Exercisable at March 31, 2020		613,484		$	15.16		3.88	$	18,600

As of

March 31, 2020,

the total unrecognized compensation cost related to non-vested stock option awards was approximately

$2.2

million which was expected to be recognized over a weighted average period of

3.59

years.

There was

cash received from stock options exercised for the

three

months ended

March 31, 2020

and

2019.

We recognized

$282,000

and

$230,000

of non-cash compensation for

three

months ended

March 31, 2020

and

2019,

respectively, related to options, which is included in direct fixed and selling, general and administrative expenses.

During the

three

months ended

March 31, 2019,

we granted

6,005

non-vested shares of Common Stock under the

2006

Equity Incentive Plan.

shares were granted during the

three

months ended

March 31, 2020.

As of

March 31, 2020,

we had

49,554

non-vested shares of Common Stock outstanding under the

2006

Equity Incentive Plan. These shares vest over

five

years following the date of grant and holders thereof are entitled to receive dividends from the date of grant, whether or

not

vested. The fair value of the awards is calculated as the fair market value of the shares on the date of grant. We recognized

$50,000

and

$73,000

of non-cash compensation for the

three

months ended

March 31, 2020

and

2019,

respectively, related to this non-vested stock, which is included in direct fixed and selling, general and administrative expenses. During the

three

months ended

March 31, 2020,

34,622

shares vested.

The following table summarizes information regarding non-vested stock granted to associates under the

2006

Equity Incentive Plan for the

three

-month period ended

March 31, 2020:

	Common Shares Outstanding			Weighted Average Grant Date Fair Value Per Share
Outstanding at December 31, 2019		84,176		$	17.23
Granted		--			--
Vested		(34,622	)		13.17
Forfeited		--		$	--
Outstanding at March 31, 2020		49,554		$	20.06

As of

March 31, 2020,

the total unrecognized compensation cost related to non-vested stock awards was approximately

$361,000

and is expected to be recognized over a weighted average period of

2.91

years.