NOTE 6 – STOCK COMPENSATION PLAN

On August 14, 2003, the shareholders approved and ratified the Company’s 2003 Stock Option Plan (the 2003 Plan) authorizing the grant to officers and key employees of options to purchase up to 1,500,000 shares of common stock. On June 7, 2010, the shareholders approved and ratified an amendment and restatement of the Plan. The amendment and restatement made two substantive changes: (1) the inclusion of Directors as participants in the Plan, and (2) the ability to grant restricted stock to Directors, officers and key employees. The amendment and restatement also made other conforming, technical and other minor changes. The amendment also makes certain modifications and clarifications, including concerning administration and compliance with applicable tax rules, such as Section 162(m) of the Internal Revenue Code. There was no change to the total number of shares subject to grant under the Plan.

On June 13, 2013, the shareholders approved and ratified the Company's 2013 Stock Option and Stock Award Plan (the 2013 Plan) authorizing the grant of stock options or restricted stock awards to directors, officers and key employees of options to purchase up to 3,000,000 shares of common stock. All options are exercisable one year from the date of grant. The option price shall not be below the fair market value at date of grant. If and to the extent that an award made under the 2013 Plan is forfeited, terminated, expires or is canceled unexercised, the number of shares associated with the forfeited, terminated, expired or canceled portion of the award shall again become available for additional awards under the 2013 Plan. The 2013 Plan replaced the Company's 2003 Plan, which, pursuant to its terms, terminated in 2013. The outstanding options under the 2003 Stock Option and Award Plan, as amended, remain outstanding until exercised, forfeited or expired. Not more than 200,000 shares of the Company’s common stock may be granted as options in any one fiscal year to a participant under the 2013 Plan. In general, each option may be exercised only after one year of continued service with the Company.

The Compensation Committee determines the recipients of restricted stock awards; the number of restricted shares to be awarded; the length of the restricted period of the award; the restrictions applicable to the award including,

without limitation, the employment or retirement status of the participant; rules governing forfeiture and restrictions applicable to any sale, assignment, transfer, pledge or other encumbrance of the restricted stock during the restricted period; and the eligibility to share in dividends and other distributions paid to the Company’s stockholders during the restricted period. The maximum number of shares underlying restricted stock awards that may be granted in any one fiscal year to a participant shall be 100,000 shares.

Unless otherwise provided for in an underlying restricted stock award agreement, if a participant’s status as an employee or director of the Company is terminated by reason of death or disability, the restrictions will lapse on such date. Unless otherwise provided for in an underlying restricted stock award agreement, the Plan provides that if an individual’s status as an employee or director is terminated by reason of retirement following an involuntary termination (other than for “cause” as defined in the 2013 Plan), the restrictions will generally lapse, unless the restricted stock award is intended to constitute “performance based” compensation for purposes of Section 162(m) of the Internal Revenue Code. If a participant’s status as an employee or director terminates for any other reason, the Plan provides that a participant will generally forfeit any outstanding restricted stock awards, unless otherwise indicated in the applicable award agreement. Shares of restricted stock that are forfeited become available again for issuance under the 2013 Plan. The Compensation Committee has the authority to accelerate the time at which the restrictions may lapse whenever it considers that such action is in the best interests of the Company and of its stockholders, whether by reason of changes in tax laws, a “change in control” as defined in the 2013 Plan or otherwise.

The Company accounts for stock options and restricted stock in accordance with ASC 718-10, Compensation-Stock Compensation. ASC 718-10 requires that compensation cost for all stock awards be calculated and amortized over the service period (generally equal to the vesting period).

Stock Options

During the year ended December 31, 2014, twenty-five employees were granted options to purchase a total of 339,000 shares. During the year ended December 31, 2013, twenty-four employees were granted options to purchase a total of 392,000 shares. During the year ended December 31, 2012, fifteen employees were granted options to purchase a total of 94,000 shares. The fair value of these options for the years ended December 31, 2014, 2013 and 2012 was approximately $332,000, $556,000 and $87,000, respectively, based on assumptions noted below and is being amortized over the 1-year vesting period. The remaining unamortized stock option expense was $97,594 as of December 31, 2014, and that amount will be expensed in 2015.

The Company calculates the fair value of each option grant on the grant date using the Black-Scholes option-pricing model which requires the Company to provide certain inputs, as follows:

	•	The assumed dividend yield is based on the Company’s expectation of an annual dividend rate for regular dividends over the estimated life of the option.

	•	Expected volatility is based on the historical volatility of the Company’s stock over a period relevant to the related stock option grant.

	•	The risk-free interest rate utilized is the interest rate on U.S. Government Bonds and Notes having the same life as the estimated life of the Company’s option awards.

	•	Expected life of the options granted is estimated based on historical data reflecting actual hold periods.

	•	Estimated forfeiture is based on historical data reflecting actual forfeitures.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in the following years:

	2014	2013	2012

Dividend yield	7.14%	6.67%	7.08%
Expected volatility	27.12%	32.37%	26.19%
Risk-free interest rate	2.23%	1.96%	1.11%
Expected lives	8	8	8
Estimated forfeitures	-0-	-0-	-0-

During the year ended December 31, 2014, options to two employees to purchase a total of 23,000 shares were exercised. During the year ended December 31, 2013, no options were exercised. During the year ended December 31, 2012, options to one employee to purchase a total of 4,000 shares were exercised. During the year ended December 31, 2014, options to eleven employees to purchase a total of 108,000 shares expired. During the year ended December 31, 2013, options to ten employees to purchase a total of 84,000 shares expired. During the year ended December 31, 2012, options to eight employees to purchase a total of 55,000 shares expired.

A summary of the status of the Company’s stock option plans as of December 31, 2014, 2013 and 2012 and changes during the years then ended are as follows:

	2014		2013		2012
		Weighted-		Weighted-		Weighted-
		Average		Average		Average
		Exercise		Exercise		Exercise
	Shares	Price	Shares	Price	Shares	Price

Outstanding at beginning of year	1,093,000	$10.86	785,000	$11.71	750,000	$12.03
Granted	339,000	9.85	392,000	10.08	94,000	11.29
Exercised	(23,000)	7.28	-0-	-0-	(4,000)	7.56
Expired	(108,000)	14.52	(84,000)	15.51	(55,000)	15.58
Outstanding at end of year	1,301,000	10.34	1,093,000	10.86	785,000	11.71
Options exercisable at end of year	962,000		701,000		691,000
Weighted-average fair value of options granted during the year		$0.98		$1.42		$0.92

The following is a summary of stock options outstanding as of December 31, 2014:

Date of Grant	Number of Employees	Number of Shares		Option Price	Expiration Date

01/03/07	1	44,200		15.51	01/03/15
01/03/07	1	5,800		17.06	01/03/15
07/16/07	12	51,000		14.21	07/16/15
09/20/07	2	7,000		13.19	09/20/15
01/08/08	1	42,300		11.79	01/08/16
01/08/08	1	7,700		12.97	01/08/16
09/25/08	11	33,000		7.55	09/25/16
01/07/09	1	14,000		7.12	01/07/17
01/07/09	1	61,000		6.47	01/07/17
06/22/09	12	43,000		7.57	06/22/17
01/08/10	1	10,900		9.13	01/08/18
01/08/10	1	14,100		8.30	01/08/18
07/27/10	12	80,000		11.40	07/27/18
07/05/11	11	74,000		11.16	07/05/19
08/29/12	14	88,000		11.29	08/29/20
02/28/13	1	10,000		10.02	02/28/21
06/26/13	23	376,000		10.08	06/26/21
06/11/14	25	339,000	*	9.85	06/11/22

		1,301,000

* Unexercisable

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for the options that were in-the-money. The aggregate intrinsic value of options outstanding as of December 31, 2014, 2013 and 2012 was $395,243, $421,563 and $602,653, respectively, of which $395,243, $421,563 and $602,653 relate to options exercisable. The intrinsic value of options exercised in 2014, 2013 and 2012 was $57,250, $-0- and $18,000, respectively, determined as of the date of option exercise. The weighted-average remaining contractual term of the above options was 4.3, 4.8 and 3.9 years as of December 31, 2014, 2013 and 2012, respectively. For the years ended December 31, 2014, 2013 and 2012, amounts charged to stock compensation expense relating to stock option grants, which is included in General and Administrative Expenses, totaled $437,063, $411,017 and $69,253, respectively.

Restricted Stock

On January 15, 2014, the Company awarded 25,000 shares of restricted stock to one participant. During 2013, the Company did not award any restricted stock grants. During 2012, the Company awarded 75,000 shares of restricted stock to nine participants. The grant date fair value of restricted stock grants awarded to participants was $232,750, $-0- and $803,700 for the years ended December 31, 2014, 2013 and 2012, respectively. These grants vest in equal installments over five years. As of December 31, 2014, there remained a total of $845,429 of unrecognized restricted stock compensation related to outstanding non-vested restricted stock grants awarded and outstanding at that date. Restricted stock compensation is expected to be expensed over a remaining weighted average period of 2.3 years. For the years ended December 31, 2014, 2013 and 2012, amounts charged to stock compensation expense related to restricted stock grants, which is included in General and Administrative Expenses, totaled $485,881, $439,332 and $503,991, respectively. During 2012, compensation costs included a one-time charge of $123,490 for restricted stock grants awarded to one participant who is of retirement age and therefore the entire amount of measured compensation cost has been recognized at grant date.

A summary of the status of the Company’s non-vested restricted stock awards as of December 31, 2014, 2013 and 2012, and changes during the year ended December 31, 2014, 2013 and 2012 are presented below:

	2014		2013		2012
		Weighted-		Weighted-		Weighted-
		Average		Average		Average
		Grant Date		Grant Date		Grant Date
	Shares	Fair Value	Shares	Fair Value	Shares	Fair Value

Non-vested at beginning of year	152,292	$10.77	187,470	$10.90	130,974	$11.14
Granted	25,000	9.31	-0-	-0-	75,000	10.72
Dividend Reinvested Shares	12,194	9.22	12,992	9.33	11,470	9.90
Vested	(52,140)	(10.77)	(48,170)	(10.90)	(29,974)	(11.10)
Non-vested at end of year	137,346	$10.37	152,292	$10.77	187,470	$10.90

As of December 31, 2014, there were 2,260,000 shares available for grant as stock options or restricted stock under the 2013 Plan.