STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2014

STOCK-BASED COMPENSATION [Abstract]

STOCK-BASED COMPENSATION

6. STOCK-BASED COMPENSATION

Under the terms of the Company’s stock option plans adopted in 1999 and 2009, options have been granted to key employees and directors to purchase shares of the Company’s stock. Under the 2009 Stock Incentive Plan (“the Plan”), a total of 500,000 shares of the Company’s common stock were reserved for issuance, of which 268,499 shares remain for possible issuance at March 31, 2014. There are no remaining shares reserved for issuance under the 1999 Stock Option Plan. Options are awarded by the Compensation Committee of the Board of Directors. Both plans provide that the option price shall not be less than the fair value of the common stock on the date the option is granted. All options are exercisable for a period of ten years or less.

No options were granted during the first three months of 2014. Options granted in 2013 and 2012 are exercisable over a three-year period commencing one year from the date of grant at a rate of one third per year. Options granted in 2011 are exercisable over a three-year period commencing three years from the date of grant at a rate of one third per year. No options were exercised during the first three months of 2014 and 2013.

Both plans provide for but do not require the grant of stock appreciation rights (“SARs”) that the holder may exercise instead of the underlying option. At March 31, 2014, there were 6,000 SARs outstanding related to options granted before 2011. The SARs had no intrinsic value at March 31, 2014. When the SAR is exercised, the underlying option is canceled. The optionee receives shares of common stock or cash with a fair market value equal to the excess of the fair value of the shares subject to the option at the time of exercise (or the portion thereof so exercised) over the aggregate option price of the shares set forth in the option agreement. The exercise of SARs is treated as the exercise of the underlying option.

In 2011 the Company granted an award of 30,000 non-qualified stock options at an exercise price of $10.79 per share to its President and Chief Executive Officer as a material inducement to employment with the Company. The non-qualified options were not issued as part of any of the Company’s registered stock-based compensation plans. The options are exercisable over a three-year period commencing three years from the date of grant at a rate of one third per year.

A summary of stock option activity follows:

				Weighted-Average
	Number			Exercise Price
	of Shares			Per Share
Outstanding, January 1, 2014		291,000		$	16.18
Granted		-			-
Exercised		-			-
Forfeited or expired		(9,166	)	$	20.27
Outstanding, March 31, 2014		281,834		$	16.04

The following summarizes shares subject to purchase from stock options outstanding and exercisable as of March 31, 2014:

		Outstanding					Exercisable
				Weighted-Average					Weighted-Average
Range of				Remaining	Weighted-Average				Remaining	Weighted-Average
Exercise Prices		Shares		Contractual Life	Exercise Price		Shares		Contractual Life	Exercise Price
$	10.00 - $14.00		140,000	7.9 years	$	12.01		50,003	8.0 years	$	12.81
$	14.01 - $20.00		114,834	9.2 years	$	17.24		11,668	8.8 years	$	14.47
$	20.01 - $30.00		5,000	4.8 years	$	28.30		5,000	4.8 years	$	28.30
$	30.01 - $40.00		22,000	2.3 years	$	32.69		22,000	2.3 years	$	32.69
			281,834	8.0 years	$	16.04		88,671	6.5 years	$	18.83

The Company accounts for stock-based compensation on a modified prospective basis with the fair value of grants of employee stock options recognized in the financial statements. Compensation expense related to stock-based compensation amounted to $165 thousand and $82 thousand for the three months ended March 31, 2014 and 2013, respectively. The remaining unrecognized compensation cost of approximately $728 thousand at March 31, 2014 will be expensed over the remaining weighted average vesting period of approximately 2.3 years.