NOTE

– Share-Based Compensation

2003,

the stockholders of the Company approved the

2003

Incentive Stock and Awards Plan (the

“2003

Plan

”), authorizing the granting of incentive stock options, non-qualified stock options, stock appreciation rights (“SARS”), restricted stock, performance shares and other stock based compensation. This plan expired in

May

2013,

at which time, the stockholders of the Company approved the

2013

Incentive Stock and Awards Plan (the

“2013

Plan”), authorizing the granting of incentive stock options, non-qualified stock options, SARS, restricted stock, performance shares and other stock based compensation. A total of

5,000,000

shares of common stock (subject to adjustment for expirations and cancellations of options outstanding from the

2003

Plan subsequent to its termination) have been reserved for issuance under the

2013

Plan. All options and SARS under both plans have been or will be granted with exercise prices at least equal to the fair market value of the shares on the date of grant. At

September 30, 2017,

the Company had

3,659,877

shares of common stock available for grant of share-based compensation under the

2013

Plan.

Share-based compensation is recorded in selling and administrative expense in the consolidated statements of comprehensive income. The following table details the share-based compensation expense by type of award and the total related tax benefit for the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Stock options and SARS	$	345,000	$	238,000	$	1,092,000	$	1,071,000
Restricted stock		80,000		78,000		243,000		229,000
Performance shares		121,000		182,000		319,000		295,000
Total share-based compensation expense	$	546,000	$	498,000	$	1,654,000	$	1,595,000

Related income tax benefit	$	29,000	$	28,000	$	197,000	$	200,000

Stock options and SARS

The Company grants stock options and stock settled SARS to employees that allow them to purchase shares of the Company

’s common stock. Options are also granted to outside members of the Board of Directors of the Company. The Company determines the fair value of stock options and SARS at the date of grant using the Black-Scholes valuation model.

All

options and SARS vest immediately at the date of grant. Awards generally expire

five

years after the date of grant with the exception of options granted to outside directors, which expire

ten

years after the date of grant. The Company issues new shares upon the exercise of stock options and SARS.

A summary of stock option transactions during t

nine

months ended

September 30, 2017

follows:

	No. of			Weighted Average
	Shares			Exercise Price
Outstanding December 31, 2016		825,251		$	10.46
Granted		155,142			18.67
Exercised		(241,844	)		8.60
Lapsed		(1,100	)		5.86
Cancelled		(990	)		13.44
Outstanding September 30, 2017		736,459		$	12.80

September 30, 2017,

options outstanding, all of which were fully vested and exercisable, had an aggregate intrinsic value of

$7,438,000.

The weighted-average remaining contractual term was

months.

Options exercised during the

three

-month period ended

September 30, 2017

and

2016

had intrinsic values of

$387,000

and

$301,000,

respectively. Options exercised during the

nine

-month period ended

September 30, 2017

and

2016

had intrinsic values of

$2,675,000

and

$1,876,000,

respectively.

The weighted average fair value

s of the Company’s

53,970

and

52,530

options granted during each of the

three

-month periods ended

September 30, 2017

and

2016

was

$6.40

and

$4.53,

respectively. The weighted average fair values of the Company’s

155,142

and

172,862

options granted during each of the

nine

-month periods ended

September 30, 2017

and

2016

was

$5.56

and

$4.69,

respectively.

During the

three

-month periods ended

September 30, 2017

and

2016,

respectively, the Company received

$420,000

and

$327,000

in cash from stock option exercises. Additionally, during the

three

-month period ended

September 30, 2017

and

2016,

the Company received -

- and

2,164

shares of its common stock as payment of the exercise price in the exercise of stock options for -

- and

5,568

shares. During the

nine

-month periods ended

September 30, 2017

and

2016,

respectively, the Company received

$1,218,000

and

$1,109,000

in cash from stock option exercises. Additionally, during the

nine

-month period ended

September 30, 2017

and

2016,

the Company received

43,841

and

12,598

shares of its common stock as payment of the exercise price in the exercise of stock options for

113,143

and

35,984

shares. The tax benefit recognized for these exercises during each of the

three

-month periods ended

September 30, 2017

and

2016

was

$97,000

and

$60,000,

respectively. The tax benefit recognized for these exercises during the

nine

-month period ended

September 30, 2017

and

2016

was

$306,000

and

$250,000,

respectively.

The following table summarizes information about stock options outstanding as of

September 30, 2017.

Range of Exercise Price			Shares		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
$ 3.82	-	$ 5.55		66,000		2.36	$	4.79
$ 5.65	-	$ 7.36		213,112		1.78	$	6.55
$ 7.96	-	$10.38		50,400		4.47	$	9.03
$16.35	-	$21.63		406,947		5.07	$	17.84

$ 3.82	-	$21.63		736,459		3.83	$	12.80

A summary of stock-settled SARS transactions during the

nine

months ended

September 30, 2017

follows:

	No. of			Weighted Average
	Shares			Exercise Price
Outstanding December 31, 2016		325,506		$	10.26
Granted		43,988			16.97
Exercised		(128,062	)		6.87
Lapsed		-			-
Cancelled		-			-
Outstanding September 30, 2017		241,432		$	13.28

September 30, 2017,

SARS outstanding, all of which were fully vested and exercisable, had an aggregate intrinsic value of

$2,327,000.

The weighted-average remaining contractual term was

months.

The weighted average fai

r values of the Company’s

43,988

and

58,108

SARS granted during each of the

nine

-month periods ended

September 30, 2017

and

2016

was

$4.83

and

$4.49,

respectively.

There were

SARS exercised during the

three

-month periods ended

September 30, 2017

and

2016,

respectively.

There were

128,062

and

75,792

SARS exercised during the

nine

-month periods ended

September 30, 2017

and

2016,

respectively. SARS exercised during the

nine

-month periods ended

September 30, 2017

and

2016

had intrinsic values of

$1,544,000

and

$928,000.

The tax benefit recognized for these exercises during each of the

nine

-month periods ended

September 30, 2017

and

2016

was

$572,000

and

$311,000,

respectively.

The following table summarizes information about SARS outstanding as of

September 30, 2017:

Range of Exercise Price			Shares		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
$ 5.65	-	$ 7.36		94,928		1.09	$	6.95
$16.35	-	$21.63		146,504		3.17	$	17.38

$ 5.65	-	$21.63		241,432		2.35	$	13.28

September 30, 2017

shares available for grant as awards under the plan were

3,659,877.

Options and SARS have never been repriced by the Company in any year.

The following table summarizes significant assumptions utilized to determine the fair value of

options and SARS.

Three months ended
September 30,	SARS		Options

Exercise price
2017		N/A	$	21.63
2016		N/A	$	16.47

Market price
2017		N/A	$	21.63
2016		N/A	$	16.47

Risk free interest rate 1
2017		N/A		1.8	%
2016		N/A		1.1	%

Expected award life (years) 2		N/A		5

Expected volatility 3
2017		N/A		37.2	%
2016		N/A		37.1	%

Expected dividend yield 4
2017		N/A		1.8	%
2016		N/A		2.1	%

Nine months ended
September 30,	SARS			Options

Exercise price
2017	$	16.97			$16.97	-	$21.63
2016	$	16.35			$16.35	-	$18.55

Market price
2017	$	16.97			$16.97	-	$21.63
2016	$	16.35			$16.35	-	$18.55

Risk free interest rate 1
2017		1.9	%		1.8%	-	2.4%
2016		1.3	%		1.1%	-	1.8%

Expected award life (years) 2		5			5	-	10

Expected volatility 3
2017		36.6	%		36.6%	-	41.4%
2016		36.5	%		36.5%	-	40.3%

Expected dividend yield 4
2017		2.1	%		1.8%	-	2.1%
2016		2.0	%		1.8%	-	2.1%

The risk-free interest rate is based on the yield of a U.S. treasury bond with a similar maturity as the expected life of the awards.

The expected life in years for awards granted was based on the historical exercise patterns experienced by the Company when the award is made.

The determination of expected stock price volatility for awards granted in each of the periods ending

September 30, 2017

and

2016

was based on historical prices of Superior’s common stock over a period commensurate with the expected life.

The dividend yield assumption is based on the history and expectation of the Company’s dividend payouts.

Restricted Stock

The Company has granted restricted stock to directors and certain employees under the terms of the

2013

Plan which vest at a specified future date, generally after

three

years, or when certain conditions are met. The shares are subject to accelerated vesting under certain circumstances as outlined in the

2013

Plan. Expense for each of these grants is based on the fair value at the date of the grant and is being recognized on a straight-line basis over the respective service period. As of

September 30, 2017,

the Company had

$624,000

of unrecognized compensation cost related to nonvested grants expected to be recognized over the weighted average service period of

2.0

years.

A summary of restricted stock transactions during the

nine

months ended

September 30, 2017

follows:

	No. of			Weighted Average
	Shares			Exercise Price
Outstanding December 31, 2016		123,688		$	8.94
Granted		34,619			16.97
Vested		(100,000	)		7.36
Forfeited		-			-
Outstanding September 30, 2017		58,307		$	16.42

Performance Shares

he Compensation Committee of the Board of Directors has approved grants of performance shares under the terms of the

2013

Plan. Under the terms of the grants, certain employees received service-based or service-based and performance-based shares. The service-based awards vest after the service period is met, which is generally

three

five

years. Expense for these grants is based on the fair value on the date of the grant and is being recognized on a straight-line basis over the respective service period. The performance-based shares generally vest after

five

years if the performance and service targets are met. The Company evaluates the performance conditions associated with these grants each reporting period to determine the expected number of shares to be issued. Based upon this evaluation, expected expenses for these grants are being recognized based on the fair value on the date of the grant on a straight-line basis over the respective service period. The shares are subject to accelerated vesting under certain circumstances as outlined in the

2013

Plan. As of

September 30, 2017,

the Company had

$1,733,000

of unrecognized compensation cost related to nonvested grants expected to be recognized over the weighted average service period of

3.2

years.

A summary of performance share transactions during the

nine

months ended

September 30, 2017

follows:

	No. of		Weighted Average
	Shares		Exercise Price
Outstanding December 31, 2016		101,000	$	16.36
Granted		50,826		18.39
Vested		-		-
Forfeited		-		-
Outstanding September 30, 2017		151,826	$	17.04