Incentive Plans

As of June 30, 2013, the Corporation had four share-based compensation plans, which are described below. These plans are the 2010 Equity Incentive Plan (“2010 Plan”), the 2006 Equity Incentive Plan (“2006 Plan”), the 2003 Stock Option Plan and the 1996 Stock Option Plan. For the years ended June 30, 2013, 2012 and 2011, the compensation cost for these plans was $768,000, $1.3 million and $958,000, respectively. Net income tax expense recognized in the Consolidated Statements of Operations for share-based compensation plans for the year ended June 30, 2013 was $92,000; and no income tax benefit was recognized in the years ended June 30, 2012 and 2011.

Equity Incentive Plan. The Corporation established and the shareholders approved the 2010 Plan and the 2006 Plan for directors, advisory directors, directors emeriti, officers and employees of the Corporation and its subsidiary. The 2010 Plan authorizes 586,250 stock options and 288,750 shares of restricted stock. The 2010 Plan also provides that no person may be granted more than 117,250 stock options or 43,312 shares of restricted stock in any one year. The 2006 Plan authorizes 365,000 stock options and 185,000 shares of restricted stock. The 2006 Plan also provides that no person may be granted more than 73,000 stock options or 27,750 shares of restricted stock in any one year.

Equity Incentive Plan - Stock Options. Under the 2010 Plan and 2006 Plan (collectively, “the Plans”), options may not be granted at a price less than the fair market value at the date of the grant. Options typically vest over a five-year or shorter period as long as the director, advisory director, director emeritus, officer or employee remains in service to the Corporation. The options are exercisable after vesting for up to the remaining term of the original grant. The maximum term of the options granted is 10 years.

The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option valuation model with the following assumptions. The expected volatility is based on implied volatility from historical common stock closing prices for the prior 84 months. The expected dividend yield is based on the most recent quarterly dividend on an annualized basis. The expected term is based on the historical experience of all fully vested stock option grants and is reviewed annually. The risk-free interest rate is based on the U.S. Treasury note rate with a term similar to the underlying stock option on the particular grant date.



	Fiscal 2013		Fiscal 2012		Fiscal 2011
Expected volatility range	55.2	%	—	%	55.4	%
Weighted-average volatility	55.2	%	—	%	55.4	%
Expected dividend yield	1.2	%	—	%	1.6	%
Expected term (in years)	7.7		—		7.1
Risk-free interest rate	1.2	%	—	%	2.3	%

In fiscal 2013, there were 20,000 options granted under the Plans with 50% vesting after two years of service and 50% vesting after four years of service. Also in fiscal 2013, the weighted-average fair value of the options granted as of the grant date was $8.35 per option, while 42,000 options were exercised and 24,000 options were forfeited. There was no activity under the Plans in fiscal 2012, except the exercise of 9,000 options. In fiscal 2011, there was no activity, except 412,000 options were granted under the Plans with 50% vesting after two years of service and 50% vesting after four years of service and the weighted-average fair value of the options granted as of the grant date was $3.64 per option. As of June 30, 2013 and 2012, there were 188,450 options and 184,450 options, respectively, available for future grants under the Plans.

The following tables summarize the stock option activity in the Plans during the years ended June 30, 2013, 2012 and 2011.



Options	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value ($000)
Outstanding at June 30, 2010	354,800		$	17.45
Granted	412,000		$	7.43
Exercised	—		$	—
Forfeited	—		$	—
Outstanding at June 30, 2011	766,800		$	12.07	8.31	$	321
Vested and expected to vest at June 30, 2011	370,610		$	16.59	6.98	$	173
Exercisable at June 30, 2011	139,040		$	28.31	5.61	$	—

Outstanding at June 30, 2011	766,800		$	12.07
Granted	—		$	—
Exercised	(9,000	)	$	7.03
Forfeited	—		$	—
Outstanding at June 30, 2012	757,800		$	12.13	7.32	$	2,463
Vested and expected to vest at June 30, 2012	660,800		$	12.82	7.08	$	2,066
Exercisable at June 30, 2012	345,800		$	17.73	5.35	$	774

Outstanding at June 30, 2012	757,800		$	12.13
Granted	20,000		$	16.47
Exercised	(42,000	)	$	7.03
Forfeited	(24,000	)	$	7.41
Outstanding at June 30, 2013	711,800		$	12.71	6.43	$	4,429
Vested and expected to vest at June 30, 2013	668,900		$	12.99	6.32	$	4,100
Exercisable at June 30, 2013	497,300		$	14.62	5.71	$	2,785

As of June 30, 2013 and 2012, there was $700,000 and $1.2 million of unrecognized compensation expense, respectively, related to unvested share-based compensation arrangements with respect to stock options issued under the Plans. The expense is expected to be recognized over a weighted-average period of 2.2 years and 3.0 years, respectively. The forfeiture rate during fiscal 2013 and 2012 was 20 percent for both periods, and was calculated by using the historical forfeiture experience of all fully vested stock option grants and is reviewed annually.

Equity Incentive Plan – Restricted Stock. The Corporation used 288,750 shares and 185,000 shares of its treasury stock to fund the 2010 Plan and the 2006 Plan, respectively. Awarded shares typically vest over a five-year or shorter period as long as the director, advisory director, director emeriti, officer or employee remains in service to the Corporation. Once vested, a recipient of restricted stock will have all rights of a shareholder, including the power to vote and the right to receive dividends. The Corporation recognizes compensation expense for the restricted stock awards based on the fair value of the shares at the award date.

There was no restricted stock awarded in fiscal 2013, and the only activity consisted of the vesting and distribution of 73,050 shares and the forfeiture of 1,500 shares. In fiscal 2012, no restricted stock was awarded or forfeited, while 111,500 shares were vested and distributed. In fiscal 2011, a total of 146,000 shares of restricted stock were awarded with 50% vesting after two years of service and 50% vesting after four years of service, additionally 12,000 shares were vested and distributed and no shares were forfeited. As of June 30, 2013 and 2012, there were 169,600 and 168,100 shares, respectively, available for future awards.

The following table summarizes the restricted stock activity in the years ended June 30, 2013, 2012 and 2011.



Unvested Shares	Shares		Weighted-Average Award Date Fair Value
Unvested at June 30, 2010	124,300		$	10.29
Awarded	146,000		$	7.07
Vested	(12,000	)	$	25.93
Forfeited	—		$	—
Unvested at June 30, 2011	258,300		$	7.75
Expected to vest at June 30, 2011	193,725		$	7.75

Unvested at June 30, 2011	258,300		$	7.75
Awarded	—		$	—
Vested	(111,500	)	$	8.56
Forfeited	—		$	—
Unvested at June 30, 2012	146,800		$	7.13
Expected to vest at June 30, 2012	117,440		$	7.13

Unvested at June 30, 2012	146,800		$	7.13
Awarded	—		$	—
Vested	(73,050	)	$	7.19
Forfeited	(1,500	)	$	7.07
Unvested at June 30, 2013	72,250		$	7.07
Expected to vest at June 30, 2013	57,800		$	7.07

As of June 30, 2013 and 2012, the unrecognized compensation expense was $505,000 and $820,000, respectively, related to unvested share-based compensation arrangements with respect to restricted stock issued under the Plans, and reported as a reduction to stockholders’ equity. This expense is expected to be recognized over a weighted-average period of 2.0 years and 3.0 years, respectively. Similar to stock options, a forfeiture rate of 20 percent has been applied to the restricted stock compensation expense calculations in fiscal 2013 and 2012. For the years ended June 30, 2013, 2012 and 2011, the fair value of shares vested and distributed was $1.1 million, $922,000 and $83,000, respectively.

Stock Option Plans. The Corporation established the 2003 Stock Option Plan and the 1996 Stock Option Plan (collectively, the “Stock Option Plans”) for key employees and eligible directors under which options to acquire up to 352,500 shares and 1.15 million shares of common stock, respectively, may be granted. Under the Stock Option Plans, stock options may not be granted at a price less than the fair market value at the date of the grant. Stock options typically vest over a five-year period on a pro-rata basis as long as the employee or director remains in service to the Corporation. The stock options are exercisable after vesting for up to the remaining term of the original grant. The maximum term of the stock options granted is 10 years.

The fair value of each stock option grant is estimated on the date of the grant using the Black-Scholes option valuation model with the following assumptions. The expected volatility is based on implied volatility from historical common stock closing prices for the prior 84 months. The expected dividend yield is based on the most recent quarterly dividend on an annualized basis. The expected term is based on the historical experience of all fully vested stock option grants and is reviewed annually. The risk-free interest rate is based on the U.S. Treasury note rate with a term similar to the underlying stock option on the particular grant date.

In fiscal 2013, 2012 and 2011, there was no activity under the Stock Option Plans, except forfeitures of 7,500 shares, 62,700 shares and 67,500 shares, respectively. As of June 30, 2013 and 2012, the number of stock options available for future grants under the 2003 Stock Option Plan was 14,900 stock options. No stock options remain available for future grant under the 1996 Stock Option Plan, which expired in January 2007.

The following is a summary of the activity in the Stock Option Plans for the years ended June 30, 2013, 2012 and 2011.



Options	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value ($000)
Outstanding at June 30, 2010	550,400		$	20.52
Granted	—		$	—
Exercised	—		$	—
Forfeited	(67,500	)	$	8.28
Outstanding at June 30, 2011	482,900		$	22.23	3.06	$	—
Vested and expected to vest at June 30, 2011	474,700		$	22.20	3.02	$	—
Exercisable at June 30, 2011	450,100		$	22.11	2.87	$	—

Outstanding at June 30, 2011	482,900		$	22.23
Granted	—		$	—
Exercised	—		$	—
Forfeited	(62,700	)	$	9.67
Outstanding at June 30, 2012	420,200		$	24.11	2.47	$	—
Vested and expected to vest at June 30, 2012	418,200		$	24.13	2.46	$	—
Exercisable at June 30, 2012	410,200		$	24.21	2.41	$	—

Outstanding at June 30, 2012	420,200		$	24.11
Granted	—		$	—
Exercised	—		$	—
Forfeited	(7,500	)	$	13.67
Outstanding at June 30, 2013	412,700		$	24.30	1.51	$	—
Vested and expected to vest at June 30, 2013	412,700		$	24.30	1.51	$	—
Exercisable at June 30, 2013	412,700		$	24.30	1.51	$	—

As of June 30, 2013, there was no unrecognized compensation expense. This compares to unrecognized compensation expense of $1,000 at June 30, 2012, related to unvested share-based compensation arrangements under the Stock Option Plans, which was recognized over a weighted-average period of less than a year. The forfeiture rate during fiscal 2013 and 2012 was 20 percent, for both periods and was calculated by using the historical forfeiture experience of all fully vested stock option grants and is reviewed annually.