9.	Stock-Based and Other Employee Compensation

In May 2010, our shareholders approved the adoption of our 2010 Equity Incentive Plan (the “2010 Incentive Plan”), which authorized and set aside a total of 400,000 shares of our common stock for issuance on the exercise of stock options or the grant of restricted stock or other equity incentives to our officers, and other key employees and directors. At the 2013 Annual Shareholders Meeting, our shareholders approved an 800,000 share increase in the maximum number of shares of our common stock that may be issued pursuant to grants or exercises of options or restricted shares or other equity incentives under the 2010 Incentive Plan. As a result, as of June 30, 2013, the maximum number of shares that were available for the grant of options or other equity incentives under the 2010 Incentive Plan totaled 2,475,959 shares, or approximately 13% of the shares of our common stock then outstanding.

A stock option entitles the recipient to purchase shares of our common stock at a price per share that may not be less than 100% of the fair market value of the Company’s shares on the date the option is granted. Restricted shares may be granted at such purchase prices and on such other terms, including restrictions and Company repurchase or reacquisition rights, as are fixed by the Compensation Committee at the time rights to purchase such restricted shares are granted. Stock appreciation rights (“SARs”) entitle the recipient to receive a cash payment in an amount equal to the difference between the fair market value of the Company’s shares on the date of vesting and a “base price” (which, in most cases, will be equal to fair market value of the Company’s shares on the date the SAR is granted), subject to the right of the Company to make such payment in shares of its common stock at their then fair market value. Options, restricted shares and SARs may vest immediately or in installments over various periods generally ranging up to five years, subject to the recipient’s continued employment or service or the achievement of specified performance goals, as determined by the Compensation Committee at the time it grants or awards the options, the restricted shares or the SARs. Stock options and SARs may be granted for terms of up to 10 years after the date of grant, but will terminate sooner upon or shortly after a termination of service occurring prior to the expiration of the term of the option or SAR. The Company will become entitled to repurchase any unvested restricted shares, at the same price that was paid for the shares by the recipient, or to cancel those shares in the event of a termination of employment or service of the holder of such shares or if any performance goals specified in the award are not satisfied. To date, the Company has not granted any restricted shares or any SARs.

Under ASC 718-10, we are required to recognize, in our financial statements, the fair value of the options or any restricted shares that we grant as compensation cost over their respective service periods. The fair values of the options that were outstanding at June 30, 2013 under the 2010 Plan were estimated as of their respective dates of grant using the Black-Scholes option-pricing model. For additional information regarding the Company’s stock based compensation plans, refer to Note 14—“Stock-Based Employee Compensation Plans” in the Notes to the Company’s Consolidated Financial Statements included in its Form 10-K for the year ended December 31, 2012.

The table below summarizes the weighted average assumptions used to determine the fair values of the options granted during the following periods:


	Three Months Ended June 30,						Six Months Ended June 30,
Assumptions with respect to:	2013			2012			2013			2012
Expected volatility		43	%		40	%		43	%		40	%
Risk-free interest rate		1.77	%		1.54	%		1.77	%		1.54	%
Expected dividends		0.57	%		0.26	%		0.57	%		0.26	%
Expected term (years)		2.0–6.9			6.6–8.2			2.0–6.9			6.6–8.2
Weighted average fair value of options granted during period	$	1.91		$	1.54		$	1.91		$	1.54

The following table summarizes the stock option activity under the Company’s equity incentive plans during the six months ended June 30, 2013 and 2012, respectively.


	Number of Shares			Weighted- Average Exercise Price Per Share		Number of Shares			Weighted- Average Exercise Price Per Share
	2013					2012
Outstanding – January 1,		1,565,965		$	6.90		1,153,741		$	7.35
Granted		214,000			6.05		421,300			4.88
Exercised		(6,300	)		3.52		(5,328	)		3.16
Forfeited/Canceled		(243,600	)		6.60		(100,066	)		7.50

Outstanding – June 30,		1,530,065			6.84		1,469,847			6.74

Options Exercisable – June 30,		980,789		$	7.52		828,899		$	8.55

Options to purchase 6,100 shares and 200 shares of our common stock were exercised during the three and six months ended June 30, 2013, respectively. Options to purchase 128 and 5,328 shares of our common stock were exercised during the three and six months ended June 30, 2012, respectively. The fair values of options vested during the six months ended June 30, 2013 and 2012 were $270,629 and $158,300, respectively.

The following table provides additional information regarding the vested and unvested options that were outstanding at June 30, 2013.


	Options Outstanding as of June 30, 2013								Options Exercisable as of June 30, 2013 ⁽¹⁾
	Vested		Unvested		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Shares		Weighted Average Exercise Price
$2.97 – $5.99		569,246		233,876	$	4.06		7.69		569,246	$	3.90
$6.00 – $9.99		11,100		315,400		6.53		9.35		11,100		7.19
$10.00 – $12.99		265,100		—		11.21		0.63		265,100		11.21
$13.00 – $17.99		115,843		—		15.12		2.13		115,843		15.21
$18.00 – $18.84		19,500		—		18.06		2.59		19,500		18.06

		980,789		549,276	$	6.84		6.33		980,789	$	7.52

⁽¹⁾	The weighted average remaining contractual life of the options that were exercisable as of June 30, 2013 was 4.82 years.

The aggregate intrinsic values of options that were outstanding and exercisable under the Company’s equity incentive plans at June 30, 2013 and 2012 were $1.1 million and $1.2 million, respectively.

A summary of the status of the unvested options at June 30, 2013, and changes in the number of shares subject to and in the weighted average grant date fair values of the unvested options during the six months ended June 30, 2013, are set forth in the following table.


	Number of Shares Subject to Options			Weighted Average Grant Date Fair Value
Unvested at December 31, 2012		635,706		$	2.30
Granted		214,000			1.91
Vested		(135,831	)		1.99
Forfeited/Cancelled		(164,599	)		2.56

Unvested at June 30, 2013		549,276		$	2.15

The aggregate amounts of stock based compensation expense recognized in our consolidated statements of operations for the six months ended June 30, 2013 and 2012, were $354,000 and $216,000, respectively, net of taxes. At June 30, 2013, the weighted average period over which unvested options were expected to be recognized was 1.15 years.

We expect that the compensation expense that will be recognized during the periods presented below in respect of unvested stock options outstanding at June 30, 2013, will be as follows:


	Estimated Stock Based Compensation Expense
(Dollars in thousands)
For the period and years ending December 31,
Remainder 2013	$	237
2014		458
2015		247
2016		32
2017		12

	$	986

In 1999, we established a Supplemental Retirement Plan (“SERP”) for our Chief Executive Officer, who retired from that position in April 2013. The components of net periodic benefit cost for the SERP are set forth in the table below:


	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(Dollars in thousands)
Service cost	$	—	$	50	$	18	$	99
Interest cost		44		36		89		71
Expected return on plan assets		—		—		—		—
Amortization of prior service cost		—		4		1		8
Amortization of net actuarial loss		—		2		29		3

Net periodic SERP cost	$	44	$	92	$	137	$	181