Stock Option Plan and Stock Grants

Our Stock Option and Stock Award Plan (the “Plan”) was adopted in December 1992 and was amended and restated from time to time, most recently effective March 23, 2001 for a ten year term. Since January 1, 2011 through the expiration of the Plan we granted to certain directors and executive officers a total of 207,330 shares of restricted stock. After March 23, 2011, when the Plan expired, we granted to certain directors, executive officers and a consultant a total of 383,330 shares of restricted stock net of the number of shares that were subsequently forfeited before vesting in private placements exempt from registration.

All the restricted stock shares (the “Restricted Stock Grants”) issued were approved by our Board of Directors at the recommendation of the Compensation, Nominating, and Corporate Governance Committee of our Board of Directors (the “Compensation Committee”). The Restricted Stock Grants were subject to conditions and restrictions, including vesting schedule and term, determined by the Compensation Committee. The amount and vesting terms of the Restricted Stock Grants were disclosed in the appropriate periods in our previously filed reports. Under Maryland law, the Restricted Stock Grants were duly authorized and validly issued, and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, were validly issued private placements exempt from registration. The expiration of the Plan did not materially impact the accounting for these awards. At our 2014 Annual Meeting of Stockholders, we intend to ask our stockholders to ratify the Restricted Stock Grants. Shares that did not vest were forfeited. Dividends are paid on restricted stock and are not returnable, even if the underlying stock does not entirely vest. Stock Options are awarded at the New York Stock Exchange closing price of our common stock on the grant date.

Grants Issued

On May 8, 2013, we awarded Restricted Stock Grants for 40,000 shares of common stock at a fair market value of approximately $1.7 million to the members of the Board of Directors. One-third of the shares of restricted common stock covered by these awards vest on each of November 8, 2013, May 8, 2014, and May 8, 2015.

On April 10, 2013, we awarded Restricted Stock Grants for 2,000 shares of common stock at a fair market value of $80,200 to a member of our senior management. These Restricted Stock Grants will vest on December 31, 2013.

On March 13, 2013, we awarded Restricted Stock Grants for 666 shares of common stock at a fair market value of approximately $24,800 to a member of the Board of Directors. One-third of the shares of restricted common stock covered by these awards vests on each of September 13, 2013, March 13, 2014, and March 13, 2015.

On February 1, 2013, we awarded Restricted Stock Grants for 68,666 shares of common stock at a fair market value of $2.5 million to certain members of our senior management. These Restricted Stock Grants will vest on December 31, 2013.

On January 31, 2013, we awarded Restricted Stock Grants for 62,000 shares of common stock at a fair market value of approximately $2.2 million to certain members of the Board of Directors for services rendered in 2012. One-third of the shares of restricted common stock covered by these awards vest on each of December 31, 2013, December 31, 2014, and December 31, 2015. The fair market value of our restricted stock grants is recorded as compensation expense and paid in capital over the vesting period.

On May 8, 2012, we awarded Restricted Stock Grants for 32,000 shares of common stock at a fair market value of approximately $1.1 million to the Board of Directors. One-third of the shares of restricted common stock covered by these awards vests on each of November 8, 2012, May 8, 2013, and May 8, 2014.

On January 31, 2012, we awarded Restricted Stock Grants for 62,000 shares of common stock at a fair market value of approximately $2.2 million to certain members of the Board of Directors for services rendered in 2011. One-third of the shares of restricted common stock covered by these awards vests on each of December 31, 2012, December 31, 2013, and December 31, 2014.

On January 31, 2012, we awarded Restricted Stock Grants for 120,664 shares of common stock to certain members of our senior management. These Restricted Stock Grants vested on December 31, 2012. The fair market value of these Restricted Stock Grants was approximately $4.2 million as of the date of grant and is recorded as a compensation expense and paid in capital over the vesting period. During 2012, 36,666 shares of this restricted stock grant valued at issuance date of approximately $1.3 million were relinquished by certain members of senior management.

On May 11, 2011, we awarded Restricted Stock Grants for 32,000 shares of common stock at a fair market value of approximately $0.9 million to the Board of Directors. One-third of the shares of restricted common stock covered by these awards vests on each of November 11, 2011, May 11, 2012, and May 11, 2013.

On February 1, 2011, we awarded Restricted Stock Grants for 145,330 shares of common stock to certain members of our senior management. These Restricted Stock Grants vested December 31, 2011. The fair market value of these Restricted Stock Grants was approximately $4.2 million as of the date of grant and is recorded as a compensation expense and paid in capital over the vesting period.

On January 31, 2011, we awarded Restricted Stock Grants for 62,000 shares of common stock at a fair market value of approximately $1.8 million to certain members of the Board of Directors. One-third of the shares of restricted common stock covered by these awards vests on each of December 31, 2011, December 31, 2012, and December 31, 2013.

We recognized compensation expense of approximately $6.0 million, $5.8 million and $5.8 million primarily related to Restricted Stock Grants in 2013, 2012 and 2011, respectively.

A summary of our restricted stock activity, and related information for the years ended December 31, 2013, 2012, and 2011 follows:



	Number of Shares		Weighted Average Grant Date Fair Value
Balance at December 31, 2010	104,686		$	18.61
Shares granted	239,330		28.75
Shares canceled/forfeited	(22,666	)	28.70
Shares vested	(227,330	)	24.50
Balance at December 31, 2011	94,020		27.75
Shares granted	214,664		35.06
Shares canceled/forfeited	(36,666	)	35.07
Shares vested	(177,998	)	32.30
Balance at December 31, 2012	94,020		32.97
Shares granted	173,332		37.32
Shares vested	(167,564	)	34.97
Balance at December 31, 2013	99,788		37.17

Compensation expense to be recognized subsequent to December 31, 2013 for Restricted Stock Grants issued prior to 2014 that has not yet vested was approximately $3.3 million, which is expected to be recognized over a weighted average term of 1.4 years.

Stock Options

The fair value of each grant is estimated on the grant date using the Black-Scholes-Merton model. No options were issued, forfeited or expired during the years ended December 31, 2013, 2012, and 2011.

A summary of our stock option activity, and related information for the years ended December 31, 2013, 2012, and 2011 follows:



	Shares Subject To Options		Weighted Average Exercise Price Per Share		Weighted Average Outstanding Contractual Life (in years)
Balance at December 31, 2010	1,610,368		$	20.16	4.9
Options canceled	(344,768	)	13.14
Balance at December 31, 2011	1,265,600		22.07		4.9
Options exercised	(160,000	)	24.10
Balance at December 31, 2012	1,105,600		21.78		4.0
Options exercised	(20,000	)	12.34
Balance at December 31, 2013	1,085,600		21.95		3.1
Exercisable at December 31, 2013	1,085,600		21.95		3.1

The intrinsic value of outstanding and exercisable stock options represents the excess of the closing stock price as of the end of the year, over the exercise price multiplied by the applicable number of shares that may be acquired upon exercise of stock options. For the years ending December 31, 2013, 2012 and 2011, the intrinsic value of exercised options was $0.5 million, $1.7 million and $6.1 million, respectively. For the years ending December 31, 2013, 2012 and 2011, the intrinsic value of outstanding and exercisable options was $15.5 million, $13.1 million and $14.3 million, respectively.