(12) Stock Option and Equity Incentive Plans

Employee Stock Option Plan

The Company’s 1993 Employee Stock Option Plan (“Employee Stock Option Plan”), which is stockholder approved, provides long-term rewards and incentives in the form of stock options to the Company’s key employees, officers, employee directors, consultants, and advisors. The plan provides for either non-qualified stock options or incentive stock options for the issuance of up to 1,550,000 shares of common stock. The exercise price of the incentive stock options may not be less than the fair market value of the common stock on the date of grant, and the exercise price for non-qualified stock options shall be determined by the Compensation Committee. These options expire over 5- to 10-year periods.

Options granted under the plan generally become exercisable with respect to 25% of the total number of shares subject to such options at the end of each 12-month period following the grant of the options, except for options granted to officers, which may vest on a different schedule. At December 31, 2012, there were 220,000 options outstanding under the Employee Stock Option Plan. The plan expired on April 12, 2010.

Incentive Plan

In June 2003, the Company formally adopted the 2003 Incentive Plan (the “Plan”). The Plan was originally intended to benefit the Company by offering equity-based incentives to certain of the Company’s executives and employees, thereby giving them a permanent stake in the growth and long-term success of the Company and encouraging the continuance of their involvement with the Company’s businesses. The Plan was amended effective June 4, 2008, to permit certain performance-based cash awards to be made under the Plan. The Plan was further amended on June 8, 2011, to increase the maximum number of shares of common stock in the aggregate to be issued to 2,250,000. The amendment also added appropriate language so as to enable grants of stock-based awards under the Plan to continue to be eligible for exclusion from the $1,000,000 limitation on deductibility under Section 162(m) of the Internal Revenue Code (the “Code”).

Two types of equity awards may be granted to participants under the Plan: restricted shares or other stock awards. Restricted shares are shares of common stock awarded subject to restrictions and to possible forfeiture upon the occurrence of specified events. Other stock awards are awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of common stock. Such awards may include Restricted Stock Unit Awards (“RSUs”), unrestricted or restricted stock, incentive and non-qualified stock options, performance shares, or stock appreciation rights. The Company determines the form, terms, and conditions, if any, of any awards made under the Plan.

Through December 31, 2012, 1,024,143 shares of common stock have been issued under the 2003 Incentive Plan, none of which have been restricted. An additional 108,866 shares are being reserved for outstanding grants of RSUs and other share-based compensation that are subject to various performance and time-vesting contingencies. The Company has also granted awards in the form of stock options under this Plan. Through December 31, 2012, 60,000 options have been granted and 30,000 options are outstanding. At December 31, 2012, 1,068,241 shares or options are available for future issuance in the 2003 Incentive Plan.

Director Plan

Effective July 15, 1998, the Company adopted the 1998 Director Plan. The Plan was amended and renamed, on June 3, 2009, the 2009 Non-Employee Director Stock Incentive Plan. The Plan, as amended, provides for the issuance of stock options and other equity-based securities up to 975,000 shares. At December 31, 2012, there were 243,888 options outstanding, and 3,682 shares of common stock were issued in the year ended December 31, 2012, 209,784 shares remained available to be issued under the Plan.

The following is a summary of stock option activity under all plans:

	Shares Under Options		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding December 31, 2011	638,521		$	4.98
Granted	7,770		16.32
Exercised	(141,153	)	3.58
Cancelled or expired	(11,250	)	9.09
Outstanding December 31, 2012	493,888		$	5.47	$	6,149,167
Exercisable at December 31, 2012	461,388		$	5.10	$	5,913,492
Vested and expected to vest at December 31, 2012	493,888		$	5.47	$	6,149,167

During the years ended December 31, 2012, 2011, and 2010, the total intrinsic value of all options exercised (i.e., the difference between the market price and the price paid by the employees to exercise the options) was $2,039,642, $2,204,962, and $2,711,864, respectively, and the total amount of consideration received from the exercise of these options was $505,708, $344,417, and $850,806, respectively. At its discretion, the Company allows option holders to surrender previously owned common stock in lieu of paying the exercise price and withholding taxes. During the year ended December 31, 2012, 22,161 shares were surrendered at a market price of $18.01. During the years ended December 31, 2011, and 2010, 20,492 shares were surrendered at a market price of $17.64 and 62,202 shares were surrendered at a market price of $10.42, respectively.

During the years ended December 31, 2012, 2011, and 2010, the Company recognized compensation expense related to stock options granted to directors and employees of $132,774, $141,499, and $213,716, respectively.

On February 17, 2012, the Company’s Compensation Committee approved an award of $300,000 payable in shares of the Company’s common stock to the Company’s Chairman, Chief Executive Officer, and President under the 2003 Equity Incentive Plan. The shares were issued on December 27, 2012. The Company has recorded compensation expense of $300,000 for the year ended December 31, 2012. Stock compensation expense of $423,250 and $192,500 were recorded in 2011 and 2010, respectively, for similar awards.

On June 14, 2012, the Company issued 3,672 shares of unrestricted common stock to the non-employee members of the Company’s Board of Directors as part of their annual retainer for serving on the Board. Based upon the closing price of $16.32 on June 14, 2012, the Company recorded compensation expense of $60,000 associated with the stock issuance for the year ended December 31, 2012. The Company recorded compensation expense of $60,000 in 2011 for a similar award.

It has been the Company’s practice to allow executive officers to take a portion of their earned bonuses in the form of the Company’s common stock. The value of the stock received by executive officers, measured at the closing price of the stock on the date of grant, was $0, $55,000, and $79,248, respectively, for the years ended December 31, 2012, 2011, and 2010.

The Company grants RSUs to its executive officers. The stock unit awards are subject to various time-based vesting requirements, and certain portions of these awards are subject to performance criteria of the Company. Compensation expense on these awards is recorded based on the fair value of the award at the date of grant, which is equal to the Company’s closing stock price, and is charged to expense ratably during the service period. No compensation expense is taken on awards that do not become vested, and the amount of compensation expense recorded is adjusted based on management’s determination of the probability that these awards will become vested. The following table summarizes information about stock unit award activity during the year ended December 31, 2012:

	Restricted Stock Units		Weighted Average Award Date Fair Value
Outstanding at December 31, 2011	176,209		$	6.98
Awarded	13,553		15.62
Shares distributed	(80,896	)	5.96
Forfeited / Cancelled	—		—
Outstanding at December 31, 2012	108,866		$	8.77

The Company recorded $367,631, $463,923, and $557,494, in compensation expense related to these RSUs during the years ended December 31, 2012, 2011, and 2010, respectively.

At the Company’s discretion, RSU holders are given the option to net-share settle to cover the required minimum withholding tax, and the remaining amount is converted into the equivalent number of common shares. During the year ended December 31, 2012, 25,684 shares were redeemed for this purpose at a market price of $16.10. During the years ended December 31, 2011, and 2010, 30,920, and 19,579 shares were redeemed for this purpose at a market price of $18.19 and $9.25, respectively.

The following summarizes the future share-based compensation expense the Company will record as the equity securities granted through December 31, 2012, vest:

	Options		Common Stock		Restricted Stock Units		Total
2013	$	70,080	$	—	$	272,225	$	342,305
2014	43,892		—		129,380		173,272
2015	12,962		—		61,466		74,428
2016	—		—		6,818		6,818
Total	$	126,934	$	—	$	469,889	$	596,823

Tax benefits totaling $831,584, $699,659, and $854,015, were recognized as additional paid-in capital during the years ended December 31, 2012, 2011, and 2010, respectively, since the Company’s tax deductions exceeded the share-based compensation charge recognized for stock options exercised and RSUs vested.