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Stock Option and Equity Incentive Plans

Share-based compensation is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant).

The Company issues share-based awards through several plans that are described below. The compensation cost charged against income for those plans is included in selling, general & administrative expenses as follows (in thousands):

	Years Ended December 31,
Share-based compensation related to:	2018		2017		2016
Common stock grants	$	505	$	505	$	505
Stock option grants		149		138		237
Restricted Stock Unit awards		559		425		314
Total share-based compensation	$	1,213	$	1,068	$	1,056

Incentive Plan

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 Plan was further amended on

March 7, 2013,

to (i) prohibit the repricing of stock options or other equity awards without the consent of the Company’s shareholders, and (ii) prohibit the Company from buying out underwater stock options.

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, 2018,

1,236,812

shares of common stock have been issued under the

2003

Incentive Plan,

none

of which have been restricted. An additional

73,392

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, 2018,

185,000

options have been granted and

49,375

options are outstanding. At

December 31, 2018,

854,077

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, which was amended and renamed, on

June 3, 2009,

the

2009

Non-Employee Director Stock Incentive Plan (the “Director Plan”). The Director Plan was amended on

March 7, 2013,

to (i) prohibit the repricing of stock options or other equity awards without the consent of the Company’s shareholders, and (ii) prohibit the Company from buying out underwater stock options. The Director Plan, as amended, provides for the issuance of stock options and other equity-based securities of up to

975,000

shares to non-employee members of the Company’s board of directors. Through

December 31, 2018,

348,490

options have been granted and

106,543

options are outstanding. For the year ended

December 31, 2018,

3,366

shares of common stock were issued, and

101,626

shares remained available to be issued under the Director Plan.

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

	Shares Under Options			Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)

Outstanding December 31, 2017		202,739		$	18.23
Granted		10,344			31.20
Exercised		(78,680	)		31.43
Outstanding December 31, 2018		134,403		$	20.46		4.50	$	1,296
Exercisable at December 31, 2018		126,543		$	19.97		4.53	$	1,286
Vested and expected to vest at December 31, 2018		134,403		$	20.46		4.50	$	1,296

During the years ended

December 31, 2018,

2017

and

2016,

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 approximately

$1.2

million,

$0.6

million and

$0.7

million, respectively, and the total amount of consideration received from the exercise of these options was approximately

$1.3

million,

$0.8

million and

$0.7

million, 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, 2018,

shares were surrendered for this purpose. During the year ended

December 31, 2017,

6,511

shares (

6,511

for options and

zero

for taxes) were surrendered at an average market price of

$26.45.

During the year ended

December

31,

2016,

6,514

shares (

6,514

for options and

zero

for taxes) were surrendered at an average market price of

$25.50.

February 21, 2018,

the Company’s Compensation Committee approved the award of

$400,000

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 12, 2018.

June 6, 2018

the Company issued

3,366

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.

The Company grants RSUs to its executive officers and employees. 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.

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, 2018:

	Restricted Stock Units			Weighted Average Award Date Fair Value
Outstanding at December 31, 2017		57,395		$	21.03
Awarded		30,831			29.36
Shares vested		(16,050	)		23.55
Outstanding at December 31, 2018		72,176		$	23.60

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, 2018,

5,238

shares were redeemed for this purpose at an average market price of

$27.60.

During the years ended

December 31, 2017

and

2016,

4,377

and

3,389

shares were redeemed for this purpose at an average market price of

$24.50

and

$22.82,

respectively.

The following summarizes the future share-based compensation expense the Company will record as the equity securities granted through

December 31, 2018,

vest (in thousands):

	Options		Common Stock		Restricted Stock Units		Total
2019	$	28	$	-	$	502	$	530
2020		28		-		416		444
2021		-		-		250		250
2022		-		-		30		30
Total	$	56	$	-	$	1,198	$	1,254

Tax benefits totaling approximately

$0,

and

$145,000

were recognized as additional paid-in capital during the years ended

December 31, 2018,

2017

and

2016,

respectively, since the Company’s tax deductions exceeded the share-based compensation charge recognized for stock options exercised and RSUs vested.