(

)

Stock Option and Purchase Plans

The Company’s stock compensation program provides for the grant of restricted stock (including performance-based restricted stock), unrestricted stock, stock options and stock appreciation rights. A total of

3,655,088

shares of common stock were registered for issuance under the

2010

Omnibus Plan. On

May

19,

2015,

the

2010

Omnibus Plan was replaced with the

2015

Omnibus Plan. A total of

3,476,021

shares were registered for issuance under the

2015

Omnibus Plan. Additionally, awards under the

2010

Omnibus Plan that are cancelled without having been fully exercised or vested are available again for new awards under the

2015

Omnibus Plan. The aggregate number of shares available for future grant as of

December

31,

2016

and

2015

was

1,712,021

and

3,476,021,

respectively.

The

2010

and

2015

Omnibus Plans provide for restrictions which lapse after

three

years. During the restricted period, which is commensurate with each vesting period, the recipient has the right to receive dividends and voting rights for the shares. Generally, if a recipient leaves the Company before the end of the restricted period or if performance requirements, if any, are not met, the shares will be forfeited. During

2015,

the Company modified the restriction on certain restricted stock grants to increase the restriction period by

one

year. The modification did not have a material effect on the financial statements.

Under the plans, the Company

may

grant options to purchase common stock to officers, key employees and non-employee directors. Options

may

be granted at not less than the market price on the date of grant. Stock option grants under the

2010

and

2015

Omnibus Plans include a

five

year life along with vesting after

three

years of service.

Compensation expense is measured based on the fair value at the date of grant and is recognized on a straight-line basis over the vesting period. Fair value for restricted shares is equal to the stock price on the date of grant, while the fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing method. The Company uses historical Company and industry data to estimate the expected price volatility, the expected option life, the expected forfeiture rate and the expected dividend yield. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option.

The following weighted average assumptions were used to estimate the fair value of options granted using the Black-Scholes option-pricing model:

	Year ended December 31,
	2016			2015
Expected life (years)		4.0			4.0
Expected volatility		52.0	%		50.2	%
Risk-free interest rates		1.42	%		1.32	%
Expected dividend yield		0.0	%		0.0	%

A summary of the restricted stock activity is as follows:

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Nonvested shares at January 1, 2016		1,074,700		$	3.19
Granted		793,500			1.00
Vested		(609,200	)		3.50
Forfeited		(94,000	)		2.03
Nonvested shares at December 31, 2016		1,165,000		$	1.49

The total fair value of shares vested during

2016

and

2015

was

$536,000

and

$230,000,

respectively. In conjunction with the vesting of restricted shares and payment of taxes thereon, the Company received into treasury

194,354

and

28,999

restricted shares, respectively, at an average price of

$0.98

and

$2.65

per share, respectively, the closing market price on the date the restricted stock vested. Such repurchased shares were immediately cancelled.

The following table summarizes option activity for the year ended

December

31,

2016:

				Weighted-		Weighted-
				average		average		Aggregate
	Number of			Exercise Price		Remaining		Intrinsic
	Shares			Per Share		Term		Value
Outstanding at January 1, 2016		1,222,000		$	3.38
Granted		993,500			0.97
Exercised		0			0
Forfeited		(62,500	)		1.95
Expired		(244,750	)		4.14
Outstanding at December 31, 2016		1,908,250		$	2.07		2.54	$	0
Exercisable at December 31, 2016		561,550		$	3.52		0.90	$	0

The weighted average grant date fair value based on the Black-Scholes option pricing model for options granted in the years ended

December

31,

2016

and

2015

was

$0.38

and

$0.82

per share, respectively. There were

options exercised in

2016

2015.

As of

December

31,

2016,

there was

$1,163,000

of total unrecognized compensation cost, after estimated forfeitures, related to unvested share-based compensation granted under the plans. That cost is expected to be recognized over a weighted-average period of

1.2

years. The total fair value of option shares vested during the years ended

December

31,

2016

and

2015

was

not

material.