12. Stock Based Compensation

Equity Incentive Plans

At June 30, 2011, the Company had multiple stock based compensation plans. The Company’s Board of Directors adopted and stockholders approved the 1999 Equity Incentive Plan (“the 1999 Plan”), the 2005 Equity Incentive Plan (“the 2005 Plan”) and the 2008 Equity Incentive Plan (“the 2008 Plan”). The 1999 Plan provided for the issuance of 4.1 million incentive stock options, non-statutory stock options and stock bonuses. In November 2005, the 1999 Plan terminated and the Company no longer issues shares under the 1999 Plan, however forfeited or cancelled shares from this plan become available for issuance under the 2005 Plan. The 2005 and 2008 Plans provide for the issuance of 10.5 million incentive stock options, non-statutory stock options and restricted share awards. At June 30, 2011, approximately 4.3 million shares remain available for issuance under these two plans. The Company issues new shares of common stock upon the exercise of stock options and the granting of restricted shares.

The Company’s Board of Directors adopted and stockholders approved the 2005 Non-Employee Directors’ Stock Option Plan (“the 2005 Directors’ Plan”), which provides for the automatic grant of non-statutory stock options and restricted shares to non-employee directors. Approximately 1 million shares were authorized under the 2005 Directors’ Plan. As of June 30, 2011, 359 thousand shares remain available for future issuance.

In addition to the plans discussed above, the Company has additional equity incentive plans that were established in conjunction with the acquisitions of Web.com, Solid Cactus and Register.com LP. The Company reserved 2.4 million shares, 147 thousand shares and 466 thousand shares, for the Web.com, Solid Cactus and Register.com LP acquisitions, respectively. These plans are considered one-time, inducement awards of incentive stock options, non-statutory stock options and restricted shares. Once the inducement awards are granted, no additional shares, including forfeitures and cancellations, are available for future grant under these plans.

Vesting periods for the options issued under the Web.com plans range from zero to five years and have an option term of ten years. The options issued under the Solid Cactus plan have a ten year term and generally vest ratably each month over a four year period. The Register.com LP plan includes option grants to purchase 216 thousand shares that vest over four years, with 25 percent vesting on the one year anniversary of the grant date and 1/48 of the shares vesting monthly thereafter. The Register.com LP plan also includes options to purchase 125 thousand shares that vest over four years with 50 percent vesting on the second year anniversary and 1/48 of shares vesting monthly thereafter. These options have a ten year term. Finally, the Register.com LP plan included the issuance of 125 thousand restricted shares that also vest over the course of four years with 50 percent vesting on the second year, 25 percent on the third year and 25 percent on the fourth anniversary of the grant date.

Incentive stock options and non-statutory stock options issued under the 1999 Plan, the 2005 Plan and the 2008 Plan generally vest ratably over three to four years, are contingent upon continued employment and expire ten years from the grant date. Restricted share awards that have been granted under these plans generally vest 25 percent each year over a four year period.

The Board of Directors, or a committee thereof, administers all of the equity incentive plans and determines the terms of options granted, including the exercise price, the number of shares subject to individual option awards and the vesting period of options, within the limits set forth in the plans. Options have a maximum term of 10 years and vest as determined by the Board of Directors.

The following table outlines the activity in each of the stock based compensation plans from inception through June 30, 2011:

	1999 Plan			2005 Plan			2005 Directors' Plan			Web.com Plans			2008 Plan			Solid Cactus Plan			Register.com Plan
Authorized		4,074,428			2,964,644			985,000			2,424,558			7,000,000			146,900			465,900
Outstanding Options		(1,836,341	)		(2,915,611	)		(439,000	)		(35,696	)		(814,541	)		(73,518	)		(316,650	)
Outstanding RSA		-			-			(50,500	)		-			(1,447,350	)		-			(125,000	)
Exercised Options		(1,741,040	)		(432,876	)		(50,500	)		(1,892,685	)		(185,932	)		(41,993	)		-
Released RSA		-			(10,000	)		(85,875	)		-			(440,216	)		-			-
Released RSA (minimum withholding taxes paid in lieu of shares)		-			3,245			-			-			112,111			-			-
Subtotal		497,047			(390,598	)		359,125			496,177			4,224,072			31,389			24,250
Adjustment		(497,047	)		497,047			-			-			-			-			-
Available for future grants		N/A			106,449			359,125			N/A			4,224,072			N/A			N/A

The fair value of each option award is estimated on the date of the grant using the Black Scholes option valuation model and the assumptions noted in the following table. Expected volatility rates are based on the Company’s historical volatility, since the Company’s initial public offering, on the date of the grant. The expected term of options granted represents the period of time that they are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

	Six months ended June 30,
	2011			2010
Risk-free interest rate		1.95-2.10	%		1.78-2.75	%
Dividend yield		0	%		0	%
Expected life (in years)		5			5
Volatility		61-62	%		60-61	%

Stock Option Activity

The following table summarizes option activity for the six months ended June 30, 2011 for all of the Company’s stock options:

	Shares Covered by Options			Exercise Price per Share		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)

Balance, December 31, 2010		6,995,021		$	0.50 to 46.40	$	5.92
Granted		1,156,000		9.50 to 15.56			10.31
Exercised		(1,578,759	)	0.50 to 14.05			5.28
Forfeited		(117,991	)	3.43 to 15.56			7.16
Expired		(22,913	)	3.43 to 46.40			9.89
Balance, June 30, 2011		6,431,358		0.50 to 40.15			6.83		6.39	$	35,583
Exercisable at June 30, 2011		3,882,690		$	0.50 to 40.15	$	6.41		4.71	$	23,120

Compensation costs related to the Company’s stock option plans were $1.0 million and $0.8 million for the three months ended June 30, 2011 and 2010, respectively. Compensation costs related to the Company’s stock option plans were $1.9 million and $1.6 million for the six months ended June 30, 2011 and 2010, respectively. Compensation expense is generally recognized on a straight-line basis over the vesting period of grants. As of June 30, 2011, the Company had $8.4 million of unrecognized compensation costs related to share-based payments, which is expected to recognized over a weighted average period of 2.8 years.

The total intrinsic value of options exercised during the six months ended June 30, 2011 and 2010 was $10.9 million and $41 thousand, respectively. The fair value of options vested during the six months ended June 30, 2011 and 2010 was $3.8 million and $1.7 million, respectively. The weighted average grant-date fair value of options granted during the six months ended June 30, 2011 and 2010 was $5.45 and $2.94, respectively.

Price ranges of outstanding and exercisable options as of June 30, 2011 are summarized below:

		Outstanding Options						Exercisable Options

Exercise Price		Number of Options		Weighted Average Remaining Life (Years)		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price

$	0.50 – $4.41		1,511,686		3.18	$	2.15		1,335,429	$	1.88
$	4.42 – $5.66		1,315,707		8.69		5.26		328,483		5.33
$	5.67 – $8.92		1,416,074		6.80		8.31		1,065,676		8.68
$	8.93 – $9.97		1,695,156		7.26		9.58		765,783		9.11
$	9.98 – $40.15		492,735		5.92		11.76		387,319		11.31
			6,431,358						3,882,690

Restricted Stock Activity

The following information relates to awards of restricted stock and restricted stock units that have been granted under the 2005 Directors’ Plan, the 2005 Plan, the 2008 Plan and the Register.com LP plan. The restricted stock is not transferable until vested and the restrictions lapse upon the completion of a certain time period, usually over a one- to four-year period. The fair value of each restricted stock grant is based on the closing price of the Company’s stock on the date of grant and is amortized to compensation expense over its vesting period, which ranges between one and four years.

The following restricted stock activity occurred under the Company’s equity incentive plans during the six months ended June 30, 2011:

Restricted Stock Activity	Shares			Weighted Average Grant–Date Fair Value

Restricted stock outstanding at December 31, 2010		1,481,200			4.98
Granted		319,500			10.12
Lapse of restriction		(167,850	)		5.63
Forfeited		(10,000	)		3.58
Restricted stock outstanding at June 30, 2011		1,622,850			5.94

Compensation cost related to the Company’s restricted stock for the three months ended June 30, 2011 and 2010 was approximately $0.7 million and $0.4 million, respectively. Compensation expense for the six months ended June 30, 2011 and 2010 was approximately $1.3 million and $0.7 million, respectively. As of June 30, 2011, there was approximately $5.6 million of total unrecognized compensation cost related to the restricted stock outstanding, which is expected to be recognized over a weighted average period of 2.3 years. The intrinsic value and fair value of outstanding restricted stock as of June 30, 2011 is $20.0 million and $9.6 million, respectively.

During the six months ended June 30, 2011, $0.4 million of cash was used to pay the minimum withholding tax requirements in lieu of receiving 37,408 common shares.