Stock Incentive Plan

6 Months Ended

Jun. 30, 2011

Stock lncentive Plan

Stock Incentive Plan

9. Stock Incentive Plan

     The Company set aside 325,000 shares of authorized stock for the 2010 Stock Incentive Plan ("2010 Plan") under which it may grant stock options and restricted stock units. The Company's policy is to issue new shares to cover awards. The total number of stock options and restricted stock units outstanding under the 2010 Plan and previous stock incentive plans at June 30, 2011 was 332,417. Under the 2010 plan and previous stock incentive plans, certain key employees have been granted the option to purchase set amounts of common stock at the market price on the day the option was granted. Optionees, at their own discretion, may cover the cost of exercise through the exchange, at the fair market value, of already owned shares of the Company's stock. Options are granted for a 10-year period and vest on a pro rata basis over the initial three years from grant. In addition to stock options, the Company has granted restricted stock units to certain key employees under the 2010 Plan and previous stock incentive plans. These restricted stock grants cliff vest at the end of a three-year time period.

     The Company recognized expenses of $112,000 and $94,000 on the fair value of restricted stock units and $17,000 and $35,000 on the fair value of stock options for a total of $129,000 and $129,000 in stock-based compensation expense for the three-month periods ending June 30, 2011 and 2010, respectively. For the six-month periods ending June 30, 2011 and 2010, the Company recognized expenses of $229,000 and $189,000 on the fair value of restricted stock units and $34,000 and $69,000 on the fair value of stock options for a total of $263,000 and $258,000 in stock-based compensation expense.

     Proceeds from the exercise of stock options for the three months ended June 30, 2011 were $103,000. The Company withheld shares valued at $103,000 to pay for stock option exercises or income taxes that resulted from the exercise of stock options or the vesting of restricted stock units for the three-month period ending June 30, 2011. The Company recognized tax deductions of $20,000 related to the exercise of these stock options during the quarter ended June 30, 2011. There were no exercises of stock options in the second quarter of 2010.

     For the six months ending June 30, 2011 and 2010, proceeds from the exercise of stock options were $179,000 and $497,000, respectively. The Company withheld shares valued at $179,000 and $496,000 to pay for stock option exercises or income taxes that resulted from the exercise of stock options or the vesting of restricted stock units for the six-month periods ending June 30, 2011 and 2010, respectively. The Company recognized tax deductions of $38,000 and $102,000 related to the exercise of these stock options during the six months ended June 30, 2011 and 2010, respectively.