amended from time to time, and (2) eliminate the provision that excludes the value attributable to the Development Parcels (as defined in the Plan).

Subsequent to the closing of the acquisition of the Hotel, the Company granted 0.167 options of Class A Units and 166,667 options of Class B Units to certain executives, in accordance with the Plan. The options have a 10 year life, vest over three years and have an exercise price of $100 per unit in both classes which was equal to, or greater than, the fair market value of the membership units at the date of grant. As a result of the amendment on May 16, 2006 which eliminated the exclusion of the value of the Development Parcels (as defined in the Plan), the options increased in value.

Effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123(R)) (ASC Topic 718 and 505) requiring that compensation cost relating to share-based payment transactions be recognized in the financial statements. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s estimated requisite service period (generally the vesting period of equity award) on a straight-line basis. Estimates are revised if key elements of the options change. The cumulative effect on compensation cost as a result of changes to key elements or forfeiture estimates are recognized in the period of the change. The amendment on May 16, 2006 triggered a revaluation of the options. The increase in value was recorded on a straight-line basis over the remaining vesting period of the options.

Prior to January 1, 2006, the Company accounted for share-based compensation to employees in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB No.25), and related interpretations. The Company adopted SFAS No. 123(R) using the modified prospective method and accordingly, financial statement amounts for prior periods presented in the Form 10-K have not been restated to reflect the fair value method of recognizing compensation cost relating to these options.

The fair value of the option awards is estimated on the date of grant using an appraisal of the value of the Company and its membership units. In September 2009 the number of options available for distribution was increased by the Company’s Board. During 2009 the board of directors authorized and issued an additional 0.167 Class A Membership Units and an additional 16,667 Class B Membership Units.

There was approximately $53,000 and $80,000 of compensation cost related to the 16,667 options recognized in general and administrative expenses for the six months ended June 30, 2011 and 2010 respectively. The estimated fair value of the options at the date of grant was $19.15 per membership unit and was computed using the Black-Scholes-Merton option pricing model with the following weighted average assumptions: risk free interest rate of 3.66%; no expected dividend yields; and expected vesting periods of 36 months. The following table sets forth the assumptions used to determine compensation cost for these options consistent with the requirements of ASC Topic 718.

Weighted-average assumptions:
Model		Black-Scholes
Number of options		16,667 options
Membership unit price		$100
Exercise unit price		$100
Dividend Yield		N/A
Volatility		5%
Risk-Free rate		3.66%
Valuation Date		September 29, 2009
Expiration Date		September 29, 2012

Note 7. 2004 INCENTIVE PLAN