Stock-Based Compensation

Alon has two employee incentive compensation plans, (i) the Amended and Restated 2005 Incentive Compensation Plan and (ii) the 2000 Incentive Stock Compensation Plan.


(a)	Amended and Restated 2005 Incentive Compensation Plan (share value in dollars)

Alon’s original incentive compensation plan, the Alon USA Energy, Inc. 2005 Incentive Compensation Plan, was approved by its stockholders in 2006. In May 2010, Alon’s stockholders approved an amended and restated incentive compensation plan, the Alon USA Energy, Inc. Amended and Restated 2005 Incentive Compensation Plan, which is a component of Alon’s overall executive incentive compensation program. The Amended and Restated 2005 Incentive Compensation Plan permits the granting of awards in the form of options to purchase common stock, Stock Appreciation Rights (“SARs”), restricted shares of common stock, restricted common stock units, performance shares, performance units and senior executive plan bonuses to Alon’s directors, officers and key employees.

Restricted Stock. Non-employee directors are awarded an annual grant of shares of restricted stock valued at $25. The restricted shares granted to the non-employee directors vest over a period of three years, assuming continued service at vesting.

In May 2011, Alon granted awards of 180,000 restricted shares to certain executive officers at a grant date price of $13.53. These May 2011 restricted shares will vest as follows: 50% on May 10, 2012 and 50% on May 10, 2016, assuming continued service at vesting.

Compensation expense for the restricted stock grants amounted to $264 and $19 for the three months ended June 30, 2011 and 2010, respectively, and $276 and $31 for the six months ended June 30, 2011 and 2010, respectively, and is included in selling, general and administrative expenses in the consolidated statements of operations. There is no material difference between intrinsic value and fair value under FASB ASC Topic 718-10 for pro forma disclosure purposes.

The following table summarizes the restricted share activity from January 1, 2010:



			Weighted Average Grant Date Fair Values
Nonvested Shares	Shares		(per share)
Nonvested at January 1, 2010	10,226		$	14.67
Granted	10,416		7.20
Vested	(4,473	)	16.77
Forfeited	—		—
Nonvested at December 31, 2010	16,169		$	9.28
Granted	186,015		13.50
Vested	(7,278	)	10.31
Forfeited	—		—
Nonvested at June 30, 2011	194,906		$	13.26

As of June 30, 2011, there was $2,298 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Amended and Restated 2005 Incentive Compensation Plan. That cost is expected to be recognized over a weighted-average period of 2.78 years. The fair value of shares vested in 2011 was $88.

Restricted Stock Units. In May 2011, Alon granted 500,000 restricted stock units to the CEO and President of Alon at a grant date fair value of $11.47. Each restricted unit represents the right to receive one share of Alon common stock upon the vesting of the restricted stock unit. All 500,000 restricted stock units vest on March 1, 2015, assuming continued service at vesting. Compensation expense for the restricted stock units amounted to $249 for the three months ended June 30, 2011, and is included in selling, general and administrative expenses in the consolidated statements of operations.

Stock Appreciation Rights. Through December 31, 2010, Alon has granted awards of 580,915 SARs to certain officers and key employees of Alon of which 62% of these SARs have a grant price of $28.46 and the remaining SARs have grant prices ranging from $10.00 to $16.00.

In January 2011, Alon granted awards of 18,250 SARs to certain officers and key employees at a grant price equal to $16.00. The January 2011 SARs vest as follows: 50% on January 5, 2013, 25% on January 5, 2014, and 25% on January 5, 2015, and are exercisable during the 365-day period following the date of vesting.

When exercised, all SARs are convertible into shares of Alon common stock, the number of which will be determined at the time of exercise by calculating the difference between the closing price of Alon common stock on the exercise date and the grant price of the SARs (the “Spread”), multiplying the Spread by the number of SARs being exercised and then dividing the product by the closing price of Alon common stock on the exercise date.

Compensation expense for the SARs grants amounted to $32 and $97 for the three months ended June 30, 2011 and 2010, respectively, and $274 and $306 for the six months ended June 30, 2011 and 2010, respectively, and is included in selling, general and administrative expenses in the consolidated statements of operations.


(b)	2000 Incentive Stock Compensation Plan

On August 1, 2000, Alon Assets, Inc. (“Alon Assets”) and Alon USA Operating, Inc. (“Alon Operating”), majority owned, consolidated subsidiaries of Alon, adopted the 2000 Incentive Stock Compensation Plan pursuant to which Alon’s board of directors may grant stock options to certain officers and members of executive management. The 2000 Incentive Stock Compensation Plan authorized grants of options to purchase up to 16,154 shares of common stock of Alon Assets and 6,066 shares of common stock of Alon Operating. This plan was closed to new participants subsequent to August 1, 2000, the initial grant date. All stock options have been exercised during the three months ended March 31, 2011. There was no compensation expense recognized under this plan during 2011. Total compensation expense recognized under this plan was $13 for the six months ended June 30, 2010 and is included in selling, general and administrative expenses in the consolidated statements of operations.

The following table summarizes the stock option activity for Alon Assets and Alon Operating for the six months ended June 30, 2011, and for the year ended December 31, 2010:



	Alon Assets				Alon Operating
	Number of Options Outstanding		Weighted Average Exercise Price		Number of Options Outstanding		Weighted Average Exercise Price
Outstanding at January 1, 2010	2,793		$	100	1,049		$	100
Granted	—		—		—		—
Exercised	(2,187	)	100		(822	)	100
Forfeited and expired	—		—		—		—
Outstanding at December 31, 2010	606		$	100	227		$	100
Granted	—		—		—		—
Exercised	(606	)	100		(227	)	100
Forfeited and expired	—		—		—		—
Outstanding at June 30, 2011	—		$	—	—		$	—

The intrinsic value of total options exercised in 2011 was $471.