8. Stock Options

Stock Options

The Company's 2006 Stock Incentive Plan (the "2006 Plan") provides for the grant of non-qualified stock options to directors and eligible employees, as defined in the 2006 Plan. A total of 899 of Holdings' shares of common stock were reserved for issuance under the 2006 Plan. The number of options to be granted and the terms thereof were approved by Holdings' board of directors. The option price for each share of common stock subject to an option may be greater than or equal to the fair market value of the stock at the date of grant. The stock options generally vest ratably over a five year period and expire 10 years from the date of grant, if not previously exercised.

In September 2009, the Company's board of directors and stockholders adopted and approved the Addus HomeCare Corporation 2009 Stock Incentive Plan (the "2009 Plan"). The 2009 Plan provides for the grant of 750 incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, deferred stock units, restricted stock units, other stock units and performance shares.

A summary of stock option activity and weighted average exercise price is as follows:


					For The Year Ended December 31,
				Weighted				Weighted				Weighted
				Average				Average				Average
	2011				2010				2009
				Exercise				Exercise				Exercise
	Options			Price	Options			Price	Options			Price
Outstanding, beginning of period	588		$	8.63	607		$	9.51	802		$	9.35
Granted	229			5.33	91			4.30	105			10.00
Forfeited/Cancelled	(42	)		7.93	(110	)		9.95	(300	)		9.26
Outstanding, end of period	775		$	7.69	588		$	8.63	607		$	9.51

The following table summarizes stock options outstanding and exercisable at December 31, 2011:


			Outstanding				Exercisable
			Weighted				Weighted
			Average				Average
			Remaining		Weighted		Remaining		Weighted
			Contractual		Average		Contractual		Average
			Life In		Exercise		Life In		Exercise
	Exercise Price	Options	Years		Price	Options	Years		Price

$	4.06 – $ 5.45	299	9.2	$	5.00	15	8.9	$	4.06
$	9.26 – $10.00	476	5.4		9.38	418	5.2		9.31

		775	6.9	$	7.69	433	5.3	$	9.13

The Company historically used the Black-Scholes option pricing model to estimate the fair value of its stock based payment awards under its 2006 Plan, but beginning October 28, 2009 under its 2009 Plan it began using an enhanced Hull-White Trinomial model. The determination of the fair value of stock-based payments utilizing the Black-Scholes model and the Enhanced Hull-White Trinomial model is affected by Holdings' stock price and a number of assumptions, including expected volatility, risk-free interest rate, expected term, expected dividends yield, expected forfeiture rate, expected turn-over rate, and the expected exercise multiple. Holdings did not have a history of market prices of its common stock as it was not a public company prior to the IPO, and as such it

estimates volatility based on the volatilities of a peer group of publicly traded companies. The expected term of options is based on the Company's estimate of when options will be exercised in the future. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of the Company's awards. The dividend assumption is based on the Company's history and expectation of not paying dividends. The expected turn-over rate represents the expected forfeitures due to employee turnover and is based on historical rates experienced by the Company. The expected exercise multiple represents the mean ratio of the stock price to the exercise price at which employees are expected to exercise their options.

The weighted-average estimated fair value of employee stock options granted as calculated using the Black-Scholes model and the Enhanced Hull-White Trinomial model and the related assumptions follow:


					For the year ended December 31,
		2011			2010			2009
		Grants			Grants			Grants
Weighted average fair value	$	2.54		$	1.88		$	4.28
Risk-free discount rate		3.17	%		2.89% – 2.99%			3.00% – 3.10%
Expected life		6.0 – 6.5 years			6.5 years			6.5 years
Dividend yield		—			—			—
Volatility		42	% – 51%		42	% – 51%		42	% – 51%
Expected turn-over rate(1)		5	%		5	%		5	%
Expected exercise multiple(1)		2.2			2.2			2.2

(1) These assumptions are used with the Enhanced Hull-White Trinomial model which the Company began using on October 28, 2009.

Stock option compensation expense totaled $254, $241 and $294 for the three years ended December 31, 2011, 2010 and 2009, respectively. As of December 31, 2011, there was $794 of total unrecognized compensation cost that is expected to be recognized over a period of five years.

There is no intrinsic value on vested and outstanding stock options at December 31, 2011 due to the weighted average exercise prices for vested and outstanding stock options being above fair market value as of December 31, 2011. There were no stock options exercised during the three year period ended December 31, 2011 and as a result the Company did not receive any cash from option exercises and did not realize any related tax benefits. In conjunction with the IPO, the former Chairman of Addus HealthCare entered into a separation agreement which terminated his employment with Addus HealthCare. As a result of the termination and the time permitted to exercise any vested options expiring following such termination, 300 stock options were not exercised and deemed forfeited.

Restricted Stock Awards

In 2011, management awarded 24 shares of restricted stock awards under the 2009 with a weighted average fair value of $5.63 per share. As of December 31, 2011, $91 of unearned compensation related to unvested awards of restricted stock will be recognized over the remaining vesting terms of the awards.

The following table summarizes the status of unvested restricted stock awards outstanding at December 31, 2011 and 2010:


					For The Year Ended December 31,
	2011			Weighted-	2010			Weighted-	2009		Weighted-
	Restricted			Average	Restricted			Average	Restricted		Average
	Stock			Grant Date	Stock			Grant Date	Stock		Grant Date
	Awards			Fair Value	Awards			Fair Value	Awards		Fair Value
Unvested restricted stock awards	6		$	6.85	3		$	10.00	—	$	—
Awarded	24			5.63	4			5.21	3		10.00
Vested	(8	)		5.64	(1	)		10.00	—		—
Forfeited	(1	)		5.93	—			—	—		—
Unvested restricted stock awards at
December 31,	21		$	5.95	6		$	6.85	3	$	10.00

Restricted stock award compensation expense totaled $77, $14 and $3 for the three years ended December 31, 2011, 2010 and 2009, respectively.

As of December 31, 2011, shares reserved under the 2006 and 2009 Plans were 226 and 575, respectively. The Company does not plan on issuing any further grants under the 2006 Plan.