STOCK BASED COMPENSATION

6 Months Ended

Jun. 30, 2011

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION

NOTE C - STOCK BASED COMPENSATION

Stock-based compensation cost is estimated at the grant date based on the fair value of the award, and the cost is recognized as expense ratably over the vesting period. The Company uses the Black-Scholes model for estimating the grant date fair value of stock options. Determining the assumptions that enter into the model is highly subjective and requires judgment. The Company uses an expected volatility that is based on the historical volatility of its common stock. The expected life assumption is based on historical employee exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the average market rate on U.S. treasury securities in effect during the quarter in which the options were granted. The dividend yield reflects historical experience as well as future expectations over the expected term of the option. The Company estimates forfeitures at the time of grant and revises in subsequent periods, if necessary, if actual forfeitures differ from initial estimates.

The Company recorded stock-based compensation expense related to options of $1,758,000 and $2,485,000 during the three and six months ended June 30, 2011, respectively.  In the prior year, the Company recorded stock-based compensation of $994,000 and $1,263,000 during the respective three and six month periods ended June 30, 2010.  The Company uses the single-award method for allocating compensation cost to each period.

The weighted-average assumptions used in estimating the grant date fair value of the stock options granted during the three months ended June 30, 2011 and 2010, along with the weighted-average grant date fair values, were as follows:

	THREE MONTHS			THREE MONTHS
	ENDED			ENDED
	JUNE 30, 2011			JUNE 30, 2010
Expected volatility		76	%		80	%
Expected life (in years)		3.8			3.9
Risk-free interest rate		2.0	%		2.0	%
Dividend yield		-			-
Fair value per stock option	$	3.70		$	1.53
Forfeiture rate		8	%		8	%

The table below sets forth a summary of activity within the Company's stock-based compensation plans for the six months ended June 30, 2011:

	Number of Options (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2010		7,960		$	1.87		3.93	$	33,452,000
Granted		1,935			6.62
Exercised		(153	)		1.85
Forfeited		(124	)		2.25
Outstanding at June 30, 2011		9,618		$	2.82		3.72	$	40,203,000
Exercisable at June 30, 2011		3,412		$	1.83		3.35	$	17,653,000

The aggregate intrinsic value for stock options outstanding and exercisable is defined as the difference between the market value of the Company's common stock as of the end of the period and the exercise price of the stock options. Stock option exercises during the six months ended June 30, 2011 and 2010 generated tax-deductible expenses totaling $643,000 and $14,000, respectively.

The Company also may grant restricted stock awards (“RSAs”) to certain employees and members of its Board of Directors. Restricted stock awards are valued based on the closing market price of the Company's common stock on the date of grant and the total value of the award is recognized as expense ratably over the vesting period of the grants. The Company did not grant any restricted stock awards during the six months ended June 30, 2011 or June 30, 2010.  As of June 30, 2011, the total amount of unrecognized compensation expense related to non-vested restricted stock awards was $17,000. The Company recorded compensation expense of $5,000 and $9,000 during the three and six months ended June 30, 2011 related to outstanding restricted stock awards.  In the prior year, the Company recorded compensation expense of $10,000 and $42,000 during the three and six months ended June 30, 2010 related to outstanding restricted stock awards.

The following is a summary of non-vested restricted stock activity:

	Number of Shares			Weighted Average
	(in thousands)			Grant Date Fair Value
Non-vested at December 31, 2010		28		$	1.89
Granted		-			-
Forfeited		-			-
Vested		(3	)		7.34
Non-vested at June 30, 2011		25		$	1.34