20.	COMPENSATION PLANS

Deferred Compensation Obligations

The Company has deferred compensation agreements with certain key employees. The agreements provide for monthly benefits for ten years subsequent to retirement, disability, or death. The Company has accrued an estimated liability based upon the present value of an annuity needed to provide the future benefit payments.

The assumed discount rate to measure the liability was 7% for both of the years ended December 31, 2011 and 2010. The Company recognized expense of $0.2 million for each of the years ended December 31, 2011, 2010 and 2009 in conjunction with this plan. Life insurance contracts have been purchased which may be used to fund these agreements. The contracts are recorded at their cash surrender value in the statements of financial position. Any differences between actual proceeds and cash surrender value are recorded as gains or losses in the periods presented. Additionally, the Company records gains or losses on the cash surrender value in the period incurred. The Company recognized gains of $21,000, $139,000 and $109,000 for the years ended December 31, 2011, 2010 and 2009, respectively.

Bonus Plan

The Company pays bonuses to certain management and sales personnel. Historically, bonuses are determined annually and are based upon corporate and divisional income levels and the achievement of individually defined performance criteria. The charge to operations amounted to approximately $2.4 million, $1.4 million and $89,000 for the years ended December 31, 2011, 2010 and 2009, respectively.

Profit-Sharing Plan

The Company has a qualified profit-sharing plan, more commonly known as a 401(k) plan, for all of its full-time and part-time eligible employees upon completion of a 90-day probationary period and who are at least 18 years of age. The plan provides for a matching contribution by the Company as defined in the agreement and, in addition, provides for a discretionary contribution annually as determined by the Board of Directors. The contributions and related expense for the years ended December 31, 2011, 2010 and 2009 were immaterial.

Stock Option and Stock-Based Incentive Plans

The Company has various stock option and stock-based incentive plans and various agreements whereby stock options, performance share awards, time-based share awards, restricted stock awards, and other stock-based incentives were made available to certain key employees, directors and others based upon meeting various individual, divisional or company-wide performance criteria and time-based criteria. Non-equity incentive plan awards are intended to reward outstanding performance and efforts as they relate to the Company's short-term and long-term objectives and its strategic plan and are tied to items including sales levels and EBITDA.

The Company recorded compensation expense of $0.3 million, $0.2 million and $0.1 million for the years ended December 31, 2011, 2010 and 2009, respectively, on the consolidated statements of operations for its stock-based compensation plans.

In November 2009, Patrick's shareholders approved the Patrick Industries, Inc. 2009 Omnibus Incentive Plan (the “2009 Plan”) which included incentive stock options, non-qualified stock options, related stock appreciation rights, performance and restricted stock awards, and other awards. Prior to November 2009, Patrick granted equity awards under the terms of the 1987 Plan. Stock options and awards previously granted under the 1987 Plan were not affected by the 2009 Plan and will remain outstanding until they are exercised, expire or otherwise terminate. The shares that were available for future awards under the 1987 Plan are included in the total shares available under the 2009 Plan.

The Company's 2009 Plan permits the future granting of share options and share awards to its employees, Directors and other service providers for up to 573,877 shares of stock as of December 31, 2011. Option awards are generally granted with an exercise price equal to the market price of the Company's stock at the date of grant. Ten percent of the option awards granted on May 21, 2009 under the 1987 Plan were immediately vested on the grant date. The remaining options will vest in increments until the completion of a three-year period of continuous employment and have 10-year contractual terms.

The following table summarizes the Company's option activity during the years ended December 31, 2011, 2010 and 2009:

Years ended December 31	2011					2010					2009
(shares in thousands)	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Total Options:
Outstanding, beginning of year		497		$	1.61		585		$	2.67		126		$	9.99
Granted during the year		-			-		-			-		495			1.25
Forfeited during the year		(22	)		9.36		(88	)		8.70		(31	)		9.99
Exercised during the year		(23	)		0.90		-			-		(5	)		1.25
Outstanding, end of year		452		$	1.27		497		$	1.61		585		$	2.67

Vested Options:
Vested during the year		166		$	1.25		124		$	1.25		67		$	3.49
Eligible, end of year for exercise		317		$	1.27		187		$	2.20		143		$	7.02

Aggregate intrinsic value of total options outstanding ($ thousands)				$	1,282				$	310				$	578

Aggregate intrinsic value of options exercisable ($ thousands)				$	897				$	108				$	58
Weighted average fair value of options granted during the year					N/A					N/A				$	1.25

The aggregate intrinsic value (excess of market value over the option exercise price) in the table above is before income taxes, based on the Company's closing stock price of $4.10 per share as of December 31, 2011, which would have been received by the option holders had those option holders exercised their options as of that date. The aggregate intrinsic value of options exercised for the years ended December 31, 2011 and 2009 was $28,000 and $16,000, respectively. The cash received, and the tax benefit realized from, the exercise of stock options was approximately $21,000 and $7,000 in 2011 and 2009, respectively. No options were exercised for the year ended December 31, 2010. There are 141,000 stock options that are expected to vest in 2012.

The Company estimates the fair value of all stock option awards as of the grant date by applying the Black-Scholes option-pricing model. The use of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense and include the dividend yield, exercise price, and forfeiture rate. Expected volatilities are based on historical volatility of the Company stock. The expected term of options represents the period of time that options granted are expected to be outstanding based on historical Company trends. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for instruments of a similar term.

The following table presents assumptions used in the Black-Scholes model for the stock options granted in 2009. There were no stock options granted in 2011 and 2010.

	2009
Dividend rate		-	%
Risk-free interest rate		3.37	%
Expected option life	4 years
Price volatility		71.42	%

A summary of options outstanding and exercisable at December 31, 2011 is as follows:

Options Outstanding

Options Exercisable

Weighted

Average

Weighted

Remaining

Average

Contractual

Exercise

(shares in thousands)

Outstanding

Life (years)

Price

Exercisable

Price

2009 Grants:

Exercise price - $0.75

218

7.4

0.75

153

0.75

Exercise price - $1.75

234

7.4

1.75

164

1.75

In conjunction with the Company's restricted stock awards, the Board of Directors approved the following share grants in 2010 and 2011: 131,000 shares on May 20, 2010; 140,000 shares on March 1, 2011; 21,000 shares on May 26, 2011; and 3,500 shares on August 18, 2011.

As of December 31, 2011, there was approximately $0.4 million of total unrecognized compensation cost related to share-based compensation arrangements granted under incentive plans. That cost is expected to be recognized over a weighted-average period of approximately 14 months. The total fair value of stock options vested was approximately $0.2 million for each of the three years ended December 31, 2011, 2010 and 2009.

Restricted Stock

The following table summarizes the activity for unvested restricted stock for the years ended December 31, 2011 and 2010:

(shares in thousands)	Shares			Weighted- Average Grant Date Fair Value
Unvested, January 1, 2010		112		$	1.35
Granted during the year		131			2.75
Vested during the year		(89	)		1.88
Unvested, December 31, 2010		154			2.23
Granted during the year		165			2.06
Vested during the year		(141	)		2.06
Unvested, December 31, 2011		178		$	2.21

The total fair value of restricted stock vested during the years ended December 31, 2011 and 2010 was approximately $0.3 million and $0.2 million, respectively.