17. Stock Options and Incentive Plans

We recognized no stock option expense during 2012, 2011 or 2010 and there are currently no remaining unvested options for which stock-option compensation costs will be recognized in future periods.

There have been no stock options granted since November 2002 and we have no stock option plan under which options may be granted. Options issued under previous plans and still outstanding were exercisable in five cumulative annual amounts beginning twelve months after date of grant. Option exercise prices were normally equal to and were not permitted to be less than the market value on the date of grant. Unexercised options generally terminate twenty years after the date of grant for all plans, and must be exercised within ten years of retirement.

Activity with respect to these plans is as follows:

	2012	2011	2010
Shares under option January 1	597,313	639,163	651,143
Options canceled	23,300	400	4,750
Options exercised	66,700	41,450	7,230
Shares under option at December 31	507,313	597,313	639,163
Options exercisable at December 31	507,313	597,313	639,163

The weighted average exercise price is as follows:

	2012	2011	2010
Shares under option January 1	$19.54	$19.51	$19.50
Options granted	-	-	-
Options canceled	21.23	20.54	21.98
Options exercised	19.65	19.03	17.66
Shares under option December 31	19.45	19.54	19.51
Options exercisable December 31	19.45	19.54	19.51

As of December 31, 2012, the aggregate intrinsic value of vested options was $1.4 million. The aggregate intrinsic value of options exercised was $0.2 million in 2012, $0.3 million in 2011, and was insignificant in 2010.

In 2011, shareholders approved the Albany International 2011 Incentive Plan, replacing the similar 2005 Incentive Plan approved by shareholders in 2005. Awards granted to date under these plans provide key members of management with incentive compensation based on achieving certain performance targets over a three year period. Such awards are paid out partly in cash and partly in shares of Class A Common Stock. In March 2012 we issued 6,727 shares and made cash payments totaling $0.2 million, and in March 2011, we issued 32,177 shares and made cash payments totaling $0.8 million, and in March 2010, we issued 22,844 shares and made cash payments totaling $1.1 million under these plans. Shares that are expected to be paid out are included in the calculation of diluted earnings per share. If a person terminates employment prior to the award becoming fully vested, the person may forfeit all or a portion of the incentive compensation award. Expense associated with this these awards is recognized over the vesting period, which includes the year for which performance targets are measured and may, if payment is made over three years, include the two subsequent years. In connection with this plan, we recognized expense of $2.4 million in 2012 and 2011, and $1.5 million in 2010.

In 2011, the Board of Directors modified the annual incentive plan for executive management whereby 40% of the earned incentive compensation will be paid in the form of shares of Class A Common Stock. In March 2012, the Company issued 27,768 shares and made cash payments totaling $1.5 million as a result of performance in 2011. Expense recorded for this plan was $3.4 million in 2012 and $2.7 million in 2011.

In 2003, the Company adopted a Restricted Stock Program under which certain key employees are awarded restricted stock units. Such units vest over a five-year period and are paid annually in cash based on current market prices of the Company's stock. The amount of compensation expense is subject to changes in the market price of the Company's stock. The amount of compensation cost attributable to such units is recorded in Selling and general expenses and was $1.9 million in 2012, $2.5 million in 2011, and $2.8 million in 2010. The Company has not awarded new restricted stock units since November 2010. However, awards up to that time will continue to vest until 2015.

In 2012, the Company adopted a Phantom Stock Plan that replaces the Restricted Stock Program. Awards under this program also vest over a five-year period and are paid annually in cash based on current market prices of the Company's stock. Under this program, employees may earn more or less than the target award based on the Company's results in the year of the award. We recognized expense of $0.5 million in 2012 for this plan.

In 2008, the Company granted restricted stock units to certain executives. Upon vesting, each restricted stock unit is payable in cash. These grants vested in 2011 and 2012. Expense recognized for these grants was $0.5 million in 2012, $1.3 million in 2011, and $1.5 million in 2010. In 2012, the Company granted additional restricted stock units to two executives. The amount of compensation expense is subject to changes in the market price of the Company's stock and is recorded in Selling and general expenses. These grants will vest various periods from 2015 to 2017. Expense recognized for these grants was $0.4 million in 2012.

The Company maintains a voluntary savings plan covering substantially all employees in the United States. The Plan, known as the ProsperityPlus Savings Plan, is a qualified plan under section 401(k) of the U.S. Internal Revenue Code. Under the plan, employees may make contributions of 1% to 15% of their wages, subject to contribution limitations specified in the Internal Revenue Code. The Company matches between 50% and 100% of each dollar contributed by employees up to a maximum of 5% of pretax income. Prior to February 2011, the Company match was in the form of Class A Common Stock, but the Company has made matching contributions in cash since that date. The investment of employee contributions to the plan is self-directed. The Company's cost of the plan amounted to $3.8 million for 2012, and $3.7 million for 2011 and 2010.

The Company's profit-sharing plan covers substantially all employees in the United States. After the close of each year, the Board of Directors determines the amount of the profit-sharing contribution. Through 2010, profit sharing contributions were made in the form of Class A Common Stock, but contributions have been made in cash since 2010. The expense recorded for this plan was $1.8 million in 2012, and $2.3 million in 2011 and 2010.