Stock Incentive Plans

9 Months Ended

Sep. 30, 2011

Stock Incentive Plans

Stock Incentive Plans

Note E – Stock Incentive Plans

On June 20, 2006, the shareholders approved the 2006 Stock Incentive Plan. The aggregate number of shares of common stock that would have been subject to awards under the 2006 Stock Incentive Plan, subject to adjustment upon a change in capitalization, was 3,000. On June 16, 2009, the shareholders approved an amendment to the 2006 Stock Incentive Plan to increase the number of authorized awards that may be issued under the 2006 Stock Incentive Plan from 3,000 to 5,100. On June 25, 2010, the shareholders approved an amendment to the 2006 Stock Incentive Plan to increase the number of authorized awards that may be issued under the 2006 Stock Incentive Plan from 5,100 to 7,850.

The 2006 Stock Incentive Plan allows for the issuance of stock options, stock appreciation rights ("SARs"), PARS and RS, subject to share availability. Vesting of equity instruments issued under the 2006 Stock Incentive Plan is determined on a grant-by-grant basis. Options expire at the end of 10 years from the date of grant, and Kforce issues new shares upon exercise of options. The 2006 Stock Incentive Plan terminates on April 28, 2016. The Employee Incentive Stock Option Plan expired in 2005.

Stock Options

The following table presents the activity under each of the stock incentive plans discussed above for the nine months ended September 30, 2011:

	Employee Incentive     Stock Option     Plan		2006 Stock      Incentive     Plan		Total			Weighted      Average Exercise     Price per Share		Total Intrinsic Value of Options     Exercised
Outstanding as of December 31, 2010		587		98		685		$	9.47
Exercised		(297)		—		(297	)	$	8.75	$	2,583
Forfeited/Cancelled		(12)		—		(12	)	$	10.75
Outstanding and exercisable as of September 30, 2011		278		98		376		$	10.00

No compensation expense was recorded during the three or nine months ended September 30, 2011 or 2010. As of September 30, 2011, there was no unrecognized compensation cost related to stock options.

Stock Appreciation Rights

Although no such requirement exists, SARs are generally granted (if any) on the first trading day of each year to certain Kforce executives based on the extent by which annual long-term incentive performance goals, which are established by Kforce's Compensation Committee during the first 90 days of the year of performance, are certified by the Compensation Committee as having been met. SARs generally cliff vest three years from the date of issuance; however, vesting is accelerated if Kforce's stock price exceeds the stock price at the date of grant by 30% for a period of 10 trading days, or if the Compensation Committee determines that the criteria for acceleration are satisfied. There were no SARs granted in the nine months ended September 30, 2011 and 2010.

The following table presents the activity for the nine months ended September 30, 2011:

	# of SARs			Weighted Average Exercise Price Per SAR		Total Intrinsic Value of SARs Exercised
Outstanding as of December 31, 2010		169		$	10.32
Exercised		(169	)	$	10.32	$	1,278
Outstanding and exercisable as of September 30, 2011		—		$	—

No compensation expense related to SARs was recorded during the three or nine months ended September 30, 2011 or 2010. There was no unrecognized compensation expense related to SARs as of September 30, 2011.

Performance Accelerated Restricted Stock

PARS are periodically granted to certain Kforce executives and Kforce's Board and, for Kforce's executives, are generally based on the extent by which annual long-term incentive performance goals, which are established by Kforce's Compensation Committee during the first 90 days of the year of performance, are certified by the Compensation Committee as having been met. PARS granted during the three months ended March 31, 2011 will cliff vest three years from the grant date. However, vesting is accelerated if Kforce's closing stock price exceeds the stock price at the date of grant by a pre-established percentage (which has historically ranged from 40—50%) for a period of 10 trading days, or if the Compensation Committee determines that the criteria for acceleration are satisfied.

Certain PARS granted during the three months ending March 31, 2011 are subject to forfeiture based upon the level of attainment of performance conditions established by the Compensation Committee. Vesting for these PARS may not occur until the Compensation Committee has certified the level of attainment of the performance conditions.

PARS contain voting rights and are included in the number of shares of common stock issued and outstanding. PARS granted subsequent to September 30, 2009 contain a non-forfeitable right to dividends or dividend equivalents in the form of additional shares of restricted stock containing the same vesting provisions as the underlying award. The following table presents the activity for the nine months ended September 30, 2011:

	# of PARS			Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2010		1,436		$	12.87
Granted		1,569		$	16.37
Vested		(69	)	$	13.31
Outstanding as of September 30, 2011		2,936		$	14.73

The fair market value of PARS is determined based on the closing stock price of Kforce's common stock at the date of grant, and is amortized on a straight-line basis over the derived service period, which is determined using a lattice model. The derived service period for the PARS granted during the nine months ended September 30, 2011 is 3.00 years, which is subject to any acceleration provisions being met.

Kforce recognized total compensation expense related to PARS of $2,761 and $7,802 during the three and nine months ended September 30, 2011, respectively. Kforce recognized total compensation expense related to PARS of $1,337 and $3,745 during the three and nine months ended September 30, 2010, respectively. As of September 30, 2011, total unrecognized compensation expense related to PARS was $22,279, which will be recognized over a weighted average remaining period of 2.14 years.

Restricted Stock

RS is periodically granted to certain Kforce executives and is generally based on the extent by which annual long-term incentive performance goals, which are established by Kforce's Compensation Committee during the first 90 days of the year of performance, are certified by the Compensation Committee as having been met. RS granted during the nine months ended September 30, 2011 had vesting terms of two years.

RS contain voting rights and are included in the number of shares of common stock issued and outstanding. RS granted subsequent to September 30, 2009 contain a non-forfeitable right to dividends or dividend equivalents in the form of additional shares of restricted stock containing the same vesting provisions as the underlying award. The following table presents the activity for the nine months ended September 30, 2011:

	# of RS			Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2010		462		$	10.68
Granted		35		$	13.78
Vested		(99	)	$	10.09
Outstanding as of September 30, 2011		398		$	11.10

The fair market value of restricted stock is determined based on the closing stock price of Kforce's common stock at the date of grant, and is amortized on a straight-line basis over the service period.

During the three and nine months ended September 30, 2011, Kforce recognized compensation expense related to RS of $327 and $944, respectively. Kforce recognized compensation expense related to RS of $295 and $792 for the three and nine months ended September 30, 2010, respectively. As of September 30, 2011, total unrecognized compensation expense related to RS was $3,140, which will be recognized over a weighted average remaining period of 3.02 years.