STOCK-BASED COMPENSATION

The Company has two equity incentive plans, the 2004 Stock Incentive Plan (“2004 Plan”) and the 1999 Stock Option Plan (“1999 Plan”), which provide for the granting of non-qualified and incentive stock options, restricted stock and restricted stock units, stock appreciation rights and other awards to employees, directors and consultants.

1999 Stock Option Plan. In July 1999, the Company’s Board of Directors approved the 1999 Stock Option Plan and in August 2001, the Company’s shareholders approved an amendment to the 1999 Plan such that 15% of the outstanding shares of the Company would always be available for grants under the 1999 Plan. The 1999 Plan is designed to encourage selected employees and directors to improve operations and increase profits, to accept or continue employment or association with the Company through participation in the growth in the value of the common stock. The 1999 Plan requires that option exercise prices be not less than fair market value per share of common stock on the option grant date for incentive and nonqualified options. The options issued under the 1999 Plan generally vest in between three and five years. Option expiration dates are established by the plan administrator but may not be later than 10 years after the date of the grant.

In November 2007, the shareholders of the Company approved the termination of the 1999 Plan. No new option awards will be made under the 1999 Plan and the outstanding awards under the 1999 Plan will continue to be subject to the terms and conditions of the 1999 Plan.

2004 Stock Incentive Plan. In October 2004, the Company’s Board of Directors and the stockholders approved the 2004 Plan. In November 2007, the 2004 Plan was amended and approved by the Company’s stockholders. The maximum number of shares of common stock available for issuance under the 2004 Plan is 14.8% of the Company’s outstanding common stock measured from time to time. In addition, the number of shares of the Company’s common stock reserved for issuance will also automatically increase by an additional 1.5% on the first day of each of four fiscal years starting July 1, 2007. At March 31, 2012, there were a maximum of 2,099,632 shares available for issuance under the limits of the 2004 Plan.

Stock Options. The Company’s income before income taxes and net income for the three months ended March 31, 2012 and 2011 included stock option compensation cost of zero and $3, respectively. The total income tax benefit was zero and $1 for the three months ended March 31, 2012 and 2011, respectively. At March 31, 2012, expense related to stock option grants has been fully recognized.

A summary of stock option activity under the Plans during the period July 1, 2010 to March 31, 2012 is presented below:



	Number of Shares		Weighted-average Exercise Price Per Share
Outstanding-July 1, 2010	395,920		$	8.52
Granted	—		$	—
Exercised	(128,381	)	$	7.18
Cancelled	(6	)	$	7.35
Outstanding-June 30, 2011	267,533		$	9.15
Granted	—		$	—
Exercised	(69,322	)	$	9.75
Cancelled	(2,894	)	$	9.10
Outstanding-March 31, 2012	195,317		$	8.94
Options exercisable-June 30, 2011	267,533		$	9.15
Options exercisable-March 31, 2012	195,317		$	8.94

The following table summarizes information as of March 31, 2012 concerning currently outstanding and exercisable options:



Options Outstanding				Options Exercisable
Exercise Prices		Number Outstanding	Weighted-Average Remaining Contractual Life (Years)	Number Exercisable	Weighted- Average Exercise Price
$	7.35	56,900	4.3	56,900	$	7.35
$	8.50	7,500	3.7	7,500	$	8.50
$	9.20	7,500	3.4	7,500	$	9.20
$	9.50	78,300	3.3	78,300	$	9.50
$	10.00	44,617	2.2	44,617	$	10.00
$	11.00	500	0.3	500	$	11.00
$	8.94	195,317	3.4	195,317	$	8.94

The aggregate intrinsic value of options outstanding and options exercisable under the Plans at March 31, 2012 was $1,590.

Restricted Stock and Restricted Stock Units. Under the 2004 Plan, employees and directors are eligible to receive grants of restricted stock and restricted stock units. The Company determines stock-based compensation expense using the fair value method. The fair value of restricted stock and restricted stock units is equal to the closing sale price of the Company’s common stock on the date of grant.

During the quarters ended March 31, 2012 and 2011, the Company granted 14,068 and 9,315 restricted stock units respectively, to employees and directors. Restricted stock unit (“RSU”) awards granted during these quarters vest over three years, one-third on each anniversary date, except for any RSUs granted to our CEO, vest one-third on each fiscal year end.

The Company’s income before income taxes and net income for the quarters ended March 31, 2012 and 2011 included stock award expense of $669 and $604, respectively. The income tax benefit was $268 and $236, respectively. For the nine months ended March 31, 2012 and 2011, stock award expense was $1,850 and $1,536, with total income tax benefit of $740 and $606, respectively. The Company recognizes compensation expense based upon the grant-date fair value divided by the vesting and the service period between each vesting date. At March 31, 2012, unrecognized compensation expense related to non-vested awards aggregated to $4,024 and is expected to be recognized in future periods as follows:



	Stock Award Compensation Expense
	(Dollars in Thousands)
For the fiscal year remainder:
2012	$	658
2013	2,287
2014	950
2015	129
Total	$	4,024

The following table presents the status and changes in restricted stock grants from July 1, 2010 through March 31, 2012:



	Restricted Stock and Restricted Stock Unit Shares		Weighted-Average Grant-Date Fair Value
Non-vested balance at July 1, 2010	199,148		$	7.88
Granted	399,582		$	11.95
Vested	(197,442	)	$	9.04
Cancelled	(11,214	)	$	11.77
Non-vested balance at June 30, 2011	390,074		$	11.35
Granted	153,221		$	13.48
Vested	(68,673	)	$	10.48
Cancelled	(4,075	)	$	15.37
Non-vested balance at March 31, 2012	470,547		$	12.18

The total fair value of shares vested for the three and nine months ended March 31, 2012 was $46 and $1,311, respectively.

2004 Employee Stock Purchase Plan. In October 2004, the Company’s Board of Directors and stockholders approved the 2004 Employee Stock Purchase Plan, which is intended to qualify as an “Employee Stock Purchase Plan” under Section 423 of the Internal Revenue Code. An aggregate total of 500,000 shares of the Company’s common stock has been reserved for issuance and will be available for purchase under the 2004 Employee Stock Purchase Plan. At March 31, 2012, there have been no shares issued under the 2004 Employee Stock Purchase Plan.