PFSWEB, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

     Stock-based compensation charged against income was $0.8 million and $0.4 million for the years ended December 31, 2010 and 2009, respectively. As of December 31, 2010, there was $1.5 million of total unrecognized compensation costs related to unvested stock options, which is expected to be recognized over a weighted average period of approximately 1.7 years.

     As of December 31, 2010, the Company had the following share-based compensation plans:

PFSweb Plan Options

     The Company has an Employee Stock and Incentive Plan and an Outside Director Stock Option and Retainer Plan under which an aggregate of 3,192,341 shares of common stock have been authorized for issuance (the “Stock Options Plans”) and an outstanding stock option agreement under which 7,446 shares were originally authorized for issuance. The Stock Option Plans provide for the granting of incentive awards in the form of stock options to directors, executive management, key employees, and outside consultants of the Company. The rights to purchase shares under the employee stock option agreements typically vest over a three-year period, one-twelfth each quarter. Stock options must be exercised within 10 years from the date of grant. Stock options are generally issued such that the exercise price is equal to the market value of the Company’s common stock at the date of grant.

     As of December 31, 2010, there were 845,443 shares available for future grants under the Stock Option Plans.

     The following table summarizes stock option activity under the Stock Option Plans:

														Weighted
														Average
										Weighted				Remaining				Aggregate
										Average				Contractual				Intrinsic
										Exercise				Life (in				Value (in
		Shares				Price Per Share				Price				years)				millions)
Outstanding, December 31, 2009			1,666,258			$	1.01—$13.91			$	4.77
Granted			653,500			$	2.39—$4.00			$	3.95
Exercised			(107	)		$	1.01			$	1.01
Canceled			(125,978	)		$	1.01—$12.64			$	8.98
Outstanding, December 31, 2010			2,193,673			$	1.01—$13.91			$	4.28
Exercisable, December 31, 2010			1,453,788			$	1.01—$13.91			$	4.73				4.4			$	0.7
Exercisable and expected to vest, December 31, 2010			2,059,155			$	1.01—$13.91			$	4.34				3.9			$	1.1

     The weighted average fair value per share of options granted during the years ended December 31, 2010 and 2009 was $2.82 and $1.04, respectively.

PFSweb Non-plan Options

     Prior to the Company’s initial public offering, certain of the Company’s employees were holders of stock options of the Company’s former parent company, Daisytek International Corporation (“Daisytek”), issued under Daisytek’s stock option plans.

     In connection with the completion of the Company’s spin-off from Daisytek on July 6, 2000 (the “Spin-off”), all outstanding Daisytek stock options were replaced with substitute stock options. Daisytek options held by PFSweb employees were replaced (at the option holder’s election made prior to the Spin-off) with either options to acquire shares of PFSweb common stock or options to acquire shares of both Daisytek common stock and PFSweb common stock (that may be exercised separately) (the “Unstapled Options”). Options held by Daisytek employees were replaced (at the option holder’s election made prior to the Spin-off) with either options to acquire shares of Daisytek common stock or Unstapled Options.

     As a result of the stock option replacement process described above, in conjunction with the Spin-off, PFSweb stock options (the “Non-plan Options”) were issued to PFSweb and Daisytek officers, directors and employees. These options were issued as one-time grants and were not issued under the Stock Option Plans. The terms and provisions of the Non-plan Options are substantially the same as options issued under the Stock Option Plans.