Stock Compensation Plans

2015 Equity Incentive Plan

On June 9, 2016, the stockholders of the Company approved the 2015 Equity Incentive Plan (the “2015 Plan”), which replaced the 2006 Plan. The 2015 Plan was previously adopted by the Board on October 19, 2015 and subsequently amended on January 13, 2016. The 2015 Plan authorizes the Board to award equity-based compensation in the form of (1) stock options, including incentive stock options, (2) stock appreciation rights, (3) restricted stock, (4) restricted stock units (“RSUs”), (5) performance awards, (6) other stock-based awards, and (7) performance compensation awards. Subject to adjustment as provided in the 2015 Plan, up to an aggregate of 3,000,000 shares of the Company’s common stock may be issued or transferred in connection with awards granted thereunder.

For year 2016, the Company granted an aggregate of 981,154 stock options and 261,721 RSUs. The grants were based on the fair value at the grant date with a total fair value of approximately $3.9 million. With the exception of the grants for the Board members that vested immediately, the grants will vest in tranches ratably over three years provided the employees remain employed on each of those vesting dates. The weighted average fair value per unit for the RSUs was $6.41. Compensation expense for the vested units was recognized on the grant date. The stock options have a weighted average exercise price of $6.48 and expire 10 years from the initial grant date. Compensation expense for the stock options and units that were not immediately vested is recognized over the vesting period.



	Stock Options							Restricted Stock
2015 Plan	Number of shares		Weighted average exercise price		Weighted average contractual life	Aggregate Intrinsic Value		Number of shares		Weighted average grant date fair value
					(in years)	(in thousands)
Outstanding - November 1, 2015	—		$	—	—	$	—	—		$	—
Granted	981,154		6.48		—	—		261,721		6.41
Exercised	—		—		—	—		—		—
Forfeited	(2,748	)	$	6.06	—	—		(550	)	6.06
Vested	—		—		—	—		(75,219	)	6.06
Outstanding - October 30, 2016	978,406		$	6.48	9.51	$	242	185,952		$	7.13
Unvested at October 30, 2016	917,723		$	6.36	9.55	$	22	185,952		$	7.13
Vested and unexercisable at October 30, 2016	—		—		—	—		—		—
Exercisable at October 30, 2016	60,683		$	8.33	8.98	$	—

2006 Incentive Stock Plan

The 2006 Incentive Stock Plan (the “2006 Plan”) was approved by the shareholders of the Company in April 2007 and permitted the issuance of stock options, restricted stock and restricted stock units to employees and non-employee directors of the Company. The 2006 Plan terminated on September 5, 2016 and all of the outstanding shares granted under the 2006 Plan will remain valid.

During fiscal 2016, the Company granted 189,897 stock options and 38,314 RSUs. The grants were based on the fair value at the grant date with a total fair value of approximately $0.8 million. The grants will vest in tranches ratably over three years provided the employees remain employed on each of those vesting dates. The weighted average fair value per unit for the RSUs was $7.18. The stock options have a weighted average exercise price of $7.18 and expire 10 years from the initial grant date. Compensation expense for the stock options and units that were not immediately vested is recognized over the vesting period.

During fiscal 2015, the Company granted 393,528 stock options and 170,979 RSUs. The grants were based on the fair value at the grant date with a total fair value of approximately $2.8 million. The grants will vest in tranches ratably over three years provided the employee remain employed on each of those vesting dates. The weighted average fair value per unit for the RSUs was $9.32. The stock options have a weighted average exercise price of $9.21 and expire seven years from the grant date. Compensation expense for the stock options and units that were not immediately vested is recognized over the vesting period.

During fiscal 2014, the Company granted 340,000 stock options to purchase shares of the Company's common stock. If certain stock price targets are not met on or prior to July 3, 2017, these options will expire. The closing price for the Company's stock must be no less than certain market targets for ten consecutive trading days for the stock options to be exercisable. The stock options have a weighted average exercise price of $12.59 and expire seven years from the grant date. In addition, the Company granted 15,000 shares of the Company's common stock as restricted stock awards. The weighted average fair value for these shares at the grant date was $9.24. Compensation expense was recognized on the grant date since the shares vested immediately.

The following table summarizes transactions involving outstanding stock options and non-vested restricted stock and restricted stock unit awards (stock awards) under the 2006 plan:



	Stock Options							Restricted Stock
2006 Plan	Number of shares		Weighted average exercise price		Weighted average contractual life	Aggregate Intrinsic Value		Number of shares		Weighted average grant date fair value
					(in years)	(in thousands)
Outstanding - November 3, 2013	484,150		$	6.50	5.42	$	1,041	73,334		$	7.61
Granted	340,000		$	12.59	—	—		15,000		$	9.24
Expired	(34,600	)	$	6.39	—	—		—		—
Forfeited	(25,400	)	$	6.39	—	—		—		—
Vested	—		—		—	—		(65,000	)	$	7.97
Outstanding - November 2, 2014	764,150		$	9.22	5.43	$	776	23,334		$	7.68
Granted	393,528		$	9.21	—	—		170,979		$	9.32
Expired	—		—		—	—		—		—
Forfeited	(94,000	)	$	12.49	—	—		—		—
Vested	—		—		—	—		(144,154	)	$	9.11
Exercised	(83,264	)	$	6.39	—	—
Outstanding - November 1, 2015	980,414		$	9.14	5.31	$	727	50,159		$	9.17
Granted	189,897		$	7.18	—	—		38,314		$	7.18
Exercised	(11,682	)	$	6.39	—	—
Forfeited	(216,000	)	$	8.34	—	—		—		—
Vested	—		—		—	—		(44,692	)	$	9.24
Outstanding - October 30, 2016	942,629		$	8.97	6.91	$	1	43,781		$	7.35
Unvested at October 30, 2016	214,555		$	7.34	9.37	$	1	43,781		$	7.35
Vested and unexercisable at October 30, 2016	85,000		14.00		4.67	—		—
Exercisable at October 30, 2016	643,074		$	8.84	6.38	$	—

2015 and 2006 Incentive Stock Plans

Determining Fair Value - Stock Options

The fair value of the option grants under both plans were estimated using the Black-Scholes option-pricing and Monte Carlo Simulation models which requires estimates of key assumptions based on both historical information and management judgment regarding market factors and trends.

Expected volatility - We developed the expected volatility by using the historical volatility of the Company's stock for a period equal to the expected life of the option.

Expected term - We derived our expected term assumption based on the simplified method due to a lack of historical exercise data, which results in an expected term based on the midpoint between the graded vesting dates and contractual term of an option.

Risk-free interest rate - The rates are based on the average yield of a U.S. Treasury bond whose term was consistent with the expected life of the stock options.

Expected dividend yield - We have not paid and do not anticipate paying cash dividends on our shares of common stock; therefore, the expected dividend yield was assumed to be zero.

The Company estimated the fair value of each stock option grant using the Black-Scholes option-pricing model and Monte Carlo simulation when applicable. The weighted average assumptions used to estimate the fair value of stock options for the respective fiscal years were as follows:



	October 30, 2016	November 1, 2015	November 2, 2014
Weighted-average fair value of stock option granted	$2.41	$2.97	$3.21
Expected volatility	40.0%	40.0%	48.0%
Expected term (in years)	6.00	4.67	7.00
Risk-free interest rate	1.32%	1.53%	2.25%
Expected dividend yield	0.0%	0.0%	0.0%

Share-based compensation expense was recognized in Selling, administrative and other operating costs in the Company’s Consolidated Statements of Operations as follows (in thousands):



	Year Ended
	October 30, 2016		November 1, 2015		November 2, 2014

Selling, administrative and other operating costs	$	1,828	$	2,906	$	1,198
Total	$	1,828	$	2,906	$	1,198

As of October 30, 2016, total unrecognized compensation expense of $3.3 million related to stock options and RSU's from these grants will be recognized over the remaining average vesting period of 2.4 years of which $2.1 million, $1.0 million, and $0.2 million is expected to be recognized in fiscal 2017, 2018 and 2019, respectively.