11.	Share-Based Compensation

On September 23, 2010, the Company granted stock options to certain executives that were subject to defeasance in the event that the 2010 Omnibus Incentive Compensation Plan (“2010 Omnibus Plan”) was approved by the shareholders at the Company's Annual Shareholder meeting held on December 1, 2010. Pursuant to the approval of the 2010 Omnibus Plan, the stock options were defeased and replaced with grants of performance-based stock units (“PBSUs”). Subject to the respective executive's continued employment, the PBSUs will vest at the end of the performance period, which consists of the Company's 2011, 2012 and 2013 years. The stock option awards would have vested at a cumulative rate of 33% per year beginning on the first anniversary of the grant date.

The number of PBSUs that will ultimately be earned and will, therefore, vest is based on total shareholder return, which is defined as increases in the Company's stock price plus dividends paid during the performance period. The target number of shares that will be earned by and awarded to the seven executives in the event that there is no change in total shareholder return is 62,300. The maximum number of shares that may be awarded to the seven executives is 150% of the target number of shares, or 93,450. The probability of the actual shares expected to be earned is considered in the grant date valuation; therefore, the expense will not be adjusted to reflect the actual units earned. The vesting of the PBSUs is also subject to the achievement of a minimum level of operating income during the performance period. If this performance goal is not met, no PBSUs will be awarded and no compensation expense will be recorded.

The fair value of the PBSUs was determined using the Monte-Carlo simulation model, which simulates a range of possible future stock prices and estimates the probabilities of the potential payouts. This model incorporates several key assumptions that are similar to those used to value stock options. Those inputs include expected volatility, risk-free rate of return and expected dividend yield. Additionally, the Monte-Carlo simulation model uses the 60-consecutive calendar days beginning average price from July 1, 2010 to August 31, 2010.

The defeasance of the stock options and the replacement grant of the PBSUs were accounted for as a modification and resulted in incremental compensation expense of $1,221. Incremental compensation expense is defined as the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. The sum of the incremental compensation expense and the remaining unrecognized compensation expense for the original stock option award at the modification date will be recorded over the modified service period (See Note 1).

During the second quarter of 2011, based on the Company's determination that a performance goal would not be achieved with respect to a portion of one executive's nonvested stock grants, the Company reversed approximately $314 of share-based compensation expense. The Company did not have any similar reversals in the prior year.

Share-based compensation expense is recorded in general and administrative expenses. For the quarter and nine-month period ended April 29, 2011, share-based compensation expense totaled $482 and $1,669, respectively, for stock options and $1,626 and $4,997 respectively, for nonvested stock. For the quarter and nine-month period ended April 29, 2011, share-based compensation expense for PBSUs totaled $308 and $669, respectively. For the quarter and nine-month period ended April 30, 2010, share-based compensation expense totaled $727 and $2,438, respectively, for stock options and $3,536 and $7,650, respectively, for nonvested stock.