Note

. Stock Based Compensation

The Plan is administered by the Compensation Committee or such other Board committee (or the entire Board) as

may

be designated by the Board (the “Committee”). At

July 2, 2017,

the Company has reserved approximately

6.2

million shares of common stock for issuance, including options previously authorized for issuance under the

1999

Stock Incentive Plan.

The amounts of stock-based compensation expense recognized within operating income (*) in the periods presented are as follows:

	Years Ended
	July 2, 2017		July 3, 2016		June 28, 2015

	(in thousands, except per share data)

Stock options	$	446	$	432	$	459
Restricted stock awards		5,248		5,911		5,503
Total		5,694		6,343		5,962
Deferred income tax benefit		2,213		1,987		2,087
Stock-based compensation expense, net	$	3,481	$	4,356	$	3,875

Stock based compensation expense is recorded within the following line items of operating expenses:

	Years Ended
	July 2, 2017 (*)		July 3, 2016		June 28, 2015

	(in thousands)

Marketing and sales	$	1,624	$	2,306	$	1,866
Technology and development		315		493		392
General and administrative		3,755		3,544		3,704
Total	$	5,694	$	6,343	$	5,962

Stock-based compensation expense has

not

been allocated between business segments, but is reflected as part of Corporate overhead. (Refer to

Note

15.

Business Segments).

(*)

Excludes approximately

$0.4mm

of stock-based compensation expense recorded within the gain on the sale of Fannie

May,

resulting from the acceleration of vesting of shares for Fannie

May

personnel, upon completion of the disposition.

Stock Options

The weighted average fair value of stock options on the date of grant, and the assumptions used to estimate the fair value of the stock options using the Black-Scholes option valuation model, were as follows:

Years ended

July 2, 2017

(1)

July 3, 2016

(1)

June 28, 2015

Weighted average fair value of options granted

n/a

4.86

Expected volatility

n/a

Expected life (in years)

n/a

7.3

Risk-free interest rate

n/a

1.9

Expected dividend yield

n/a

0.0

(

)

options were granted during the fiscal years ended

July 2, 2017

and

July 3, 2016.

The expected volatility of the option is determined using historical volatilities based on historical stock prices. The Company estimated the expected life of options granted based upon the historical weighted average. The risk-free interest rate is determined using the yield available for

zero

-coupon U.S. government issues with a remaining term equal to the expected life of the option. The Company has never paid a dividend, and as such the dividend yield is

0.0%.

The following table summarizes stock option activity during the year ended

July 2, 2017:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (000s)

Outstanding beginning of period		2,182,234		$	2.49
Granted		-		$	-
Exercised		(54,500	)	$	5.22
Forfeited/Expired		-		$	-
Outstanding end of period		2,127,734		$	2.42	3.8 years	$	15,608

Options vested or expected to vest at end of period		2,127,734		$	2.42	3.8 years	$	15,608
Exercisable at July 2, 2017		1,478,734		$	2.38	3.7 years	$	10,910

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company

’s closing stock price on the last trading day of fiscal

2017

and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on

July 2, 2017.

This amount changes based on the fair market value of the Company’s stock. The total intrinsic value of options exercised for the years ended

July 2, 2017,

July 3, 2016

and

June 28, 2015

was

$0.5,

$4.2

million and

$3.6

million, respectively.

The following table summarizes information about stock options outstanding at

July 2, 2017:

		Options Outstanding						Options Exercisable
Exercise Price		Options Outstanding		Weighted - Average Remaining Contractual Life (years)		Weighted - Average Exercise Price		Options Exercisable		Weighted - Average Exercise Price

$	1.79		1,000,000		3.3	$	1.79		750,000	$	1.79
$	2.22 – 2.44		32,000		2.5	$	2.43		32,000	$	2.43
$	2.63		1,010,000		4.3	$	2.63		635,000	$	2.63
$	3.26 – 10.20		85,734		4.4	$	7.31		61,734	$	6.92

			2,127,734		3.8	$	2.42		1,478,734	$	2.38

As of

July 2, 2017,

the total future compensation cost related to non-vested options

not

yet recognized in the statement of operations was

$0.8

million and the weighted average period over which these awards are expected to be recognized was

1.9

years.

Restricted Stock

The Company grants shares of Common Stock to its employees that are subject to restrictions on transfer and risk of forfeiture until fulfillment of applicable service conditions and, in certain cases, holding periods (Restricted Stock).

The following table summarizes the activity of non-vested restricted stock during the year ended

July 2, 2017:

	Shares			Weighted Average Grant Date Fair Value

Non-vested – beginning of period		2,017,069		$	6.78
Granted		819,406		$	9.88
Vested		(965,429	)	$	6.90
Forfeited		(518,173	)	$	9.72
Non-vested - end of period		1,352,873		$	7.44

The fair value of non-vested shares is determined based on the closing stock price on the grant date. As of

July 2, 2017,

there was

$5.4

million of total unrecognized compensation cost related to non-vested restricted stock-based compensation to be recognized over a weighted-average period of

1.9

years.