Share-Based Compensation

We have two stock-based compensation plans covering officers, directors, certain employees, and consultants: the 2004 Equity Incentive Plan (the “2004 Plan”) and the 2006 Long-Term Equity Incentive Plan (the “2006 Plan”). The plans are designed to motivate and retain individuals who are responsible for the attainment of our primary long-term performance goals. The plans provide a means whereby the participants develop a further sense of proprietorship and personal involvement in our development and financial success, thereby advancing the interests of the Company and its stockholders. Although we do not have a formal policy on the matter, we issue new shares of our common stock to participants upon the exercise of options or upon the vesting of restricted stock, restricted stock units, or performance shares, out of the total amount of common shares applicable for issuance or vesting under either the 2006 Plan or the 2004 Plan. Shares are available for new issuance only under the 2006 Plan. The 2004 Plan has no shares remaining for issuance, and remaining 2004 Plan shares are outstanding only for the exercise of currently outstanding options.

The 2006 Plan permits the grant of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards, and other share-based awards to participants of the 2006 Plan selected by our Board of Directors or a committee of the Board that administers the 2006 Plan. We reserved 12,200,000 shares of our common stock for issuance under the 2006 Plan. The terms and conditions of awards under the 2006 Plan are determined by the Compensation Committee. Some of the awards issued under the 2006 Plan are subject to accelerated vesting in the event of a change in control as such an event is defined in the 2006 Plan.

We recognize compensation expense equal to the grant-date fair value for all share-based payment awards that are expected to vest. This expense is recorded on a straight-line basis over the requisite service period of the entire award, unless the awards are subject to market or performance conditions, in which case we recognize compensation expense over the requisite service period of each separate vesting tranche, to the extent the occurrence of such conditions are probable. All compensation expense related to our share-based payment awards is recorded in “Selling, general, and administrative” expense in the Consolidated Statements of Operations and Comprehensive Loss.

Restricted Stock

During fiscal 2015, the Board of Directors granted certain of our employees and executive officers restricted stock awards. The restricted stock awards vest either in equal annual increments over three years or three years after the date of grant. These awards are time-based and are not based upon attainment of performance goals.

As of January 2, 2016, there was $1.2 million of total unrecognized compensation expense related to restricted stock. The unrecognized compensation expense is expected to be recognized over a weighted average term of 1.4 years. As of January 2, 2016, the weighted average remaining contractual term for our restricted stock was 1.4 years and the maximum contractual term is 3.0 years.

The following table summarizes activity for our restricted stock awards during fiscal 2015:



	Restricted Stock Awards
	Number of Awards		Weighted Average Fair Value
Outstanding as of January 3, 2015	2,189,178		$	1.68
Granted	600,000		0.99
Vested ⁽¹⁾	(1,062,782	)	1.39
Forfeited	(23,000	)	1.70
Outstanding as of January 2, 2016	1,703,396		$	1.46


⁽¹⁾	The total fair value vested in fiscal 2015, fiscal 2014, and fiscal 2013 was $1.5 million, $2.4 million, and $6.4 million, respectively.

Restricted Stock Units

During fiscal 2015, the Board of Directors granted certain of our employees, executive officers, and directors restricted stock units. The restricted stock units vest either in equal annual increments over three years or three years after the date of grant. These awards are time-based and are not based upon attainment of performance goals.

As of January 2, 2016, there was $0.7 million of total unrecognized compensation expense related to restricted stock units. The unrecognized compensation expense is expected to be recognized over a weighted average term of 2.3 years. As of January 2, 2016, the weighted average remaining contractual term for our restricted stock units was 2.3 years, and the maximum contractual term is 3.0 years.

The following table summarizes activity for our restricted stock units during fiscal 2015:



	Restricted Stock Units
	Number of Awards		Weighted Average Fair Value
Outstanding as of January 3, 2015	54,054		$	1.13
Granted	1,448,661		1.00
Vested ⁽¹⁾	—		—
Forfeited	(100,909	)	0.99
Outstanding as of January 2, 2016	1,401,806		$	1.00


⁽¹⁾	No restricted stock units vested in fiscal 2015, fiscal 2014, or fiscal 2013.

Performance shares

During fiscal years 2015 and 2013, the Board of Directors granted certain of our directors, executive officers, and employees awards of performance shares of our common stock. The performance shares are released only upon the successful achievement of specific, measurable performance criteria approved by the Compensation Committee. The performance shares, when earned, vest in three equal tranches. If the performance targets are not met, the awards will be canceled, although performance criteria for the first tranche of the performance shares granted in fiscal 2013 was waived, and performance criteria have been met for all other tranches of performance share vestings.

As of January 2, 2016, there was $0.6 million of total unrecognized compensation expense related to performance shares. The unrecognized compensation expense is expected to be recognized over weighted average term of 2.3 years. As of January 2, 2016, the weighted average remaining contractual term for our performance shares was 1.5 years and the maximum contractual term is 3.0 years.

The following table summarizes activity for our performance share awards during fiscal 2015:



	Performance Shares
	Number of Awards		Weighted Average Fair Value
Outstanding as of January 3, 2015	1,102,089		$	1.56
Granted	727,500		0.94
Vested ^{(1) (2)}	(551,041	)	2.90
Forfeited	(15,481	)	1.59
Outstanding as of January 2, 2016 ⁽²⁾	1,263,067		$	0.90


⁽¹⁾	The total fair value vested in fiscal 2015, fiscal 2014, and fiscal 2013 was $1.6 million, $1.7 million and $1.5 million, respectively.

⁽²⁾

During fiscal 2015, a total of six individuals participating in the plan were no longer employed by the Company or otherwise eligible to meet the service condition of these awards. The Compensation Committee approved an amendment to the applicable Performance Share Award Agreements to allow these shares to vest, if and when they vest for individuals employed by the Company. These amendments were determined to be modifications of the awards, from equity-based awards to liability awards, and adjustments related to the difference in fair value were recorded in fiscal 2015. Liability awards are subsequently marked to market on a quarterly basis. As of January 2, 2016, the fair value of the performance shares was based on the closing price of our common stock on January 2, 2016, of $0.53. Of these shares, 414,284 shares vested in fiscal 2015, and 469,418 of these shares were remaining as of January 2, 2016. The remaining performance shares are expected to vest during fiscal 2016.

Options

The tables below summarize activity and include certain additional information related to our outstanding stock options granted under the 2004 Plan and 2006 Plan for the year ended January 2, 2016. The maximum contractual term for stock options is ten years. There have been no new employee stock option grants and no stock option exercises during fiscal years 2015, 2014, and 2013.



	Options
	Shares		Weighted Average Exercise Price
Outstanding as of January 3, 2015	784,500		$	5.05
Granted	—		—
Exercised	—		—
Forfeited	—		—
Expired	(25,500	)	12.99
Outstanding and exercisable as of January 2, 2016	759,000		$	4.77



	Outstanding and Exercisable
Price	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)
$4.66	750,000	$	4.66	2.2
$14.01	9,000	$	14.01	0.4
	759,000			2.2

Compensation Expense

Share-based compensation expense is recognized only for those awards that are expected to vest, with forfeitures estimated at the date of grant based on our historical experience and future expectations. We recognize the effect of adjusting the estimated forfeiture rates in the period in which we change such estimated rates. Total share-based compensation expense from restricted stock, performance shares, and stock options, net of estimated forfeitures, was as follows:



	Fiscal Year Ended January 2, 2016 ⁽¹⁾		Fiscal Year Ended January 3, 2015 ⁽²⁾		Fiscal Year Ended January 4, 2014 ⁽³⁾
	(In thousands)
Restricted Stock	$	1,606	$	1,941	$	3,521
Performance Shares	127		1,725		2,596
Restricted Stock Units and Options ⁽⁴⁾	94		174		—
Total	$	1,827	$	3,840	$	6,117

⁽¹⁾

See “Performance shares”, above, for a discussion of the modifications to certain performance share awards, now recorded as liability awards. This amendment resulted in an adjustment to fully expense the awards reclassified as liability awards during 2015, and to mark to market all outstanding liability awards on a quarterly basis. A credit to share-based compensation expense of $0.2 million was accordingly recorded during fiscal 2015 on these outstanding performance shares.

⁽²⁾

See “Performance shares”, above, for a discussion of the 2014 modification to certain performance share awards, now recorded as liability awards. These amendments resulted in an adjustment to fully expense the awards reclassified as liability awards during 2014, and to mark to market the outstanding liability awards on a quarterly basis. Share-based compensation expense of $1.2 million was accordingly recorded during fiscal 2014 on these performance shares.


⁽³⁾	Approximately $2.9 million of total share-based compensation during fiscal 2013 was related to the restructuring event discussed in Footnote 4.


⁽⁴⁾	For all fiscal years presented, there was no compensation expense for options. All compensation expense presented pertains to Restricted Stock Units.

We recognized related income tax benefits in fiscal years 2015, 2014, and 2013 of $0.7 million, $1.5 million, and $2.4 million, respectively, which have been offset by a valuation allowance. We present the benefits of tax deductions in excess of recognized compensation expense as both a financing cash inflow and an operating cash outflow in our Consolidated Statements of Cash Flows when present. There were no material excess tax benefits in fiscal years 2015, 2014, and 2013.