The 2010 Omnibus Incentive Compensation Plan (“2010 Plan”) was approved by the Company’s stockholders at the January 2011 Annual Meeting of the Shareholders. This plan replaced IEC’s 2001 Stock Option and Incentive Plan (“2001 Plan”), which expired in December 2011. The 2010 Plan, which is administered by the Compensation Committee of the Board of Directors, provides for the following types of awards: incentive stock options, nonqualified options, stock appreciation rights, restricted shares, restricted stock units, performance compensation awards, cash incentive awards, director stock and other equity-based and equity-related awards. Awards are generally granted to certain members of management and employees, as well as directors. Under the 2010 Plan, up to 2,000,000 common shares may be issued over a term of ten years.

Stock-based awards granted through December 2011, were made under the 2001 Plan. Awards granted after December 2011, were made under the 2010 Plan and future awards will be made under the 2010 Plan.

Stock-based compensation expense recorded under the plans totaled $2.0 million and $0.3 million for the six months ended March 27, 2015 and March 28, 2014, respectively. On February 2, 2015, the Company announced its shareholders elected all seven Vintage Opportunity Fund, LP-nominated directors to the Company’s Board of Directors. This change in the Company's Board of Directors was a change in control event which triggered automatic vesting for all awards outstanding under the 2010 and 2001 Plans. On the change in control date 390,882 shares of restricted stock and 119,500 stock options vested which resulted in stock-based compensation expense of $1.8 million.

Expenses relating to stock options that comply with certain U.S. income tax rules are neither deductible by the Company nor taxable to the employee. Further information regarding awards granted under the 2001 Plan, 2010 Plan and employee stock purchase plan is provided below.

Stock Options

When options are granted, IEC estimates the fair value of the option using the Black-Scholes option pricing model and recognizes the computed value as compensation cost over the vesting period, which is typically four years. The contractual term of options granted under the 2010 Plan is generally seven years.

Assumptions used in the Black-Scholes model and the estimated value of options granted during the six months ended March 27, 2015 and March 28, 2014 are included in the table below:



	Six Months Ended
Valuation of Options	March 27, 2015			March 28, 2014

Assumptions for Black-Scholes:
Risk-free interest rate	1.30		%	1.49		%
Expected term in years	4.5			4.5
Volatility	40		%	58		%
Expected annual dividends	none			none

Value of options granted:
Number of options granted	447,145			40,500
Weighted average fair value per share	$	1.48		$	1.98
Fair value of options granted (000's)	$	662		$	80

A summary of stock option activity, together with other related data, follows:



	Six Months Ended
	March 27, 2015				March 28, 2014
Stock Options	Number of Options		Wgtd. Avg. Exercise Price		Number of Options		Wgtd. Avg. Exercise Price

Outstanding, beginning of period	234,000		$	4.48	246,383		$	4.38
Granted	447,145		4.18		40,500		4.08
Exercised	(25,932	)	1.87		(14,504	)	1.37
Shares withheld for payment of exercise price upon exercise of stock option	(16,068	)	1.88		(996	)	1.43
Forfeited	(8,300	)	6.04		(14,433	)	5.44
Expired	(7,400	)	6.38		(350	)	4.71
Outstanding, end of period	623,445		$	4.40	256,600		$	4.50

For options expected to vest
Number expected to vest	467,670		$	4.50	232,637		$	4.46
Weighted average remaining term, in years	3.2				3.6
Intrinsic value (000s)			$	37			$	199

For exercisable options
Number exercisable	207,300		$	5.00	123,250		$	3.30
Weighted average remaining term, in years	1.5				2.0
Intrinsic value (000s)			$	37			$	188

For non-exercisable options
Expense not yet recognized (000s)			$	600			$	193
Weighted average years to be recognized	4.0				2.7

For options exercised
Intrinsic value (000s)			$	119			$	43

Changes in the number of non-vested options outstanding, together with other related data, follows:



	Six Months Ended
	March 27, 2015				March 28, 2014
Stock Options	Number of Options		Wgtd. Avg. Grant Date Fair Value		Number of Options		Wgtd. Avg. Grant Date Fair Value

Non-vested, beginning of period	112,350		$	2.15	138,350		$	2.51
Granted	447,145		1.48		40,500		1.98
Vested	(135,050	)	2.08		(31,067	)	2.37
Forfeited	(8,300	)	2.35		(14,433	)	5.44
Non-vested, end of period	416,145		$	1.45	133,350		$	2.30

Restricted (Non-vested) Stock

Holders of IEC restricted stock have voting and dividend rights as of the date of grant, but until vested the shares may be forfeited and cannot be sold or otherwise transferred. At the end of the vesting period, which is typically four or five years (three years in the case of directors), holders have all the rights and privileges of any other IEC common stockholder. The fair value of a share of restricted stock is its market value on the date of grant, and that value is recognized as stock compensation expense over the vesting period.

A summary of restricted stock activity, together with related data, follows:



	Six Months Ended
	March 27, 2015				March 28, 2014
Restricted (Non-vested) Stock	Number of Non-vested Shares		Wgtd. Avg. Grant Date Fair Value		Number of Non-vested Shares		Wgtd. Avg. Grant Date Fair Value

Outstanding, beginning of period	322,873		$	4.97	275,474		$	5.96
Granted	163,655		5.06		155,703		4.05
Vested	(316,539	)	5.08		(73,878	)	5.75
Shares withheld for payment of taxes upon vesting of restricted stock	(133,329	)	4.53		(18,208	)	4.28
Forfeited	(1,200	)	3.91		(31,216	)	6.55
Outstanding, end of period	35,460		$	4.23	307,875		$	5.14

For non-vested shares
Expense not yet recognized (000s)			$	163			$	924
Weighted average remaining years for vesting			2.0				3.4

For shares vested
Aggregate fair value on vesting dates (000s)			$	2,062			$	388

Employee Stock Purchase Plan

The Company administers an employee stock purchase plan (“ESPP”) that provides for a discounted stock purchase price. On May 21, 2013, the Compensation Committee of the Company’s Board of Directors suspended operation of the ESPP indefinitely in connection with the Prior Restatement (including unavailability of the registration statement covering shares offered under the plan due to the failure of the Company to be current in its filings with the SEC until the Company filed its Form 10-K on December 24, 2013). The ESPP was reinstated effective October 1, 2014. On February 13, 2015, the Compensation Committee of the Company’s Board of Directors suspended operation of the ESPP indefinitely in connection with the 2014 Restatements described in Note 2—Restatement of Deferred Tax Asset Valuation Allowance and Excess and Obsolete Inventory Reserve (including unavailability of the registration statement covering shares offered under the plan due to the failure of the Company to be current in its filings with the SEC).

Employees currently receive a 10% discount on stock purchases through the ESPP. Employee contributions to the plan, net of withdrawals were $8.0 thousand for the six months ended March 27, 2015. Compensation expense recognized under the ESPP was $1.0 thousand for the six months ended March 27, 2015. There were no employee contributions or compensation expense recognized under the ESPP during the six months ended March 28, 2014.

Stock Issued to Board Members

In addition to annual grants of restricted stock, included in the table above, Board members may elect to have their meeting fees paid in the form of shares of the Company’s common stock. In connection with the restatement of the Company’s financial statements described herein (including unavailability of the registration statement covering shares offered under the 2010 Plan due to the failure of the Company to be current in its filings with the SEC until the Company filed its Form 10-K on December 24, 2013), the Company determined not to pay, and has not paid, any meeting fees in stock during the period since May 21, 2013.