Restricted Stock

Compensation expense recorded for the third quarter of fiscal 2012 and fiscal 2011 relating to restricted stock grants was $319,000 and $952,000, respectively. Compensation expense recorded in the first nine months of fiscal 2012 and fiscal 2011 relating to restricted stock grants was $1,331,000 and $1,560,000, respectively. As of October 27, 2012, there was $1,017,000 of total unrecognized compensation cost related to non-vested restricted stock granted. That cost is expected to be recognized over a weighted average period of 0.7 years. The total fair value of restricted stock vested during the first nine months of fiscal 2012 and fiscal 2011 was $598,000 and $316,000, respectively.

On October 3, 2012, the Company granted 330,000 shares of market-based restricted stock to certain key employees as part of the Company's long-term incentive program. Each restricted stock award will vest in three tranches, as follows, on the dates when the Company's average closing stock price for 20 consecutive trading days equals or exceeds the following prices: Tranche 1 (50% of the shares subject to the award at $6.00 per share); Tranche 2 (25% at $8.00 per share); and Tranche 3 (25% at $10.00 per share). If an average closing price of $6.00 per share is not achieved on or before the third anniversary of the grant date, the entire restricted stock award will be forfeited. However, if the first tranche vests, then the vesting of the second and third tranches can occur any time on or before the fifth anniversary of the grant date. Net shares received upon the vesting of these market-based stock restricted awards (after shares are potentially withheld to cover applicable withholding taxes) may not be sold for a period of one year from the date of vesting. As of October 27, 2012, all 330,000 market-based restricted stock awards remain outstanding. The total grant date fair value was estimated to be $425,000 and is being amortized over the derived service periods for each tranche. Estimated non-cash compensation expense for fiscal 2013 related to this grant will be approximately $274,000. Grant date fair values and derived service periods for each tranche were determined using a Monte Carlo valuation model based on assumptions, which included a weighted average risk-free interest rate of 0.32%, a weighted average expected life of 2.8 years and an implied volatility of 78% and were as follows for each tranche:



	Fair Value (Per Share)	Derived Service Period
Tranche 1 ($6.00/share)	1.48	15	months
Tranche 2 ($8.00/share)	1.39	20	months
Tranche 3 ($10.00/share)	1.31	24	months

On June 13, 2012, the Company granted a total of 50,000 shares of restricted stock to six non-management board members as part of the Company's annual director compensation program. Each restricted stock award vests on the day immediately preceding the next annual meeting of shareholders following the date of grant. The aggregate market value of the restricted stock at the date of the award was $85,000 and is being amortized as director compensation expense over the twelve-month vesting period. On November 18, 2011, the Company granted a total of 453,000 shares of restricted stock to employees. The restricted stock vests in two equal annual installments beginning November 18, 2012 and ending November 18, 2013. The aggregate market value of the restricted stock at the date of the award was $816,000 and is being amortized as compensation expense over the one and two-year vesting periods. On June 15, 2011, the Company granted a total of 50,000 shares of restricted stock to seven non-management board members as part of the Company's annual director compensation program. Each restricted stock award vested on June 12, 2012 (the day immediately preceding the next annual meeting of shareholders following the date of grant). The aggregate market value of the restricted stock at the date of the award was $377,000 and was amortized as director compensation expense over the twelve-month vesting period. On March 31, 2011, the Company granted a total of 522,000 shares of restricted stock to employees in lieu of an annual cash bonus for fiscal 2010. The restricted stock vests in two equal annual installments beginning March 31, 2012 and ending March 31, 2013. The aggregate market value of the restricted stock at the date of the award was $3,323,000 and is being amortized as compensation expense over the one and two-year vesting periods.

A summary of the status of the Company’s non-vested restricted stock activity as of October 27, 2012 and changes during the nine-month period then ended is as follows:



	Shares		Weighted Average Grant Date Fair Value
Non-vested outstanding, January 28, 2012	982,000		$	4.39
Granted	382,000		$	1.52
Vested	(298,000	)	$	6.52
Forfeited	(80,000	)	$	2.92
Non-vested outstanding, October 27, 2012	986,000		$	2.76