Common Stock Plans

12 Months Ended

Sep. 28, 2011

Notes to Financial Statements

Common Stock Plans

We maintain stock-based compensation plans which allow for the issuance of incentive stock options, non-qualified stock options, and restricted stock to officers, other key employees, and to members of the Board of Directors. We generally use treasury shares to satisfy the issuance of shares under these stock-based compensation plans. We utilize the fair value recognition provisions of FASB ASC paragraph 718-10-55-10, Fair-Value-Based Instruments in a Share-Based Transaction. This guidance applies to all awards granted after the effective date and to modifications, repurchases or cancellations of existing awards. Additionally, under the modified prospective method of adoption, we recognize compensation expense for the portion of outstanding awards on the adoption date for which the requisite service period has not yet been rendered based on the grant-date fair value of those awards.

The weighted average fair value of shares granted during the years ended September 29, 2010 and September 30, 2009 was $158.52 and $33.00, respectively. No shares were granted in fiscal year 2011. We estimate the fair value of each grant using the Black-Scholes option-pricing model. Expected volatilities are generally based on historical volatility of our stock. We use historical data to estimate the expected life, and groups of employees that have similar historical behaviors are considered separately for valuation purposes. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions including the expected stock price volatility. Because our stock options have characteristics significantly different from those of traded options, changes in the subjective input assumptions can materially affect the fair value estimate. The fair value estimates are based on the following weighted average assumptions:

	2010			2009
Risk-free interest rate		4.3	%		4.3	%
Dividend yield		0.0	%		0.0	%
Expected volatility		52.4	%		31.8	%
Expected life in years		3.0 years			5.0 years

Restricted Stock Plans

On March 7, 2008, our shareholders approved the 2008 Equity Incentive Plan (the “2008 Plan”). The 2008 Plan provides for grants of stock-based awards for up to 45,000 shares of common stock with a maximum of 35,000 shares which may be issued as restricted stock. These restricted stock awards are restricted for a period and are forfeited to us if the grantee is not employed (except for reasons of retirement, permanent disability or death) at the end of the vesting period. Awards of restricted stock are valued at 100% of market value at the date of grant. The total value of the stock grant is amortized to compensation expense ratably over the vesting period. There are no shares of restricted stock granted under the 2008 Plan for which restrictions have not lapsed at September 28, 2011. At September 28, 2011, 27,742 shares were reserved for future grants. To date, 11,660 shares have vested under the 2008 Plan.

The total fair value of shares vested during the years ended September 28, 2011, September 29, 2010, and September 30, 2009, was $657, $768, and $1,149, respectively. The amount charged to expense under these plans was $51 ($32, net of tax) in 2011, $235 ($143, net of tax) in 2010, and $890 ($543, net of tax) in 2009. There was no unrecognized compensation cost at September 28, 2011.

The following table summarizes the restricted stock activity under the plans:

	Number of Shares		Weighted Average Grant Date Fair Value
Nonvested shares at September 29, 2010		5,388	$	143.28
Granted		—		—
Forfeitures		841		136.02
Vested		4,547		144.62
Nonvested shares at September 28, 2011		—	$	—

Employee Stock Option Plans
The 2008 Plan also provides for awards in the form of options to purchase shares of common stock. Options granted in 2009 under the 2008 Plan are exercisable as to 20% on each anniversary of the date of grant until fully exercisable. No options were granted in 2011 or 2010 under the 2008 Plan. Options granted in 2009 were at $200 which exceeded the market price on the date of grant. Options granted in 2008 under the 2008 Plan are exercisable as to 25% on each anniversary of the date of grant until fully exercisable. The options expire ten years from the date of the grant and are issued with an exercise price equal to the fair market value of a share of common stock on the date of grant. Options are granted under the 2008 Plan to officers and key employees selected by the Governance, Compensation and Nominating Committee of the Board of Directors (the “Compensation Committee”). As of September 28, 2011, 10,362 options have been granted under the 2008 Plan and 27,742 shares are available for future issuance. These are the same shares available for future issuance referenced in the Restricted Stock Plan disclosure.

Non-Employee Director Stock Option Plans

Our Non-Employee Director Stock Option Plans provide for the grant of non-qualified stock options at a price equal to the fair market value of the common stock on the date of the grant. Options outstanding under each plan through fiscal year 2005 are exercisable as to 20% on the date of grant and 20% on each anniversary of the date of grant thereafter until fully exercisable. Options outstanding that were issued in fiscal year 2006 or later are exercisable as to 25% on each anniversary of the date of grant until fully exercisable. The options expire five years from the date of grant. At September 28, 2011, 10,500 options have been granted under the Non-Employee Director Stock Option Plans. The Non-Employee Director Stock Option Plans were replaced by the 2008 Plan and as a result, no shares are reserved for future grants under the Non-Employee Director Stock Option Plans.

The following table summarizes the options activity under all of our Stock Option Plans:

	Options				Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at September 29, 2010	22,887			$	274.75
Granted		—				—
Exercised		(4,383	)			243.67
Canceled or forfeited	(4,925		)		281.11
Outstanding at September 28, 2011	13,579				282.44			4.48 years	$	757
Vested or expected to vest at September 28, 2011		12,780				285.18		4.54 years	$	686
Exercisable at September 28, 2011		11,629			$	303.41		4.25 years	$	548

During fiscal years 2011, 2010, and 2009, $218 ($210, net of tax), $592 ($570, net of tax), and $758 ($714, net of tax), respectively, was charged to expense related to the stock option plans. The total intrinsic value of options exercised during the years ended September 28, 2011, September 29, 2010, and September 30, 2009, was $693, $490, and $57, respectively. Total unrecognized stock option compensation cost at September 28, 2011 was $94 and is expected to be recognized over a weighted average period of 0.55 years.

Employee Stock Purchase Plan

Under the Employee Stock Purchase Plan (the “ESPP”), a maximum of 92,627 shares of common stock are available for issuance to all eligible employees as determined by the Board of Directors subject to a limitation of 7,500 shares per year. Unissued shares in any given calendar year are available to increase the annual maximum number of shares issuable in subsequent years. Employees may purchase shares of common stock through payroll deductions ranging from 2% to 10% of compensation up to a maximum fair market value of $200 or a maximum purchase of 50 shares per year, whichever is less, within the limitations of the offering. Prior to the second quarter of fiscal year 2009, shares were purchased at a 15% discount from the lesser of the share price on the first or last day of the year. Beginning with the second quarter of fiscal year 2009, shares are purchased on a quarterly basis at a 15% discount from the share price on the last day of the quarter. Shares purchased under the ESPP were 812 in 2010 and 7,540 in 2009. During fiscal years 2010 and 2009, $32 and $153 was charged to expense related to the ESPP, respectively. No shares were purchased in fiscal year 2011.

Our compensation philosophy, including the various equity plans, changed during fiscal year 2010 to reflect present management’s view on the most effective method to create shareholder value. The new incentives, which are cash based, are designed to ensure alignment with the Company’s objective to maximize intrinsic business value on a per share basis. We resolved to suspend, indefinitely, all future option grants under the 2008 Employee Stock Option Plan, we terminated the 2009 Employee Stock Option Plan, under which no options had been granted to date, we placed a moratorium on the issuance of restricted stock, and we terminated the ESPP.