Stock-Based Compensation

2008 Equity Incentive Plan

Our 2008 Equity Incentive Plan (the "Plan") was amended and restated effective May 22, 2013 upon approval by our shareholders at our annual shareholders meeting. As amended, the plan authorizes us to issue up to 3.5 million shares of common stock, along with non-qualified stock options, stock appreciation rights, restricted stock and performance units to our officers, key employees, non-employee directors and consultants. At September 27, 2015, there were 1.7 million shares available for future grants under this plan. No more than 600,000 shares may be used under the plan as “full value” awards, which include restricted stock and performance stock units. It is our policy to issue shares from authorized but not issued shares upon the exercise of stock options. Options are granted at not less than fair market value on the date of grant and expire no later than ten years after the date of grant. Options and restricted shares granted under the plan generally require no less than a three year ratable vesting period.

During the first nine months of 2015 no stock options were granted, 420,142 stock options were exercised and 998,069 options were canceled.

During the third quarter of 2015, no restricted shares were granted. During the second quarter of 2015 we granted 23,814 restricted shares to our Board of Directors vesting May 5, 2016. During the first quarter of 2015, the company implemented a long term incentive program for the benefit of certain members of company management. The program was designed to strengthen employee retention and to provide a more structured incentive program to stimulate improvement in future company results. Per the terms of the program, participants were granted time value restricted stock units (“RSUs”), vesting ratably over a three year time period, and performance restricted stock units (“PSUs”), with a three year cliff vesting. Upon vesting, each restricted stock unit is exchangeable for one share of the company’s common stock, with accrued dividends. The PSUs are categorized further into three individual categories whose vesting is contingent upon the achievement of certain targets as follows:


•	40% of the PSUs vest upon certain Return on Capital targets


•	40% of the PSUs vest upon certain EBITDA margin targets


•	20% of the PSUs vest upon certain market based Shareholder Return targets.

In the aggregate the company granted, net of forfeitures, a total of 190,772 RSUs and PSUs in 2015, net of forfeitures, comprising:


•	53,575 time value based RSUs with a grant date fair value of $18.78 per unit


•	109,758 PSUs with an initial grant date fair value of $18.78 per unit


•	27,439 market based PSUs with a grant date fair value of $24.81 per unit.

During the first three quarters of 2014, no stock options were granted, 346,835 stock options were exercised and 145,417 options were canceled.

During the first three quarters of 2014 we granted restricted shares, or "full value" awards under our Plan, totaling 90,750 shares. The fair values of each issued restricted share on the applicable date of grant averaged $19.21 for the first three quarters of 2014.

In addition, during the second quarter of 2014, we granted 35,081 restricted shares in connection with Mr. Steven J. Borick's, our former company President and Chief Executive Officer's, separation agreement (see Note 17 - Commitments and Contingencies). These shares fully vested on the grant date (March 31, 2014) and the cost was recognized from the date of the separation agreement (October 14, 2013) through March 31, 2014, the separation date. The shares issued also were net of an amount equal to required tax withholdings. The cash equivalent of the withheld shares was remitted by the company to the tax authorities. Restricted share awards, which are generally subject to forfeiture if employment terminates prior to the shares vesting, are expensed ratably over the vesting period. Shares of restricted stock granted under the Plan are considered issued and outstanding at the date of grant and have the same dividend and voting rights as other common stock. Dividends paid on the restricted shares granted under the Plan are non-forfeitable if the restricted shares do not ultimately vest.

Other Awards

During the second quarter of 2014 we granted 132,455 restricted shares, including 50,000 shares vesting April 30, 2017, and 82,455 shares vesting on December 31, 2016. The fair value of each of these restricted shares was $19.44. These grants were made outside of the Plan as inducement grants in connection with the appointment of our new CEO and company President (see Note 17 - Commitments and Contingencies).

Stock-based compensation expense related to our unvested stock options and restricted share awards was allocated as follows:



(Dollars in thousands)	Thirteen Weeks Ended						Thirty-nine Weeks Ended
	September 27, 2015			September 28, 2014			September 27, 2015			September 28, 2014
Cost of sales	$	97		$	18		$	293		$	98
Selling, general and administrative expenses	692			505			1,766			1,734
Stock-based compensation expense before income taxes	789			523			2,059			1,832
Income tax benefit	(277		)	(180		)	(577		)	(568		)
Total stock-based compensation expense after income taxes	$	512		$	343		$	1,482		$	1,264

As of September 27, 2015, a total of $4.4 million of unrecognized compensation cost related to non-vested awards is expected to be recognized over a weighted average period of approximately 1.9 years. There were no significant capitalized stock-based compensation costs at September 27, 2015 and December 28, 2014.