4. Share-Based Compensation

The Company issues stock option awards and non-vested share awards under its share-based compensation plans. The key provisions of the Company's share-based compensation plans are described in Note 4 to the Company's consolidated financial statements included in the 2014 Form 10-K.

The Company recognized income tax benefits of $15,000 related to share-based compensation arrangements during the thirteen weeks ended April 4, 2015. The Company recognized no income tax benefits related to share-based compensation arrangements during the thirteen weeks ended March 29, 2014.

1998 Equity Incentive Plan

In April 2015, our Board of Directors approved an amendment and restatement of the Company's 1998 Equity Incentive Plan (the "Equity Plan"), subject to stockholder approval at the 2015 annual meeting of stockholders to be held on June 16, 2015. If the amendment and restatement of the Equity Plan is approved by the stockholders, the cumulative number of shares of common stock that are available for issuance (inclusive of shares previously issued) under the Equity Plan will increase by 500,000 shares from 2,305,659 to 2,805,659 shares. The proposed amendments to the Equity Plan also include proposed changes in the method of counting shares under the Equity Plan, proposed changes in the minimum vesting period for restricted stock awards and restricted stock unit awards under the Equity Plan, extension of the expiration date of the Equity Plan from June 8, 2019 to June 16, 2025 and authorization of the cash-out of awards in connection with certain corporate transactions involving the Company. If the amendment and restatement of the Equity Plan is not approved by the stockholders, the Equity Plan will continue in its current form until subsequently amended in accordance with its terms.

Stock Options

A summary of the option activity under the Equity Plan, as of April 4, 2015 and changes during the thirteen weeks then ended is presented below:

	Shares		Weighted Average Exercise Price
Outstanding at April 4, 2015 and January 3, 2015		307,753	$	8.54

Options vested and expected to vest at April 4, 2015		296,378	$	8.71

Options exercisable at April 4, 2015		250,252	$	9.60

The Company did not grant any stock option awards during the thirteen weeks ended April 4, 2015, while 70,000 stock option awards were granted during the thirteen weeks ended March 29, 2014. During the thirteen weeks ended April 4, 2015 and March 29, 2014 the Company recorded $25,000 and $5,000, respectively, of stock-based compensation expense in connection with stock option awards. As of April 4, 2015, there was $51,000 of unrecognized stock-based compensation expense, net of estimated forfeitures, related to stock option awards, and this unrecognized expense is expected to be recognized over a weighted average period of 21 months. As of January 3, 2015, there was $78,000 of unrecognized stock-based compensation expense, net of estimated forfeitures, related to stock option awards.

Non-vested Shares

Service-Based Non-vested Share Awards - A summary of the status of service-based non-vested share awards issued under the Equity Plan, as of April 4, 2015 and changes during the thirteen weeks then ended is presented below:

			Weighted Average
			Grant Date
	Shares		Fair Value per share
Outstanding at January 3, 2015		81,000	$	3.93
Vested		(81,000)	$	3.93
Outstanding at April 4, 2015		-	$	-

The Company’s service-based non-vested share awards are valued at the date of grant based on the closing market price of the Company’s common stock, and are expensed on a graded vesting schedule over the vesting period. During the thirteen weeks ended April 4, 2015 and March 29, 2014 the Company recorded $53,000 and $17,000, respectively, of stock-based compensation expense in connection with service-based non-vested share awards. As of April 4, 2015, there is no unrecognized stock-based compensation expense, net of estimated forfeitures, related to service-based non-vested share awards. As of January 3, 2015, there was an estimated $54,000 of unrecognized share-based compensation expense, net of estimated forfeitures, related to service-based non-vested share awards.

Performance-Based Non-vested Share Awards - A summary of the status of performance-based non-vested share awards issued under the Equity Plan, as of April 4, 2015 and changes during the thirteen weeks then ended is presented below:

			Weighted Average
			Grant Date
	Shares		Fair Value per share
Outstanding at January 3, 2015		652,999	$	3.19
Vested		(50,233)	$	3.14
Forfeited		(53,939)	$	3.14
Outstanding at April 4, 2015		548,827	$	3.20

On March 10, 2014, the Company granted 40,000 shares of non-vested stock that vest in proportion to the ratio that the Company's "Cumulative Net Non-GAAP EBITDA" achieved over a three-year performance period compares to the Cumulative Net Non-GAAP EBITDA goal of $10.5 million. All 40,000 non-vested shares had a grant date fair value of $3.93 per share. The first potential vesting date was the Company's earnings release date for its 2015 first fiscal quarter and each subsequent potential vesting date is each of the Company's quarterly earnings release dates thereafter through the release date for the first quarter of 2017. Shares not vested as of the release date for the first quarter of 2017 are forfeited. On April 8, 2013, the Company granted performance-based non-vested share awards for a total of 800,000 shares of Common Stock to various executive officers and employees of the Company that vest in proportion to the ratio that the Company's "Cumulative Net Non-GAAP EBITDA" achieved over a four-year performance period compares to the Cumulative Net Non-GAAP EBITDA goal of $14 million. All 800,000 non-vested shares had a grant date fair value of $3.14 per share. The first potential vesting date was the Company's earnings release date for its 2014 first fiscal quarter and each subsequent potential vesting date is each of the Company's quarterly earnings release dates thereafter through the release date for the first quarter of 2017. Shares not vested as of the release date for the first quarter of 2017 are forfeited. Except for termination of employment in certain circumstances following a change of control, the unvested portion of an award is forfeited upon any termination of employment. Under the terms of an award, vesting is partially accelerated and the award is converted to a time-vested award upon a change of control of the Company.

Share-based compensation cost for performance-based non-vested share awards is measured at the grant date based on the fair value of shares expected to be earned at the end of the performance period, based on the closing market price of the Company’s common stock on the date of grant, and is recognized as expense using the straight-line method over the performance period based upon the probable number of shares expected to vest. The Company estimates and excludes compensation cost related to awards not expected to vest based upon estimated forfeitures. During the thirteen weeks ended April 4, 2015 and March 29, 2014, the Company recorded $216,000 and $150,000, respectively, of share-based compensation expense in connection with performance-based non-vested share awards. As of April 4, 2015, there was an estimated $1.1 million of unrecognized share-based compensation expense, net of estimated forfeitures, related to performance-based non-vested share awards. The Company currently expects that the performance conditions related to its outstanding performance-based non-vested share awards will be achieved and the unrecognized compensation cost at April 4, 2015 related to performance-based non-vested share awards is expected to be recognized over a period of 18 months.

2000 Supplemental Stock Plan

A summary of the option activity under the Company's 2000 Supplemental Stock Plan (the "Supplemental Stock Plan") as of April 4, 2015 and changes during the thirteen weeks then ended is presented below:

	Shares		Weighted Average Exercise Price
Outstanding at January 3, 2015		82,600	$	11.33
Forfeited/cancelled		(15,500)	$	11.27

Outstanding at April 4, 2015		67,100	$	11.35

Options vested and exercisable at April 4, 2015		67,100	$	11.35

No awards have been granted under the Supplemental Stock Plan since it expired on May 23, 2010. There were no options exercised during the thirteen weeks ended April 4, 2015 and March 29, 2014. As of April 4, 2015 there was no remaining unrecognized compensation cost, net of estimated forfeitures, related to the unvested portion of stock options issued under the Supplemental Stock Plan.