10.

Stock Option and Award Plans and Stock-Based Compensation

On April 13, 2006, the Parent’s Board of Directors (the Board) adopted the 2006 Management Incentive Plan (the Plan). The Plan provides for the granting of service-based and performance-based stock options, restricted stock and other forms of awards to directors, executive officers and other key employees of the Company and its subsidiaries. Awards made pursuant to the Plan are comprised of units of Parent’s common stock. Each “unit” consists of nine shares of Class A common stock and one share of Class L common stock of the Parent. The shares comprising a unit are in the same proportion as the shares of Class A and Class L common stock held by all stockholders of the Parent. Options granted pursuant to the Plan are exercisable only for whole units and cannot be separately exercised for the individual classes of the Parent common stock. As of February 2, 2013, there were 730,478 units reserved under the Plan consisting of 6,574,302 shares of Class A common stock of Parent and 730,478 shares of Class L common stock of Parent.

Non-cash stock compensation expense during Fiscal 2012, Fiscal 2011 and Fiscal 2010 amounted to $2.7 million, $5.8 million and $2.2 million, respectively. The table below summarizes the types of stock compensation:


	*(in thousands)*
	Years Ended
Type of Non-Cash Stock Compensation (a)	February 2, 2013		January 28, 2012		January 29, 2011
Stock Option Compensation (b)		2,260		4,610		1,378
Restricted Stock Compensation (c)		487		1,187		852

Total	$	2,747	$	5,797	$	2,230

(a)	Included in the line item “Selling and Administrative Expense” in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss).

(b)	Results in expense net of tax of $1.4 million, $2.8 million and $0.8 million during Fiscal 2012, Fiscal 2011 and Fiscal 2010, respectively.

(c)	Results in expense net of tax of $0.3 million, $0.7 million and $0.5 million during Fiscal 2012, Fiscal 2011 and Fiscal 2010, respectively.

Stock Options

Options granted during Fiscal 2012, Fiscal 2011 and Fiscal 2010 were all service-based awards granted at exercise prices of (i) $90 per unit and $180 per unit prior through May 1, 2011, (ii) $50 per unit and $120 per unit from May 1, 2011 through May 17, 2012, and (iii) $65 per unit and $120 per unit from and after May 17, 2012.

In April 2011, the Parent’s Board of Directors, in order to reflect the dividends paid in connection with the Company’s February 2011 debt refinancing, approved a reduction of the exercise prices of each then outstanding option from $90 per unit and $180 per unit, respectively, to $30.60 and $120.60 per unit, respectively, without affecting the existing vesting schedules thereof. Upon application of modification accounting, which contemplates fair value of awards both before and after the debt refinancing and related dividends, the stock compensation cost did not change as a result of this modification.

All options granted vest 40% on the second anniversary of the award with the remaining amount vesting ratably over the subsequent three years. The final exercise date for any option granted is the 10th anniversary of the grant date.

All options awarded pursuant to the Plan become exercisable upon a change of control. Unless determined otherwise by the plan administrator and except as otherwise set forth in the option holders’ agreement, upon cessation of employment, (1) options that have not vested will terminate immediately; (2) units previously issued upon the exercise of vested options will be callable at the Company’s option; and (3) unexercised vested options will be exercisable for a period of 60 days.

As of February 2, 2013, there were 424,231 options outstanding to purchase units, all of which are service-based awards. The Company accounts for awards issued under the Plan in accordance with Topic No. 718 using the modified prospective method, which requires companies to record stock compensation expense for all non-vested and new awards. The service-based awards are expensed on a straight-line basis over the requisite service period of five years.

As of February 2, 2013, there was approximately $3.4 million of unearned non-cash stock-based compensation, and 39.8% of outstanding options to purchase units had vested.

Stock option transactions are summarized as follows:


	Number of Units			Weighted Average Exercise Price Per Unit

Options Outstanding January 30, 2010		478,500		$	123.70

Options Issued		82,000			120.00
Options Forfeited		(71,001	)		120.00


Options Outstanding January 29, 2011		489,499		$	123.62

Options Issued		94,500			72.12
Options Exercised		(60,549	)		33.97
Options Forfeited		(50,777	)		81.56

Options Outstanding January 28, 2012		472,673		$	69.86

Options Issued		59,000			83.16
Options Exercised		(73,940	)		30.60
Options Forfeited		(33,502	)		77.02

Options Outstanding February 2, 2013		424,231		$	76.56

Non-vested stock option unit transactions during Fiscal 2012 are summarized below:


	Number of Units			Weighted Average Grant Date Fair Value Per Unit

Non-Vested Options Outstanding, January 28, 2012		290,464		$	34.12

Non-Vested Options Granted		59,000			41.60

Non-Vested Options Vested		(72,937	)		41.84

Non-Vested Options Forfeited		(21,070	)		43.25


Non-Vested Options Outstanding, February 2, 2013		255,457		$	33.70

The following table summarizes information about the options to purchase units that were outstanding under the Plan as well as options that were exercisable under the Plan as of February 2, 2013:


	Options Outstanding				Options Exercisable
Exercise Prices	Number Outstanding At February 2, 2013		Weighted Average Remaining Contractual Life (Years)		Number Exercisable at February 2, 2013		Weighted Average Remaining Contractual Life (Years)
$30.60		164,280		6.2		87,642		5.7
$50.00		54,000		8.5		—		—
$65.00		38,667		9.5		—		—
$120.00		46,333		8.9		—		—
$120.60		106,951		5.0		67,132		4.0
$270.00		14,000		0.1		14,000		0.1

		424,231				168,774

The following table summarizes information about the stock options vested and expected to vest during the contractual term:


Exercise Prices	Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
Vested and Expected to Vest as of February 2, 2013
$30.60		136,741		6.1	$	30.60
$50.00		43,200		8.5	$	50.00
$65.00		30,933		9.5	$	65.00
$120.00		37,067		8.9	$	120.00
$120.60		93,677		4.8	$	120.60
$270.00		14,000		0.1	$	270.00

		355,618

Beginning in Fiscal 2011, the fair value of each stock option granted was estimated on the date of grant using the Monte Carlo Simulation option pricing model. Prior to Fiscal 2011, the fair value of each stock option granted was estimated using the Black Scholes option pricing model. The fair value of each stock option granted was estimated using the following assumptions:


	Fiscal 2012		Fiscal 2011		Fiscal 2010

Risk-Free Interest Rate		1.0 – 1.3%		1.3 – 3.4%		1.8 – 3.4%
Expected Volatility		35.00%		31.10%		38.2%
Expected Life (years)		6.6		6.4 – 9.3		6.6 – 9.5
Contractual Life (years)		10.0		10.0		10.0
Expected Dividend Yield		0.0%		0.0%		0.0%
Weighted Average Grant Date Fair Value of Options Issued at an exercise price of:
$30.60		N/A	$	34.18		N/A
$50.00	$	28.14	$	27.06		N/A
$65.00	$	47.42		N/A		N/A
$90.00		N/A		N/A	$	49.80
$120.00	$	30.62	$	18.34		N/A
$120.60		N/A	$	20.39		N/A
$180.00		N/A		N/A	$	34.45

The weighted average grant date fair value of options granted has varied from period to period due to changes in the Company’s business enterprise value. For additional information related to enterprise value, refer to Note 6 to the Company’s Consolidated Financial Statements entitled “Goodwill.”

Restricted Stock Awards

Under the Plan, the Company also has the ability to grant restricted stock awards (Awards). During Fiscal 2012, the Company granted 5,000 Awards. During Fiscal 2011 and Fiscal 2010, the Company did not grant any Awards. The fair value of each unit of restricted stock granted under the Plan is estimated on the date of grant using inputs that include the Company’s business enterprise value, the book value of outstanding debt and the number of shares of common stock outstanding. All Awards of restricted stock granted to date under the Plan are service-based awards. Awards of restricted stock are expensed on a straight-line basis over the requisite service period of three years. Following a change of control, as defined by the Plan, all unvested Awards shall accelerate and vest as of the date of such change of control.

As of February 2, 2013, there was approximately $0.2 million of unearned non-cash stock-based compensation that the Company expects to recognize as an expense over the next 2.3 years. At February 2, 2013, 91,460 of the outstanding Awards of restricted stock had vested.

Award Grant, Vesting and Forfeiture transactions during Fiscal 2012 are summarized below:


	Number of Awards			Weighted Average Grant Date Fair Value Per Awards

Non-Vested Awards Outstanding, January 28, 2012		28,122		$	45.96

Awards Granted		5,000			61.12

Awards Vested		(28,122	)		45.96


Non-Vested Awards Outstanding, February 2, 2013		5,000		$	61.12