STOCK OPTION AND BENEFIT PLANS

The Company’s incentive plan provides for equity and liability awards to employees and non-employee directors in the form of stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, stock awards, stock units, performance shares, performance units, and other stock-based or cash-based awards. Compensation cost is recognized on a straight-line basis over the requisite employee service period, which is generally the vesting period, and is recorded as employee compensation expense in cost of goods sold and selling general and administrative expenses. Share-based compensation is recognized only for those awards that are expected to vest, with forfeitures estimated at the date of grant based on historical experience and future expectations.

In addition to service conditions, these SARs contain a performance condition. The additional performance condition is based upon the achievement of Return on Invested Capital (ROIC) goals relative to a peer group. All awards with performance conditions are measured over the vesting period and are charged to compensation expense over the requisite service period based on the number of shares expected to vest. The SARs cliff vest after a three-year period from date of grant and expire five years from date of grant.

On July 31, 2013, the Company granted 213,166 SARs under the 2010 Incentive Plan to certain key employees and outside directors at a strike price of $11.34 and a grant date fair value of $4.67, as of June 28, 2014, 208,166 remain outstanding. The grant date fair value for the awards granted during fiscal year 2014 were estimated using the Black Scholes option valuation method with the following weighted average assumptions as July 31, 2013:



		Fiscal Year 2014
		July 31, 2013
Expected dividend yield		—%
Risk – free interest rate		1.16%
Expected volatility		52.12%
Expected life		4.00

On July 25, 2012, the Company granted 210,666 SARs under the 2010 Incentive Plan to certain key employees and outside directors at a strike price of $7.44 and a grant date fair value of $3.71, as of June 28, 2014, 203,166 remain outstanding. The grant date fair value for the awards granted during fiscal year 2013 were estimated using the Black Scholes option valuation method with the following weighted average assumptions as July 25, 2012:



		Fiscal Year 2013
		July 25, 2012
Expected dividend yield		—%
Risk – free interest rate		0.46%
Expected volatility		66.50%
Expected life		4.00

On July 27, 2011, the Company granted 184,666 SARs under the 2010 Incentive Plan to certain key employees and outside directors at a strike price of $4.40 and a grant date weighted average fair market value of $2.20, as of June 28, 2014, 172,666 remain outstanding. On January 26, 2012, the Company granted 32,000 SARs under the 2010 Incentive Plan to certain key employees at a strike price of $6.30 and grant date weighted average fair market value of $3.08, as of June 28, 2014, 25,000 remain outstanding. The grant date fair value for the awards granted during fiscal year 2012 were estimated using the Black Scholes option valuation method with the following weighted average assumptions at each of the respective grant dates:



	Fiscal Year 2012
	January 26, 2012	July 27, 2011
Expected dividend yield	—%	—%
Risk – free interest rate	0.52%	1.16%
Expected volatility	64.90%	65.50%
Expected life	4.00	4.00

Share-based compensation expense is recognized only for those awards that are expected to vest, with forfeitures estimated at the date of grant based on the Company’s historical experience and future expectations. This forfeiture rate will be revised, if necessary, in subsequent periods if actual forfeitures differ from the amount estimated. Share-based compensation expense for fiscal years ended June 28, 2014, June 29, 2013 and June 30, 2012 was $0.7 million, $0.8 million and $0.6 million, respectively.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which differ significantly from the SARs, as traded options have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, particularly for the expected term and expected stock price volatility. Changes in these assumptions can materially affect the fair value estimates.

The intrinsic value for options exercised in fiscal years 2014, 2013 and 2012 was $0.4 million, $0.2 million and $0.3 million, respectively.

As of June 28, 2014, total unrecognized compensation expense related to nonvested share-based compensation arrangements was approximately $0.9 million. This expense is expected to be recognized over a weighted-average period of 1.77 years.

The following table summarizes the Company's stock options and SARs activity for all plans from June 29, 2013 through June 28, 2014:



	Shares Available For Grant		Options/SARs Outstanding		Aggregate Intrinsic Value (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
Balances, June 29, 2013	263,168		961,692		$	4,309	$	5.87	2.6
Shares authorized	—		—		—		—		—
Options/SARs granted	(213,166	)	213,166		—		11.34		—
Options forfeited	19,000		(19,000	)	—		6.93		—
Options exercised	—		(89,930	)	406		5.14		—
Balances, June 28, 2014	69,002		1,065,928		$	4,096	$	7.01	1.8
Exercisable at June 28, 2014			456,930		$	2,679	$	5.86	0.9

Additional information regarding stock options and SARs outstanding and exercisable as of June 28, 2014, is as follows:



Range of Exercise Prices	Number Outstanding	Weighted Avg. Remaining Contractual Life (yrs.)	Weighted Avg. Exercise Price		Number Exercisable	Weighted Avg. Exercise Price
$3.40 – $5.40	177,596	0.1	$	4.37	4,930	$	3.40
5.41 – 7.41	477,000	1.0	5.91		452,000	5.89
7.42 – 9.42	203,166	3.1	7.44		—	—
9.43 – 11.34	208,166	4.1	11.34		—	—
$3.40 to $11.34	1,065,928	1.8	$	7.01	456,930	$	5.86

The Company also has a defined contribution plan (401(k)) available to U.S. employees who have attained age 21. The Company contributes an amount equal to 100% of the employee’s contribution on the first 3% of the employee’s compensation and an additional 50% of the employee’s contribution on the following 2% of the employee’s compensation. Company contributions to the plan were approximately $0.6 million, $0.5 million, and $0.5 million during fiscal years 2014, 2013, and 2012, respectively.