Stock-Based Compensation Agreements

The Company has two stock option plans (the "Plans"), one of which provides for the issuance of both incentive stock options (under Section 422A of the Internal Revenue Code of 1986) and non-qualified stock options at exercise prices not less than the fair market value of the Company’s common stock at the date of grant, and one of which provides only for the issuance of non-qualified stock options at exercise prices not less than the fair market value of the Company’s common stock at the date of grant. One of the Plans also provides for the issuance of stock appreciation rights, restricted stock, incentive bonuses and incentive stock units. The total number of shares of the Company's common stock available for issuance of stock options and other stock rights under the Plans is approximately 158 thousand shares.

Under the provisions of the Plans, key employees and non-employee directors may be granted options to purchase shares of Magnetek common stock at a price not less than its fair market value on the date of grant. Options granted have a maximum term of 10 years. Vesting requirements are determined at the discretion of the Compensation Committee of the Company’s Board of Directors, with vesting periods generally ranging from two to four years. The Company uses the Black-Scholes option pricing model to calculate the fair value of stock options. The key assumptions for the Black-Scholes valuation method include the expected life of the option, stock price volatility, a risk-free interest rate, and dividend yield. Many of these assumptions are judgmental and highly sensitive. Following is a table of the weighted average fair value of the Company’s stock option grants for fiscal years 2013 and 2012, transition period 2011, and for fiscal year 2011, using the Black-Scholes valuation model, assuming no dividends, with the following assumptions:



	Fiscal Year Ended						Six Months Ended			Fiscal Year
	December 29, 2013			December 30, 2012			January 1, 2012			July 3, 2011
Expected life in years	5.8			5.3			5.6			5.7
Expected stock price volatility	70.9		%	74.9		%	73.7		%	73.3		%
Risk-free interest rate	2.0		%	0.8		%	1.2		%	1.6		%
Options granted (in thousands)	6			15			11			42
Weighted average fair value of options granted	$	14.03		$	6.47		$	6.18		$	8.00

Compensation expense related to stock option awards is recognized ratably over the vesting period.

The Company also awards restricted shares of the Company’s common stock to key employees under the provisions of one of the Plans. Restrictions on the shares expire either after completion of a service period, typically three years, or upon achievement of established performance objectives, as determined by the Compensation Committee of the Company’s Board of Directors. Shares are valued at the market price on the date of award. Compensation expense related to these awards is recognized ratably over the service period.

During fiscal 2013, the Company recorded $0.7 million of stock-based compensation related to all share-based awards. For fiscal year 2012, transition period 2011 and fiscal year 2011, the Company recorded $0.8 million, $0.4 million, and $0.6 million, respectively, of stock-based compensation related to share-based awards. Stock-based compensation expense is included in selling, general and administrative expense in the accompanying consolidated statements of operations. As of December 29, 2013, there was $1.0 million of total unrecognized compensation cost related to all stock option and restricted share grants, to be expensed ratably over a weighted-average remaining period of 1.8 years.

A summary of certain information with respect to outstanding stock options under the Plans follows (options in thousands):



	Options		Weighted- Average Exercise Price		Aggregate Intrinsic Value ($000's)
Options outstanding, June 27, 2010	232		$	51.60	$	—
Granted	42		$	12.60
Exercised	—		—
Canceled	(96	)	58.90
Options outstanding, July 3, 2011	178		$	38.50	$	270
Granted	11		$	9.82
Exercised	—		—
Canceled	(10	)	107.81
Options outstanding, January 1, 2012	179		$	32.67	$	1
Granted	15		$	10.41
Exercised	—		$	—
Canceled	(20	)	$	65.26
Options outstanding, December 30, 2012	174		$	26.88	$	18
Granted	6		$	22.23
Exercised	(8	)	$	12.06
Canceled	(25	)	$	22.67
Options outstanding, December 29, 2013	147		$	28.22	$	624
Exercisable options, July 3, 2011	114		$	50.90	$	23
Exercisable options, January 1, 2012	112		$	43.42	$	—
Exercisable options, December 30, 2012	115		$	34.91	$	9
Exercisable options, December 29, 2013	132		$	29.87	$	486

The following table provides information regarding exercisable and outstanding options as of December 29, 2013 (options in thousands):



	Exercisable				Outstanding
Range of exercise price per share	Options exercisable	Weighted average exercise price per share		Weighted average remaining contractual life (years)	Options outstanding	Weighted average exercise price per share		Weighted average remaining contractual life (years)
8.48 - $10.00	4	$	8.48	8.0	8	$	8.48	8.0
10.01 - $15.00	32	11.43		7.0	38	11.27		7.3
15.01 - $20.00	7	17.79		7.5	7	17.79		7.5
20.01 - $30.00	47	22.77		4.6	52	22.71		5.2
30.01 - $80.00	42	55.74		2.1	42	55.74		2.1
Total	132	$	29.87	4.7	147	$	28.22	5.1

The following table provides information regarding vested and unvested restricted stock activity for fiscal year 2011, for the six-month transition period 2011, and for fiscal years 2012 and 2013 (shares in thousands):



	Shares		Weighted average grant date fair value		Fair value of vested shares at vesting date
Unvested at June 27, 2010	64		$	15.30
Granted	50		$	11.80
Vested	—		—		$	—
Forfeited	(23	)	14.40
Unvested at July 3, 2011	91		$	13.60
Granted	21		$	13.00
Vested	—		—
Forfeited	—		—
Unvested at January 1, 2012	112		$	13.48
Granted	46		$	16.66
Vested	(42	)	$	14.85	$	437
Forfeited	(11	)	$	13.38
Unvested at December 30, 2012	105		$	14.35
Granted	66		$	12.60
Vested	(37	)	$	12.28	$	618
Forfeited	(3	)	$	11.50
Unvested at December 29, 2013	131		$	14.11