Stock Options and Stock Awards

6 Months Ended

Aug. 27, 2011

Stock Options and Stock Awards

Stock Options and Stock Awards

8. Stock Options and Stock Awards

        The Company recognizes share-based compensation expense over the requisite service period of the award, net of an estimate for the impact of forfeitures. Operating results for the twenty-six week periods ended August 27, 2011 and August 28, 2010 include $7,523 and $9,735, respectively, of compensation costs related to the company's stock-based compensation arrangements.

        The total number and type of grants and the related weighted average fair value for the thirteen week periods ended August 27, 2011 and August 28, 2010 are as follows:

		August 27, 2011				August 28, 2010
		Shares		Weighted Average Fair Value		Shares		Weighted Average Fair Value
Stock options granted			17,714	$	0.82		17,384	$	0.71
Stock awards granted			8,526	$	1.23		4,574	$	1.07
	Total awards		26,240				21,958

        Typically, stock options granted vest, and are subsequently exercisable in equal annual installments over a four-year period for employees. During fiscal 2012, certain employee stock options and awards were issued that vest 50% in year 3 and 50% in year four. Non-employee director options granted vest, and are subsequently exercisable in equal annual installments over a three-year period. Stock awards granted vest in equal annual installments over a three-year period. Beginning in fiscal 2011, stock awards granted to non-employee directors vest 80% in year one, 10% in year two and 10% in year three.

        The Company calculates the fair value of stock options using the Black- Scholes-Merton option pricing model. The following assumptions were used in the Black-Scholes-Merton option pricing model:

	Twenty-Six Week Period Ended
	August 27, 2011			August 28, 2010
Expected stock price volatility		79	%		79	%
Expected dividend yield		0	%		0	%
Risk-free interest rate		1.5	%		1.9	%
Expected option life		5.5 years			5.5 years

        As of August 27, 2011, there was $25,213 of total unrecognized pre-tax compensation costs related to unvested stock options, net of estimated forfeitures. These costs are expected to be recognized over a weighted average period of 2.86 years. As of August 27, 2011, there was $12,347 of total unrecognized pre-tax compensation costs related to unvested restricted stock grants, net of estimated forfeitures. These costs are expected to be recognized over a weighted average period of 2.84 years.

        On March 21, 2011, the Company launched a Stock Option Exchange Program ("Program") for eligible associates only. Under the Program, eligible associates had the opportunity to surrender certain stock options for a lesser number of new stock options with an exercise price that was determined based on the closing market price on April 21, 2011, the day the Program concluded. The number of new options was determined by applying exchange ratios that resulted in providing new stock options with an aggregate fair value that approximated the aggregate fair value of the options they replaced. The new options vest over two years and have a five year life with an exercise price of $1.03. A total of 14.0 million options with an average exercise price in excess of $1.77 were cancelled and 5.3 million new options were granted with an exercise price of $1.03. The Company recognized a minimal incremental compensation expense as a result of the Program.