3.                      Stock-Based Compensation

Stock Options

During the sixteen weeks ended April 15, 2012, the Company issued 97,000 options under the Second Amended and Restated 2007 Performance Incentive Plan (the “Stock Plan”) with a weighted average grant date fair value of $14.60 per share and a weighted average exercise price of $35.44 per share.  Compensation expense for these options is recognized over the remaining vesting period less expected forfeitures.  The weighted average vesting period for all options outstanding is approximately 1.4 years.  The Company issued 23,000 options with a weighted average grant date fair value of $10.36 per share and a weighted average exercise price of $24.26 per share during the sixteen weeks ended April 17, 2011.

The fair value of options at the grant date was estimated utilizing the Black-Scholes multiple option-pricing model with the following weighted average assumptions for the periods presented:

Restricted Stock

The Company did not issue any shares of restricted stock during the sixteen weeks ended April 15, 2012 or during the sixteen weeks ended April 17, 2011.   Compensation expense for the aggregate 4,000 shares of non-vested common stock outstanding at April 15, 2012 is recognized over the remaining vesting period, less expected forfeitures.  The remaining weighted average vesting period is approximately 0.7 years.  These awards vest in installments over four years on the anniversary dates.

Time Based RSUs

During the sixteen weeks ended April 15, 2012, the Company granted 30,000 time based restricted stock units (“RSUs”) to employees under the Stock Plan with a weighted average grant date fair value of $35.47.  The fair value of each RSU granted is equal to the market price of the Company’s stock at date of grant.  Compensation expense for RSUs is recognized over the vesting period, less expected forfeitures.  The Company granted 3,000 RSUs under the Stock Plan with a weighted average grant date fair value of $24.05 during the sixteen weeks ended April 17, 2011.

The weighted average vesting period for all RSUs outstanding is approximately 1.5 years.  The RSUs granted to employees vest in equal installments over three to four years on the anniversary date and, upon vesting, the Company issues one share of the Company’s common stock for each RSU.  The RSUs granted to non-employee directors are scheduled to vest in three equal installments on the first, second, and third anniversaries of the date of grant and the shares underlying the units will be distributed upon vesting.

Performance Based RSUs

During the sixteen weeks ended April 15, 2012 and April 17, 2011, the Company granted no performance based restricted stock units (“PSUs”).  During 2010, the Company issued 40,500 and 20,400 PSUs under its 2007 Stock Plan with a grant date fair value of $35.90 and $33.01, respectively.  These PSUs are subject to Company performance metrics based on Total Shareholder Return and measure the overall stock price performance of the Company to the stock price performance of a selected industry peer group, thus resulting in a market condition.  The actual number of PSUs subject to the awards will be determined at the end of the performance period based on the performance metrics.  The fair value of the PSUs is calculated using the Monte Carlo valuation method.  This method utilizes multiple input variables to determine the probability of the Company achieving the market condition and the fair value of the awards.  These awards have a three-year performance period and are classified as equity because each unit is convertible into one share of the Company’s common stock upon vesting.  Compensation expense is recognized on a straight-line basis over the requisite service period (or to an employee’s eligible retirement date, if earlier).