EMPLOYEE STOCK PLANS

Stock Incentive Plans

In connection with our acquisition of Opnext, we assumed Opnext’s Third Amended and Restated 2001 Long-Term Stock Incentive Plan and the shares reserved for issuance thereunder. After giving effect to the exchange ratio, the unused and converted share reserve thereunder consisted of 6.3 million shares of common stock as of the acquisition date. Subject to compliance with applicable NASDAQ rules, we can only make grants to legacy Opnext employees and employees hired after the close of the merger unless stockholder approval was obtained to permit awards to all our employees. On July 23, 2013, our board of directors approved the Fourth Amended and Restated 2001 Long-Term Stock Incentive Plan (the "Plan") and on January 14, 2014, our shareholders ratified this plan, establishing it as our primary equity incentive plan. The Plan (i) revises the eligibility section to allow us to make grants to all our employees, non-employee directors and consultants, (ii) allows us to grant incentive stock options and awards which may be able to qualify as qualified performance-based compensation under Section 162(m) of the Internal Revenue Code, (iii) extends the term of the Plan to ten years from the effective date of the Plan (the Plan expires in July 2023), and (iv) conforms the share counting provisions of the Plan to provide that full value awards count as 1.25 shares for purposes of the Plan.

We also maintain the Amended and Restated 2004 Stock Incentive Plan (“2004 Plan”). Under the 2004 Plan, there are a total of 7.8 million shares of common stock authorized for issuance, with full value awards being counted as 1.25 shares of common stock for purposes of the share limit. The 2004 Plan expires in October 2020.

As of June 28, 2014, there were in aggregate 5.7 million shares of our common stock available for grant under the Fourth Amended and Restated 2001 Long-Term Incentive Plan and the Amended and Restated 2004 Stock Incentive Plan.

We generally grant stock options that vest over a two to four year service period, and restricted stock awards and units that vest over a one to four year service period, and in certain cases each may vest earlier based upon the achievement of specific performance-based objectives as set by our board of directors or the compensation committee of our board of directors. We also have approximately 0.2 million SARs outstanding as of June 28, 2014, which we assumed in connection with our acquisition of Opnext. The SARs have an average remaining life of 1.2 years.

In July 2011, our board of directors approved the grant of 0.2 million performance stock units (“PSUs”) to certain executive officers with an aggregate estimated grant date fair value of $0.9 million. These PSUs vest, up to 150 percent of the target PSUs, upon the achievement of certain revenue growth targets through June 30, 2013, relative to certain comparable companies. In October 2013, the board of directors determined that achievement of the performance conditions was reached at the 100 percent target level. Approximately 0.1 million of the grants outstanding, or 50 percent, vested on October 22, 2013, with the remaining 50 percent scheduled to vest upon a two-year service condition through August 2015. As of June 28, 2014, there were less than 0.1 million PSUs outstanding, after adjustments for forfeitures due to terminations, related to this grant, with an aggregate estimated grant date fair value of $0.2 million.

In July 2012, our board of directors approved a grant of 0.6 million PSUs to certain executive officers, subject to shareholder approval of an amendment to our Plan. Prior to shareholder approval, approximately 0.4 million of the PSUs were forfeited as a result of certain executive officer departures. On January 14, 2014, shareholder approval was obtained at our annual general meeting of stockholders. In the third quarter of fiscal year 2014, the grant of 0.2 million PSUs became effective, with an aggregate estimated grant date fair value of $0.6 million. These PSUs vest upon the achievement of certain adjusted earnings before interest, taxes, depreciation and amortization targets through June 30, 2014. Vesting is also contingent upon service conditions being met through August 2016. If the performance conditions are not achieved, then the corresponding PSUs will be forfeited in the first quarter of fiscal year 2015. As of June 28, 2014, there were 0.2 million PSUs outstanding, after adjustments for forfeitures due to terminations, related to this grant, with an aggregate estimated grant date fair value of $0.4 million.

In February 2014, our board of directors granted our chief executive officer 0.8 million restricted stock units ("RSUs") in satisfaction of the terms set forth in his employment agreement dated September 11, 2013. The RSUs vested in full on the date of grant, and settled on August 15, 2014. The RSUs have an aggregate grant date fair value of $2.0 million, which was recorded during fiscal year 2014.

In March 2014, our board of directors approved a grant of 0.2 million PSUs to certain executive officers with an aggregate estimated grant date fair value of $0.5 million. These PSUs vest upon the achievement of non-GAAP operating income break-even for calendar year 2015. Vesting is also contingent upon service conditions being met through February 2018. If the performance condition is not achieved, then the corresponding PSUs will be forfeited in the third quarter of fiscal year 2016. As of June 28, 2014, there were 0.1 million PSUs outstanding, after adjustments for forfeitures due to terminations, related to this grant, with an aggregate estimated grant date fair value of $0.4 million.

The following table summarizes the combined activity under all of our equity incentive plans for the three-year period ended June 28, 2014:



	Awards Available For Grant		Stock Options / SARs Outstanding		Weighted- Average Exercise Price		Restricted Stock Awards / Units Outstanding		Weighted- Average Grant Date Fair Value
	(Thousands)		(Thousands)				(Thousands)
Balances at July 2, 2011	3,727		3,350		9.38		799		10.15
Granted	(1,513	)	498		4.11		812		4.16
Exercised or released	—		(45	)	2.10		(331	)	9.20
Canceled or forfeited	323		(333	)	20.73		(229	)	9.70
Balances at June 30, 2012	2,537		3,470		7.84		1,051		5.76
Assumed in acquisition	6,307		4,423		10.95		55		2.31
Granted	(3,419	)	423		2.57		2,541		2.53
Exercised or released	—		(6	)	1.11		(457	)	5.52
Canceled or forfeited	2,153		(1,835	)	8.84		(340	)	3.80
Balances at June 29, 2013	7,578		6,475		9.36		2,850		3.17
Granted	(5,166	)	320		2.16		3,900		2.47
Exercised or released	—		(155	)	1.03		(1,592	)	2.77
Canceled or forfeited	3,291		(2,484	)	10.63		(885	)	2.69
Balances at June 28, 2014	5,703		4,156		$	8.43	4,273		$	2.59

Supplemental disclosure information about our stock options and SARs outstanding as of June 28, 2014 was as follows:



	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
	(Thousands)			(Years)	(Thousands)
Options and SARs exercisable at June 28, 2014	3,623	$	9.21	4.6	$	67
Options and SARs outstanding at June 28, 2014	4,156	$	8.43	5.2	$	119

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on our closing stock price of $2.15 as of June 27, 2014, which would have been received by the option holders had all option holders exercised their options as of that date. There were approximately 0.1 million shares of common stock subject to in-the-money options which were exercisable as of June 28, 2014. We settle employee stock option exercises with newly issued shares of common stock.

2011 Employee Stock Purchase Plan

On October 26, 2011, our ESPP was approved by our stockholders. Under the ESPP, we reserved 1.7 million shares of our common stock for issuance. In the third quarter of fiscal 2013, prior to commencing our third six-month offering period on February 16, 2013, we suspended the ESPP program because of the limited number of shares available for future issuance. At June 28, 2014, we had 0.6 million shares available for future issuance under our ESPP.