EMPLOYEE STOCK PLANS

Stock Incentive Plans

On July 30, 2014, our Board of Directors approved the Fifth Amended and Restated 2001 Long-Term Stock Incentive Plan (the “Incentive Plan”) and on November 14, 2014, our shareholders ratified the Incentive Plan. The Incentive Plan amended and restated in its entirety the Fourth Amended and Restated 2001 Long-Term Stock Incentive Plan. The Incentive Plan (i) increased the number of shares of common stock available for issuance by 6.0 million shares, (ii) consolidated the share reserve of the Incentive Plan with the share reserve of the Amended and Restated 2004 Stock Incentive Plan ("2004 Plan"), such that from November 14, 2014, no additional awards will be granted under the 2004 Plan, and (iii) established that full value awards count as 1.40 shares of common stock for purposes of the Incentive Plan. From time to time, our stockholders approved amendments to the Incentive Plan, most recently adding 8.0 million shares of common stock to the share reserve under the Incentive Plan on November 17, 2017.

As of June 30, 2018, there were approximately 16.5 million shares of our common stock available for grant under the Incentive Plan.

We grant restricted stock awards and units that vest over a one to four year service period, and in certain limited cases vesting is also subject to the achievement of specific performance-based objectives as set by our Board of Directors or the Compensation Committee of our Board of Directors. We no longer grant stock options.

We also have a minimal amount of stock appreciation rights ("SARs") outstanding as of June 30, 2018, which we assumed in connection with our acquisition of Opnext.

Performance-Based Restricted Stock Units ("PSUs")

In August 2017, our Board of Directors approved a grant of 1.1 million PSUs to certain executive officers with an aggregate estimated grant date fair value of $9.5 million. These PSUs have service- and performance-based vesting conditions. One-third of the PSUs will vest subject to the achievement of $700.0 million of revenue over any four consecutive quarters through the end of fiscal year 2020, subject to service conditions; one-third of the PSUs will vest upon the achievement of $100.0 million of free cash flow (defined as adjusted earnings before interest, taxes, depreciation and amortization ("AEBITDA") less capital expenditures) over any four consecutive quarters through the end of fiscal year 2020, subject to service conditions; and one-third of the PSUs will vest upon the achievement of $800.0 million of revenue in any one fiscal year from 2018 through 2020 and upon achievement of $100.0 million of free cash flow over any four consecutive quarters through the end of fiscal year 2020, subject to service conditions. Upon attaining each performance condition, the service-based vesting condition is satisfied for that tranche as to 1/3 of the PSUs on the first anniversary of the vesting commencement date, and with respect to 1/12 of the underlying shares each subsequent quarter, such that all PSUs for that tranche are fully vested on the third anniversary of the vesting commencement date. As of June 30, 2018, we determined that the achievement of the performance conditions associated with these PSUs was improbable. The performance conditions associated with these PSUs will be considered achieved upon the consummation of the merger with Lumentum.

In August 2016, our Board of Directors approved a grant of 0.8 million PSUs to certain executive officers with an aggregate estimated grant date fair value of $4.8 million. Subject to the achievement of an aggregate of $25.0 million or more of free cash flow (defined as AEBITDA less capital expenditures delivered) over any consecutive four fiscal quarters ending on or before June 27, 2020, as determined by our Board of Directors, these PSUs will vest with respect to 25 percent of the shares subject to the PSUs on August 10, 2017, and with respect to 6.25 percent of the underlying shares each subsequent quarter over the following three years, subject to continuous service. On July 25, 2017, the Compensation Committee of our Board of Directors certified that the performance condition for these PSUs was achieved.

In August 2015, our Board of Directors approved a grant of 0.9 million PSUs to certain executive officers with an aggregate estimated grant date fair value of $2.5 million. Subject to the achievement of positive free cash flow (defined as AEBITDA less capital expenditures) in any fiscal quarter ending prior to June 30, 2018, vesting of these PSUs is contingent upon service conditions being met through August 10, 2018. On October 29, 2015, the Compensation Committee of our Board of Directors certified that this performance condition was achieved during the first quarter of fiscal year 2016. As a result, these PSUs cliff vested with respect to 33.4 percent of the underlying shares on August 10, 2016, and with respect to 8.325 percent of the underlying shares each subsequent quarter over the following two years, subject to continuous service.

In August 2014, our Board of Directors approved a grant of 0.5 million PSUs to certain executive officers with an aggregate estimated grant date fair value of $0.9 million. These PSUs vest at 100 percent upon the achievement of two consecutive quarters with positive AEBITDA on or before the end of our fiscal year 2017. During the second quarter of fiscal year 2016, the performance condition related to these PSUs was achieved. On February 2, 2016, the Compensation Committee of our Board of Directors certified that the performance condition was achieved and the PSUs immediately vested at 100 percent.

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. We did not achieve the performance conditions associated with these PSUs and the PSUs were forfeited in fiscal year 2016.

Restricted Stock Units ("RSUs")

In August 2017, our Board of Directors approved a long term incentive grant of 0.6 million RSUs to certain executive officers and 1.6 million RSUs to other employees, which vest over four years.

In August 2016, our Board of Directors approved a long term incentive grant of 0.8 million RSUs to certain executive officers and 2.0 million RSUs to other employees, which vest over four years.

In July 2015, our Board of Directors approved a long term incentive grant of 0.9 million RSUs to certain executive officers and 1.5 million RSUs to other employees, which vest over three years.

Stock Incentive Plan Activity

The following table summarizes the combined activity under all of our equity incentive plans for the three-year period ended June 30, 2018:



	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 June 27, 2015	8,921		3,381		$	7.07	4,545		$	1.80
Increase in share reserve	8,000		—		—		—		—
Granted	(5,496	)	—		—		3,926		2.92
Exercised or released	—		(110	)	2.40		(2,897	)	2.13
Canceled or forfeited	1,399		(296	)	9.29		(552	)	1.87
Balances at July 2, 2016	12,824		2,975		7.03		5,022		2.67
Increase in share reserve	6,000		—		—		—		—
Granted	(5,660	)	—		—		4,043		6.53
Exercised or released	163		(1,029	)	4.85		(3,257	)	2.57
Canceled or forfeited	254		(88	)	15.36		(121	)	4.76
Balances at July 1, 2017	13,581		1,858		7.84		5,687		5.43
Increase in share reserve	8,000		—		—		—		—
Granted	(6,027	)	—		—		4,330		8.22
Exercised or released	30		(543	)	4.87		(2,959	)	4.97
Canceled or forfeited	872		(249	)	14.67		(472	)	6.73
Balances at June 30, 2018	16,456		1,066		$	7.75	6,586		$	7.38

Supplemental disclosure information about our stock options and SARs outstanding as of June 30, 2018 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 30, 2018	1,054	$	7.82	2.1	$	3,088
Options and SARs outstanding at June 30, 2018	1,066	$	7.75	2.1	$	3,174

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on our closing stock price of $8.93 as of June 29, 2018, which would have been received by the option holders had all option holders exercised their options as of that date. There were approximately 0.6 million shares of common stock subject to in-the-money options which were exercisable as of June 30, 2018. We settle employee stock option exercises with newly issued shares of common stock.