Convertible Redeemable Preferred Stock And Warrants

3 Months Ended

Oct. 01, 2011

Convertible Redeemable Preferred Stock And Warrants/Stockholder Rights Plan [Abstract]

CONVERTIBLE REDEEMABLE PREFERRED STOCK AND WARRANTS

10. CONVERTIBLE REDEEMABLE PREFERRED STOCK AND WARRANTS

On September 4, 2009, the Company issued and sold 21,140 shares of Preferred Stock, par value $0.01 per share, and attached warrants to certain accredited investors (each a “Purchaser” and collectively, the “Purchasers”) for an aggregate purchase price of $21,140 (the “Offering”). The Company and each Purchaser entered into a securities purchase agreement (the “Purchase Agreement”) in connection with the Offering. The Offering was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”). The Company used the $19,235 net proceeds received from the Offering and available cash to repay all of the Company’s outstanding indebtedness under its subordinated term loan.

Preferred Stock

The terms, rights, obligations and preferences of the Preferred Stock were set forth in the Certificate of Designations of the Preferred Stock (the “Certificate of Designations”) filed with the Secretary of State of the State of Delaware on September 4, 2009.

During fiscal year 2011, holders of Preferred Stock converted all of the outstanding shares of Preferred Stock into 2,642,500 shares of the Company’s common stock. Prior to conversion, holders of Preferred Stock were entitled to quarterly dividends at an annual rate of 6.0%. All dividends were cumulative, compounded quarterly and paid in cash. The Company paid $319 of cash dividends during the three months ended October 2, 2010.

The Company considered the conversion rights and redemption options of the Preferred Stock to be embedded derivatives and, as a result, the fair value of the Derivative Liability was measured using a Monte Carlo simulation model and valuation techniques that required the Company to make various key assumptions for inputs into the model, including assumptions about the expected behavior of the Preferred Stock holders and expected future volatility of the price of the Company’s common stock. For the three months ended October 2, 2010, an increase in fair value of $5,434 was recorded in Other income (expense) in the Consolidated Statements of Operations.

Warrants

The warrants entitle the holders to purchase 50% of the number of shares of common stock that may be obtained upon conversion of the Preferred Stock, or 1,321,250 shares. The warrants have a five-year term and became exercisable on March 4, 2010. The exercise price is equal to the closing bid price of the common stock on September 3, 2009, or $10.56, and is not subject to anti-dilution protection, except in the case of stock splits and dividends. During the three months ended October 1, 2011, holders of warrants, in a cashless exercise, exchanged 10,577 warrants for 5,000 shares of common stock having a market price of $112 at the date of exercise.