Note 8. Commitments and Contingencies

3¾% Convertible Senior Notes: In December 2007, the Company issued $85.0 million of 3¾% convertible senior notes due December 15, 2014, in a private placement of which $10.5 million remained outstanding at March 30, 2012. The notes may be converted by a holder, at its option, into shares of the Company's common stock initially at a conversion rate of 73.3689 shares of common stock per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $13.63 per share of common stock (subject to adjustment in certain events), at any time on or prior to December 15, 2014, unless the notes were previously repurchased. If a holder elects to convert its notes in connection with certain fundamental changes, in certain circumstances the conversion rate will increase by a number of additional shares of common stock upon conversion. Upon conversion, a holder generally will not receive any cash payment representing accrued and unpaid interest, if any. The notes are not redeemable by the Company prior to the stated maturity.

Upon the occurrence of certain fundamental changes including, without limitation, an acquisition of voting control of the Company, the liquidation or dissolution of the Company, or the Company's common stock ceasing to be publicly traded (meaning, traded on a national securities exchange or quoted on the NASDAQ Global Market or NASDAQ Capital Market or traded on an established automated over-the-counter trading market in the United States), a holder may require the Company to purchase for cash all or any part of its notes at a purchase price equal to 100% of the principal amount plus any accrued and unpaid interest (including additional interest, if any) up until, but not including, the fundamental change purchase date. With regards to the Company's common stock being publicly traded, the common stock is currently listed on The NASDAQ Global Market and the Company is currently in compliance with NASDAQ's continued listing standards. On March 22, 2012, the Company received a deficiency letter from NASDAQ notifying the Company that it was failing to meet The NASDAQ Global Market's listing rules requirement for listed securities to maintain a minimum bid price of $1.00 per share, based upon the closing bid price of the Company's common stock for the 30 consecutive business days prior to the date of the letter. On April 10, 2012, the Company received written notification from NASDAQ that it had regained compliance with the bid price requirement, based upon the Company's common stock remaining above $1.00 per share for the period from March 23, 2012 to April 9, 2012. The matter is now closed, however the Company remains subject to NASDAQ's continued listing standards, including the bid price requirement.

The notes are unsecured senior obligations, ranking equal in right of payment to all existing and future senior indebtedness, and senior in right of payment to any existing and future subordinated indebtedness. The notes are effectively subordinated to existing and future secured indebtedness to the extent of the assets securing such indebtedness and structurally subordinated to the claims of all existing and future indebtedness and other liabilities of the Company's subsidiaries.

In fiscal 2010, the Company repurchased and retired $2.5 million principal amount of the outstanding notes in privately negotiated transactions. The Company recorded a net gain on this extinguishment of debt of $555,000, consisting of a $625,000 gain resulting from the repurchase of debt at below principal, partially offset by a $70,000 write-off of unamortized deferred financing costs related to the repurchased debt.

Interest expense relating to the 3¾% Convertible Senior Notes was $394,000, $394,000 and $482,000 in fiscal 2012, 2011 and 2010, respectively, and consisted solely of contractual coupon interest.

7¼% Redeemable Convertible Subordinated Debentures: In May 1989, the Company issued $75.0 million of 7¼% redeemable convertible subordinated debentures due May 15, 2014, of which $23.7 million remained outstanding at March 30, 2012. Each debenture is convertible at the option of the holder into common stock at $31.50 per share and is redeemable at the option of the Company. The debentures are entitled to a sinking fund which began May 15, 2000, of 14 annual payments of 5% of the aggregate principal amount of debentures issued ($3.8 million annually), reduced by any redemption or conversion of the debentures. As a result of previous redemptions, the total remaining sinking fund requirement is $1.2 million, which, assuming no further redemptions, will be due as a final sinking fund payment on May 15, 2013.

Interest expense relating to the 7¼% Redeemable Convertible Subordinated Debentures was $1.7 million, $1.7 million, and $1.7 million in fiscal 2012, 2011 and 2010, respectively, and consisted solely of contractual coupon interest.

Operating Leases: The Company leases its facilities under operating leases. These leases expire at various dates through fiscal 2017. The Company's headquarters facility lease expires in fiscal 2017. The minimum future lease commitments under these leases as of March 30, 2012, were as follows:

(in thousands)		2013				2014				2015				2016				2017				Thereafter				Total
Minimum future operating lease payments		$	2,069			$	1,322			$	1,266			$	1,285			$	976			$	-			$	6,918

Rental expense under operating leases was $2.5 million, $2.6 million and $2.9 million for fiscal 2012, 2011 and 2010, respectively.

Equipment Financing: In fiscal 2011, the Company acquired certain office equipment through two agreements classified as capital leases. The cost of equipment financed by capital leases was $162,000. The terms of the capital lease agreements range from three to five years. One of the capital lease agreements includes a bargain purchase option which the Company may exercise at the end of the lease term. The equipment financed by the capital leases is included in the consolidated balance sheets as property and equipment, net.

In fiscal 2010, the Company acquired certain office equipment through an agreement classified as a capital lease and also through a note payable. The cost of equipment financed by the capital lease and by the note payable was $145,000 and $141,000, respectively. The terms of both the capital lease agreement and the note payable are three years. The capital lease agreement includes a bargain purchase option which the Company may exercise at the end of the lease term. The equipment financed by the capital lease and the note payable is included in the consolidated balance sheets as property and equipment, net.

Amortization of assets under capital lease is included in depreciation expense. Accumulated amortization of assets under capital lease was $188,000, $81,000 and $13,000 at March 30, 2012, March 25, 2011 and March 26, 2010, respectively.

The minimum future lease commitments under capital leases as of March 30, 2012, were as follows:

(in thousands)		2013				2014				2015				2016				2017				Thereafter				Total
Minimum future capital lease payments		$	68			$	30			$	25			$	21			$	-			$	-			$	144

License and Development Agreement: The Company is a party to a license and development agreement with a third-party technology supplier, under which the Company acquired a license to manufacture and distribute the supplier's high-speed networking platform. The Company agreed to pay an additional $5.0 million in four equal installments to the supplier for the advanced platform and an extended exclusive right to market. The first two installments were paid in fiscal 2008 and the remaining two will be due at separate future dates dependent upon the supplier's delivery of future enhancements of the advanced platform. The Company believes it is unlikely the remaining two installments will become due or be paid.

Contingencies: In the normal course of business, the Company enters into contractual commitments to purchase services, materials, components, and finished goods from suppliers, mainly its primary contract manufacturer, Plexus. Under the agreement with Plexus, the Company may incur certain liabilities, as described in Note 3.

Product Warranty: See Note 5.

Restructure: See Note 6.

Litigation: See Note 16.