EMPLOYEE STOCK PLANS

On May 10, 2012, our shareholders approved our 2012 Equity Incentive Plan (the "2012 Plan"), which amended and restated the 2005 Equity Incentive Plan to increase our common stock available for grant under the plan by 2.5 million shares.

Stock Options

Options to purchase common stock granted under the 2012 Plan generally have terms not exceeding seven years. Options to purchase stock under our equity incentive plans are generally granted at exercise prices that are at least 100 percent of the fair market value of our common stock on the date of grant. Generally, 25 percent of the options vest on the first anniversary of the vesting commencement date, and the remaining options vest 1/36 per month for the next 36 months thereafter.

The following table summarizes the stock option activity under all of our equity incentive plans for the nine months ended September 30, 2012:



	Number of Shares		Weighted- Average Exercise Price		Weighted Average Remaining Term	Aggregated Intrinsic Value
	(thousands)				(years)	(thousands)
Outstanding at December 31, 2011	6,489		$	4.37
Granted	1,385		$	2.61
Exercised	(165	)	$	1.06
Canceled or forfeited	(1,029	)	$	4.79
Outstanding at September 30, 2012	6,680		$	4.02	3.7	$	137
Vested and expected to vest at September 30, 2012	6,242		$	4.14	3.6	$	134
Exercisable at September 30, 2012	4,149		$	4.98	2.5	$	120

The aggregate intrinsic value represents the pre-tax differences between the exercise price of stock options and the quoted market price of our stock on September 30, 2012 and October 2, 2011, respectively, for all in-the-money options. There were approximately 0.6 million shares of common stock subject to in-the-money options that were exercisable as of September 30, 2012.

The following table provides information pertaining to our stock options for the nine months ended September 30, 2012 and October 2, 2011 (in thousands, except weighted-average fair values):



	Nine Months Ended
	September 30, 2012		October 2, 2011
Weighted-average fair value of options granted	$	1.67	$	1.46
Intrinsic value of options exercised	$	203	$	86
Cash received from options exercised	$	175	$	58

Restricted Stock Units

The 2012 Plan provides for grants of time-based and performance-based restricted stock units ("RSUs").

Time-Based Restricted Stock Units

Generally, 25 percent of the time-based RSUs vest on each anniversary of the vesting commencement date or date of grant. On occasion, we grant time-based RSUs for varying purposes with different vesting schedules. Time-based RSUs granted under the 2012 Plan are counted against the total number of shares of common stock available for grant under the plan at 1.75 shares of common stock for every one share of common stock subject thereto.

The associated stock-based compensation expense on time-based RSUs is determined based on the fair value of our common stock on the date of grant of the RSU and recognized over the vesting period.

Performance-Based Restricted Stock Units

The vesting of performance-based RSUs is contingent on our achievement of certain predetermined financial goals and in some cases, the achievement of certain market performance measures. The amount of stock-based compensation expense recognized in any one period can vary based on the achievement or anticipated achievement of these specific performance goals. If a performance goal is not met or is not expected to be met, no compensation cost would be recognized on the underlying RSUs, and any previously recognized compensation expense on those RSUs would be reversed.

As of December 31, 2011, we had 0.2 million performance-based RSUs outstanding. All of the performance-based RSUs expired during the first quarter of 2012. We did not record any compensation expense related to these performance-based RSUs during the three and nine months ended September 30, 2012 and October 2, 2011 since the performance targets were not expected to be met.

The following table summarizes RSU activity under all of our equity incentive plans for the nine months ended September 30, 2012:



	Number of Shares		Weighted Average Grant Date Fair Value
	(thousands)
Outstanding at December 31, 2011	246		$	3.50
Granted	30		0.88
Released	(15	)	$	5.68
Expired	(229	)	$	3.32
Outstanding at September 30, 2012	32		$	1.30