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Employee Stock Plans - Note 8

9 Months Ended

Oct. 02, 2011

8. Employee Stock Plans

As of October 2, 2011, the Company had approximately 1.6 million shares available for future grants under the Company's 2005 Equity Incentive Plan (the "2005 Plan"). The following table summarizes the combined activity under all of the Company's equity incentive plans for the nine months ended October 2, 2011:

			Weighted-	Restricted	Weighted-
	Awards	Stock	Average	Stock	Average
	Available	Options	Exercise	Units	Grant Date
	For Grant	Outstanding	Price	Outstanding	Fair Value
	(thousands)	(thousands)		(thousands)
Balances at December 31, 2010	2,263	6,278	$ 5.51	343	$ 3.67
Stock options:
Granted	(1,412)	1,412	$ 2.32	-	-
Exercised	-	(61)	$ 0.95	-	-
Cancelled or forfeited	711	(711)	$ 7.96	-	-
Restricted stock units:
Granted	-	-	-	-	-
Released	13	-	-	(22)	$ 6.35
Cancelled or forfeited	63	-	-	(36)	$ 3.40
Balances at October 2, 2011	1,638	6,918	$ 4.64	285	$ 3.49

Supplemental disclosure information about the Company's stock options and RSUs with time-based vesting is as follows:

	Three Months Ended		Nine Months Ended
	October 2,	September 26,	October 2,	September 26,
	2011	2010	2011	2010
	(thousands, except weighted-average fair values)
Stock options:
Weighted-average fair value of options granted	$ 1.08	$ 1.90	$ 1.46	$ 1.96
Intrinsic value of options exercised ⁽¹⁾	$ 17	$ 11	$ 86	$ 235
Cash received from options exercised	$ 11	$ 5	$ 58	$ 64
Restricted stock units with time-based vesting:
Weighted-average fair value of
time-based RSUs granted	$ -	$ -	$ -	$ 3.96
__________________
⁽¹⁾ Amount represents the difference between the exercise price of the option and the CompanyÆs closing stock price on the date of exercise.<>

Stock Options

Stock options granted under the 2005 Plan are for periods not to exceed seven years. Generally, options to purchase stock under the 2005 Plan are granted at exercise prices that are at least 100 percent of the fair market value of the Company's 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.

During the three months ended October 2, 2011 and September 26, 2010, the Company granted options to purchase 0.1 million and 0.7 million shares of common stock, respectively, with an estimated total grant-date fair value of $0.2 million and $1.3 million, respectively. During the nine months ended October 2, 2011 and September 26,

2010, the Company granted options to purchase 1.4 million and 2.0 million shares of common stock, respectively, with an estimated total grant-date fair value of $2.1 million and $4.0 million, respectively.

Supplemental disclosure information about the Company's stock options outstanding as of October 2, 2011:

		Weighted-	Average
		Average	Remaining	Aggregate
		Exercise	Contractual	Intrinsic
	Shares	Price	Life	Value
	(thousands)		(in years)	(thousands)
Stock options:
Outstanding options	6,918	$ 4.64	4.0	$ 342
Vested and exercisable options	4,457	$ 5.77	3.0	$ 283

The aggregate intrinsic value shown in the table above represents the total pretax intrinsic value, based on the Company's closing stock price of $1.17 as of September 30, 2011, which would have been received by the option holders had all option holders exercised their "in-the-money" options at that date. The Company settles employee exercises of options with newly issued shares of common stock.

Restricted Stock Units ("RSUs")

The Company's 2005 Plan provides for grants of time-based and performance-based 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, the Company grants time-based RSUs for varying purposes with different vesting schedules. Time-based RSUs granted under the 2005 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.

During the three and nine months ended October 2, 2011, the Company did not grant any time-based RSUs. During the three months ended September 26, 2010, the Company also did not grant any time-based RSUs. During the nine months ended September 26, 2010, the Company granted 3,000 time-based RSUs, with an estimated total grant-date fair value of $12,000. The associated stock-based compensation expense on time-based RSUs is determined based on the fair value of the Company's 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 the Company's achievement of certain predetermined financial goals and in some cases, the achievement of certain market performance. The amount of stock-based compensation expense recognized in any one period can vary based on the achievement or anticipated achievement of specific performance goals. If a performance goal is not met or is not expected to be met, no compensation cost is recognized on the underlying RSUs, and any previously recognized compensation expense on those RSUs would be reversed.

As of October 2, 2011, the Company had 0.3 million performance-based RSUs outstanding. These RSUs will expire during the first quarter of 2012, if the performance targets are not achieved by then. The Company did not record any compensation expense related to these performance-based RSUs during the three and nine months ended October 2, 2011 and September 26, 2010 since the Company has determined that due to market conditions it is not probable that any of the performance targets will be met.