Note 7 – Stock-Based Compensation

The Company has various stockholder-approved programs which allow for the grant of stock-based compensation to officers, employees, and non-employee directors.

The amount of compensation cost related to stock-based payment transactions is measured based on the grant-date fair value of the equity instruments issued. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Company determines compensation cost for restricted stock units (“RSUs”), phantom stock units, and restricted stock based on the grant-date fair value of the underlying common stock. Compensation cost is recognized over the period that an officer, employee, or non-employee director provides service in exchange for the award.

The following table summarizes stock-based compensation expense recognized (in thousands) :

	Fiscal quarters ended					Six fiscal months ended
	July 2, 2011			July 3, 2010		July 2, 2011			July 3, 2010
Stock options	$	(245	)	$	161	$	(125	)	$	354
Restricted stock units		3,573			592		4,639			812
Phantom stock units		-			-		222			175
Total	$	3,328		$	753	$	4,736		$	1,341

Stock-based compensation expense for the fiscal quarter and six fiscal months ended July 2, 2011 includes amounts associated with the acceleration of vesting of awards upon the death of Vishay’s Executive Chairman of the Board of Directors, Dr. Felix Zandman. In accordance with Dr. Zandman’s employment agreement, 98,375 RSUs held by Dr. Zandman immediately vested and were contributed to his estate upon his death and 202,330 RSUs with performance-based vesting criteria will be contributed to his estate upon the Company’s achievement of the performance-based criteria. Additionally, the vesting of 77,334 stock options was accelerated. These options may be exercised by Dr. Zandman’s estate within one year from his death pursuant to the Company’s 2007 Stock Incentive Program (as amended, the “2007 Program”).

The following table summarizes unrecognized compensation cost and the weighted average remaining amortization periods at July 2, 2011 (dollars in thousands, amortization periods in years) :

			Weighted Average
	Unrecognized		Remaining
	Compensation		Amortization
	Cost		Periods
Stock options	$	208	1.6
Restricted stock units		6,248	1.9
Phantom stock units		-	0.0
Total	$	6,456

2007 Stock Incentive Plan

The Company’s 2007 Program permits the grant of up to 3,000,000 shares of restricted stock, unrestricted stock, RSUs, and stock options, to officers, employees, and non-employee directors. Such instruments are available for grant until May 22, 2017.

The 2007 Program was originally approved by stockholders of the Company on May 22, 2007, as the “2007 Stock Option Program.” On May 28, 2008, the Company’s stockholders approved amendments to the 2007 Stock Option Program, which was then renamed the “2007 Stock Incentive Program.”

On February 23, 2011, the Board of Directors of the Company amended and restated the 2007 Program. The amendment eliminated share recycling, so that on the exercise of an option where the exercise price is paid via the tender of previously-owned shares or pursuant to an “immaculate cashless exercise,” the total “gross” number of option shares exercised is removed from the pool of shares available for future issuance. Similarly, shares withheld to pay income taxes in connection with the exercise of an option are also removed from the pool. The amendment also restricts re-pricing and cash repurchases of options without the prior approval of stockholders.

Stock Options

In addition to stock options outstanding pursuant to the 2007 Program, the Company has stock options outstanding under previous stockholder-approved stock option programs. These programs are more fully described in Note 12 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2010. No additional options may be granted pursuant to these programs.

Option activity under the stock option plans as of July 2, 2011 and changes during the six fiscal months then ended are presented below (number of options in thousands, contractual life in years) :

					Weighted
			Weighted		Average
	Number		Average		Remaining
	of		Exercise		Contractual
	Options		Price		Life
Outstanding:
January 1, 2011	1,254		$	15.04
Granted	-			-
Exercised	(534	)		14.87
Cancelled or forfeited	(40	)		15.18
Outstanding at July 2, 2011	680		$	15.16	1.67

Vested and expected to vest
at July 2, 2011	680		$	15.16	1.67
Exercisable at July 2, 2011	582		$	15.41	1.33

During the six fiscal months ended July 2, 2011, 155,000 options vested. At July 2, 2011, there are 98,000 unvested options outstanding, with a weighted average grant-date fair value of $8.50 per option.

The pretax aggregate intrinsic value (the difference between the closing stock price on the last trading day of the second fiscal quarter of 2011 of $15.70 per share and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on July 2, 2011 is $549,000. This amount changes based on changes in the market value of the Company’s common stock. During the six fiscal months ended July 2, 2011, 534,000 options were exercised. The total intrinsic value of options exercised during the six fiscal months ended July 2, 2011 was approximately $1,628,000.

Restricted Stock Units

RSU activity under the 2007 Program as of July 2, 2011 and changes during the six fiscal months then ended are presented below (number of RSUs in thousands) :

			Weighted Average
	Number		grant date
	of		fair value
	RSUs		per unit
Outstanding:
January 1, 2011	634		$	9.61
Granted	398			16.91
Vested*	(126	)		10.95
Cancelled or forfeited	-			-
Outstanding at July 2, 2011	906		$	12.63

Expected to vest at July 2, 2011	906
____________________

* The number of RSUs vested includes shares that the Company withheld on behalf of employees to satisfy the statutory tax withholding requirements.

The Company recognizes compensation cost for RSUs that are expected to vest. The Company expects all performance-based vesting criteria to be achieved. RSUs with performance-based vesting criteria are expected to vest as follows (number of RSUs in thousands) :

Vesting Date		Number of RSUs
January 1, 2013		324
January 1, 2014		215

Phantom Stock Plan

The Company maintains a phantom stock plan for certain senior executives. The Phantom Stock Plan authorizes the grant of up to 300,000 phantom stock units to the extent provided for in employment agreements with the Company. Following the completion of the spin-off of VPG in 2010 and the passing of Dr. Zandman in the second fiscal quarter of 2011, the Company has such employment arrangements with two of its executives. The arrangements provide for an annual grant of 5,000 shares of phantom stock to each of these executives on the first trading day of the year. If the Company later enters into other employment arrangements with other individuals that provide for the granting of phantom stock, those individuals also will be eligible for grants under the Phantom Stock Plan. No grants may be made under the Phantom Stock Plan other than under the terms of employment arrangements with the Company. Each phantom stock unit entitles the recipient to receive a share of common stock at the individual’s termination of employment or any other future date specified in the employment agreement. The phantom stock units are fully vested at all times. In accordance with the Phantom Stock Plan, following Dr. Zandman’s passing, 43,667 phantom stock units held by Dr. Zandman’s estate were redeemed as common stock.

Phantom stock units activity under the 2007 Program as of July 2, 2011 and changes during the six fiscal months then ended are presented below (number of phantom stock units in thousands) :

	Number		Grant date
	of		fair value
	Units		per unit
Outstanding:
January 1, 2011	116
Granted	15		$	14.78
Redeemed for common stock	(44	)
Outstanding at July 2, 2011	87