Stockholders' Equity

Preferred Stock

The Certificate of Incorporation allows for the issuance of up to two million shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences, and the number of shares constituting any series of the designation of such series, without further vote or action by the stockholders. At March 31, 2014, there were no preferred shares outstanding.

Common Stock

At March 31, 2014, the Company had 375.0 million shares authorized for issuance and approximately 77.7 million shares issued and outstanding. At March 31, 2013, there were approximately 68.0 million shares issued and outstanding.

Stock Repurchase Program

In August 2004, the Board of Directors authorized a stock repurchase program for the repurchase of up to $200.0 million of the Company's common stock. Under the program, the Company is authorized to make purchases in the open market or enter into structured agreements. In October 2008, the Board of Directors increased the stock repurchase program by $100.0 million. There were no stock repurchases during the fiscal year ended March 31, 2014. During the fiscal year ended March 31, 2013, approximately 0.1 million shares were repurchased on the open market at a weighted average price of $5.18 per share. From the time the program was first implemented in August 2004, the Company has repurchased on the open market a total of 17.3 million shares at weighted average price of $10.04 per share. All repurchased shares were retired upon delivery to the Company. As of March 31, 2014, the Company had $15.9 million available in its stock repurchase program.

Stock Options

The Company has granted stock options to employees and non-employee directors under several plans. These equity plans include three stockholder-approved plans (the 1992 Stock Option Plan and 1997 Directors’ Stock Option Plan and 2011 Equity Incentive Plan) and four plans not approved by stockholders (the 2000 Equity Incentive Plan, Cimaron Communications Corporation’s 1998 Stock Incentive Plan assumed in the fiscal 1999 merger, and JNI Corporation’s 1997 and 1999 Stock Option Plans assumed in the fiscal 2004 merger). Certain other outstanding options were assumed through the Company’s various acquisitions.

In May 2009, Dr. Gopi, the Company's CEO, was awarded 300,000 stock options for “Extraordinary Accomplishment.” The Black-Scholes value of these stock options was $1.1 million. These options vest only if Company performance milestones are satisfied; otherwise they expire unvested. The first milestone for vesting of 75,000 shares is when it is determined that the Company achieved an annual revenue target of $270.0 million or more for any fiscal year from fiscal 2010 through fiscal 2013. The next milestone for vesting of another 75,000 shares is when it is determined that the Company achieved an annual revenue target of $310.0 million or more for any fiscal year from fiscal 2010 through fiscal 2013 or an annual revenue target of $350.0 million or more for fiscal 2014. The last milestone for vesting of 150,000 shares is when it is determined that the Company achieved an annual operating margin of 13.5% of annual revenue or higher in fiscal 2013 or 15% or higher for any fiscal year from fiscal 2010 through fiscal 2012. All options issued under the above award expired unvested when it concluded in fiscal 2014.

A summary of the Company's stock option activity and related information is as follows:



	Options Outstanding
	Number of Shares (thousands)		Weighted Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value* (millions)
Outstanding as of March 31, 2011	5,390		$	11.91
Granted	250		$	10.10
Exercised	(156	)	$	5.11		$	0.5	(1)
Cancelled	(1,320	)	$	16.20
Outstanding as of March 31, 2012	4,164		$	10.67
Granted	40		$	5.58
Exercised	(161	)	$	5.31		$	0.3	(1)
Cancelled	(551	)	$	14.49
Outstanding as of March 31, 2013	3,492		$	10.26
Granted	40		7.35
Exercised	(662	)	9.36			$	1.8	(1)
Cancelled	(461	)	12.35
Outstanding as of March 31, 2014	2,409		$	10.06	2.7	$	3.4	(2)
Vested and expected to vest as of March 31, 2014	2,409		$	10.06	2.6	$	3.4	(2)
Vested and exercisable at the end of the year	2,312		$	10.14	2.7	$	3.2	(2)

(1) The aggregate pre-tax intrinsic value is calculated as the difference between the market value on the date of exercise and the exercise price of the shares.

(2) The aggregate pre-tax intrinsic value is calculated as the difference between the market value as of the end of the fiscal period and the exercise price of the shares. The closing price of the Company’s common stock was $9.90 on March 31, 2014.

The following table summarizes the information about stock options outstanding and exercisable as of March 31, 2014 (shares in thousands):



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number of Shares	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number of Shares	Weighted Average Exercise Price
$ 1.68 - $ 7.60	540	3.07	$	6.77	462	$	6.71
7.61 - 7.67	650	2.34	7.67		650	7.67
7.68 - 11.86	430	3.3	10.49		419	10.47
11.87 - 14.20	491	2.38	12.87		483	12.88
14.21 - 23.32	298	1.47	15.96		298	15.96
$ 1.68 - $23.32	2,409	2.57	$	10.06	2,312	$	10.14

Restricted Stock Units

The Company has granted RSUs pursuant to its 1992 Plan, 2000 Equity Incentive Plan and 2011 Equity Incentive Plan as part of its regular annual employee equity compensation review program as well as to new hires. RSUs are share awards that, upon vesting, will deliver to the holder shares of the Company’s common stock. Generally, RSUs vest ratably on a quarterly basis over four years from the date of grant. For employees hired after May 15, 2006, RSUs will vest on a quarterly basis over four years from the date of hire provided that no shares will vest during the first year of employment, at the end of which the shares that would have vested during that year will vest and the remaining shares will vest over the remaining 12 quarters.

In April 2011, the Committee authorized additional three-year performance-based RSU grants, or “EBITDA2” Grants. Fiscal 2012, 2013 and 2014 were declared as zero attainment years and all shares issued under the EBITDA2 program expired unvested when the program concluded in May 2014.

In November 2011 and February 2012, the Committee authorized additional 18-month performance-based RSU grants, or “Performance Retention Grants”, which were intended to incentivize superior performance and retain key employees. In May 2012, the Committee authorized 12-month Performance Retention Grants. Vesting for the Performance Retention Grants was subject to (i) the accomplishment of goals and objectives of the individual’s business unit and (ii) individual performance as measured by the accomplishment of individual goals and objectives. The 18-month RSU shares generally vest 2/3 after one year, with certain unearned amounts able to roll over to the subsequent vesting period, and 1/3 after 18 months. The 12-month RSU shares have the opportunity to vest after 1 year. Unvested RSU shares remaining at the end of the program period will expire unvested. This program has concluded and no further grants will be made under this program.

In February 2012, Dr. Gopi was awarded 500,000 performance-based RSUs based on three underlying performance milestones. The value of these RSUs is $3.7 million. The Company evaluated the probability of achieving the milestones and recognized expense accordingly. As of March 31, 2014, all three performance milestones have been completed, and the associated stock-based compensation expense has been recorded in the Company's Consolidated Financial Statements. In November 2013, Dr. Gopi was awarded an additional 500,000 RSUs of which 200,000 RSUs were vested on the grant date and the remaining 300,000 RSUs have not vested as of March 31, 2014 and will vest upon the attainment of certain specified X-Gene and X-Weave commercialization goals. The value of these unvested performance-based RSUs is $3.3 million.

In May and November 2013, the Committee authorized performance-based MSUs. The MSUs will be earned, if at all, based on the Company's Total Shareholder Return (“TSR”) compared to that of the SPDR S&P Semiconductor Index ("Index”) over a 2-year performance period (for half of the MSU award) and a three-year performance period (for the remaining half of the MSU award). The MSUs will vest between ranges of 0% and 150% based on the Company's relative TSR compared to the Index. The value of these MSUs is $3.1 million.

In May 2013, the Committee authorized an annual incentive compensation plan (the “FY2014 Short-Term Plan”). The FY 2014 Short-Term Plan will pay out based on fiscal 2014 revenue and non-GAAP earnings per share metrics. The award payouts for each corporate financial measure range from 50% to 150% of the pre-established target level based on the Company's actual performance for fiscal 2014 and the associated stock-based compensation expense of $1.4 million has been recorded in the Company's Consolidated Financial Statements as of March 31, 2014. The FY 2014 Short-Term Plan was payable in fully vested RSUs on May 15, 2014 and was duly paid in May 2014.

A summary of the Company's RSU activity is as follows (in thousands):



	Fiscal Years Ended March 31,
	2014		2013		2011
Outstanding at the beginning of the year	6,444		9,244		3,074
Awarded	3,594		1,040		8,833
Vested	(2,397	)	(2,345	)	(1,701	)
Cancelled	(1,536	)	(1,495	)	(962	)
Outstanding at the end of the year	6,105		6,444		9,244

The weighted average remaining contractual term for the RSUs outstanding as of March 31, 2014 was 0.9 years.

As of March 31, 2014, the aggregate pre-tax intrinsic value of RSUs outstanding was $60.4 million which includes performance based awards which are subject to milestone attainment. The aggregate pretax intrinsic values were calculated based on the closing price of the Company’s common stock of $9.90 on March 31, 2014.

The aggregate pretax intrinsic values of RSUs released during the fiscal year ended March 31, 2014 was $22.4 million. This intrinsic value represents the fair market value of the Company’s common stock on the date of release.

Employee Stock Purchase Plan

Under the Company's 1998 Employee Stock Purchase Plan ("1998 Plan"), the Company had 6.3 million shares reserved for issuance. In August 2012, the Company’s stockholders approved the proposal to reserve an additional 1.8 million shares under the 2012 Employee Stock Purchase Plan ("2012 Plan"). Upon adoption of the 2012 Plan, the 1998 Plan was terminated. Under the terms of the 2012 Plan, purchases are made semiannually and the purchase price of the common stock is equal to 85% of the fair market value of the common stock on the first or last day of the offering period, whichever is lower. During the fiscal years ended March 31, 2014 and 2013, 0.7 million and 0.6 million shares, respectively, were issued under the 2012 plan. During the fiscal year ended March 31, 2013, 0.4 million shares were issued under the 1998 plan prior to its termination in August 2012. At March 31, 2014, 0.5 million shares were available for future issuance from the 2012 Plan.

Warrants

On May 17, 2009, the Company entered into a development agreement with Veloce pursuant to which Veloce agreed, among other things, to perform development work for the Company on an exclusive basis for up to five years for cash and other consideration, including a warrant to purchase shares of the Company’s common stock (the “Warrant”). In connection with the Merger Agreement amendment entered into on April 5, 2012, the Company and Veloce further modified the Warrant by fully accelerating the vesting schedule resulting in the recognition of approximately $1.3 million of stock compensation expense during the quarter ended June 30, 2012.

Common Shares Reserved for Future Issuance

At March 31, 2014, the Company has the following shares of common stock reserved for issuance upon the exercise of equity instruments (in thousands):



Options granted and outstanding	2,409
Restricted Stock Units granted and outstanding	6,105
Options and RSUs authorized for future grants	355
Employee Stock Purchase Plan	498
	9,367