NOTE 10 – SHARE-BASED COMPENSATION

In March 2007 the Company's shareholders approved a new share-based compensation plan ("Plan"), under which options, restricted stock, restricted stock units, stock appreciation rights, performance stock, performance units, and other awards based on, or related to, shares of the Company's common stock may be granted from shares authorized but unissued or shares previously issued and reacquired by the Company. The maximum number of shares of common stock approved by the Company's shareholders to be issued under the Plan was increased from 3.0 million shares to 6.0 million shares during the second quarter of fiscal 2010. Awards may be granted to officers, employees, directors, consultants, advisors, and independent contractors of the Company or its subsidiaries. In the event of a change in control (as defined in the Plan), the vesting of awards may be accelerated. The Plan, aspects of which are more fully described below, prohibits further awards from being issued under prior plans. The Company incurred total share-based compensation cost of $2.5 million, $1.9 million and $2.1 million in fiscal years 2011, 2010 and 2009, respectively. No share-based compensation cost was capitalized as part of inventory and no related income tax benefits were recorded during the fiscal years presented.

Stock Options

Option awards generally vest in one to four years, and have a ten year contractual term. All incentive and non-qualified stock option grants must have an exercise price no less than the market value of the underlying common stock on the date of grant. The grant date fair values of options are based on the closing prices of the Company's common stock on the date of grant using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility of the Company's stock. The Company uses historical option exercise behavior and employee termination data to estimate expected term, which represents the period of time that the options granted are expected to remain outstanding. The risk-free rate of return for the estimated term of the option is based on the U.S. Treasury yield curve in effect at the date of grant. The weighted-average inputs and risk-free rate of return ranges used to calculate the grant date fair values of options issued during fiscal years 2011, 2010 and 2009 are presented in the following table:

	Year Ended
	October 30, 2011			October 31, 2010			November 1, 2009

Expected volatility		98.7	%		89.9	%		69.8	%

Risk-free rate of return		0.7 – 1.9	%		1.5 – 2.4	%		1.9 - 2.5	%

Dividend yield		0.0	%		0.0	%		0.0	%

Expected term	4.2 years			4.4 years			4.7 years

A summary of option activity under the Plan as of October 30, 2011, and changes during the year then ended is presented as follows:

Options	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life		Aggregate Intrinsic Value

Outstanding at October 31, 2010		3,901,909		$	9.34
Granted		625,750			6.77
Exercised		(318,974	)		1.28
Cancelled and forfeited		(174,769	)		16.11
Outstanding at October 30, 2011		4,033,916		$	9.28		6.1 years	$	7,300
Exercisable at October 30, 2011		2,068,448		$	14.32		4.3 years	$	2,166
Expected to vest as of October 30, 2011		1,651,417		$	3.73		8.0 years	$	4,711

The weighted-average grant date fair value of options granted during the fiscal years 2011, 2010 and 2009 were $4.75, $2.98 and $0.44, respectively. The total intrinsic value of options exercised during fiscal years 2011 and 2010 was $2.1 million and $0.4 million, respectively. A summary of the status of the Company's unvested options as of October 30, 2011, is presented below:

Unvested Options	Shares			Weighted-Average Fair Value at Grant Date

Unvested at October 31, 2010		1,968,554		$	1.71
Granted		625,750			4.75
Vested		(616,473	)		1.63
Cancelled and forfeited		(12,363	)		1.75
Unvested at October 30, 2011		1,965,468		$	2.70

The Company received cash from option exercises of $0.4 million and $0.1 million in fiscal years 2011 and 2010, respectively, and there were no options exercised during fiscal year 2009. As of October 30, 2011, the total unrecognized compensation cost of unvested option awards was approximately $3.3 million. That cost is expected to be recognized over a weighted-average amortization period of 2.7 years.

Restricted Stock

The Company periodically grants restricted stock awards. The restrictions on these awards lapse over a service period that has ranged from less-than-one to eight years. The weighted-average grant date fair values of restricted stock awards issued during fiscal years 2011 and 2009 were $6.71 and $0.76, respectively. No restricted stock awards were granted during fiscal 2010. The total fair value of awards for which restrictions lapsed was $0.5 million, $0.4 million and $0.3 million during fiscal years 2011, 2010 and 2009 respectively. As of October 30, 2011, the total compensation cost for restricted stock awards not yet recognized was approximately $1.3 million. That cost is expected to be recognized over a weighted-average amortization period of 2.6 years. A summary of the status of the Company's outstanding restricted stock awards as of October 30, 2011, is presented below:

Restricted Stock	Shares			Weighted- Average Fair Value at Grant Date

Outstanding at October 31, 2010		97,272		$	14.60
Granted		176,250			6.71
Vested		(80,695	)		9.79
Cancelled and forfeited		(1,000	)		17.02
Outstanding at October 30, 2011		191,827		$	9.37
Expected to vest as of October 30, 2011		163,220		$	9.23

Employee Stock Purchase Plan

The Company's Employee Stock Purchase Plan ("ESPP") permits employees to purchase shares at 85% of the lower of the fair market value at the commencement of the offering or the last day of the payroll payment period. The maximum number of shares of common stock approved by the Company's shareholders to be purchased under the ESPP was increased from 0.9 million shares to 1.2 million shares during fiscal 2010. The vesting period for shares purchased under the ESPP is approximately one year. Under the ESPP, approximately 1.0 million shares had been issued through October 30, 2011, and approximately 62,000 shares are subject to outstanding subscriptions. As of October 30, 2011, the total compensation cost related to the ESPP not yet recognized was $0.1 million, all of which is expected to be recognized within fiscal 2012.