Employee Stock Plans

9 Months Ended

Sep. 30, 2011

Employee Stock Plans [Abstract]

EMPLOYEE STOCK PLANS

10. EMPLOYEE STOCK PLANS

Employee Stock Incentive Plans

The Company grants nonstatutory and incentive stock options, restricted stock awards, restricted stock units and performance share awards to attract and retain officers, directors, employees and consultants. For the quarter ended March 31, 2010, the Company granted awards under the 2010 Equity Incentive Plan (the “2010 Plan”), which was approved by the Company’s stockholders on January 25, 2010. Previously, the Company had also adopted the 2001 Employee Stock Purchase Plan, however, purchases under this plan have been suspended for several years. Options to purchase Trident’s common stock remain outstanding under the following incentive plans which have expired or been terminated: the 1992 Stock Option Plan, the 1994 Outside Directors Stock Option Plan, the 1996 Nonstatutory Stock Option Plan (the “1996 Plan”), the 2002 Stock Option Plan (the “2002 Plan”) and the 2006 Equity Incentive Plan (the “2006 Plan”). In addition, options to purchase Trident’s common stock are outstanding as a result of the assumption by the Company of options granted to TTI’s officers, employees and consultants under the TTI 2003 Employee Option Plan (the “TTI Plan”). The options granted under the TTI option Plan were assumed in connection with the acquisition of the minority interest in TTI on March 31, 2005 and converted into options to purchase Trident’s common stock. Except for the 1996 Plan, all of the Company’s equity incentive plans, as well as the assumption and conversion of options granted under the TTI Plan, have been approved by the Company’s stockholders.

At the Company’s Annual Stockholder Meeting held on June 16, 2011, the Company’s stockholders approved an increase of 35,000,000 shares to be available for issuance under the 2010 Plan. The 2010 Plan provides for the grant of equity incentive awards, including stock options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance units and cash-based and other stock-based awards of up to 67,200,000 shares, subject to increase for unissued predecessor plan shares as set forth in the 2010 Plan. For purposes of the total number of shares available for grant under the 2010 Plan, any shares that are subject to awards of stock options, stock appreciation rights or other awards that require the option holder to purchase shares for monetary consideration equal to their fair market value determined at the time of grant are counted against the available-for-grant limit as one share for every one share issued, and any shares issued in connection with any other awards, or “full value” awards, are counted against the available-for-grant limit as 1.2 shares for every one share issued. Stock options granted under the 2010 Plan generally must have an exercise price equal to the closing market price of the underlying stock on the grant date and generally expire no later than ten years from the grant date. Options generally become exercisable beginning one year after the date of grant and vest as to a percentage of shares annually over a period of three to four years following the date of grant. The 2010 Plan supersedes the 2006 Plan and the 2002 Plan. The 2006 Plan and 2002 Plan were terminated on January 26, 2010 following approval of the 2010 Plan by the Company’s stockholders.

Valuation of Employee Stock Options

The Company values its stock-based incentive awards granted using the Black-Scholes model, except for performance-based restricted stock awards with a market condition granted during the fiscal year ended June 30, 2008 and during the quarter ended March 31, 2010, for which the Company used a Monte Carlo simulation model to value the awards.

The Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The Black-Scholes model requires the input of certain assumptions. The Company’s stock options have characteristics significantly different from those of traded options, and changes in the assumptions can materially affect the fair value estimates.

For the three and nine months ended September 30, 2011 and 2010, the fair value of options granted were estimated at the date of grant using the Black-Scholes model with the following weighted average assumptions:

	Three months Ended September 30,					Nine Months Ended September 30,
Employee Incentive Plans	2011		2010			2011			2010
Expected term (in years)		—		5.03			5.03			4.78
Expected volatility		—		71.28	%		71.93	%		69.02	%
Risk-free interest rate		—		1.25	%		2.23	%		2.25	%
Expected dividend rate		—		—			—			—
Weighted average fair value at grant date	$	—	$	1.00		$	0.57		$	1.03

No options were granted during the three months ended September 30, 2011.

The expected term of stock options represents the weighted average period the stock options are expected to remain outstanding. The expected term is based on the observed and expected time to exercise and post-vesting cancellations of options by employees. The Company uses historical volatility in deriving its expected volatility assumption because it believes that future volatility over the expected term of the stock options is not likely to differ from the past. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of options to purchase Trident common stock. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts.

Stock-Based Compensation Expense

The following table summarizes the Company’s stock-based award activities for the quarters ended September 30, 2011 and 2010. The Company has not capitalized any stock-based compensation expense in inventory for the quarters ended September 30, 2011 and 2010 as such amounts were immaterial.

	Three Months  Ended September 30,				Nine Months Ended September 30,
(In thousands)	2011		2010		2011		2010
Cost of revenues	$	82	$	82	$	232	$	272
Research and development		698		845		2,309		2,627
Selling, general and administrative		763		938		2,398		1,864
Total stock-based compensation expense	$	1,543	$	1,865	$	4,939	$	4,763

During the three months ended September 30, 2011, total stock-based compensation expense recognized in income before taxes was $1.5 million, and there was no related recognized tax benefit. During the three months ended September 30, 2010, total stock-based compensation expense recognized in income before taxes was $1.9 million, with no related recognized tax benefit; during the nine months ended September 30, 2010, total stock-based compensation expense recognized in income before taxes was $4.8 million, with no related recognized tax benefit, that was reduced by a reduction in a contingent liability of $1.6 million associated with the “modification of certain options” that was recorded in Selling, general administrative expenses on the Company’s Condensed Consolidated Statement of Operations for the quarter ended March 31, 2010. See Note 16, “Commitments and Contingencies — “Special Litigation Committee,” in the Notes to Condensed Consolidated Financial Statements for further discussion regarding the modification of certain options.

Stock Option Awards

During the three months ended September 30, 2011, the Company did not grant any stock options to purchase its common stock and no options to purchase common stock were exercised.

Total compensation expense related to stock options outstanding during the three months ended September 30, 2011 was $0.3 million. Total gross unrecognized compensation cost of options granted but not yet vested as of September 30, 2011 was $2.8 million, which is expected to be recognized over the weighted average service period of 3.34 years.

Restricted Stock Awards and Restricted Stock Units

For the three months ended September 30, 2011, the Company granted approximately 2.7 million stock awards (“RSAs”) and restricted stock units (“RSUs”) with a weighted average grant date value of $0.65 per share.

For the three months ended September 30, 2011, the Company recognized expense for RSAs and RSUs, excluding performance share awards with market and service conditions, of $2.5 million. Included in the $2.5 million of expense was a one-time fully vested bonus issuance of RSAs and RSUs of approximately $1.3 million, as settlement of employee bonuses previously accrued. A total of $6.5 million of unrecognized compensation cost is expected to be recognized over a weighted average period of 2.52 years.

For the three months ended September 30, 2011, the Company recognized expense related to performance share awards with market and service conditions granted under the 2010 Plan, of $0.1 million. A total of $0.5 million of unrecognized compensation cost is expected to be recognized over a weighted average period of 2.28 years.