On June 2, 2011, the Board of Directors of our company approved the adoption of the 2011 Equity Incentive Plan, under which 600,000 shares of our common stock will be reserved for the grant of stock options and other equity incentives. Unless and until stockholder approval occurs, no rights will be granted under this plan.

On September 10, 2009, our stockholders approved the 2009 Equity Incentive Plan, or the 2009 Plan, under which 900,000 shares of our common stock are reserved for the grant of stock options.

Under the 2009 Plan, nonqualified and incentive stock options may be granted to employees, consultants and non-employee directors. Generally, the per share exercise price shall not be less than 100% of the fair market value of a share on the grant date. The Board of Directors has the full power to determine the provisions of each option issued under the 2009 Plan. While we may grant options that become exercisable at different times or within different periods, we have granted options that primarily vest over four years. The options, once granted, expire ten years from the date of grant.

Restricted stock awards may be granted to any employee, director or consultant under the 2009 Plan. Pursuant to a restricted stock award, we will issue shares of common stock that will be released from restriction if certain requirements, including continued performance of services, are met.

Awards of stock appreciation rights, or SARs, may be granted to employees, consultants and nonemployee directors pursuant to the 2009 Plan. In any event, the exercise price of a SAR shall be not less than 100% of the fair market value of a share on the grant date and shall expire no later than ten years from the grant date. Upon exercise, the holder of SAR shall be entitled to receive payment either in cash or a number of shares by dividing such cash amount by the fair market value of a share on the exercise date.

Performance units may be granted to employees, consultants and nonemployee directors under the 2009 Plan. Each performance unit shall have a value equal to the fair market value of one share. After the applicable performance period has ended, the holder will be entitled to receive a payment, either in cash or in the form of shares, based on the number of performance units earned over the performance period, to be determined as a function of the extent to which the corresponding performance goals or other vesting provisions have been achieved.

The Zilog 2004 Omnibus Stock Incentive Plan, or the Zilog 2004 Plan, was approved by the stockholders of Zilog in 2004, and was amended and approved by the stockholders of Zilog in 2007. In connection with the acquisition of Zilog, our Board of Directors approved assumption of the Zilog 2004 Plan. Employees of Zilog and persons first employed by our company after the closing of the acquisition of Zilog may receive grants under the Zilog 2004 Plan. Under the 2004 Plan, incentive stock options, non-statutory stock options, or restricted shares may be granted. At the time of the assumption of the Zilog 2004 Plan by our company, up to 652,963 shares of our common stock were available for grant under the plan.

The Zilog 2002 Omnibus Stock Incentive Plan, or the Zilog 2002 Plan, was adopted in 2002. In connection with the acquisition of Zilog, our Board of Directors approved the assumption of the Zilog 2002 Plan with respect to the shares available for grant as stock options. Employees of Zilog and persons first employed by our company after the closing of the acquisition of Zilog may receive grants under the Zilog 2002 Plan. At the time of the assumption of the Zilog 2002 Plan by our company, up to 366,589 shares of our common stock were available for grant under the plan.

In May 1999, the Board of Directors approved the 1999 Employee Stock Purchase Plan, or the Purchase Plan, and reserved 500,000 shares of common stock for issuance under the Purchase Plan. Under the Purchase Plan, all eligible employees may purchase our common stock at a price equal to 85% of the lower of the fair market value at the beginning of the offer period or the semi-annual purchase date. Stock purchases are limited to 15% of an employee's eligible compensation. On July 31, 2007 and July 9, 2010, the Board of Directors amended the Purchase Plan and on each occasion reserved an additional 350,000 shares of common stock for issuance under the Purchase Plan. During the three months ended June 30, 2011, there were 55,706 shares purchased under the Purchase Plan, leaving approximately 350,053 shares available for purchase under the plan in the future.

The following table summarizes the effects of stock-based compensation charges (in thousands):

	Three Months Ended June 30,
Income Statement Classifications		2011		2010
	(unaudited)
Selling, general and administrative expenses	$	784	$	792
Stock-based compensation effect in income before taxes		784		792
Provision for income taxes (1)		282		301
Net stock-based compensation effects in net income	$	502	$	491
________________
(1) Estimated at a statutory income tax rate of 36% in fiscal year 2012 and 38% in fiscal year 2011.

During the three months ended June 30, 2011, the unaudited condensed consolidated statements of operations and cash flows do not reflect any tax benefit for the tax deduction from option exercises and other awards. As of June 30, 2011, approximately $5.7 million in stock-based compensation is to be recognized for unvested stock options granted under our equity incentive plans. The unrecognized compensation cost is expected to be recognized over a weighted average period of 2.8 years.

The Black-Scholes option pricing model is used to estimate the fair value of options granted under our equity incentive plans and rights to acquire stock granted under our stock purchase plan. The weighted average estimated fair values of employee stock option grants and rights granted under the 1999 Employee Stock Purchase Plan, as well as the weighted average assumptions that were used in calculating such values during the three months ended June 30, 2011 and 2010, were based on estimates at the date of grant as follows:

		Stock Options				Purchase Plan
		Three Months				Three Months
		Ended June 30,				Ended June 30,
		2011		2010		2011		2010

Weighted average estimated fair
	value of grant per share	$	6.74	$	4.67	$	2.51	$	3.23
Risk-free interest rate			1.9%		2.3%		0.2%		0.3%
Expected term in years			5.95		5.97		0.5		0.5
Volatility			55.7%		56.2%		44.9%		54.2%
Dividend yield			0%		0%		0%		0%

Activity with respect to outstanding stock options for the three months ended June 30, 2011 was as follows:

			Weighted Average
		Number of	Exercise Price			Intrinsic
		Shares	Per Share			Value (1)
						(000)
Balance at March 31, 2011		5,199,768	$	9.03
	Options granted	312,000	$	12.71
	Options exercised	(130,032)	$	7.79	$	849
	Options cancelled	(142,750)	$	8.58
	Options expired	(35,200)	$	15.32
Balance at June 30, 2011		5,203,786	$	9.25

Exercisable at June 30, 2011		3,630,282	$	9.34
Exercisable at March 31, 2011		3,540,264	$	9.35


(1) Represents the difference between the exercise price and the value of our common stock at the time of exercise.