Stock Benefit Plans and Stock-Based Compensation

Stock Benefit Plans

2008 Equity Incentive Plan (the "2008 Plan") and 1996 Stock Option Plan (the "1996 Plan"). On August 1, 2008, the 2008 Plan replaced the 1996 Stock Option Plan. As of November 30, 2013, there were 2.7 million shares available for grant under the 2008 Plan and 8.6 million shares underlying stock options and awards outstanding under the 2008 Plan and no shares available for grant and 5.1 million underlying stock options and awards outstanding under the 1996 Plan.

Stock options granted under the 2008 Plan may be either incentive stock options or nonqualified stock options. Incentive stock options may be granted only to employees (including officers and directors who are employees). Nonqualified stock options may be granted to our employees and consultants. Stock options are generally granted at fair market value on the date of grant and generally vest over four years. Stock options granted from the 1996 Plan prior to December 1, 2005 generally have a contractual term of ten years from the date of grant, and stock options granted from the 1996 Plan on or after December 1, 2005 and stock options granted from the 2008 Plan, have a contractual term of seven years from the date of grant.

In addition to stock options, we issue restricted stock or restricted stock units to our employees (including officers and directors who are employees). Shares of restricted stock are issued at the time of grant, but held in escrow until they are vested. The recipient of restricted stock becomes the owner of record of the stock immediately upon grant, subject to certain restrictions. The balance of unvested restricted stock will be forfeited and automatically transferred back to us at no cost upon the termination of the recipient’s employment. Upon vesting of restricted stock, the recipient has the option to settle minimum withholding taxes by electing to have us withhold otherwise deliverable shares having a fair market value equal to the required tax obligations ("net-settlement"). The net-settlement shares are then immediately cancelled and retired. As vesting of restricted stock units occur, common stock is issued. The recipient of restricted stock units does not acquire any rights as a stockholder until the restricted stock units are settled upon vesting and the recipient actually receives shares of our common stock.

Since fiscal year 2010, certain of our employees, received performance-based restricted stock units ("PRSUs"). These PRSUs are subject to the terms and conditions set forth in the PRSU Agreements and granted under our 2008 Plan as recently amended and restated. As of November 30, 2013, there were approximately 2.8 million nonvested PRSUs.

Under the terms of the PRSUs granted in fiscal year 2010, these PRSUs started vesting as of the end of our fiscal year 2012 because we achieved the performance goal of non-GAAP EPS of $1.00 or greater for our fiscal year 2012 and a cumulative non-GAAP EPS of $2.40 or greater over the three fiscal years 2010, 2011 and 2012. Half of the PRSUs granted in fiscal year 2010 vested in December 2012 and the other half vested in December 2013.

In fiscal years 2013, 2012 and 2011, we granted approximately 1.4 million PRSUs, which are subject to performance criteria based on certain financial goals for fiscal periods through 2015.

1998 Director Option Plan (the "Director Plan"). In February 1998, we adopted the Director Plan. On August 1, 2008, the Director Plan was retired and replaced by the 2008 Plan. As of November 30, 2013, no shares were available for grant and approximately 0.7 million shares underlying stock options were outstanding under the Director Plan.

2008 Employee Stock Purchase Plan (the "2008 ESPP"). On August 1, 2008, we adopted the 2008 ESPP replacing the previous Employee Stock Purchase Program (the "ESPP") pursuant to the 1996 Plan. As of November 30, 2013, approximately 8.3 million shares were reserved for future issuance under the 2008 ESPP and we issued approximately 0.3 million shares under the 2008 ESPP during fiscal year 2013.

Under the 2008 ESPP, participants are entitled to purchase shares at 85% of the lesser of the fair market value of our common stock on either the first or last trading day of each six-month offering period. Participants may contribute a maximum amount of $2,500 per offering period and no contribution percentage changes are allowed during an offering period.

2009 Deferred Compensation Plan (the "2009 DCP"). On February 20, 2009, we adopted the 2009 DCP. Pursuant to the 2009 DCP, eligible participants may elect to defer certain cash compensation into restricted stock units in accordance with the terms of the 2009 DCP. The restricted stock units will be settled in shares of our common stock at the end of the elected deferral period except in certain situations as provided in the 2009 DCP. As of November 30, 2013, approximately 980,000 shares of our common stock remained available for issuance under the 2009 DCP.

2013 Inducement Award Plan (the “Inducement Plan”). On April 9, 2013, we adopted the Inducement Plan. The Inducement Plan reserved 1.0 million shares for issuance as an inducement to individuals entering into employment with us. As of November 30, 2013, approximately 0.5 million restricted awards were outstanding and approximately 0.5 million shares remained available for issuance under the Inducement Plan.

Stock Option Activity

The summary of stock option activity in fiscal year 2013 is presented below (in thousands, except per share data):



Stock Options	Number of Shares Underlying Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (year)	Aggregate Intrinsic Value
Outstanding at November 30, 2012	12,199		$	10.45
Granted	24		22.61
Exercised	(3,473	)	7.40
Forfeited or expired	(424	)	22.10
Outstanding at November 30, 2013	8,326		$	11.60	1.84	$	111,001
Vested and expected to vest at November 30, 2013	8,298		$	11.55	1.83	$	110,978
Exercisable at November 30, 2013	7,644		$	10.31	1.60	$	109,990

The intrinsic value of exercised stock options is calculated based on the difference between the exercise price and the quoted market price of our common stock as of the close of the exercise date. The total intrinsic value of stock options exercised in fiscal years 2013, 2012 and 2011 was $18.9 million, $73.7 million and $136.8 million, respectively. Upon the exercise of stock options, we issue common stock from our authorized shares. Total fair value of stock options vested and expensed in fiscal year 2013, 2012 and 2011 was $38.2 million, $40.7 million and $32.2 million, respectively, net of taxes.

The total realized tax benefits attributable to stock options exercised and vesting of stock awards were $14.3 million, $24.6 million and $8.6 million in fiscal year 2013, 2012 and 2011 respectively. The gross excess tax benefits from stock-based compensation were $18.5 million, $30.3 million and $42.0 million in the fiscal years 2013, 2012 and 2011, respectively, as reported on the Consolidated Statements of Cash Flows in financing activities. The excess tax benefits represent the reduction in income taxes otherwise payable during the period which are attributable to the actual gross tax benefits in excess of the expected tax benefits for stock options exercised in current and prior periods.

Stock Awards Activities

Our nonvested stock awards are comprised of restricted stock, restricted stock units and PRSUs. A summary of the status for nonvested stock awards as of November 30, 2013, and activities during fiscal year 2013 is presented as follows (in thousands, except per share data):



Nonvested Stock Awards	Restricted Stock		Restricted Stock Units		Performance-based Restricted Stock Units		Total Number of Shares Underlying Stock Awards		Weighted-Average Grant Date Fair Value
Nonvested at November 30, 2012	3,127		1,523		4,770		9,420		$	16.51
Granted	2,219		591		382		3,192		22.27
Vested	(1,161	)	(622	)	(2,060	)	(3,843	)	18.89
Forfeited	(494	)	(137	)	(309	)	(940	)	19.03
Nonvested at November 30, 2013	3,691		1,355		2,783		7,829		16.91

We granted nonvested stock awards at no cost to recipients during fiscal years 2013, 2012 and 2011. The total fair value of shares vested pursuant to stock awards during fiscal year 2013, 2012 and 2011 were $52.5 million, $24.3 million and $18.9 million, respectively.

Stock-Based Compensation

Stock-based compensation cost in fiscal year 2013, 2012 and 2011 was $53.6 million, $61.1 million and $48.9 million, respectively. The deferred tax benefit on employee stock-based compensation expenses in fiscal years 2013, 2012 and 2011 was $15.4 million, $20.5 million and $16.5 million, respectively. We did not capitalize any stock-based compensation in any of the fiscal periods reported. As of November 30, 2013, total unamortized stock-based compensation cost was $86.9 million, with a weighted-average remaining recognition period of 1.67 years.

We recognize the fair value of service-based stock awards and options generally on a straight-line basis over the requisite service period of generally three to four years, net of estimated forfeitures.

We recognize the stock-based compensation costs for PRSUs when we believe it is probable that we will achieve the performance criteria as defined in the PRSU agreements. We then estimate the most probable period in which the performance criteria will be met, if at all, and the number of awards ultimately expected to vest and recognize the expense using the graded vesting attribution method over the remaining recognition period. On a quarterly basis we determine, based on these estimates, the appropriate compensation expense to be recognized over the requisite service period and adjust compensation cost in that reporting period. Changes in our estimates could significantly affect the stock-based compensation expense and thus, our earnings, in that quarterly period.

As of November 30, 2013, all performance goals for the PRSUs granted in fiscal years 2010 and 2011 were met. For the PRSUs granted in fiscal year 2012 and 2013, we estimate that the performance criteria will not be met and as such no stock-based compensation expense was recorded. Accordingly, stock-based compensation expense of $3.1 million recorded in fiscal year 2012 for the PRSUs granted in that period was reversed in the third quarter of fiscal year 2013.

We recognized stock-based compensation cost associated with our employee stock purchase programs on a straight-line basis over each six-month offering period.

Assumptions for Estimating Fair Value of Stock-Based Awards

We selected the Black-Scholes option pricing model as the most appropriate model for determining the estimated fair value for stock-based awards including stock options and employee stock purchase plans. The use of the Black-Scholes model requires the use of extensive actual employee exercise behavior data and the use of a number of complex assumptions including expected volatility, risk-free interest rate and expected dividends. The following table summarizes the assumptions used to value options granted in the respective periods:



	Year Ended November 30,
	2013			2012			2011
Stock Option grants:
Expected term of stock options (years)	4.8			4.8			4.8 – 5.1
Risk-free interest rate	0.8 - 1.7%			0.7 - 1.5%			0.9 - 2.1%
Volatility	40 – 43%			42 – 47%			42 – 47%
Weighted-average grant-date fair value (per share)	$	8.18		$	9.91		$	10.70
Employee stock purchase plans:
Expected term of ESPP (years)	0.5			0.5			0.5
Risk-free interest rate	0.1		%	0.1		%	0.2		%
Volatility	36 – 43%			43 – 52%			38 – 39%
Weighted-average grant-date fair value (per share)	$	6.63		$	7.62		$	6.56

We estimated the volatility of our stock using historical volatility, as well as the implied volatility in market-traded options on our common stock. We determined that a blend of implied volatility and historical volatility is more reflective of market conditions and a better indicator of expected volatility than using purely historical volatility. We will continue to monitor these and other relevant factors used to measure expected volatility for future stock option grants.

The expected term of employee stock options represents the weighted-average period that the stock options are expected to remain outstanding. We derived the expected term assumption based on our historical settlement experience, while giving consideration to stock options that have life cycles less than the contractual terms and vesting schedules.

The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of our employee stock options. The dividend yield assumption is based on our history and expectation of dividend payouts. We have never declared or paid any cash dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future.

As stock-based compensation expense recognized in our Consolidated Statement of Operations is based on awards ultimately expected to vest, the amount has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on our historical experience.

The fair value of restricted stock and restricted stock units is the grant date closing price of our common stock. We expense the cost of the restricted stock and restricted stock units ratably over the period during which the restrictions lapse, and adjust for estimated forfeitures.