9. Stock Incentive Plan and Employee Stock Purchase Plan

As of June 30, 2016, the Company had two outstanding stock incentive plans: the 2007 Stock Incentive Plan, or the 2007 Plan; and the 1998 Stock Incentive Plan, or the1998 Plan. The 2007 Plan permits the granting of stock options, restricted stock awards, or RSAs and restricted stock units, or RSUs. The vesting of RSUs under the 2007 Plan may be time-based (over the requisite service period), performance-based, or PSUs or market-based, or MSUs. Only employees of the Company are eligible to receive incentive stock options. Non-employees may be granted non-qualified stock options.

Stock options granted under the 2007 Plan have an exercise price of at least 100% of the fair market value of the underlying stock on the grant date and no less than 85% of the fair value for non-qualified stock options. The stock options have 10 year contractual terms and generally become exercisable for 25% of the option shares one year from the date of grant and then ratably over the following 36 months. Time-based RSUs generally vest 25% of the share units covered by the grant on each of the first through fourth anniversaries of the date of the grant. However, certain of the outstanding RSUs vest 50% upon the first anniversary year of the grant date, and 50% upon the second anniversary year of the grant date. The Board of Directors has the discretion to use different vesting schedules.

As of June 30, 2016, the 1998 Plan continued to remain in effect; however, the Company can no longer grant equity awards under the plan.

The following table summarizes the share-based compensation charges included in the Company's consolidated statements of operations and comprehensive loss:

	Years ended June 30,
(in thousands)	2016		2015		2014
Cost of revenue	$	1,677	$	1,874	$	1,912
Research and development		2,564		2,971		2,585
Selling and marketing		2,633		2,945		2,059
General and administrative		5,764		6,140		4,757

	$	12,638	$	13,930	$	11,313

The amount of capitalized share-based compensation costs as components of inventory for the years ended June 30, 2016 and 2015 was insignificant. For the year ended June 30, 2014, the Company capitalized share-based compensation costs of $0.5 million, as components of inventory.

Stock Options

The Company did not grant any stock options in the years ended June 30, 2016, 2015 and 2014.

A summary of option activity under the Company's Incentive Plan during the fiscal years is presented below:

(in thousands, except per share and term amounts)	Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (In Years)		Aggregate Intrinsic Value (in thousands)
Balance at June 30, 2013		4,844		$	7.15		6.17	$	2,771
Options granted		—		$	—
Options exercised		(1,062	)	$	5.01
Options forfeited/expired		(573	)	$	9.49

Balance at June 30, 2014		3,209		$	7.44		5.38	$	8,251
Options granted		—		$	—
Options exercised		(529	)	$	4.84
Options forfeited/expired		(143	)	$	8.72

Balance at June 30, 2015		2,537		$	7.91		5.10	$	1,862
Options granted		—		$	—
Options exercised		(59	)	$	4.89
Options forfeited/expired		(101	)	$	7.53

Balance at June 30, 2016		2,377		$	8.00		3.97	$	452


Vested or Expected to vest at June 30, 2016		2,377		$	8.00		3.97	$	452


Exercisable at June 30, 2016		2,304		$	8.06		3.89	$	443

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the fair value of the Company's common stock on June 30, 2016 of $5.19 and the exercise price of the options) that would have been received by option holders if all options exercisable had been exercised on June 30, 2016. The total intrinsic value of options exercised in the years ended June 30, 2016, 2015 and 2014 was approximately $0.1 million, $1.4 million and $3.8 million, respectively.

During the years ended June 30, 2016, 2015 and 2014, the Company recognized $0.8 million, $1.1 million and $1.7 million, respectively, of share-based compensation expense for stock options granted to employees.

Tax benefits from tax deductions for exercised options and disqualifying dispositions in excess of the deferred tax asset attributable to stock compensation costs for such options are credited to additional paid-in capital. Realized excess tax benefits related to stock options exercises was zero for each of the years ended June 30, 2016, 2015 and 2014.

As of June 30, 2016, there was approximately $0.1 million of unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options, which is expected to be recognized over a weighted average period of 0.47 years.

The following table summarizes information about outstanding and exercisable options at June 30, 2016:

	Options Outstanding						Options Exercisable
(in thousands, except years and exercise prices) Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Outstanding		Weighted Average Exercise Price
$4.00 - 4.01		332,613		4.49		4.01		332,613		4.01
$4.23 - 5.68		356,621		4.13		5.37		341,581		5.40
$5.74 - 6.28		443,640		5.33		6.15		416,552		6.14
$6.32 - 6.63		343,271		3.52		6.51		339,041		6.51
$6.75 - 6.82		13,500		5.22		6.77		13,500		6.77
$6.96		340,845		5.83		6.96		313,793		6.96
$7.06 - 28.47		546,686		1.52		15.28		546,686		15.28

Total Outstanding		2,377,176		3.97	$	8.00		2,303,766	$	8.06

Restricted Stock

The following table summarizes the activity of RSUs, PSUs and MSUs:

(In thousands, except dollars) Unvested Restricted Stock	Restricted Stock Units (000's)			Performance Stock Units (000's)			Market Stock Units (000's)			Total Number of Shares Underlying Stock Awards (000's)			Weighted Average Grant Date Fair Value Per Share
Unvested at June 30, 2013		2,424			556			407			3,387		$	5.66
Granted		2,125			70			735			2,930			7.28
Vested		(888	)		(25	)		—			(913	)		8.70
Cancelled/Forfeited		(545	)		(576	)		(336	)		(1,457	)		5.44

Unvested at June 30, 2014		3,116			25			806			3,947			6.24
Granted		1,679			20			513			2,212			6.77
Vested		(1,150	)		(25	)		—			(1,175	)		6.73
Cancelled/Forfeited		(320	)		—			(181	)		(501	)		6.20

Unvested at June 30, 2015		3,325			20			1,138			4,483			6.86
Granted		2,563			—			585			3,148			6.12
Vested		(1,138	)		(20	)		(413	)		(1,571	)		6.81
Cancelled/Forfeited		(546	)		—			(148	)		(694	)		6.59

Unvested at June 30, 2016		4,204			—			1,162			5,366		$	6.48

As of June 30, 2016, there was approximately $20.4 million of unrecognized compensation cost, net of estimated forfeitures, related to restricted stock, which is expected to be recognized over a weighted average period of 2.28 years.

Restricted Stock Units

The Company recognized $7.6 million, $7.9 million and $6.4 million of share-based compensation expense, net of estimated forfeitures, related to RSUs during the years ended June 30, 2016, 2015 and 2014. The weighted average grant date fair value per share of RSUs was $6.01, $6.79 and $7.32 for the years ended June 30, 2016, 2015 and 2014, respectively. As of June 30, 2016, there was approximately $17.7 million of unrecognized compensation cost, net of estimated forfeitures, related to RSUs. The aggregate fair market value of RSUs that vested during the year ended June 30, 2016 was $7.6 million.

Performance Stock Units

During fiscal 2012, the Compensation Committee approved the grant of 1.0 million PSUs to certain employees of the Company. The PSUs were cancelled in fiscal 2014 as it was determined that the Company did not achieve the requisite performance targets. The Compensation Committee approved the grant of zero, 20,000 and 70,000 PSUs to select employees of the Company in the years ended June 30, 2016, 2015 and 2014, respectively. Of these PSUs, 20,000, 25,000 and 25,000 vested in the years ended June 30, 2016, 2015 and 2014, respectively, due to the achievement of the requisite performance targets while zero, zero and 38,000 were cancelled in the years ended June 30, 2016, 2015 and 2014, respectively.

The Company recognized $0.04 million, 0.2 million, and $0.1 million of share-based compensation expense, net of estimated forfeitures, related to PSUs during the years ended June 30, 2016, 2015, and 2014, respectively.

Market Stock Units

The Compensation Committee approved the performance equity program, referred to as the market stock unit program, or MSU program, in October 2012. The Company's MSU Program uses the Russell 2000 index as a performance benchmark and requires that the Company's total stockholder return match or exceed that of the Russell 2000. Based on a sliding scale of how much the Company's total stockholder return outperforms the Russell 2000 benchmark, the participating executives can earn up to a maximum of 150% of the target number of shares over two measurement periods. The Company uses a Monte-Carlo simulation to calculate the fair value of the award on the grant date. The Compensation Committee approved the grant of 0.6 million, 0.5 million and 0.7 million MSUs to select employees of the Company in the years ended June 30, 2016, 2015 and 2014, respectively. Of these MSUs, 0.4 million, 0.5 million and zero vested in the years ending June 30, 2016, 2015 and 2014, respectively, due to the Company's total stockholder return performance against the Russell 2000 index while 0.1 million, 0.2 million and 0.3 million MSUs were cancelled in the years ended June 30, 2016, 2015 and 2014, respectively. Assuming 100% performance target will be achieved, 0.2 million and 0.3 million of MSUs will vest by the end of fiscal 2017 and 2018, respectively.

The Company recognized $3.0 million, $3.4 million and $1.8 million of share-based compensation expense, net of estimated forfeitures, related to MSUs during the years ended June 30, 2016, 2015 and 2014, respectively. The weighted average grant date fair value per share of MSUs was $6.61, $6.64 and $7.18 for the years ended June 30, 2016, 2015 and 2014, respectively. As of June 30, 2016, there was approximately $2.8 million of unrecognized compensation cost, net of estimated forfeitures, related to MSUs.

Employee Stock Purchase Plan

Under the Company's 2007 Employee Stock Purchase Plan, or ESPP, qualified employees are permitted to purchase the Company's common stock at 85% of the lower of the fair market value of the common stock on the commencement date of each offering period or the fair market value on the specified purchase date. The ESPP is deemed compensatory and compensation costs are accounted for under ASC 718, Stock Compensation. Employees' payroll deductions may not exceed 10% of their salaries. Employees may purchase up to 2,500 shares per period provided that the value of the shares purchased in any calendar year may not exceed $25,000, as calculated pursuant to the purchase plan.

The Company estimates the fair value of ESPP shares at the date of grant using the Black-Scholes option pricing model. The weighted average assumptions were as follows:

	Years Ended June 30,
	2016	2015	2014
Risk-free interest rate	0.7% - 0.51%	0.07% - 0.26%	0.06% - 0.13%
Dividend yield	—	—	—
Expected life	0.5 - 1.0	0.5 - 1.0	0.5 - 1.0
Expected volatility	33.3% - 49.1%	27.1% - 41.3%	27.5% - 46.5%

The risk-free rate for the expected term of the ESPP option was based on the U.S. Treasury Constant Maturity rate for each offering period; expected volatility was based on the historical volatility of the Company's common stock; and the expected term was based upon the offering period of the ESPP. For the years ended June 30, 2016, 2015 and 2014, the Company recognized $1.3 million, $1.3 million and $1.3 million, respectively, of compensation expense related to its ESPP.

The Company issued 0.7 million shares under the ESPP in fiscal 2016 and 2015, respectively, at a weighted average price per share of $4.92 and $5.61, respectively. As of June 30, 2016, total unrecognized compensation cost related to the ESPP plan was $0.6 million, which the Company expects to recognize over a weighted average period of 0.6 years.