Stock Options and Restricted Stock Awards

The Company has a 2007 Equity Incentive Plan (the “2007 Plan”), which was assumed from CSI-MN, under which options to purchase common stock and restricted stock awards have been granted to employees, directors and consultants at exercise prices determined by the board of directors; and also in connection with the merger the Company assumed options and restricted stock awards granted by CSI-MN under its 1991 Stock Option Plan (the “1991 Plan”) and 2003 Stock Option Plan (the “2003 Plan”) (the 2007 Plan, the 1991 Plan and the 2003 Plan collectively, the “Plans”). The 1991 Plan and 2003 Plan permitted the granting of incentive stock options and nonqualified options. A total of 485,250 shares of common stock were originally reserved for issuance under the 1991 Plan, but with the approval of the 2003 Plan no additional options were granted under it. A total of 2,458,600 shares of common stock were originally reserved for issuance under the 2003 Plan, but with the approval of the 2007 Plan no additional options will be granted under it.

The 2007 Plan originally allowed for the granting of up to 1,941,000 shares of common stock as approved by the board of directors in the form of nonqualified or incentive stock options, restricted stock awards, restricted stock unit awards, performance share awards, performance unit awards or stock appreciation rights to officers, directors, consultants and employees of the Company. The Plan was amended in February 2009 to increase the number of authorized shares to 2,509,969. Generally, options or shares granted under the 2007 Plan expire ten years from the date of grant and vest over three years. The amended 2007 Plan includes a renewal provision whereby the number of shares shall automatically be increased on the first day of each fiscal year ending on July 1, 2017, by the lesser of (i) 970,500 shares, (ii) 5% of the outstanding common shares on such date, or (iii) a lesser amount determined by the board of directors. On July 1, 2014, the number of shares available for grant was increased by 834,134 under the 2007 Plan renewal provision, which was 2.7% of shares outstanding at June 30, 2014.

All options granted under the Plans become exercisable over periods established at the date of grant. The option exercise price is generally not less than the estimated fair market value of the Company’s common stock at the date of grant, as determined by the Company’s management and board of directors. In addition, the Company has granted nonqualified stock options to a director outside of the Plans.

Stock Options

Stock option activity is as follows:



	Number of Options^(a)		Weighted Average Exercise Price
Options outstanding at June 30, 2011	3,070,999		$	10.54
Exercised	(311,814	)	$	9.12
Forfeited or expired	(387,987	)	$	13.11
Options outstanding at June 30, 2012	2,371,198		$	10.31
Exercised	(533,954	)	$	11.59
Forfeited or expired	(97,581	)	$	12.49
Options outstanding at June 30, 2013	1,739,663		$	9.79
Exercised	(816,854	)	$	9.38
Forfeited or expired	—		$	—
Options outstanding at June 30, 2014	922,809		$	10.16

(a) Includes the effect of options granted, exercised, forfeited or expired from the 1991 Plan, 2003 Plan, 2007 Plan, 2006 Plan and options granted outside the stock option plans described above.

As of June 30, 2014, all options were fully vested. An employee’s vested options must be exercised at or within 90 days of termination to avoid forfeiture. The Company determined the fair value of options using the Black-Scholes option pricing model. The estimated fair value of options, including the effect of estimated forfeitures, was recognized as expense on a straight-line basis over the options’ vesting periods. There were no options granted during the years ended June 30, 2014, 2013 or 2012.

The aggregate intrinsic value of a stock option award is the amount by which the market value of the underlying stock exceeds the exercise price of the award. The aggregate intrinsic value for vested and outstanding options at June 30, 2014, 2013 and 2012, was $19,377, $19,842 and $1,624, respectively. The total aggregate intrinsic value of options exercised during the years ended June 30, 2014, 2013 and 2012, was $16,848, $1,712, and $770, respectively. Cash received from option exercises was $7,664, $5,691 and $2,845 for the years ended June 30, 2014, 2013 and 2012, respectively. Shares supporting option exercises are sourced from new share issuances.

Restricted Stock Awards

The fair value of each restricted stock award was equal to the fair market value of the Company’s common stock at the date of grant. Vesting of restricted stock awards range from one to three years. The estimated fair value of restricted stock awards, including the effect of estimated forfeitures, is recognized on a straight-line basis over the restricted stock’s vesting period.

In August 2012, the Company granted performance based restricted stock awards to certain executives. The awards included grants of an aggregate of a maximum of 67,854 shares that vested based upon achievement of certain thresholds measuring total shareholder return during periods within fiscal 2013 compared to a pre-determined peer group of companies, and grants of an aggregate of a maximum of 67,854 shares that vested based upon achievement of certain thresholds measuring annual revenue growth during fiscal 2013 compared to a pre-determined peer group of companies. Both the total shareholder return and revenue growth performance measures exceeded the established thresholds for fiscal 2013.

In September 2013, the Company granted performance based restricted stock awards to certain executives. The awards included grants of an aggregate of a maximum of 53,566 shares that vest based upon achievement of certain thresholds measuring total shareholder return during periods within fiscal 2014 compared to a pre-determined peer group of companies, and grants of an aggregate of a maximum of 53,566 shares that vest based upon achievement of certain thresholds measuring annual revenue growth during fiscal 2014 compared to a pre-determined peer group of companies. The total shareholder return performance exceeded threshold for fiscal 2014 and we expect the revenue growth to exceed the threshold for fiscal 2014 as well.

Restricted stock award activity, including performance based awards, is as follows:



	Number of Shares		Weighted Average Grant Date Fair Value
Restricted stock awards outstanding at June 30, 2011	1,198,207		$	6.39
Granted	817,878		$	11.32
Forfeited	(253,810	)	$	7.80
Vested	(517,445	)	$	12.88
Restricted stock awards outstanding at June 30, 2012	1,244,830		$	9.08
Granted	880,282		$	11.46
Forfeited	(123,494	)	$	9.31
Vested	(571,488	)	$	8.76
Restricted stock awards outstanding at June 30, 2013	1,430,130		$	10.78
Granted	741,039		$	21.28
Forfeited	(106,742	)	$	14.04
Vested	(788,024	)	$	10.47
Restricted stock awards outstanding at June 30, 2014	1,276,403		$	17.37

Total fair value of restricted stock that vested during fiscal 2014, 2013 and 2012 was $8,252, $5,006, and $3,625, respectively. Estimated pre-vesting forfeitures are considered in determining stock-based compensation expense. As of June 30, 2014, 2013 and 2012, the Company estimated its weighted average forfeiture rate at 17.5%, 11.5% and 11.6%, respectively. As of June 30, 2014, there was approximately $13,956 of total unrecognized compensation expense, net of the effect of estimated forfeitures, related to nonvested restricted stock awards which is expected to be recognized over a weighted-average period of 2.04 years.

Restricted Stock Units

The Company grants restricted stock units to members of the Board of Directors. Restricted stock units represent the right to receive payment in the form of shares of the Company’s common stock or in cash at the Company’s option. Restricted stock unit payments would occur within 30 days following the six month anniversary of the date that the director ceases to serve on the Board. The estimated fair value of restricted stock awards is recognized on a straight-line basis over the vesting period.

Restricted stock unit activity is as follows:



	Number of Shares		Weighted Average Grant Date Fair Value
Restricted stock units outstanding at June 30, 2011	237,719		$	6.51
Granted	50,344		$	13.91
Forfeited	(3,596	)	$	13.91
Restricted stock units outstanding at June 30, 2012	284,467		$	7.67
Granted	70,883		$	9.41
Converted to common stock	(42,677	)	$	7.03
Restricted stock units outstanding at June 30, 2013	312,673		$	8.15
Granted	45,228		$	21.87
Converted to common stock	(61,770	)	$	8.90
Restricted stock units outstanding at June 30, 2014	296,131		$	10.09

Stock-Based Compensation Expense

The following amounts were recognized as stock-based compensation expense in the consolidated statements of operations for the year ended June 30, 2014:



	Restricted Stock Awards		Employee Stock Purchase Plan		Restricted Stock Units		Total
Cost of goods sold	$	576	$	91	$	—	$	667
Selling, general and administrative	7,403		998		770		9,171
Research and development	1,003		87		—		1,090
Total	$	8,982	$	1,176	$	770	$	10,928

The following amounts were recognized as stock-based compensation expense in the consolidated statements of operations for the year ended June 30, 2013:



	Restricted Stock Awards		Employee Stock Purchase Plan		Restricted Stock Units		Total
Cost of goods sold	$	392	$	35	$	—	$	427
Selling, general and administrative	4,954		596		667		6,217
Research and development	780		18		—		798
Total	$	6,126	$	649	$	667	$	7,442

The following amounts were recognized as stock-based compensation expense in the consolidated statements of operations for the year ended June 30, 2012:



	Restricted Stock Awards		Employee Stock Purchase Plan		Restricted Stock Units		Total
Cost of goods sold	$	256	$	40	$	—	$	296
Selling, general and administrative	3,105		621		669		4,395
Research and development	439		35		—		474
Total	$	3,800	$	696	$	669	$	5,165

Shares Available for Grant

The following summarizes shares available for grant under the Company’s 2007 Plan:



Shares available for grant at June 30, 2011^(a)	50,723
Reserved	849,353
Granted	(868,222	)
Forfeited, expired or cancelled	581,447
Shares available for grant at June 30, 2012^(a)	613,301
Reserved	450,000
Granted	(951,165	)
Forfeited, expired or cancelled	211,155
Shares available for grant at June 30, 2013^(a)	323,291
Reserved	475,000
Granted	(786,267	)
Forfeited, expired or cancelled	106,742
Shares available for grant at June 30, 2014^(a)	118,766


(a)	Excludes the effect of shares granted, exercised, forfeited or expired related to activity from shares granted outside the stock option plans described above. Excludes share forfeitures from grants not under the 2007 Plan.