Employee Stock and Savings Plans

Stock Options Plans and Stock Plans

The 2010 Omnibus Incentive Plan (Incentive Plan) is administered by the Compensation Committee of our Board of Directors and permits accelerated vesting of outstanding options, restricted stock units, restricted stock awards, and other equity incentives upon the occurrence of certain changes in control of our company.

Stock options and restricted stock units under the Incentive Plan are generally expected to vest over four years. Stock options have an expiration date of ten years from the date of grant and an exercise price no less than the fair market value of the shares on the date of grant.

As of January 31, 2013, a total of 5,392 shares of common stock were available for future grant under the Incentive Plan.

We assumed the stock plans of Valor on March 18, 2010. Under the terms of our merger agreement with Valor, options outstanding under these plans were converted to options to purchase shares of our common stock. Options issued under these plans vest over four years from the original grant date and have an expiration date of ten years from the original grant date. The exercise price of each converted option is equal to the product of the original exercise price and the original number of options granted divided by the number of converted options received. These stock plans have been suspended and no future awards will be granted under these plans. Options for a total of 2,160 shares of our common stock have been authorized and issued under the Valor plans.

On December 14, 2009, our shareholders approved the exchange of certain options for restricted stock units. Eligible for the exchange were options held by non-executive employees with an exercise price equal to or greater than $11.00 which were granted prior to January 7, 2009 and expire after August 15, 2010. The offer expired February 5, 2010. Effective February 8, 2010 a total of 6,945 options were exchanged for 557 restricted stock units. Total incremental cost of $491 resulted from this exchange. The incremental cost was amortized over 2 years.

Stock options outstanding, the weighted average exercise price, and transactions involving the stock option plans are summarized as follows:



	Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms (Years)	Aggregate Intrinsic Value
Balance as of January 31, 2012	9,187		$	10.00
Granted	539		16.97
Exercised	(2,835	)	8.56
Forfeited	(34	)	6.61
Expired	(140	)	14.71
Balance as of January 31, 2013	6,717		11.08		5.24	$	40,677
Options exercisable as of January 31, 2013	5,504		10.61		4.48	35,925
Options vested as of January 31, 2013 and options expected to vest after January 31, 2013	6,717		$	11.08	5.24	$	40,677

The total intrinsic value of options exercised and cash received from options exercised was as follows:



Year ended January 31,	2013		2012		2011
Intrinsic value	$	21,647	$	15,802	$	7,812
Cash received	$	24,262	$	15,194	$	8,639

The following table summarizes restricted stock activity:



	Restricted Stock Units		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Nonvested as of January 31, 2012	3,596		$	10.71
Granted	1,681		16.74
Vested	(1,162	)	10.13
Cancelled	(119	)	11.76
Nonvested as of January 31, 2013	3,996		$	13.39	1.67	$	68,453

The following table summarizes the fair value of restricted stock vested:



Year ended January 31,	2013		2012		2011
Total fair value of restricted stock vested	$	11,698	$	5,446	$	560

Employee Stock Purchase Plans

We have an ESPP for U.S. employees and an ESPP for certain foreign subsidiary employees. The ESPPs provide for six month offerings commencing on January 1 and July 1 of each year with purchases on June 30 and December 31 of each year. Each eligible employee may purchase up to six thousand shares of stock on each purchase date at prices no less than 85% of the lesser of the fair market value of the shares on the offering date or on the purchase date. As of January 31, 2013, 4,101 shares remain available for future purchase under the ESPPs.

The following table summarizes shares issued under the ESPPs:



Year ended January 31,	2013		2012		2011
Shares issued under the ESPPs	1,884		2,099		3,461
Cash received for the purchase of shares under the ESPPs	$	22,645	$	22,155	$	19,019
Weighted average purchase price per share	$	12.02	$	10.55	$	5.50

Stock-Based Compensation Expense

We estimate the fair value of stock options and purchase rights under our ESPPs using a Black-Scholes option-pricing model. The Black-Scholes option-pricing model incorporates several highly subjective assumptions including expected volatility, expected term, and interest rates.

In determining expected volatility for options, we include the elements listed below at the weighted percentages presented:


•	Historical volatility of our shares of common stock at 35%;


•	Historical volatility of shares of comparable companies at 20%;


•	Implied volatility of our traded options at 30%; and


•	Implied volatility of traded options of comparable companies at 15%.

The greatest weighting is provided to the historic volatility of our common stock based on the amount of consistent historic information available. A lesser weighting is applied to the implied volatility of our traded options due to a low volume of trades and shorter terms. We also include the historic and implied volatility of comparable companies in our industry in an effort to capture a broader view of the marketplace.

The relative weighting percentages are periodically reviewed for reasonableness and are subject to change depending on market conditions and our particular facts and circumstances.

The expected volatility for purchase rights under our ESPPs is based on the historical volatility of our shares of common stock. The expected term for purchase rights under our ESPPs is the 6 month offering period.

We base the expected term of our stock options on historical experience.

The risk-free interest rate for periods within the contractual life of the stock options and purchase rights under our ESPPs is based on the U.S. Treasury yield curve in effect at the time of the grant.

The fair value of restricted stock units is the market value as of the grant date.

The weighted average grant date fair values are summarized as follows:



Year ended January 31,	2013		2012		2011
Options granted	$	7.18	$	5.43	$	5.02
Restricted stock units granted	$	16.74	$	10.91	$	9.61
ESPP purchase rights	$	3.82	$	3.19	$	2.17

The fair value calculations used the following assumptions:



Year ended January 31,	2013		2012		2011
Stock Option Plans
Risk-free interest rate	0.9% - 1.3%		1.2	%	1.4% - 2.6%
Dividend yield	0	%	0	%	0	%
Expected life (in years)	5.8 - 6.3		6.3		5.5 - 6.5
Volatility (range)	43% - 53%		53	%	50% - 55%
Volatility (weighted average)	43	%	53	%	51	%



Year ended January 31,	2013		2012		2011
Employee Stock Purchase Plans
Risk-free interest rate	0.05% - 0.15%		0.05% - 0.18%		0.2	%
Dividend yield	0	%	0	%	0	%
Expected life (in years)	0.5		0.5		0.5
Volatility (range)	33% - 43%		32% - 38%		38% - 64%
Volatility (weighted average)	39	%	35	%	40	%



Year ended January 31,	2013	2012	2011
Acquired Company Options Exchange
Risk-free interest rate	—	—	0.1% - 3.3%
Dividend yield	—	—	0	%
Expected life (in years)	—	—	0.1 - 7.7
Volatility (range)	—	—	35% - 72%
Volatility (weighted average)	—	—	60	%



Year ended January 31,	2013	2012	2011
Employee Options Exchange
Risk-free interest rate	—	—	0.2% - 2.7%
Dividend yield	—	—	0	%
Expected life (in years)	—	—	0.5 - 5.9
Volatility (range)	—	—	43% - 77%
Volatility (weighted average)	—	—	43	%

The following table summarizes stock-based compensation expense included in the results of operations and the tax benefit associated with the exercise of stock options:



Year ended January 31,	2013		2012		2011
Cost of revenues:
Service and support	$	1,529	$	1,065	$	888
Operating expense:
Research and development	9,206		8,203		7,785
Marketing and selling	6,654		5,874		6,112
General and administration	6,308		6,516		5,726
Equity plan-related compensation expense	$	23,697	$	21,658	$	20,511
Tax effect of the exercise of stock options	$	266	$	—	$	—

As of January 31, 2013, we had $6,061 in unrecognized compensation cost related to nonvested options which is expected to be recognized over a weighted average period of 1.4 years and $44,668 in unrecognized compensation cost related to nonvested restricted stock units which is expected to be recognized over a weighted average period of 1.6 years.

Employee Savings Plan

We have an employee savings plan (the Savings Plan) that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the Savings Plan, participating U.S. employees may defer a portion of their pretax earnings, up to the Internal Revenue Service annual contribution limit. We currently match 50% of eligible employee’s contributions, up to a maximum of 6% of the employee’s earnings. Employer matching contributions vest over five years, 20% for each year of service completed. Our matching contributions to the Savings Plan were as follows:



Year ended January 31,	2013		2012		2011
Employer matching contribution	$	7,181	$	7,141	$	6,413