SHARE-BASED COMPENSATION

Share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite service period, which is generally the vesting period of the equity award.

On December 7, 2012, our Board of Directors adopted, and our shareholders subsequently approved on February 14, 2013, the Atwood Oceanics, Inc. 2013 Long-Term Incentive Plan (the “2013 Plan”). Under our 2013 Plan, up to 2,200,000 shares of common stock were authorized for issuance to eligible participants in the form of restricted stock and restricted stock unit awards (which we refer to as "restricted stock awards"), performance awards or upon exercise of stock appreciation rights or stock options granted pursuant to the 2013 Plan. We also maintain two other stock incentive plans approved by our shareholders, the Atwood Oceanics, Inc. Amended and Restated 2007 Long-Term Incentive Plan (as amended, the "2007 Plan") and the Atwood Oceanics, Inc. Amended and Restated 2001 Stock Incentive Plan (as amended, the “2001 Plan”). Up to 4,000,000 shares of common stock were authorized for issuance under each of the 2007 Plan and the 2001 Plan to eligible participants in the form of restricted stock awards or upon exercise of stock options granted. No additional awards of any kind have or will be made under the 2001 Plan since the implementation of the 2007 Plan, and no additional awards of any kind have or will be made under the 2007 Plan since the implementation of the 2013 Plan. All stock incentive plans currently in effect have been approved by our shareholders.

A summary of shares available for issuance and outstanding stock option and restricted stock awards for our three stock incentive plans as of September 30, 2013 is as follows:



(In shares)	2013 Plan	2007 Plan	2001 Plan
Shares available for future awards or grants	2,199,194	—	—
Outstanding stock option grants	—	806,648	182,550
Outstanding unvested restricted stock awards	26,246	823,229	—

Awards of restricted stock and stock options have both been granted under our stock incentive plans as of September 30, 2013. We deliver newly issued shares of common stock for restricted stock awards upon vesting and upon exercise of stock options.

We recognize compensation expense on grants of share-based compensation awards on a straight-line basis over the required service period for each award. Unrecognized compensation cost, net of estimated forfeitures, related to awards of stock options and restricted stock and the related remaining weighted-average service period is as follows:



	September 30,
(In thousands, except average service periods)	2013		2012
Unrecognized compensation cost
Stock options	$	3,577	$	6,484
Restricted stock awards	16,321		12,999
Total	$	19,898	$	19,483
Remaining weighted average service period (Years)	1.8		2.2

Stock Options

Under our stock incentive plans, the exercise price of each stock option must be equal to or greater than the fair market value of one share of our common stock on the date of grant, with all outstanding options having a maximum term of 10 years. Options vest ratably over a period ranging from the end of the first to the fourth year from the date of grant for stock options. Each option is for the purchase of one share of our common stock.

The total fair value of stock options vested during fiscal years 2013, 2012 and 2011 was $3.2 million, $2.5 million and $2.7 million, respectively. No stock options were granted during fiscal year 2013. The per share weighted-average grant-date fair value of stock options granted during fiscal years 2012 and 2011 was $16.90 and $15.72, respectively. For fiscal years 2012 and 2011, we estimated the fair value of each stock option on the date of grant using the Black-Scholes pricing model and the following assumptions:



	Fiscal 2012		Fiscal 2011
Risk-Free Interest Rate	0.9	%	1.9	%
Expected Volatility	44	%	44	%
Expected Life (Years)	5.4		5.2
Dividend Yield	None		None

The average risk-free interest rate is based on the five-year U.S. treasury security rate in effect as of the grant date. We determined expected volatility using a six-year historical volatility figure and determined the expected term of the stock options using 10 years of historical data. The expected dividend yield is based on the expected annual dividend as a percentage of the market value of our common stock as of the grant date.

A summary of stock option activity for fiscal year 2013 is as follows:



	Number of Options (000s)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (000s)
Outstanding at October 1, 2012	1,450		$	29.74
Granted	—		$	—
Exercised	(437	)	$	21.22		$	14,492
Forfeited	(24	)	$	39.35
Outstanding at September 30, 2013	989		$	33.21	5.9	$	21,592
Exercisable at September 30, 2013	627		$	29.47	4.9	$	16,033

Restricted Stock

We have awarded restricted stock to certain employees and to our non-employee directors. All current awards of restricted stock to employees are subject to a vesting and restriction period ranging from three to four years, subject to acceleration upon certain events as set forth in the terms of the grant. In addition, certain awards of restricted stock to employees are subject to market-based performance conditions. The number of shares that vest based on market-based performance conditions will depend on the degree of achievement of specified corporate performance criteria which are strictly market-based. All awards of restricted stock to non-employee directors are subject to a vesting and restriction period of a minimum of 13 months, subject to acceleration upon certain events as set forth in the terms of the grant. We value restricted stock awards based on the fair market value of our common stock on the date of grant and also adjust to fair market value for any awards subject to market-based performance conditions, where applicable.

A summary of restricted stock activity for fiscal year 2013 is as follows:



	Number of Shares (000s)		Weighted Average Fair Value
Unvested at October 1, 2012	701		$	38.54
Granted	350		$	46.80
Vested	(168	)	$	35.46
Forfeited	(34	)	$	42.30
Unvested at September 30, 2013	849		$	42.42