EQUITY INCENTIVE PLANS

The Company has two active stock option plans administered by the Compensation Committee of the Board of Directors. As of June 30, 2014, the Company had reserved an aggregate of 2.4 million shares of common stock for issuance under the 2003 Equity Incentive Plan (“2003 Plan”) and the 2009 Equity Incentive Plan (“2009 Plan”) (collectively, the “Option Plans”). The Option Plans provide for the granting of stock and option awards. Currently, the Company may grant new awards only under the 2009 Plan. The 2009 Plan provides for the granting of restricted stock, stock units, stock options and stock appreciation rights. The Option Plans were approved by the Company's shareholders. The Compensation Committee may also grant awards outside of the Option Plans as an inducement to an employee commencing employment with the Company. As of June 30, 2014, the Company had reserved an aggregate of 34,167 shares of common stock for the issuance of inducement awards.

Option and stock awards granted generally vest over a three-year period. Option awards generally expire after a period not to exceed six years, except in the event of termination, whereupon vested shares must be exercised generally within three months under the 2009 Plan and 2003 Plan, or upon death or disability, in which case an extended six- or twelve-month exercise period is specified. As of June 30, 2014, approximately 0.3 million shares were available for grant in the future under the Option Plans.

Stock Options

The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model, which uses the weighted-average assumptions noted in the following table:



	Fiscal Year
	2014		2013
Expected volatility	85.0	%	78.6	%
Risk-free interest rate	2.0	%	0.9	%
Dividend yield	—		—
Expected term (in years)	6		6

The Company utilizes a volatility study for expected volatility, which takes into account such factors as the overall market conditions, the industry sector, and the expected and realistic pricing of equity instruments in the marketplace and is generally reflective of both historical and implied volatility. The Company applies a forfeiture rate based upon historical pre-vesting option cancellations. The risk-free interest rate is determined based upon a constant maturity U.S. Treasury security with a contractual life approximating the expected term of the option. The expected term of options granted is estimated based on a number of factors, including but not limited to the vesting term of the award, historical employee exercise behavior (for both options that have run their course and outstanding options), the expected volatility of the Company's stock and an employee's average length of service.

Option activity is summarized below (shares and aggregate intrinsic value in thousands):



	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Options outstanding at June 30, 2012	332		$	13.30
Granted	107		7.90
Exercised	(7	)	6.60
Forfeited and expired	(75	)	18.10
Options outstanding at June 30, 2013	357		10.80
Granted	45		5.00
Exercised	—		—
Forfeited and expired	(125	)	10.01
Options outstanding at June 30, 2014	277		$	10.23	2.68	$	74
Vested and expected to vest at June 30, 2014	271		$	10.32	2.74	$	73
Exercisable at June 30, 2014	242		$	10.84	2.37	$	66

The following table summarizes information about stock options (in thousands, except per share amounts):



	Fiscal Year
	2014		2013
Weighted-average grant date fair value per share of options granted with exercise prices:
Equal to fair value	$	3.86	$	5.25
Intrinsic value of stock options exercised	$	—	$	50
Cash received upon exercise of stock options	$	—	$	200
Actual tax benefit realized for the tax deductions from stock option exercises	$	—	$	—
Total income tax benefit recognized in the consolidated statements of operations	$	—	$	—

Restricted Stock Units

The following table summarizes information about restricted stock units activity (in thousands, except per share amounts):



	Number of Shares		Weighted- Average Grant Date Fair Value
Outstanding — June 30, 2012	810		$	12.55
Granted	89		8.15
Vested	(336	)	12.50
Forfeited	(34	)	10.30
Outstanding — June 30, 2013	529		11.95
Granted	1,822		3.35
Vested	(313	)	11.63
Forfeited	(135	)	9.81
Outstanding — June 30, 2014	1,903		$	3.92

The fair value of each restricted stock unit is the market price of the Company's stock on the date of grant and typically vests over three years. In fiscal 2014 and 2013, the fair value of restricted stock that vested was $3.6 million and $4.2 million, respectively. The Company recognized $3.8 million and $4.2 million in fiscal 2014 and 2013, respectively, for share-based compensation expense related to these awards.

Stock Appreciation Rights

In June 2011, the Company modified options, which had been granted to certain executives during fiscal 2010 to purchase 318,671 shares of the Company's common stock, and reissued the options as SAR awards. No other terms of the awards changed. The purpose of the amendment and reissuance was to provide that, upon exercise, the SAR would be settled in cash or stock, at the discretion of the Company. Based on the SAR settlement provisions, and the Company's intentions, this modification changed these awards from equity-based instruments to liability-based instruments. As such, the fair value of the SAR awards is recalculated at each subsequent reporting period until settlement, and recorded as an adjustment to the liability. The Company uses a Black-Scholes valuation model to determine the fair value and recorded a current liability of $0.2 million and $0.5 million as of June 30, 2014 and 2013, respectively.

As of June 30, 2014, there were 283,000 SAR awards vested with an exercise price of $12.45, a remaining contractual term of 1.8 years, and no intrinsic value. During fiscal 2014, there were 35,671 SAR awards canceled. No SAR awards were exercised during fiscal 2014 and 2013.

2006 Employee Stock Purchase Plan

In February 2007, the Company adopted the 2006 Employee Stock Purchase Plan (“2006 ESPP”). As of June 30, 2014, 88,527 shares of common stock were reserved for issuance under the 2006 ESPP.

Offerings under the 2006 ESPP are for a duration of six months and consist of one purchase interval. The 2006 ESPP limits stock purchases to (i) no more than $25,000 worth of stock in any calendar year and (ii) no more than 500 shares per individual per offering. Shares are purchased at 85% of the lower of the beginning or end of the period price. During fiscal 2014 and 2013, the Company issued 19,667 and 26,718 shares, respectively, and recognized approximately $15,000 and $30,000 as share-based compensation in fiscal 2014 and 2013, respectively.

Share-Based Compensation Expense

The Company recorded the following compensation expense related to its share-based compensation awards (in thousands):



	Fiscal Year
	2014		2013
Cost of product revenue	$	99	$	135
Sales and marketing	316		1,006
Research and development	304		319
General and administrative	3,234		3,310
	$	3,953	$	4,770

As of June 30, 2014, there was a total of $5.6 million of unrecognized compensation expense related to unvested equity-based compensation awards. The expense associated with non-vested stock and options awards granted prior to June 30, 2014 is expected to be recognized over a weighted-average period of 1.7 years.