(7) Stock-Based Compensation

Stock Compensation Plans

In April 2010, the shareholders approved the establishment of the 2010 Equity Incentive Plan (the 2010 Plan), which provides for the issuance of a maximum of 7,000,000 shares of common stock. The 2010 Plan provides for the grant of incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-related awards, and performance awards that may be settled in cash, stock, or other property. As of June 30, 2013, there were 4,566,530 shares of common stock available for issuance subject to awards under the 2010 Plan.

In May 2005, the shareholders approved the establishment of the 2005 Stock Incentive Plan (the 2005 Plan), which provides for the issuance of a maximum of 4,000,000 shares of common stock. The 2005 Plan provides for the grant of incentive and nonqualified stock options and other stock-based awards, including the grant of shares based upon certain conditions, the grant of securities convertible into common stock and the grant of stock appreciation rights. Restricted stock and other stock-based awards granted under the 2005 Plan may not exceed, in the aggregate, 4,000,000 shares of common stock. As of June 30, 2013, there were 214,712 shares of common stock available for issuance subject to awards under the 2005 Plan.

General Award Terms

We issue stock options and restricted stock units (RSUs) to our employees and outside directors, pursuant to stockholder- approved equity compensation plans. Option awards are granted with an exercise price equal to the market closing price of our stock on the trading day prior to the date of grant; those options generally vest over four years and expire within 7 or 10 years of grant. RSUs generally vest over four years. Historically, our practice has been to settle stock option exercises and RSU vesting through newly-issued shares.

Stock Compensation Accounting

Our stock-based compensation is principally accounted for as awards of equity instruments. Our policy is to issue new shares upon the exercise of stock awards. We adopted the simplified method related to accounting for the tax effects of share-based payment awards to employees under ASC Topic 718, Compensation—Stock Compensation (ASC 718). We use the "with-and-without" approach for determining if excess tax benefits are realized under ASC 718.

We utilize the Black-Scholes option valuation model for estimating the fair value of options granted. The Black-Scholes option valuation model incorporates assumptions regarding expected stock price volatility, the expected life of the option, the risk-free interest rate, dividend yield and the market value of our common stock. The expected stock price volatility is determined based on our stock's historic prices over a period commensurate with the expected life of the award. The expected life of an option represents the period for which options are expected to be outstanding as determined by historic option exercises and cancellations. The risk-free interest rate is based on the U.S. Treasury yield curve for notes with terms approximating the expected life of the options granted. The expected dividend yield is zero, based on our history and expectation of not paying dividends on common shares. We recognize compensation costs on a straight-line basis, net of estimated forfeitures, over the requisite service period for time-vested awards.

The weighted average estimated fair value of awards granted during fiscal 2013, 2012 and 2011 was $9.76, $6.49 and $4.99 respectively.

We utilized the Black-Scholes option valuation model with the following weighted average assumptions:

	Year Ended June 30,

	2013			2012			2011
Risk-free interest rate		0.6	%		1.1	%		1.3	%
Expected dividend yield		None			None			None
Expected life (in years)		4.8			4.6			4.6
Expected volatility factor		49	%		50	%		53	%

The stock-based compensation expense and its classification in the accompanying consolidated statements of operations for fiscal 2013, 2012 and 2011 was as follows:

	Year Ended June 30,

	2013		2012		2011
	(Dollars in Thousands)
Recorded as expenses:
Cost of service and other	$	1,281	$	1,168	$	945
Selling and marketing		3,890		4,601		3,603
Research and development		2,969		1,334		1,152
General and administrative		6,497		5,303		3,999

Total stock-based compensation	$	14,637	$	12,406	$	9,699

A summary of stock option and RSU activity under all equity plans in fiscal 2013, 2012 and 2011 is as follows:

	Stock Options									Restricted Stock Units

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (in 000's)		Shares			Weighted Average Grant Date Fair Value
Outstanding at June 30, 2012		4,180,265		$	9.03						1,327,071		$	12.73
Granted		498,264			23.40						592,842			23.46
Settled (RSUs)		—			—						(815,440	)		13.99
Exercised		(2,743,772	)		7.71						—			—
Cancelled / Forfeited		(82,639	)		12.99						(73,634	)		15.59

Outstanding at June 30, 2013		1,852,118		$	14.68		6.80	$	26,140		1,030,839		$	17.69

Vested and exercisable at June 30, 2013		972,407		$	12.05		5.64	$	16,278		—			—
Vested and expected to vest at June 30, 2013		1,563,655		$	14.09		6.53	$	22,984		751,521		$	17.39

During fiscal 2013, 2012 and 2011, the weighted average grant-date fair value of RSUs granted was $23.46, $15.52 and $11.02, respectively. During fiscal 2013, 2012 and 2011 the total fair value of vested shares from RSU grants amounted to $22.5 million, $14.0 million and $11.7 million, respectively.

As of June 30, 2013, the total future unrecognized compensation cost related to stock options and RSUs was $4.9 million and $13.4 million, respectively, and is expected to be recorded over a weighted average period of 2.3 years and 2.4 years, respectively.

The total intrinsic value of options exercised during fiscal 2013, 2012 and 2011 was $55.7 million, $14.6 million and $12.2 million, respectively. We received $21.1 million, $8.9 million and $9.7 million in cash proceeds from option exercises during fiscal 2013, 2012 and 2011, respectively. We paid $7.7 million, $4.6 million and $3.9 million for withholding taxes on vested RSUs during fiscal 2013, 2012 and 2011, respectively.

At June 30, 2013, common stock reserved for future issuance or settlement under equity compensation plans was 7.7 million shares.

The compensation committee and Board of Directors completed its annual program grant for fiscal 2014 and authorized and approved the grant of 392,440 RSUs and 333,214 stock options with a grant date of August 1, 2013.