(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, 2012, there were 5,108,019 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, 2012, there were 349,702 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 to our employees and outside directors, pursuant to stockholder approved stock option plans. Option awards are generally granted with an exercise price equal to the market price of our stock at the closing price 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. Restricted stock units (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, less an estimated forfeiture rate, over the requisite service period for time-vested awards.

The weighted average estimated fair value of awards granted during fiscal 2012, 2011 and 2010 was $6.49, $4.99 and $3.96 respectively.

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

	Year Ended June 30,
	2012			2011			2010
	Stock Option Plans			Stock Option Plans			Stock Option Plans
Risk-free interest rate		1.1	%		1.3	%		1.4	%
Expected dividend yield	None			None			None
Expected life (in years)		4.6			4.6			3.4
Expected volatility factor		50	%		53	%		57	%

The stock-based compensation expense and its classification in the accompanying consolidated statements of operations for fiscal 2012, 2011 and 2010 was as follows (dollars in thousands):

	Year Ended June 30,
	2012		2011		2010
Recorded as expense:
Cost of service and other	$	1,168	$	945	$	1,314
Selling and marketing		4,601		3,603		5,742
Research and development		1,334		1,152		1,880
General and administrative		5,303		3,999		6,324
Total stock-based compensation	$	12,406	$	9,699	$	15,260

During the period from mid-September 2007 until November 9, 2009, and from November 16, 2009 to December 21, 2009, we did not maintain our status as a timely filer with the SEC and we were unable to issue stock-based compensation to our directors and employees. The Board of Directors approved the grant, as of November 9, 2009, of 2,727,033 RSUs and 264,640 stock options under the 2005 Stock Incentive Plan and the 2001 Stock Option Plan. A portion of these awards vested upon issuance. The immediate vesting of a portion of the November 2009 grant caused the higher level of stock-based compensation expense for fiscal 2010, as compared to fiscal 2011 and 2012.

A summary of stock option and RSU activity under all equity plans in fiscal 2012, 2011 and 2010 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, 2009		7,569,215		$	7.61						150,613		$	10.42
Granted		264,640			9.55						2,749,283			9.56
Settled (RSUs)		-									(1,333,370	)		9.63
Exercised		(1,416,794	)		5.07						-			-
Cancelled / Forfeited		(1,021,191	)		13.90						(54,263	)		9.66
Outstanding at June 30, 2010		5,395,870		$	7.19						1,512,263		$	9.58
Granted		1,030,154			11.21						788,928			11.02
Settled (RSUs)		-									(853,044	)		9.91
Exercised		(1,506,969	)		6.44						-			-
Cancelled / Forfeited		(194,750	)		23.15						(109,771	)		9.89
Outstanding at June 30, 2011		4,724,305		$	7.64						1,338,376		$	10.19
Granted		764,925			15.52						908,750			15.52
Settled (RSUs)		-			-						(770,170	)		11.74
Exercised		(1,204,010	)		7.40						-			-
Cancelled / Forfeited		(104,955	)		12.65						(149,885	)		12.12
Outstanding at June 30, 2012		4,180,265		$	9.03		5.01	$	59,034		1,327,071		$	12.73

Vested and exercisable at June 30, 2012		3,214,482		$	7.67		4.00	$	49,754		-			-

Vested and expected to vest at June 30, 2012		3,987,372		$	8.81		4.84	$	57,184		1,088,779		$	12.75

During fiscal 2012, 2011 and 2010, the weighted average grant-date fair value of RSUs granted was $15.52, $11.02 and $9.56, respectively. During fiscal 2012, 2011 and 2010 the total fair value of vested shares from RSU grants amounted to $14.0 million, $11.7 million and $13.1 million, respectively.

As of June 30, 2012, the total future unrecognized compensation cost related to stock options and RSUs was $4.8 million and $13.5 million, respectively, and is expected to be recorded over a weighted average period of 2.6 years and 2.5 years, respectively.

The total intrinsic value of options exercised during fiscal 2012, 2011 and 2010 was $14.6 million, $12.2 million and $8.3 million, respectively. We received $8.9 million, $9.7 million and $7.2 million in cash proceeds from option exercises during fiscal 2012, 2011 and 2010, respectively. We paid $4.6 million, $3.9 million and $4.0 million for withholding taxes on vested RSUs during fiscal 2012, 2011 and 2010, respectively.

At June 30, 2012, common stock reserved for future issuance or settlement under equity compensation plans was 11.0 million shares.