9.                       Stock-based Compensation Plans and Awards

The Company’s 2011 Equity Incentive Plan (the “2011 Plan”) provides for the issuance of stock options, restricted stock units and other stock-based awards. Each fiscal year, (beginning with the fiscal year that commenced February 1, 2012 and ending with the fiscal year commencing February 1, 2021), the number of shares in the reserve under the 2011 Plan may be increased by the lesser of (x) 10,000,000 shares, (y) 4.0% of the outstanding shares of common stock on the last day of the prior fiscal year or (z) another amount determined by the Company’s board of directors. For the fiscal year beginning February 1, 2012, 4.0% of the outstanding shares of common stock as of January 31, 2012 were added to the number of shares in the reserve. The 2011 Plan is scheduled to terminate in 2021, unless the board of directors determines otherwise. The 2011 Plan is administered by the compensation committee of the board of directors of the Company.

Valuation of Awards

The per-share fair value of each stock option was determined on the date of grant using the Black-Scholes option pricing model using the following assumptions:

Stock Options

No stock options were granted during the three months ended October 31, 2012.  A summary of stock option activity for the nine months ended October 31, 2012 is as follows:

(1)                  Amounts represent the difference between the exercise price and the fair value of common stock at period end for all in the money options outstanding based on the fair value per share of common stock.

Restricted Stock Units

The fair value of the restricted stock units (“RSUs”) is expensed ratably over the vesting period. RSUs vest annually on a cliff basis over the service period, generally four years.

During the three and nine months ended October 31, 2012, the Company recorded stock-based compensation expense related to RSUs of approximately $2.9 million and $7.0 million, respectively. As of October 31, 2012, total compensation cost not yet recognized of approximately $42.9 million related to non-vested RSUs, is expected to be recognized over a weighted average period of 3.33 years.

The following table summarizes the activities for our RSUs for the nine months ended October 31, 2012:

Stock Option Awards with Both a Service Period and a Market Condition

On March 22, 2012, Mr. Joseph Kennedy, the Company’s Chief Executive Officer, was granted a non-statutory stock option to purchase 800,000 shares of common stock. This option grant to Mr. Kennedy was intended to be in lieu of an annual equity grant for fiscal 2014. This option includes both a service period and a market vesting condition. The stock option will vest if the 60-day trailing volume weighted average price of the Company’s common stock exceeds $21.00 per share, or if there is a sale of the Company for at least $21.00 per share, in each case prior to July 6, 2017. If the market condition is met, the performance option will vest ratably over four years, beginning on July 6, 2013, subject to severance and change of control acceleration. To the extent that the market condition is not met, the option will not vest and will be cancelled. The Company used a binomial model to value the option with a market condition. The Company used Monte Carlo simulation techniques that incorporate assumptions as provided by management for the term of option from grant date (in years), risk-free interest rate, stock price volatility and beginning stock price. The Company does not adjust compensation cost recognition for subsequent changes in the expected outcome of the market-vesting conditions.

The following assumptions were used to value the grant using the Monte-Carlo simulation option pricing model: 10-year term, risk-free interest rate of 2.33%, expected volatility of 70% and a beginning stock price of $10.63. The grant-date fair value for the option was $6.08 per share. As of October 31, 2012, the remaining unrecognized compensation expense of approximately $4.0 million related to this grant is expected to be recognized over a period of 4.7 years.

Stock-based Compensation Expenses

The weighted-average fair value of stock option grants was $6.02 and $4.55 for the three and nine months ended October 31, 2011, respectively and $6.02 for the nine months ended October 31, 2012. No stock options were granted during the three months ended October 31, 2012. As of October 31, 2012, total compensation cost related to stock options granted, but not yet recognized, was approximately $34.6 million which the Company expects to recognize over a weighted-average period of approximately 2.4 years.

The total grant date fair value of stock options vested during the three and nine months ended October 31, 2011was $1.3 million and $3.1 million, respectively.  For the three and nine months ended October 31, 2012 the total grant date fair value of stock options vested was $2.6 million and $10.6 million, respectively. The aggregate intrinsic value of all options and warrants exercised during the three and nine months ended October 31, 2011 was $3.0 million and $34.3 million, respectively.  For the three and nine months ended October 31, 2012 the aggregate intrinsic value of all options and warrants exercised was $11.9 million and $63.5 million, respectively.

Stock-based compensation expenses related to all employee and non-employee stock-based awards was as follows (in thousands):