Employee Benefit Plans

The Company grants options and RSUs from the Amended and Restated 2006 Long-Term Incentive Plan, under which awards may be granted to all employees. Award vesting periods for this plan is generally four years. As of September 28, 2014, a total of approximately 2.0 million shares from this plan were reserved for future grants.

Additionally, the Company sponsors an Employee Stock Purchase Plan (the “ESPP”), pursuant to which eligible employees may contribute up to 10% of base compensation, subject to certain income limits, to purchase shares of the Company’s common stock. Employees may purchase stock semi-annually at a price equal to 85% of the fair market value on the purchase date. As of September 28, 2014, a total of approximately 0.2 million shares were reserved for future grants under the ESPP.

Option Activity

Stock option activity during the nine months ended September 28, 2014 was as follows:



	Number of shares		Weighted Average Exercise Price Per Share
	(in thousands)		(in dollars)
Outstanding at December 31, 2013	4,165		$	30.11
Granted	389		32.79
Exercised	(255	)	23.67
Cancelled	(67	)	35.43
Expired	(129	)	36.58
Outstanding at September 28, 2014	4,103		$	30.47

RSU Activity

RSU activity during the nine months ended September 28, 2014 was as follows:



	Number of shares		Weighted Average Grant Date Fair Value Per Share
	(in thousands)		(in dollars)
Outstanding at December 31, 2013	731		$	29.40
RSUs granted	445		33.14
RSUs vested	(188	)	30.17
RSUs cancelled	(44	)	29.34
Outstanding at September 28, 2014	944		$	30.92

Valuation and Expense Information

The fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton option valuation model that uses the assumptions noted in the following table. The estimated expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. The risk free interest rate is based on the implied yield currently available on U.S. Treasury securities with a remaining term commensurate with the estimated expected term. Expected volatility is based on historical volatility over the most recent period commensurate with the estimated expected term.

The following table sets forth the weighted average assumptions used to estimate the fair value of option grants during the three and nine months ended September 28, 2014 and September 29, 2013:



	Three Months Ended			Nine Months Ended
	September 28, 2014	September 29, 2013		September 28, 2014		September 29, 2013
Expected life (in years)	N/A	4.4		4.5		4.4
Risk-free interest rate	N/A	1.14	%	1.44	%	0.71	%
Expected volatility	N/A	46.4	%	42.6	%	48.1	%
Dividend yield	N/A	—		—		—

The following table sets forth the stock-based compensation expense resulting from stock options, RSUs and the ESPP included in the Company’s unaudited condensed consolidated statements of operations (in thousands):



	Three Months Ended				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Cost of revenue	$	573	$	479	$	1,533	$	1,074
Research and development	1,255		1,047		3,878		2,854
Sales and marketing	1,409		1,331		4,759		3,871
General and administrative	1,925		1,654		5,056		4,693
Total stock-based compensation	$	5,162	$	4,511	$	15,226	$	12,492

As of September 28, 2014, $13.2 million of unrecognized compensation cost related to stock options, adjusted for estimated forfeitures, is expected to be recognized over a weighted-average period of 2.39 years. Additionally, $18.9 million of unrecognized compensation cost related to unvested RSUs, adjusted for estimated forfeitures, is expected to be recognized over a weighted-average period of 2.82 years.