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 April 3, 2016, approximately 0.7 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. Prior to February 16, 2016, employees could purchase stock semi-annually at a price equal to 85% of the fair market value on the purchase date. As the price of the shares was determined at the purchase date, the Company recognized expense based on the 15% discount at purchase. Beginning February 16, 2016, the terms of the plan include a look-back feature that enables employees to purchase stock semi-annually at a price equal to 85% of the lesser of the fair market value at the beginning of the offering period or the purchase date. The duration of each offering period is generally six-months. The fair value of the shares offered under the ESPP is estimated at grant using a Black-Scholes option valuation model. As of April 3, 2016, approximately 47,000 shares were reserved under the ESPP.

Option Activity

Stock option activity during the three months ended April 3, 2016 was as follows:



	Number of shares		Weighted Average Exercise Price Per Share
	(in thousands)		(in dollars)
Outstanding at December 31, 2015	2,461		$	30.08
Granted	328		39.53
Exercised	(128	)	28.54
Cancelled	(12	)	33.75
Expired	(1	)	33.79
Outstanding at April 3, 2016	2,648		$	31.31

RSU Activity

RSU activity during the three months ended April 3, 2016 was as follows:



	Number of shares		Weighted Average Grant Date Fair Value Per Share
	(in thousands)		(in dollars)
Outstanding at December 31, 2015	964		$	31.63
RSUs granted	362		39.23
RSUs vested	(25	)	30.77
RSUs cancelled	(50	)	30.19
Outstanding at April 3, 2016	1,251		$	33.91

Valuation and Expense Information

The fair value of each option award and share granted under the ESPP commencing February 16, 2016 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 for options and ESPP shares 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 for options and ESPP shares is based on historical volatility over the most recent period commensurate with the estimated expected term.

The table below sets forth the weighted average assumptions used to estimate the fair value of option grants and purchase rights granted under the ESPP commencing February 16, 2016 during the three months ended April 3, 2016 and March 29, 2015.



	ESPP		Stock Options
	Three Months Ended		Three Months Ended
	April 3, 2016	March 29, 2015	April 3, 2016	March 29, 2015
Expected life (in years)	0.5	N/A	4.4	4.4
Risk-free interest rate	0.42%	N/A	1.28%	1.06%
Expected volatility	44.7%	N/A	35.4%	39.9%
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
	April 3, 2016		March 29, 2015
Cost of revenue	$	439	$	496
Research and development	866		845
Sales and marketing	1,197		1,393
General and administrative	1,909		1,614
Total stock-based compensation	$	4,411	$	4,348

As of April 3, 2016, $8.4 million of unrecognized compensation cost related to stock options, adjusted for estimated forfeitures, is expected to be recognized over a weighted-average period of 2.9 years. $27.3 million of unrecognized compensation cost related to unvested RSUs, adjusted for estimated forfeitures, is expected to be recognized over a weighted-average period of 2.7 years.