Note 6. Stock-Based Compensation

On September 8, 2005, the Board of Directors approved the 2005 Stock Incentive Plan (the “2005 Plan”), which was later approved by the Company’s stockholders. Pursuant to the 2005 Plan, stock options, restricted shares, stock units, including RSUs, and stock appreciation rights may be granted to employees, consultants, and outside directors of the Company. Options granted may be either incentive stock options or nonstatutory stock options. The Company initially reserved 5,000,000 shares of common stock for issuance under the 2005 Plan, effective upon the closing of the Company’s initial public offering on October 4, 2005. On June 8, 2009, the Company’s stockholders approved an amendment to the 2005 Plan to increase the shares reserved for issuance under the 2005 Plan by 3,980,000 shares. The amended and restated plan also extends the term under which awards may be granted under the 2005 Plan until January 27, 2019. On June 11, 2015, the Company’s stockholders approved an amendment to the amended and restated 2005 Plan to increase the shares reserved for issuance under the 2005 Plan by 1,500,000 shares. On June 9, 2016, the Company’s stockholders approved an amendment to the amended and restated 2005 Plan to increase the shares reserved for issuance under the 2005 Plan by 1,500,000 shares.

Stock Options

A summary of the stock option activity under the 2005 Plan for the nine months ended September 30, 2016 is as follows:



	Outstanding Options
	Number of	Weighted-Average
	Shares	Exercise Price
	(In thousands)
Balance at December 31, 2015	3,630	$	23.80
Options granted	716	$	26.98
Options exercised	(344)	$	18.58
Options forfeited	(24)	$	29.42
Options expired	(42)	$	28.70
Balance at September 30, 2016	3,936	$	24.75
Exercisable at September 30, 2016	2,783	$	23.19
Vested and expected to vest at September 30, 2016	3,840	$	24.66

Performance-Based Vesting Stock Options

In April 2016, the Company granted performance-based vesting stock options (“PV stock options”) to purchase 75,531 shares of common stock with an exercise price of $31.12 per share. The number of shares potentially issuable under PV stock options are subject to the attainment of pre-established, objective performance goals over a specified period. In addition, the awards have a service vesting criteria following the achievement of performance criteria through February 2019.

A summary of the PV stock option activity under the 2005 Plan for the nine months ended September 30, 2016 is as follows:


	Outstanding PV Stock Options
	Number of	Weighted-Average
	Shares	Exercise Price
	(In thousands)
Balance at December 31, 2015	—	$	—
PV stock options granted	76	$	31.12
PV stock options exercised	—	$	—
PV stock options forfeited	—	$	—
PV stock options expired	—	$	—
Balance at September 30, 2016	76	$	31.12
Exercisable at September 30, 2016	—	$	—
Vested and expected to vest at September 30, 2016	72	$	31.12

Restricted Stock Units

A summary of the RSU activity under the 2005 Plan for the nine months ended September 30, 2016 is as follows:


		Weighted-Average
	Number of	Grant Date Fair
	Shares	Value
	(In thousands)
Balance at December 31, 2015	682	$	30.18
RSUs granted	586	$	27.46
RSUs vested	(301)	$	30.10
RSUs cancelled	(73)	$	29.24
Balance at September 30, 2016	894	$	28.50

Performance-Based Vesting Restricted Stock Units

In April 2016, the Company awarded 11,720 performance-based restricted stock units (“PVRSU”) with a grant-date fair value of $329,000, or $28.09 per share. The amount potentially available under the PVRSU is subject to the attainment of a pre-established, objective performance goal over a specified period. In addition, the awards have a service vesting criteria following the achievement of performance criteria through February 2018.

A summary of the PVRSU activity under the 2005 Plan for the nine months ended September 30, 2016 is as follows:


		Weighted-Average
	Number of	Grant Date Fair
	Shares	Value
	(In thousands)
Balance at December 31, 2015	6	$	27.21
PVRSUs granted	12	$	28.09
PVRSUs vested	(6)	$	27.21
PVRSUs cancelled	—	$	—
Balance at September 30, 2016	12	$	28.09

Restricted Stock in Lieu of Directors’ Fees

Outside members of the Company’s Board of Directors may elect to receive fully-vested restricted stock in lieu of cash compensation for services as a director. During the nine months ended September 30, 2016, the Company issued 5,245 shares of restricted stock to outside directors, with a grant date fair value of $150,000 and a weighted-average grant date fair value of $28.56 per share.

Employee Stock Purchase Plan

A total of 1,250,000 shares of common stock have been reserved for issuance under the Employee Stock Purchase Plan (“ESPP”), of which 436,624 shares were available for issuance as of September 30, 2016. Shares are issued twice yearly at the end of each offering period. During the nine months ended September 30, 2016, 119,272 shares of common stock were issued under the ESPP. As of September 30, 2016, there was $264,000 of unrecognized compensation expense related to the ESPP, which is expected to be recognized over a period of two months.

Employee Stock-Based Compensation Expense

Share-based compensation expense recognized and included in the condensed consolidated statements of operations and comprehensive income (loss) was allocated as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
	(In thousands)				(In thousands)
Cost of product revenues	$	140	$	129	$	451	$	401
Research and development		1,123		996		3,646		3,149
Selling and marketing		1,359		1,132		4,234		3,406
General and administrative		2,091		1,671		5,771		5,099
Total	$	4,713	$	3,928	$	14,102	$	12,055