During the 2016 annual shareholder meeting, the Company's shareholders approved the Mellanox Technologies, Ltd. Amended and Restated Global Share Incentive Plan (2006) (the "First Restated 2006 Plan"), which constituted an amendment and restatement of the Mellanox Technologies, Ltd. Global Share Incentive Plan (2006) and its appendices (the "2006 Plan"). The First Restated 2006 Plan became effective on March 14, 2016 ("Effective Date"). The approval of the First Restated 2006 Plan extended the term to February 2026.

The First Restated 2006 Plan reserved 750,000 ordinary shares for issuance under new equity awards and reduced to zero the shares available for issuance under all of the Company's other equity incentive plans in effect, including the Voltaire Ltd. 2007 Incentive Compensation Plan, the Voltaire Ltd. 2003 Section 102 Stock Option/Stock Purchase Plan, the Voltaire Ltd. 2001 Section 102 Stock Option/Stock Purchase Plan, the Voltaire Ltd. 2001 Stock Option Plan, the Kotura, Inc. Second Amended and Restated 2003 Stock Plan, the IPtronics, Inc. 2013 Restricted Stock Unit Plan, the Global Share Incentive Assumption Plan (2010), the EZchip Semiconductor Ltd. 2003 Amended and Restated Equity Incentive Plan, the EZchip Semiconductor Ltd. 2007 U.S. Equity Incentive Plan, and the Amended and Restated EZchip Semiconductor Ltd. 2009 Equity Incentive Plan (collectively, the "Prior Plans").

As of the Effective Date of the First Restated 2006 Plan, the Company ceased granting awards under the Prior Plans, and began granting new awards only from the First Restated 2006 Plan. Any shares subject to issued and outstanding awards under the Prior Plans that expire, are canceled or otherwise terminate after the Effective Date of the First Restated 2006 Plan will be added back to share reserves under the First Restated 2006 Plan. The share reserve of the 2006 Plan is no longer available for issuance under the First Restated 2006 Plan. In addition, the First Restated 2006 Plan implemented additional amendments to reflect compensation and governance best practices.

On April 25, 2017, the Company's shareholders approved the Mellanox Technologies, Ltd. Second Amended and Restated Global Share Incentive Plan (2006) (the “Second Restated 2006 Plan”), which constituted a second amendment and restatement of the 2006 Plan, as amended and restated by the First Restated 2006 Plan. The Second Restated 2006 Plan became effective on February 14, 2017. The Second Restated 2006 Plan increased the ordinary shares reserved for issuance under the First Restated 2006 Plan by 1,640,000 shares to 2,390,000 shares plus any shares subject to issued and outstanding awards under the other equity incentive plans that existed prior to the First Restated 2006 Plan that expire, are cancelled or otherwise terminated after the effective date of the First Restated 2006 Plan. The Second Restated Plan also extended the term of the First Restated 2006 Plan to February 14, 2027. In addition, the Second Restated Plan implemented additional amendments to reflect compensation and governance best practices.

On July 25, 2018, the Company's shareholders approved the Mellanox Technologies, Ltd. Third Amended and Restated Global Share Incentive Plan (2006) (the “Third Restated Plan”), which constituted an amendment and restatement of the Second Restated 2006 Plan. The Third Restated Plan increased the ordinary shares reserved for issuance under the Second Restated 2006 Plan by 2,077,000 shares to 4,467,000 shares plus any shares subject to issued and outstanding awards under certain of the Company’s prior equity plans that expire, are cancelled or otherwise terminated after March 14, 2016, the effective date of the

On July 25, 2019, the Company's shareholders approved the Mellanox Technologies, Ltd. Fourth Amended and Restated Global Share Incentive Plan (2006) (the “Fourth Restated Plan”), which constitutes an amendment and restatement of the Third Restated Plan. The Fourth Restated Plan increased the ordinary shares reserved for issuance under the Third Restated Plan by 1,960,000 shares to 6,427,000 shares plus any shares subject to issued and outstanding awards under certain of the Company’s prior equity plans that expire, are cancelled or otherwise terminated after March 14, 2016, the effective date of the First Restated 2006 Plan. The Fourth Restated Plan also clarifies the treatment of PSU's upon the occurrence of a change in control of the Company.



	Options Outstanding
	Number of Shares		Weighted Average Exercise Price
Outstanding at December 31, 2017	1,110,061		$	38.35
Options exercised	(586,076	)	$	24.77
Options canceled	(29,482	)	$	100.81
Outstanding at December 31, 2018	494,503		$	50.73
Options exercised	(219,458	)	$	34.63
Options canceled	(1,040	)	$	91.91
Outstanding at December 31, 2019	274,005		$	63.46

The total pretax intrinsic value of options exercised in 2019 was $15.6 million. This intrinsic value represents the difference between the fair market value of the Company's ordinary shares on the date of exercise and the exercise price of each option. Based on the most recently available closing price of the Company's ordinary shares of $117.18 at December 31, 2019, the total pretax intrinsic value of all outstanding options was $14.7 million. The total pretax intrinsic value of exercisable options at December 31, 2019 was $14.7 million.

The total pretax intrinsic value of options exercised in 2018 was $33.5 million. Based on the most recently available closing price of the Company's ordinary shares of $92.38 prior to December 31, 2018, the total pretax intrinsic value of all outstanding options was $21.8 million. The total pretax intrinsic value of exercisable options at December 31, 2018 was $21.7 million.

The weighted average remaining contractual life of options outstanding at December 31, 2019 was 2.6 years. There were 273,963 options exercisable at December 31, 2019 with a weighted average exercise price $63.47 per share.



	Restricted Share Units Outstanding
	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested restricted share units at December 31, 2017	3,414,705		$	48.45
Restricted share units granted	1,773,217		$	80.40
Restricted share units vested	(1,354,359	)	$	48.35
Restricted share units canceled	(539,400	)	$	52.29
Non-vested restricted share units at December 31, 2018	3,294,163		$	65.05
Restricted share units granted	1,581,524		$	105.42
Restricted share units vested	(1,316,316	)	$	60.63
Restricted share units canceled	(244,023	)	$	73.76
Non-vested restricted share units at December 31, 2019	3,315,348		$	85.43

The weighted average fair value of restricted share units granted was $105.42, $80.40 and $49.88 for the years ended December 31, 2019, 2018 and 2017, respectively. The total intrinsic value of all outstanding restricted share units was $388.5 million as of December 31, 2019.

The non-vested restricted share units at December 31, 2019 included 36,000 PSUs. The PSUs will vest and be earned based on the Company’s achievement of relative total shareholder return and average non-GAAP net operating margin over a three-year performance period commencing on January 1, 2018 and ending on December 31, 2020, subject to the continued service to the Company through the end of the performance period. The number of shares that will actually vest range from zero to 175% of the target.

The ESPP is designed to allow eligible employees to purchase the Company's ordinary shares, at semi-annual intervals, with their accumulated payroll deductions. A participant may contribute up to 15% of his or her base compensation through payroll deductions, and the accumulated deductions will be applied to the purchase of shares on the purchase date, which is the last trading day of the offering period. The purchase price per share will be equal to 85% of the fair market value per share on the start date of the offering period in which the participant is enrolled or, if lower, 85% of the fair market value per share on the purchase date. No participant in the ESPP may be issued or transferred more than $25,000 worth of ordinary shares pursuant to purchase rights under the ESPP per calendar year. During the years ended December 31, 2019, 2018 and 2017, 309,723, 490,123, and 568,876 shares, respectively, were issued under the ESPP at weighted average per share prices of $78.92, $46.62 and $38.83, respectively.



	Number of Shares
Share options outstanding	274,005
Restricted share units outstanding	3,315,348
Shares authorized for future issuance	2,253,990
ESPP shares available for future issuance	2,625,623
Total shares reserved for future issuance as of December 31, 2019	8,468,966

The Company accounts for share-based compensation expense for share option awards and ESPP based on the estimated fair value of the instruments as of the grant dates. There were no employee share options granted in 2019, 2018 and 2017. The following weighted average assumptions were used in the valuation of the ESPP for the years ended December 31, 2019, 2018 and 2017:



	Employee Share Purchase Plan
	Year ended December 31,
	2019		2018		2017
Dividend yield, %	—		—		—
Expected volatility	27.1	%	31.0	%	24.6	%
Risk free interest rate	2.14	%	1.78	%	1.20	%
Expected life, years	0.50		0.50		0.50



	Year ended December 31,
	2019		2018		2017
	(in thousands)
Share-based compensation expense by caption:
Cost of goods sold	$	3,493	$	1,950	$	2,000
Research and development	61,315		38,922		40,278
Sales and marketing	26,614		17,042		15,693
General and administrative	20,696		13,428		10,893
Total share-based compensation expense	$	112,118	$	71,342	$	68,864

Share-based compensation expense by type of award:
Share options	$	8	$	12	$	115
ESPP	7,161		6,378		6,232
RSU	102,898		64,059		62,517
PSU	2,051		893		—
Total share-based compensation expense	$	112,118	$	71,342	$	68,864

At December 31, 2019, there was $235.4 million of total unrecognized share-based compensation costs related to non-vested share-based compensation arrangements. The costs are expected to be recognized over a weighted average period of approximately 2.69 years.