NOTE 13. STOCK-BASED COMPENSATION AND STOCK-BASED PLANS

Certain information regarding our stock-based compensation was as follows (in thousands, except per share amounts):


	Year Ended December 31,
	2014		2013		2012
Weighted average grant-date per share fair value of stock options granted	$	5.58	$	5.35	$	2.56
Total intrinsic value of stock options exercised		377		523		4
Fair value of restricted shares vested		2,309		1,398		1,236
Tax benefit realized from stock options exercised and restricted stock units (“RSUs”) released		954		729		436
Tax benefit recognized in our Consolidated Statements of Operations related to stock-based compensation		750		537		25

Our stock-based compensation was included in our Consolidated Statements of Operations as follows (in thousands):


	Year Ended December 31,
	2014		2013		2012
Cost of sales	$	234	$	201	$	165
Research and development		321		198		242
Selling, general and administrative		1,927		1,215		1,052

	$	2,482	$	1,614	$	1,459

To determine the fair value of stock-based awards granted, we used the Black-Scholes option pricing model and the following weighted-average assumptions:


	Year Ended December 31,
	2014	2013	2012
Stock Option Plan
Risk-free interest rate	1.8%	1.1% - 1.8%	0.8% - 1.2%
Expected dividend yield	0.0%	0.0%	0.0%
Expected term	6.25 years	6.25 years	6.5 years
Expected volatility	61.2%	60.6% - 61.0%	58.2% - 59.4%
Employee Stock Purchase Plan
Risk-free interest rate	0.1%	0.8%	0.1% - 0.2%
Expected dividend yield	0.0%	0.0%	0.0%
Expected term	6 months	6 months	6 months
Expected volatility	35.4% - 37.8%	24.5% - 31.5%	40.1% - 54.3%

The risk-free rate used is based on the U.S. Treasury yield over the expected term of the options granted. Our option pricing model utilizes the simplified method to estimate the expected term. The expected volatility for options granted pursuant to our stock incentive plans and for our employee stock purchase plan is calculated based on our historic volatility. We have not paid dividends in the past and we do not expect to pay dividends in the future and, therefore, the expected dividend yield is 0%.

We amortize stock-based compensation on a straight-line basis over the vesting period of the individual awards, which is the requisite service period, with estimated forfeitures considered. Shares to be issued upon the exercise of stock options will come from newly issued shares.

Stock Incentive Plans

Our stock incentive plans include our 2000 Stock Incentive Plan (the “2000 Plan”) and our 2010 Stock Incentive Plan (the “2010 Plan”) (together, the “Plans”) and provide for the granting of incentive stock options, nonqualified stock options and RSUs. Incentive stock options must be granted at an exercise price not less than 100% of the fair market value per share at the grant date. Nonqualified stock options granted or shares sold under the Plans cannot be granted or sold at a price less than 85% of the fair market value per share at the date of grant or sale. The contractual term of options granted under the Plans is ten years, and the right to exercise options granted generally vests 25% each year over four years. Grants of RSUs generally vest 25% each year over four years, or 50% each year over two years. Grants to outside Board members vest immediately upon grant. We have authorized a total of 3,000,000 shares of common stock for issuance under the 2000 Plan and 2,869,600 shares under the 2010 Plan.

At December 31, 2014, a total of 994,202 shares were available for future grants, and we had 2,306,705 shares of our common stock reserved for future issuance under the Plans.

Stock option activity for the year ended December 31, 2014 and other Plan information was as follows:


	Options Outstanding			Weighted Average Exercise Price
Outstanding at December 31, 2013		1,042,937		$	6.52
Granted		90,000			9.61
Exercised		(148,166	)		9.90
Forfeited		(67,992	)		9.01

Outstanding at December 31, 2014		916,779			6.10

Certain information regarding options outstanding as of December 31, 2014 was as follows:


	Options Outstanding		Options Exercisable
Number		916,779		555,689
Weighted-average exercise price	$	6.10	$	5.48
Aggregate intrinsic value	$	7,803,203	$	5,071,011
Weighted-average remaining contractual term (in years)		6.38		5.36

RSU activity for the year ended December 31, 2014 was as follows:


	Restricted Stock Units			Weighted Average Grant Date Per Share Fair Value
Outstanding at December 31, 2013		409,403		$	6.87
Granted		226,400			10.47
Vested		(205,739	)		7.04
Forfeited		(34,340	)		6.98

Outstanding at December 31, 2014		395,724			8.83

As of December 31, 2014, total unrecognized stock-based compensation related to outstanding, but unvested stock options and RSUs was $4.0 million, which will be recognized over the weighted average remaining vesting period of 2.2 years.

Employee Stock Purchase Plan

Our 2013 Employee Share Purchase Plan (the “2013 ESPP”) was approved by shareholders in May 2013. The terms of our 2013 ESPP provide for the sale and issuance of up to 1.0 million shares of our common stock. The 2013 ESPP replaced our 2004 Employee Share Purchase Plan (the “2004 ESPP”) for the six-month option period beginning on November 1, 2013.

Any eligible employee may participate in the 2013 ESPP by completing a subscription agreement which allows participants to have between 2% and 15% of their compensation withheld to purchase shares of common stock at 85% of the fair market value of a share of common stock on the enrollment date or on the exercise date, whichever is lower. No more than $12,500 can be withheld to purchase shares of common stock in each offering period. The exercise date is the last trading day of each offering period and participating employees are automatically enrolled in the new offering period.

The following information relates to our 2013 ESPP activity during 2014:


Shares issued pursuant to the 2013 ESPP		70,533
Weighted average price of shares issued	$	9.00
Discount per share from the fair market value on the dates of purchase	$	1.71
Shares remaining available for purchase pursuant to the 2013 ESPP as of December 31, 2014		929,467