Equity and Stock Based Compensation Plans

Options

The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model and the assumptions noted in the following table. The expected life of options granted was calculated using the simplified method. The risk-free rate is based on the U.S. Treasury rates in effect during the corresponding period of grant. The expected volatility is based on the historical volatility of the Company's stock price. The dividend yield reflects that the Company has not paid any cash dividends since inception and does not intend to pay any cash dividends in the foreseeable future.



	Three Months Ended
	March 29, 2014		March 30, 2013
Stock Options
Expected life	4.6 years		4.5 years
Expected volatility	56.79	%	73.12	%
Risk-free interest rate	1.53	%	0.86	%
Dividends	—		—
Employee Stock Purchase Plan
Expected life	0.5 years		0.5 years
Expected volatility	32.60	%	27.61	%
Risk-free interest rate	1.00	%	0.11	%
Dividends	—		—

The weighted average fair value per share of the stock options awarded in the three month periods ended March 29, 2014 and March 30, 2013 was $8.69 and $8.88, respectively, based on the fair market value of the Company’s common stock on the grant dates.

A summary of activity under the Company’s stock option plans during the three month period ended March 29, 2014 is as follows:



	Number of Shares Outstanding (Options)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in Thousands)
Options:
Outstanding at December 28, 2013	1,909,039		$	13.22	4.02	$	10,341
Exercised	(217,848	)	10.64
Granted	44,300		18.28
Cancelled	(34,342	)	15.49
Outstanding at March 29, 2014	1,701,149		$	13.64	4.03	$	8,510
Exercisable at March 29, 2014	1,069,675		$	12.31	3.18	$	6,772

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price of $17.91 as of March 29, 2014, which would have been received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of options exercised during the three month periods ended March 29, 2014 and March 30, 2013 was $1.7 million and $0.8 million, respectively.

Restricted Stock Units ("RSUs")

A summary of activity for RSUs during the three month period ended March 29, 2014 is as follows:



	Number of RSUs		Weighted Average Fair Value
Outstanding RSUs as of December 28, 2013	334,444		$	18.61
Granted	189,000		$	18.68
Released	(91,817	)	$	18.61
Cancelled	(8,073	)	$	18.43
Outstanding RSUs as of March 29, 2014	423,554		$	18.61

Stock-based Compensation Expense

Stock-based compensation expense for all share-based payment awards made to the Company’s employees and directors pursuant to the employee stock option and employee stock purchase plans by function was as follows (in thousands):



	Three Months Ended
	March 29, 2014		March 30, 2013
Cost of products	$	61	$	45
Cost of service	84		59
Research and development	340		317
Selling	427		440
General and administrative	722		596
Total stock-based compensation expense	$	1,634	$	1,457