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				Nine Months Ended
	September 27, 2014		September 28, 2013		September 27, 2014		September 28, 2013
Stock Options
Expected life	—		4.6 years		4.6 years		4.5 years
Expected volatility	—		64.38	%	54.86	%	71.04	%
Risk-free interest rate	—		1.52	%	1.54	%	1.00	%
Dividends	—		—		—		—
Employee Stock Purchase Plan
Expected life	0.5 years		0.5 years		0.5 years		0.5 years
Expected volatility	29.64	%	25.94	%	32.60	%	26.75	%
Risk-free interest rate	0.06	%	0.10	%	0.54	%	0.11	%
Dividends	—		—		—		—

No stock options were awarded during the three months ended September 27, 2014. The weighted average fair value per share of the stock options awarded in the three months September 28, 2013 was $7.75, and in the nine months ended September 27, 2014 and September 28, 2013, was $8.13 and $8.55, 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 nine months ended September 27, 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	(395,940	)	$	10.54
Granted	74,300		$	17.56
Cancelled	(104,781	)	$	15.64
Outstanding at September 27, 2014	1,482,618		$	13.98	3.65	$	3,521
Exercisable at September 27, 2014	1,038,707		$	13.03	2.92	$	3,346

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price of $15.70 as of September 26, 2014, the last trading day of the quarter, 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 months ended September 27, 2014 and September 28, 2013, was $0.4 million and $0.2 million, respectively, and during the nine months ended September 27, 2014 and September 28, 2013, was $2.9 million and $1.7 million, respectively.

Restricted Stock Units ("RSUs")

A summary of activity for RSUs during the nine months ended September 27, 2014, is as follows:



	Number of RSUs		Weighted Average Fair Value
Outstanding RSUs at December 28, 2013	334,444		$	18.61
Granted	399,475		$	17.61
Released	(136,959	)	$	17.89
Cancelled	(63,711	)	$	16.75
Outstanding RSUs at September 27, 2014	533,249		$	18.27

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				Nine Months Ended
	September 27, 2014		September 28, 2013		September 27, 2014		September 28, 2013
Cost of products	$	70	$	55	$	199	$	153
Cost of service	53		74		227		204
Research and development	331		412		967		1,092
Selling	490		476		1,353		1,418
General and administrative	761		789		2,369		2,149
Restructuring	—		896		—		896
Total stock-based compensation expense	$	1,705	$	2,702	$	5,115	$	5,912