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Employee Benefit Plans
12 Months Ended
Dec. 31, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Employee Benefit Plans
EMPLOYEE BENEFIT PLANS
Equity Incentive Plans
We have several equity incentive plans under which we have granted incentive stock options, non-qualified stock options and RSUs to employees, directors and consultants. The Board of Directors or a designated Committee of the Board is responsible for administration of our employee equity incentive plans and determines the term, exercise price and vesting terms of each option. Prior to May 2011, options issued to our employees had a four-year vesting term, an exercise price equal to the fair market value on the date of grant, and a ten year life from the date of grant (6.2 years for options issued in exchange for options cancelled under our 2009 option exchange program). Stock options issued after May 2011 have a four-year vesting term, an exercise price equal to the fair market value on the date of grant, and a seven year life from the date of grant. RSUs granted to our employees vest over a four year term; RSUs issued after September 29, 2011 vest annually; the remaining unvested portion of RSUs issued prior to September 29, 2011 vested quarterly.
In December 2005, our Board of Directors adopted a Change in Control and Severance Benefit Plan for executives and certain non-executives. Eligible Change in Control and Severance Benefit Plan participants include our employees with the title of vice president and above. If a participant’s employment is terminated without cause during a period commencing one month before and ending thirteen months following a change in control, as defined in the plan document, then the Change in Control and Severance Benefit Plan participant is entitled to have the vesting of all of such participant’s stock options accelerated with the exercise period being extended to no more than one year.
Employee Stock Purchase Plan
In January 2000, we adopted the 2000 Employee Stock Purchase Plan (the “ESPP”). The ESPP allows for qualified employees (as defined in the ESPP) to purchase shares of our common stock at a price equal to the lower of 85% of the closing price at the beginning of the offering period or 85% of the closing price at the end of each six month purchase period. Compensation expense related to our ESPP was $0.4 million, $0.8 million, and $0.6 million for the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015, we had 1,046,959 shares available for issuance under our ESPP. We issued 324,315 shares, 669,565 shares, and 345,828 shares of common stock during the years ended December 31, 2015, 2014 and 2013, respectively, pursuant to the ESPP at an average price per share of $1.75, $2.14 and $4.13, respectively.
Stock-Based Compensation
We recorded and allocated employee stock-based compensation expense for our equity incentive plans and our ESPP as follows (in thousands):
 
Year Ended December 31,
 
2015
 
2014
 
2013
Research and development expense
$
11,691

 
$
3,245

 
$
6,021

Selling, general and administrative
10,286

 
6,783

 
5,948

Restructuring-related stock compensation expense (recovery)

 
(22
)
 
49

Total employee stock-based compensation expense
$
21,977

 
$
10,006

 
$
12,018


We use the Black-Scholes Merton option pricing model to value our stock options. The weighted average grant-date fair value of our stock options and ESPP purchases was as follows:
 
2015
 
2014
 
2013
Stock options
$
2.55

 
$
1.46

 
$
2.97

ESPP
$
1.20

 
$
1.28

 
$
1.64




The fair value of employee stock option awards and ESPP purchases was estimated using the following assumptions:
 
Stock Options
 
2015
 
2014
 
2013
Risk-free interest rate
1.22
%
 
1.80
%
 
1.51
%
Dividend yield
%
 
%
 
%
Volatility
93
%
 
85
%
 
61
%
Expected life
4.5 years

 
5.5 years

 
5.6 years


 
ESPP
 
2015
 
2014
 
2013
Risk-free interest rate
0.15
%
 
0.06
%
 
0.11
%
Dividend yield
%
 
%
 
%
Volatility
98
%
 
69
%
 
66
%
Expected life
6 months

 
6 months

 
6 months


The expected life computation is based on historical exercise patterns and post-vesting termination behavior. We considered implied volatility as well as our historical volatility in developing our estimate of expected volatility.
A summary of all option activity was as follows for the periods presented (dollars in thousands, except per share amounts): 
 
Shares
 
Weighted 
Average
Exercise Price
 
Weighted 
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value
Options outstanding at December 31, 2014
27,811,992

 
$
5.00

 
 
 
 
Granted
8,894,800

 
$
3.78

 
 
 
 
Exercised
(2,340,963
)
 
$
4.66

 
 
 
 
Forfeited
(924,890
)
 
$
3.67

 
 
 
 
Expired
(6,015,085
)
 
$
7.12

 
 
 
 
Options outstanding at December 31, 2015
27,425,854

 
$
4.22

 
5.09 years
 
$
51,501

Exercisable at December 31, 2015
15,666,177

 
$
4.68

 
4.38 years
 
$
25,532


At December 31, 2015, a total of 8,041,842 shares were available for grant under our stock option plans.
The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between our closing stock price on the last trading day of fiscal 2015 and the exercise prices, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2015. The total intrinsic value of options exercised was $2.9 million during the year ended December 31, 2015 and nominal in 2014 and 2013. The total estimated fair value of employee options vested and recorded as expense in 2015, 2014 and 2013 was $18.9 million, $8.6 million and $7.4 million, respectively.
On July 20, 2015, as a result of positive top-line results from the primary analysis of METEOR, the Compensation Committee of the Board of Directors of Exelixis convened to determine we had met certain performance objectives for performance-based stock options granted to employees in 2013, 2014 and 2015. As a result of this determination, 6,982,613 performance-based stock options vested on July 20, 2015. Previously, we had not considered achievement of those performance objectives to be probable and therefore, we recorded $9.9 million in employee stock-based compensation expense during 2015 related to those options.
We have an additional 5,934,052 outstanding unvested stock options as of December 31, 2015 which were granted to employees in 2014 and 2015 and are subject to performance objectives tied to the achievement of regulatory goals set by the Compensation Committee of our Board of Directors and will vest in part based on achievement of such goals. As of December 31, 2015, we expect that achievement of the performance objectives tied to 2,967,026 performance-based stock options with a fair value of $3.7 million is probable and have, therefore, recorded $3.3 million of stock-based compensation expense in connection with such awards; the remainder of the expense for these awards will be recognized on a straight-line basis through the anticipated achievement date of the performance objectives. We have not included any stock-based compensation expense for the remaining 2,967,026 stock options with performance objectives for which the achievement of the performance goals is not considered probable; the grant date fair value of such awards outstanding was $3.7 million.
The following table summarizes information about stock options outstanding and exercisable at December 31, 2015:
 
Options Outstanding
 
Options Outstanding and
Exercisable
Exercise Price Range
Number
 
Weighted 
Average
Remaining
Contractual Life
 
Weighted
Average
Exercise
Price
 
Number
Exercisable
 
Weighted
Average
Exercise
Price
$1.46 - $1.87
7,997,474

 
5.78 years
 
$
1.70

 
3,857,469

 
$
1.70

$1.90
3,738,000

 
6.07 years
 
$
1.90

 
1,826,502

 
$
1.90

$2.57 - $4.88
2,772,796

 
5.27 years
 
$
3.80

 
1,681,199

 
$
3.98

$5.01 - $5.51
4,043,479

 
4.02 years
3,186,063

$
5.44

 
3,186,063

 
$
5.44

$5.55 - $6.02
2,600,943

 
4.70 years
 
$
5.73

 
1,890,661

 
$
5.70

$6.21
2,822,900

 
6.69 years
 
$
6.21

 

 
 
$6.25 - $11.66
3,450,262

 
2.53 years
 
$
8.71

 
3,224,283

 
$
8.82

 
27,425,854

 
5.09 years
 
$
4.22

 
15,666,177

 
$
4.68

As of December 31, 2015, $19.5 million of total unrecognized compensation expense related to stock options is expected to be recognized over a weighted-average period of 2.56 years.
Cash received from option exercises and purchases under the ESPP in 2015, 2014 and 2013 was $11.5 million, $1.6 million and $1.5 million, respectively.
A summary of all RSU activity was as follows for all periods presented (dollars in thousands, except per share amounts): 
 
Shares
 
Weighted 
Average
Grant Date
Fair Value
 
Weighted 
Average
Remaining
Contractual 
Term
 
Aggregate
Intrinsic
Value
Awards outstanding at December 31, 2014
961,469

 
$
3.82

 
 
 
 
Awarded
838,535

 
$
5.01

 
 
 
 
Vested and released
(672,951
)
 
$
5.62

 
 
 
 
Forfeited
(124,865
)
 
$
5.32

 
 
 
 
Awards outstanding at December 31, 2015
1,002,188

 
$
5.16

 
2.50 years
 
$
5,652

As of December 31, 2015, $3.4 million of total unrecognized compensation expense related to employee RSUs was expected to be recognized over a weighted-average period of 2.50 years.
401(k) Retirement Plan
We sponsor a 401(k) Retirement Plan (the “401(k) Plan”) whereby eligible employees may elect to contribute up to the lesser of 50% of their annual compensation or the statutorily prescribed annual limit allowable under Internal Revenue Service regulations. The 401(k) Plan permits us to make matching contributions on behalf of all participants. We matched 100% of the first 3% of participant contributions into the 401(k) Plan in the form of our common stock. We recorded expense of $0.4 million, $1.1 million, and $0.8 million related to the stock match for the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015, we had 450,042 shares available for issuance under our 401(k) Plan.