STOCK-BASED COMPENSATION

The allocation of stock-based compensation for our equity incentive plans and our Employee Stock Purchase Plan (the “ESPP”) was as follows (in thousands):



	Year Ended December 31,
	2017		2016		2015
Research and development	$	7,569	$	9,366	$	11,691
Selling, general and administrative	16,369		13,546		10,286
Total stock-based compensation	$	23,938	$	22,912	$	21,977

We have several equity incentive plans under which we have granted stock options and RSUs to employees, directors and consultants. At December 31, 2017, 20,328,545 shares were available for grant under our equity incentive plans. The Board of Directors or a designated Committee of the Board is responsible for administration of our equity incentive plans and determines the term, exercise price and vesting terms of each grant. Stock options 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. Stock options issued prior to May 2011 have a ten year life from the date of grant. RSUs granted to our employees generally vest annually over a four year term.

We have 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 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.

We have an ESPP that 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 $1.6 million, $1.0 million, and $0.4 million for the years ended December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017, we had 5,052,500 shares available for issuance under our ESPP. Pursuant to the ESPP, we issued 434,523 shares, 559,936 shares, and 324,315 shares of common stock at an average price per share of $11.20, $3.91 and $1.75 during the years ended December 31, 2017, 2016 and 2015, respectively. Cash received from purchases under the ESPP in the years ended December 31, 2017, 2016 and 2015 was $4.9 million, $2.2 million and $0.6 million, respectively.

We use the Black-Scholes Merton option pricing model to value our stock options. The weighted average grant-date fair value of our stock option grants and ESPP purchases were as follows:



	Year Ended December 31,
	2017		2016		2015
Stock options	$	11.42	$	4.77	$	2.55
ESPP	$	6.00	$	2.17	$	1.20

The grant-date fair value of employee stock option grants and ESPP purchases was estimated using the following assumptions:



	Year Ended December 31,
	2017		2016		2015
Stock options:
Risk-free interest rate	1.98	%	1.15	%	1.22	%
Dividend yield	—	%	—	%	—	%
Volatility	59	%	76	%	93	%
Expected life	4.5 years		4.4 years		4.5 years
ESPP:
Risk-free interest rate	1.09	%	0.55	%	0.15	%
Dividend yield	—	%	—	%	—	%
Volatility	58	%	65	%	98	%
Expected life	6 months		6 months		6 months

We considered implied volatility as well as our historical volatility in developing our estimates of expected volatility. The assumptions for the expected life of stock options were based on historical exercise patterns and post-vesting termination behavior.

Stock option activity for the year ended December 31, 2017 was as follows (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, 2016	24,999,665		$	4.91
Granted	2,166,110		$	23.43
Exercised	(4,469,203	)	$	3.91
Forfeited	(229,793	)	$	8.09
Expired	(258,333	)	$	9.91
Options outstanding at December 31, 2017	22,208,446		$	6.83	4.05 years	$	523,448
Exercisable at December 31, 2017	16,158,740		$	4.51	3.46 years	$	418,304

As of December 31, 2017, $39.7 million of unrecognized compensation expense related to stock options will be recognized over a weighted-average period of 2.57 years.

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 2017 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, 2017. The total intrinsic value of options exercised was $85.2 million, $50.0 million and $2.9 million during the years ended December 31, 2017, 2016 and 2015, respectively. Cash received from option exercises during the years ended December 31, 2017, 2016 and 2015 was $17.6 million, $25.3 million and $10.9 million, respectively. The total estimated fair value of employee options vested and recorded as expense during the years ended December 31, 2017, 2016 and 2015 was $13.1 million, $13.4 million and $18.9 million, respectively.

In April 2016, March 2016 and July 2015, 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 these determinations, 5,870,303 and 6,982,613 performance-based stock options vested during the years ended December 31, 2016 and 2015, respectively. During the years ended December 31, 2016 and 2015 we recognized $4.1 million and $13.2 million in stock-based compensation for those performance-based stock option grants. We did not have any performance-based stock options outstanding during the year ended December 31, 2017 and therefore, did not record any stock-based compensation for performance-based stock options during the year.

The fair value of RSUs was determined based on the value of the underlying common stock on the date of grant. The expenses relating to RSUs are recognized over their vesting period. A summary of all RSU activity were as follows (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, 2016	2,469,791		$	8.69
Awarded	2,137,817		$	24.60
Vested and released	(708,541	)	$	7.97
Forfeited	(136,077	)	$	11.48
Awards outstanding at December 31, 2017	3,762,990		$	17.76	1.95 years	$	114,395

As of December 31, 2017, $61.2 million of unrecognized compensation expense related to employee RSUs will be recognized over a weighted-average period of 3.20 years.

401(k) Retirement Plan

We sponsor the Exelixis, Inc. 401(k) 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. We make matching contributions in the form of our common stock of 100% of the first 3% of each participant’s contributions into the 401(k) Plan. We recorded compensation expense related to the stock match of $1.7 million, $1.1 million, and $0.4 million for the years ended December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017, 231,090 shares were available for issuance under the 401(k) Plan.