ACHN 2017 Annual Report

Achillion Pharmaceuticals, Inc. Notes to Financial Statements—(Continued) (in thousands, except per share amounts) the lower of the fair market value of the common stock at the beginning or end of each six-month offering period. The Company originally reserved for issuance 250 shares of common stock under the 2006 ESPP Plan. On June 10, 2010, stockholders of the Company approved an amendment to the 2006 ESPP Plan to increase by 250 shares the number of shares of common stock reserved for issuance under the 2006 ESPP Plan from 250 shares to 500 shares. On June 2, 2015, stockholders of the Company approved an amendment to the 2006 ESPP Plan to increase by 1,700 shares the number of shares of common stock reserved for issuance under the 2006 ESPP Plan from 500 to 2,200 shares. The Company measures the fair value of issuances under the 2006 ESPP Plan using the Black-Scholes option pricing model at the end of each reporting period. The compensation cost for the 2006 ESPP Plan consists of the 15% of the grant date stock price discount and the fair value of the option features. The Company recorded compensation cost related to the 2006 ESPP Plan of $94, $100 and $160 for the years ended December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017, there were 1,591 shares available for future issuance under the 2006 ESPP Plan. The assumptions used to value options granted under the 2006 ESPP Plan are as follows: For the Years Ended December 31, 2017 2016 2015 Expected term of option . . . . . . . . . . . . . . . . . . . . . . . 6 months 6 months 6 months Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . 58% – 73% 55% – 66% 57% – 88% Risk free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . 0.05 – 1.3% 0.05 – 0.06% 0.07 – 0.08% Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . 0% 0% 0% 12. Other Income In August 2015, a stockholder of the Company paid $8,944 to the Company relating to the disgorgement of short swing profits under Section 16(b) of the Securities Exchange Act. 13. Commitments and Contingencies 401(k) Retirement Plan The Company has a 401(k) defined contribution retirement plan covering substantially all full-time employees. The Company currently matches employee contributions at a rate of $0.50 cents for each dollar contribution, up to 6% of salary deferrals. However, the decision to match any employee contributions is at the sole discretion of the Company. The Company made matching contributions of $415, $406 and $296 for the years ended December 31, 2017, 2016 and 2015, respectively. Operating Leases The Company’s commitments consist of obligations under operating leases for its facilities and office equipment. The Company leases its operating facility located in New Haven, Connecticut. The lease agreement requires monthly lease payments through March 2020. The Company is recording the expense associated with the lease on a straight-line basis over the expected term of the lease and, as a result, has accrued $149 and $216 at December 31, 2017 and 2016, respectively. F-24