At December 31, 2021, and 2020, the Company had stock option and award plans, and a stock purchase plan.

The Board of Directors adopted the Amended and Restated 2012 Long-Term Incentive Plan (the “2012 LTIP”) on April 23, 2018, which was subsequently approved by shareholder ratification. The 2012 LTIP provides for the grant of options to purchase shares of the Company’s common stock, stock awards (including restricted stock, unrestricted stock, and stock units), stock appreciation rights, performance-based awards and other equity-based awards. All of the Company’s employees and the employees of the Company’s subsidiaries and affiliates are eligible and may receive awards under the 2012 LTIP. In addition, the Company’s non-employee directors, consultants, and advisors who perform services for the Company and its subsidiaries and affiliates may receive awards under the 2012 LTIP. Awards granted under the 2012 LTIP expire no later than ten years after the date of grant. At December 31, 2021, the Company reserves a total of 7,050,000 shares of common stock for issuance pursuant to the 2012 LTIP, subject to certain adjustments set forth in the 2012 LTIP. At December 31, 2021, there were 1,150,898 options outstanding under the 2012 LTIP, of which 748,539 were exercisable. In addition, there were 13,978 shares of unvested restricted stock awards outstanding and 851,847 restricted stock units outstanding, some of which contain market-based vesting conditions, under the 2012 LTIP as of December 31, 2021.

The 2004 Long Term Incentive Plan (the “2004 LTIP”) reserved 3,100,000 shares for issuance, subject to certain adjustments set forth in the 2004 LTIP. At December 31, 2021, there were 12,500 options outstanding under the 2004 LTIP, all of which were exercisable.

The Inducement Plan for Spinal Kinetics Employees (the “Spinal Kinetics Inducement Plan”) reserved 51,705 shares for issuance to employees of Spinal Kinetics as an inducement to continue employment with the Company. At December 31, 2021, there were no remaining options outstanding under the Spinal Kinetics Inducement Plan and 1,284 shares of unvested restricted stock outstanding.

In August 2019, the Company appointed a new President of Global Spine, who was then subsequently promoted to President and Chief Executive Officer. As an inducement to accept employment with the Company, the individual was awarded a grant of stock options to acquire up to 50,711 shares of common stock and an award of 14,743 restricted stock units. As of December 31, 2021, there were 50,711 options outstanding under this inducement, 25,355 of which were exercisable, and 7,372 unvested restricted stock units outstanding.

In September 2020, the Company appointed a new President of Global Orthopedics. As an inducement to accept employment with the Company, the individual was awarded a grant of stock options to acquire up to 32,945 shares of common stock and an award of 10,624 restricted stock units. As of December 31, 2021, there were 32,945 options outstanding under this inducement, of which 8,236 were exercisable, and 7,968 unvested restricted stock units outstanding.

The Second Amended and Restated Stock Purchase Plan, as Amended (the “Stock Purchase Plan”) provides for the issuance of shares of the Company’s common stock to eligible employees and directors of the Company and its subsidiaries that elect to participate in the plan and acquire shares of common stock through payroll deductions (including executive officers).

During each purchase period, eligible employees may designate between 1% and 25% of their compensation to be deducted for the purchase of common stock under the plan (or such other percentage in order to comply with regulations applicable to employees domiciled in or resident of a member state of the European Union). For eligible directors, the designated percentage will be applied to an amount equal to his or her director compensation paid in cash for the current plan period. The purchase price of the shares under the plan is equal to 85% of the fair market value on the first day of the plan period or, if lower, on the last day of the plan period.

Due to the compensatory nature of such plan, the Company records the related share-based compensation expense in the consolidated statement of operations. Compensation expense is estimated using the Black-Scholes valuation model, with such value recognized as expense over the plan period. As of December 31, 2021, the aggregate number of shares reserved for issuance under the Stock Purchase Plan is 2,850,000. As of December 31, 2021, a total of 2,172,134 shares had been issued pursuant to the Stock Purchase Plan.

Share-based compensation expense is recorded in the same line of the consolidated statements of operations as the employee’s cash compensation. The following tables present the detail of share-based compensation expense by line item in the consolidated statements of income as well as by award type, for the years ended December 31, 2021, 2020, and 2019:

	Year Ended December 31,
(U.S. Dollars, in thousands)	2021		2020		2019
Cost of sales	$	779	$	705	$	715
Sales and marketing		3,385		3,620		2,512
General and administrative		10,289		10,624		16,872
Research and development		979		1,258		1,441
Total	$	15,432	$	16,207	$	21,540

	Year Ended December 31,
(U.S. Dollars, in thousands)	2021		2020		2019
Stock options	$	1,893	$	2,571	$	4,054
Time-based restricted stock awards and stock units		7,437		8,485		11,084
Performance-based restricted stock awards and stock units		—		—		—
Market-based restricted stock units		4,414		3,509		4,733
Stock purchase plan		1,688		1,642		1,669
Total	$	15,432	$	16,207	$	21,540

The income tax benefit related to this expense was $3.1 million, $3.2 million, and $3.5 million for the years ended December 31, 2021, 2020, and 2019, respectively.

The fair value of time-based stock options is determined using the Black-Scholes valuation model, with such value recognized as expense over the service period, which is typically four years, net of actual forfeitures. A summary of the Company’s assumptions used in determining the fair value of the stock options granted during the year is shown in the following table.

	Year Ended December 31,
	2021		2020		2019
Assumptions:
Expected term (in years)	6.0		5.5		5.0
Expected volatility	34.4% – 34.8%		30.2% – 35.1%		29.7% – 31.0%
Risk free interest rate	0.83% – 1.25%		0.28% – 1.65%		1.38% – 2.31%
Dividend yield		—		—		—
Weighted average grant date fair value	$	12.33	$	8.74	$	14.64

The expected term of the options granted is estimated based on a number of factors, including the vesting and expiration terms of the award, historical employee exercise behavior for both options that are currently outstanding and options that have been exercised or are expired, and an employee’s average length of service. Expected volatility is based on the historical volatility of the Company’s common stock. The risk-free interest rate is determined based upon a constant U.S. Treasury security rate with a contractual life that approximates the expected term of the option.

Summaries of the status of the Company’s stock option plans as of December 31, 2021, and 2020, and changes during the year ended December 31, 2021, are presented below:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Outstanding at December 31, 2020		1,491,019		$	39.56
Granted		72,995		$	35.59
Exercised		(89,151	)	$	36.68
Forfeited or expired		(77,809	)	$	45.49
Outstanding at December 31, 2021		1,397,054		$	39.20		5.04
Vested and expected to vest at December 31, 2021		1,397,054		$	39.20		5.04
Exercisable at December 31, 2021		944,630		$	41.10		3.51

As of December 31, 2021, the unamortized compensation expense relating to options granted and expected to be recognized was $2.0 million. This amount is expected to be recognized through December 2025 over a weighted average period of approximately 1.4 years. The total intrinsic value of options exercised was $0.6 million, $0.9 million and $1.4 million for the years ended December 31, 2021, 2020, and 2019, respectively. For the year ended December 31, 2021, we received $3.3 million in cash from stock option exercises, with the tax benefit realized for the tax deductions from these exercises of $0.6 million. The aggregate intrinsic value of options outstanding and options exercisable as of December 31, 2021, is calculated as the difference between the exercise price of the underlying options and the market price of the Company’s common stock for options that had exercise prices lower than $31.09, the closing price of the Company’s stock on December 31, 2021. The aggregate intrinsic value of options outstanding was $1.7 million as of December 31, 2021, whereas the aggregate intrinsic value of options exercisable was $0.5 million as of that date.

During the year ended December 31, 2021, the Company granted to employees and non-employee directors 295,240 shares of time- based restricted stock stock units, which vest at various dates through December 2025. The compensation expense, which represents the fair value of the stock measured at the market price at the date of grant, is recognized on a straight-line basis over the vesting period, which is typically four years, net of actual forfeitures.

Since 2017, the annual grant to non-employee directors has been made in the form of one-year vesting restricted stock units with deferred delivery (“DSUs”), whereby shares are not settled until after the director ceases service as a director. As of December 31, 2021, there were 59,001 DSUs outstanding that are vested but not settled.

The aggregate fair value of time-based restricted stock awards and stock units that vested during the years ended December 31, 2021, 2020, and 2019, was $9.0 million, $6.5 million and $9.5 million, respectively. Unamortized compensation expense related to time-based restricted stock awards and stock units amounted to $15.2 million at December 31, 2021, and is expected to be recognized over a weighted average period of approximately 2.6 years. The aggregate intrinsic value of time-based restricted stock awards and stock units outstanding was $17.4 million as of December 31, 2021.

The Company’s performance-based restricted stock awards and stock units contain performance-based vesting conditions.

The fair value of performance-based restricted stock awards and stock units is calculated based upon the closing stock price at the date of grant. Such value is recognized as expense over the derived requisite service period beginning in the period in which they are deemed probable to vest, net of actual forfeitures. Vesting probability is assessed based upon forecasted earnings and financial results. The Company did not grant any performance-based restricted stock awards or stock units to employees during the years ended December 31, 2021, 2020, and 2019.

During the year ended December 31, 2015, the Company granted to employees 110,660 shares of performance-based restricted stock awards, which vested based upon the achievement of certain earnings or return on invested capital targets. No compensation expense was recorded for these awards in 2021, 2020, or 2019, as the performance targets were obtained in prior years. The fair value of performance-based restricted stock awards that vested and settled during the years ended December 31, 2021, 2020, and 2019, were $0.0 million, $0.0 million, and $3.2 million, respectively. No unamortized compensation expense related to performance-based restricted stock awards remains as of December 31, 2021. There was no intrinsic value of performance-based restricted stock awards outstanding as of December 31, 2021 as the awards were fully settled in 2019.

During the year ended December 31, 2015, the Company also granted 55,330 shares of performance-based restricted stock units to employees, which vested based upon the achievement of certain earnings or return on invested capital targets for the year ended December 31, 2018. No compensation expense was recorded for these awards in 2021, 2020, or 2019, as the performance targets were obtained in a prior year. The fair value of performance-based restricted stock units that vested and settled during the years ended December 31, 2021, 2020, and 2019, were $0.0 million, $0.0 million, and $2.7 million, respectively. No unamortized compensation expense remains as of December 31, 2021 related to these 2015 performance-based restricted stock units. There was no intrinsic value of performance-based restricted stock units outstanding as of December 31, 2021, as the stock units were fully settled in 2019.

The Company’s market-based restricted stock units contain market-based vesting conditions.

The fair value of market-based restricted stock units is determined at the date of the grant using the Monte Carlo valuation methodology, with any discounts for post-vesting restrictions estimated using the Chaffe Model. The Monte Carlo methodology incorporates into the valuation the possibility that the market condition may not be satisfied. Such value is recognized on a straight-line basis over the vesting period, net of actual forfeitures. The awards, if the market conditions are achieved, will be settled in shares of common stock, with one share of common stock issued per restricted stock unit if targets are achieved at the 100% level. Awards may be achieved at a minimum level of 50% and a maximum of 200%. The market conditions for the awards are based on the Company’s stock achieving certain total shareholder return targets relative to specified index companies during a 3-year performance period beginning on each respective grant date. The fair value of market-based restricted stock units that vested and settled during the years ended December 31, 2021, 2020, and 2019, were $0.0 million, $1.4 million, and $0.0 million, respectively. Unamortized compensation expense for market-based restricted stock units amounted to $8.3 million at December 31, 2021, and is expected to be recognized over a weighted average period of approximately 1.7 years. The aggregate intrinsic value of market-based restricted stock units outstanding was $10.0 million as of December 31, 2021.

A summary of the status of our time-based and market-based restricted stock awards and stock units as of December 31, 2021, and 2020, and changes during the year ended December 31, 2021, are presented below:

	Time-based Restricted Stock Awards and Stock Units					Market-based Restricted Stock Units
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2020		493,127		$	41.13		275,338		$	54.45
Granted		295,240		$	41.20		152,575		$	48.53
Vested and settled		(191,082	)	$	44.50		—		$	—
Cancelled		(37,917	)	$	41.00		(104,832	)	$	63.97
Outstanding at December 31, 2021		559,368		$	40.03		323,081		$	48.56

On February 25, 2019, the Company entered into a Transition and Retirement Agreement (the “Retirement Agreement”) with the Company’s former President and Chief Executive Officer, Brad Mason. As part of the Retirement Agreement, certain time-based stock options and restricted stock awards were modified to vest on the Retirement Date. In addition, stock options were modified to extend the post-termination exercise period from 18 months under a standard qualified retirement to up to four years, dependent upon the remaining contractual terms of the options. The Company did not recognize share-based compensation expense related to the Retirement Agreement for the years ended December 31, 2021 and 2020, and recognized approximately $6.5 million in expense during the year ended December 31, 2019.