
	Years Ended December 31,
Dollars in thousands	2022		2021		2020
Cost of goods sold	549		470		344
Research and development	1,739		1,644		1,471
Selling, general and administrative	$	25,437	$	34,096	$	17,776
Total stock-based compensation expense	27,725		36,210		19,591
Total estimated tax benefit related to stock-based compensation expense	10,574		13,804		6,221
Net effect on net income	$	17,151	$	22,406	$	13,370

The purpose of the Employee Stock Purchase Plan (the “ESPP”) is to provide eligible employees of the Company with the opportunity to acquire shares of common stock at periodic intervals by means of accumulated payroll deductions. The ESPP is a non-compensatory plan. Under the ESPP, a total of 3.0 million shares of common stock are reserved for issuance. These shares will be made available either from the Company’s authorized but unissued shares of common stock or from shares of common stock reacquired by the Company as treasury stock. At December 31, 2022, 2.0 million shares remain available for purchase under the ESPP. During the years ended December 31, 2022, 2021 and 2020, the Company issued 20,780 shares, 16,948 shares and 18,284 shares under the ESPP for $1.1 million, $1.1 million and $1.1 million, respectively.

As of December 31, 2022, the Company had stock options, restricted stock awards, performance stock awards, contract stock awards and restricted stock unit awards outstanding under the Integra LifeSciences Holdings Corporation Fifth Amended and Restated 2003 Equity Incentive Plan (the “2003 Plan”). The 2000 and 2001 Equity Incentive Plans were terminated as of February 19, 2021, and no further awards may be issued under the plans.

In May 2010 and May 2017, the stockholders of the Company approved amendments to the 2003 Plan to increase by 3.5 million and 1.7 million, respectively, the number of shares of common stock that may be issued under the 2003 Plan. The Company has reserved 4.0 million shares under each of the 2000 Plan and the 2001 Plan, and 14.7 million shares under the 2003 Plan. The Plans permit the Company to grant incentive and non-qualified stock options, stock appreciation rights, restricted stock, contract stock, performance stock, or dividend equivalent rights to designated directors, officers, employees and associates of the Company.

Stock options issued under the 2003 Plan became exercisable over specified periods, generally within four years from the date of grant for officers and employees, and within one year from the date of the grant for members of the Board of Directors. The awards generally expire eight years from the grant date for employees and from six to ten for directors and certain executive officers, except in certain instances that result in accelerated vesting due to death, disability, retirement age or change in control provisions within their grant agreements. Restricted stock issued under the 2003 Plan vests ratably over specified periods, generally three years after the date of grant. The vesting of performance stock issued under the 2003 Plan is subject to service and performance conditions.

The Company values stock option grants using the binomial distribution model. Management believes that the binomial distribution model is preferable to the Black-Scholes model because it is a more flexible model that gives consideration to the impact of non-transferability and vesting provisions in valuing employee stock options.

In determining the value of stock options granted, the Company considered that it has never paid cash dividends and does not currently intend to pay cash dividends, and thus has assumed a 0% dividend yield. Expected volatilities are based on the historical volatility of the Company’s stock price. The expected life of stock options is estimated based on historical data on exercise of stock options, post-vesting forfeitures and other factors to estimate the expected term of the stock options granted. The risk-free interest rates are derived from the U.S. Treasury yield curve in effect on the date of grant for instruments with a remaining term similar to the expected life of the options. The Company accounts for forfeitures as they occur.


	Years Ended December 31,
	2022	2021	2020
Dividend yield	0%	0%	0%
Expected volatility	30%	29%	27%
Risk free interest rate	2.01%	1.30%	0.89%
Expected life of option from grant date	7 years	7 years	7 years
Weighted average grant date fair value of options granted	$23.15	$22.59	$13.03


	Shares	Weighted Average Exercise Price		Weighted Average Contractual Term in Years	Aggregate Intrinsic Value
Stock Options	(In thousands)				(In thousands)
Outstanding at January 1, 2022	1,225	$	45.11	4.30	$26,970
Granted	146	65.11		—	—
Exercised	(155)	28.32		—	—
Forfeited or Expired	(14)	50.68		—	—
Outstanding at December 31, 2022	1,202	$	49.63	4.14	$	10,772
Exercisable at December 31, 2022	871	$	45.82	3.30	$	9,635

The Company recognized $3.5 million, $5.0 million and $3.2 million in expense related to stock options during the years ended December 31, 2022, 2021 and 2020, respectively. The intrinsic value of options exercised for the years ended December 31, 2022, 2021 and 2020 were $4.0 million, $11.1 million and $8.7 million, respectively. Cash received from option exercises and employee stock purchase plan was $5.5 million, $6.8 million and $5.2 million, for the years ended December 31, 2022, 2021 and 2020, respectively. The realized tax benefit from options exercised were $0.6 million, $2.2 million and $1.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2022, there was approximately $3.5 million of total unrecognized compensation costs related to unvested stock options. These costs are expected to be recognized over a weighted-average period of approximately two years.


	Restricted Stock Awards			Performance Stock and Contract Stock Awards
	Shares	Weighted Average Grant Date Fair Value Per Share		Shares	Weighted Average Grant Date Fair Value Per Share
	(In thousands)			(In thousands)
Unvested, January 1, 2022	422	$	58.78	442	60.62
Granted	334	62.88		245	62.89
Adjustments for performance achievement related to award target	—	—		(18)	60.76
Cancellations	(34)	62.29		(10)	59.88
Released	(239)	58.27		(252)	59.38
Unvested, December 31, 2022	483	$	61.63	407	62.88

The Company recognized $24.3 million, $31.2 million and $16.4 million in expense related to such awards during the years ended December 31, 2022, 2021 and 2020, respectively. The total fair market value of shares vested and released in 2022, 2021 and 2020 was $65.0 million, $15.7 million and $17.3 million, respectively. Vested awards include shares that have been fully earned but had not been delivered as of December 31, 2022.

Performance stock awards have performance features associated with them. Performance stock, restricted stock and contract stock awards generally have requisite service periods of three years. The fair value of these awards is being expensed on a straight-line basis over the vesting period. As of December 31, 2022, there were 129,399 performance stock units ("PSU's") subject to vest and be released based on 2022 performance achievement.

As of December 31, 2022, there was approximately $29.7 million of total unrecognized compensation costs related to unvested restricted stock, performance stock and contract stock awards. These costs are expected to be recognized over a weighted-average period of approximately two years.

The Company capitalized into inventory, share based compensation costs of $0.6 million, $0.5 million and $0.4 million for the years ended December 31, 2022, 2021 and 2020, respectively. Such share-based compensation was recognized as cost of goods sold when related inventory was sold.