7.	STOCK PURCHASE AND AWARD PLANS

Employee stock-based compensation expense recognized under the authoritative guidance was as follows:


	Years Ended December 31,
	2011		2010		2009
	(In thousands)
Selling, general and administrative	$	26,310	$	16,694	$	14,958
Research and development expense		404		426		492
Cost of product revenues		91		89		130

Total employee stock-based compensation expense		26,805		17,209		15,580
Total tax benefit related to employee stock-based compensation expense		10,468		7,006		6,253

Net effect on net income	$	16,337	$	10,203	$	9,327

EMPLOYEE STOCK PURCHASE PLAN

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. Under the ESPP, a total of 1.5 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 shares. At December 31, 2011, 1.1 million shares remain available for purchase under the ESPP. During the years ended December 31, 2011, 2010 and 2009, the Company issued 8,523 shares, 5,515 shares and 7,263 shares under the ESPP for $0.2 million, $0.2 million and $0.3 million, respectively.

The ESPP was amended in 2005 to reduce the discount available to participants to five percent and to fix the price against which such discount would be applied. Accordingly, the ESPP is a non-compensatory plan.

EQUITY AWARD PLANS

As of December 31, 2011, the Company had stock options, restricted stock awards, and contract stock outstanding under six plans, the 1996 Incentive Stock Option and Non-Qualified Stock Option Plan (the "1996 Plan"), the 1998 Stock Option Plan (the "1998 Plan"), the 1999 Stock Option Plan (the "1999 Plan"), the 2000 Equity Incentive Plan (the "2000 Plan"), the 2001 Equity Incentive Plan (the "2001 Plan"), and the 2003 Equity Incentive Plan (the "2003 Plan", and collectively, the "Plans"). No new awards may be granted under the 1996 Plan, the 1998 Plan or the 1999 Plan.

In July 2008 and May 2010, the stockholders of the Company approved amendments to the 2003 Plan to increase by 750,000 and 1,750,000, respectively, the number of shares of common stock that may be issued under the 2003 Plan. The Company has reserved 750,000 shares of common stock for issuance under the 1996 Plan, 1,000,000 shares under the 1998 Plan, 2,000,000 shares under each of the 1999 Plan, the 2000 Plan and the 2001 Plan, and 6,500,000 shares under the 2003 Plan. The 1996 Plan, 1998 Plan, and the 1999 Plan permit the Company to grant both incentive and non-qualified stock options to designated directors, officers, employees and associates of the Company. In general, the 2000 Plan, 2001 Plan, and 2003 Plan 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 Plans become exercisable over specified periods, generally within four years from the date of grant for officers, employees and consultants, and generally expire six years from the grant date. The transfer and non-forfeiture provisions of restricted stock issued under the Plans lapse over specified periods, generally at three years after the date of grant.

Stock Options

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 the binomial distribution model is a more flexible model that considers the impact of non-transferability, and vesting provisions in the valuation of 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 with forward-looking assumptions. 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. In addition, the Company applies an expected forfeiture rate when amortizing stock-based compensation expenses. The estimate of the forfeiture rates is based primarily upon historical experience of employee turnover. As individual grant awards become fully vested, stock-based compensation expense is adjusted to recognize actual forfeitures. The following weighted-average assumptions were used in the calculation of fair value:


	Years Ended December 31,
	2011	2010	2009
Dividend yield	0%	0%	0%
Expected volatility	28%	30%	29%
Risk free interest rate	2.47%	2.82%	2.0%
Expected life of option from grant date	8 years	8 years	8 years

The following table summarizes the Company's stock option activity:


Stock Options	Shares			Weighted Average Exercise Price		Weighted Average Contractual Term in Years		Aggregate Intrinsic Value
	(In thousands)							(In thousands)
Outstanding at December 31, 2010		1,560			$38.13
Granted		34			50.78
Exercised		(100	)		34.43
Forfeited or Expired		(11	)		36.60

Outstanding at December 31, 2011		1,483			$38.68		4.4		$270

Vested or expected to vest at December 31, 2011		1,483			$38.68		4.4		$270

Exercisable at December 31, 2011		1,465			$38.54		4.4		$270

The intrinsic value of options exercised for the years ended December 31, 2011, 2010 and 2009 was $1.4 million, $14.4 million and $1.0 million, respectively. The weighted average grant date fair value of options granted during the years ended December 31, 2011, 2010 and 2009 was $19.18, $17.03 and $8.12, respectively. Cash received from option exercises was $3.7 million, $16.1 million and $6.6 million, for the years ended December 31, 2011, 2010 and 2009, respectively.

As of December 31, 2011, there was approximately $0.2 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 one year.

Awards of Restricted Stock, Performance Stock and Contract Stock

The following table summarizes the Company's awards of restricted stock, performance stock and contract stock for the year ended December 31, 2011:


	Restricted Stock Awards					Performance Stock and Contract Stock Awards
	Shares			Wtd. Avg. Grant Date Fair Value Per Share		Shares			Wtd. Avg Grant Date Fair Value Per Share
	(In thousands)			(In thousands)
Unvested, December 31, 2010		413			$34.98		277			$40.74
Granted		122			47.48		361			40.29
Cancellations		(35	)		37.99		(6	)		40.66
Released		(195	)		36.95		(9	)		44.51
Vested but not released		—			—		(479	)		43.83

Unvested, December 31, 2011		305			$38.37		144			$29.15

The Company recognized $24.5 million, $13.5 million and $10.5 million in expense related to such awards during the years ended December 31, 2011, 2010 and 2009, respectively. The total fair market value of shares vested in 2011, 2010 and 2009 was $29.7 million, $11.5 million and $4.7 million, respectively.

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, 2011, there was approximately $7.4 million of total unrecognized compensation costs related to unvested awards. These costs are expected to be recognized over a weighted-average period of approximately two years.

In July 2004, the Company renewed the employment agreement of its former Chief Executive Officer ("the Executive") and the Executive received fully vested Restricted Units providing for the payment of 750,000 shares of Integra common stock which shall generally be delivered to the Executive following his termination of employment or retirement, or i) later under certain circumstances, ii) earlier if he is terminated without cause, or iii) if he leaves his position for good reason or upon a change of control or certain tax related events. In August 2008, the Company and the Executive renewed the Executive's employment agreement through December 31, 2011. In connection with the renewal of the agreement, the Executive received fully vested Restricted Units providing for the payment of 375,000 shares of Integra common stock which shall be delivered to the Executive within three business days following the first business day after the six month anniversary of his separation of service from the Company. As the Restricted Units vested on the grant date, a charge of approximately $18.0 million was recognized upon issuance, which was included in selling, general and administrative expenses. On May 17, 2011, in connection with the extension of the employment agreement with the Executive, the Company provided a grant of 165,000 contract stock/stock units ("SUs"). As the SUs vested at the grant date, the Company recognized a charge of approximately $8.4 million upon issuance, which was included in selling, general and administrative expenses. The Executive's employment contract provides for an annual equity award covering between 75,000 and 100,000 shares of the Company's stock. In December 2011, the Executive provided a letter to the Board of Directors acknowledging that the annual equity award that the Company determines to grant to him for 2011 may be granted in the first quarter of 2012 (rather than in December 2011). Because the Company is required to grant him an award for 2011 covering at least 75,000 shares, those shares have been included as part of the grants in the table above. The award is deemed to be fully vested under the Executive's contract as a result of the appointment of a new chief executive officer; therefore, the Company immediately recognized an expense of $2.3 million in 2011. Additionally, the Company's former chief executive officer's previously unvested awards immediately vested upon the appointment of a new chief executive officer, which resulted in an expense of $2.6 million in 2011. The Restricted Units granted in 2004, 2008 and 2011 were granted under the 2003 Plan, and as of December 31, 2011 the related shares have not been issued. The Executive has demand registration rights under the Restricted Unit grants.

At December 31, 2011, in addition to the Restricted Units discussed above, there are approximately 430,000 additional vested Restricted Units held by various employees for which the related shares have not yet been issued. Included in this amount are 34,868 units granted in October 2010 in connection with the Company's hiring of its Chief Executive Officer for which the Company immediately expensed $1.5 million as these shares were fully vested at the date of grant.

At December 31, 2011, there were approximately 1.9 million shares available for grant under the Plans.