Share Based Awards

At December 31, 2011, the Company has a stock incentive plan for employees and directors and an employee stock purchase plan. Shares to be issued under these plans will be issued either from authorized but unissued shares or from treasury shares.

Total stock-based compensation cost recognized in the years ended December 31, 2011, 2010 and 2009, was $4.0 million, $3.5 million and $2.7 million, respectively, for stock options and the 2002 Employee Stock Purchase Plan ("ESPP"). The tax benefit from the stock-compensation cost recognized in 2011, 2010 and 2009 was $1.4 million, $1.2 million and $0.9 million, respectively. The tax benefit excludes direct tax benefits from exercise of stock options, which are separately reported in the consolidated statements of cash flows. The net indirect tax benefit from the stock compensation cost received upon the exercise of stock options that was recognized in the years ended December 31, 2011 and 2010 was $0.8 million and $0.4 million, respectively. The indirect benefits upon exercise of stock options relate to research and development tax credits and were recorded as a reduction of income tax expense. There were no indirect tax benefits from stock compensation cost in 2009.

Stock Incentive and Stock Option Plans

The 2011 Stock Incentive Plan ("2011 Plan") replaced the 2003 Stock Option Plan (“2003 Plan”). Shares reserved for issuance under the 2011 Plan include 650,000 shares, plus the remaining available shares for grant from the 2003 Plan. In addition, any forfeited, terminated or expired shares that would otherwise return to the 2003 Plan are available under the 2011 Plan. As of December 31, 2011, the 2011 Plan has 901,700 shares of common stock reserved for issuance to employees, which includes 251,700 shares that transferred from the 2003 Plan. Shares issued as options or stock appreciation rights ("SARs") will be charged against the 2011 Plan's share reserve as one share for one share issued. Shares subject to awards other than options and SARs will be charged against the 2011 Plan's share reserve as 2.22 shares for 1 share issued. Options may be granted with exercise prices at no less than fair market value at date of grant. Options granted under the 2011 Plan may be “non-statutory stock options” which expire no more than ten years from date of grant or “incentive stock options” as defined in Section 422 of the Internal Revenue Code of 1986, as amended. Upon exercise of non-statutory stock options, the Company is generally entitled to a tax deduction on the exercise of the option for an amount equal to the excess over the exercise price of the fair market value of the shares at the date of exercise; the Company is generally not entitled to any tax deduction on the exercise of an incentive stock option. The 2011 Plan includes conditions whereby options not vested are cancelled if employment is terminated. To date, all options granted under the 2011 Plan and 2003 Plan have been non-statutory stock options. The majority of the employee option grants become exercisable five years from the grant date or one quarter becomes exercisable after one year from the grant date and the balance vests ratably on a monthly basis over 36 months. The options generally expire 10 years from the grant date.

The Company's 2001 Directors’ Stock Option Plan (the “Directors’ Plan”), which had 750,000 shares reserved for issuance to members of the Company’s Board of Directors, expired in November 2011. Although no new grants may be made under the Director's Plan, grants made under the Director's Plan prior to its expiration continue to remain outstanding. Options not vested terminate if the directorship is terminated. The options granted to non-employee directors generally vest one to four years from the grant date and expire 10 years from the grant date.

The fair value of stock option awards was estimated at the grant date with the following weighted average assumptions for the years ended December 31, 2011, 2010 and 2009:



	Year ended December 31,
	2011			2010			2009
Expected term (in years)	3.0			3.4			5.8
Expected stock price volatility	35.3		%	40.2		%	37.4		%
Risk-free interest rate	0.9		%	0.8		%	2.4		%
Expected dividend yield	—		%	—		%	—		%
Weighted average grant price	$	43.27		$	34.70		$	35.24
Weighted average grant date fair value	$	10.72		$	10.18		$	12.98

The fair value of stock grants is calculated using the Black-Scholes option valuation model. The Company granted 290,000 stock options valued at $3.1 million in 2011, 243,000 stock options valued at $2.5 million in 2010 and 254,000 stock options, valued at $3.3 million in 2009. The expected term for all periods was based on expected future employee behavior. The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock, based on the average expected exercise term.

As of December 31, 2011, the Company had $6.3 million of unamortized stock compensation cost of which approximately $3.2 million will amortize in 2012, $2.0 million will amortize in 2013, $0.9 million will amortize in 2014 and $0.2 million will amortize in 2015. As of December 31, 2011, the Company had 160 unvested time-based grants totaling 798,300 options, which vest between 2012 and 2015. Vested and expected to vest stock options equal the Company’s total outstanding options at December 31, 2011.

A summary of the Company’s stock option activity as of and for the year ended December 31, 2011 is as follows:



	Shares		Weighted Average Exercise Price
Outstanding at December 31, 2010	2,919,194		$	29.77
Granted	290,000		$	43.27
Exercised	(459,266	)	$	17.36
Forfeited or expired	(4,500	)	$	27.48
Outstanding at December 31, 2011	2,745,428		$	33.28
Exercisable at December 31, 2011	1,765,397		$	31.97
Available for grant at December 31, 2011:
2011 Plan	786,700

The intrinsic value of stock options exercised in the years ended December 31, 2011, 2010 and 2009 was $11.5 million, $4.4 million and $0.3 million, respectively. The intrinsic value of options outstanding and options exercisable at December 31, 2011 was $32.2 million and $23.0 million, respectively, based on the Company’s closing stock price of $45.00 on December 31, 2011. The above intrinsic values are before applicable taxes. The weighted average remaining contractual term of options outstanding and options exercisable at December 31, 2011, was 4.5 years and 2.9 years, respectively.

ESPP

The Company has an ESPP under which U.S. employees may purchase up to $25,000 annually of common stock at 85% of its fair market value at the beginning or the end of a six-month offering period, whichever is lower. There are 750,000 shares of common stock reserved for issuance under the ESPP, which is subject to an annual increase of the least of 300,000 shares, two percent of the shares outstanding or such a number as determined by the Board. To date, there have been no increases. The ESPP is intended to constitute an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code. Employees purchased 57,643, 53,739 and 46,401 shares of common stock under the ESPP Plan in the years ended December 31, 2011, 2010 and 2009, respectively. As of December 31, 2011 there were 381,853 shares available for future issuance.

The fair value of rights to purchase shares under the ESPP is calculated using the Black-Scholes option valuation model. Rights for the 2011, 2010 and 2009 purchase periods were valued using the following weighted average assumptions:



	Year ended December 31,
	2011		2010		2009
Expected term (in years)	0.5		0.5		0.5
Expected stock price volatility	26.0	%	26.5	%	48.3	%
Risk-free interest rate	0.4	%	0.2	%	0.4	%
Expected dividend yield	—	%	—	%	—	%

As of December 31, 2011, the Company has less than $0.1 million of unamortized stock compensation expense from the ESPP which will be recognized in the first quarter of 2012. The intrinsic value of ESPP shares at their date of purchase by employees in 2011, 2010 and 2009 was $0.5 million, $0.3 million and $0.4 million, respectively.