Our share-based compensation program is a broad-based program designed to attract and retain employees while also aligning employees’ interests with the interests of our shareholders. In addition, members of our Board of Directors participate in our share-based compensation program in connection with their service on our board. Share-based awards issued to employees include non-qualified stock options, restricted stock units and performance share units. Under the 2011 Omnibus Incentive Plan, the number of shares initially available for awards was 18 million. On November 18, 2022, there were an additional 3.2 million of shares registered for issuance under this plan, which do not increase the total pool of 18 million. On May 24, 2023, there were an additional 2.7 million shares registered for issuance. As of December 31, 2023, there were approximately 5.6 million shares of common stock available for future awards.

Total share-based compensation expense recognized for 2023, 2022 and 2021 was $60 million, $37 million, and $33 million, respectively. The unamortized compensation expense at December 31, 2023 related to our stock options, restricted share units and performance share units was $8 million, $42 million and $15 million, respectively, and is expected to be recognized over a weighted average period of 1.6, 1.7 and 1.9 years, respectively. See Note 5, "Restructuring and Asset Impairment Charges" of our consolidated financial statements for discussion of certain restructuring charges related to stock-based compensation expense.

The amount of cash received from the exercise of stock options was $62 million, $8 million and $19 million for 2023, 2022 and 2021 with a tax benefit of $12 million, $3 million and $6 million, respectively, realized associated with stock option exercises and vesting of restricted stock units. We classify as an operating activity the cash flows attributable to excess tax benefits arising from stock option exercises and restricted stock unit vestings.

Options are awarded with a contractual term of 10 years, generally vest over a three-year period and are exercisable within the contractual term, except in certain instances of termination due to death, retirement, disability and other limited circumstances in accordance with the terms of the grant agreements. The exercise price per share is the fair market value of the underlying common stock on the date each option is awarded. At December 31, 2023, there were options to purchase an aggregate of 2.1 million shares of common stock. The following is a summary of the changes in outstanding stock options for 2023 (granted amounts include options issued in conjunction with the Evoqua acquisition):


	Share units (in thousands)	Weighted Average Exercise Price / Share		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in millions)
Outstanding at January 1, 2023	1,935	$	67.55	5.9
Granted	2,153	38.13
Exercised	(1,930)	32.40
Forfeited and expired	(31)	85.46
Other	23	73.16
Outstanding at December 31, 2023	2,150	$	69.34	5.9	$	97
Options exercisable at December 31, 2023	1,577	$	62.39	5.0	$	82
Vested and non-vested expected to vest as of December 31, 2023	2,107	$	68.82	5.6	$	96

The amount of non-vested options outstanding was 0.6 million, 0.6 million and 0.7 million at a weighted average grant date share price of $88.48, $87.62 and $84.66 as of December 31, 2023, 2022 and 2021, respectively. The total intrinsic value of options exercised (which is the amount by which the stock price exceeded the exercise price of the options on the date of exercise) during 2023, 2022 and 2021 was $140 million, $4 million and $27 million, respectively.

The fair value of each option grant was estimated on the date of grant using the binomial lattice pricing model which incorporates multiple and variable assumptions over time, including assumptions such as employee exercise patterns, stock price volatility and changes in dividends. The following are weighted-average assumptions used for 2023, 2022, and 2021 (excluding the valuation of options granted in conjunction with the Evoqua acquisition):


	2023			2022			2021
Dividend yield	1.31		%	1.37		%	1.10		%
Volatility	27.30		%	26.25		%	26.29		%
Risk-free interest rate	4.25		%	1.74		%	0.86		%
Expected term (in years)	5.4			5.6			5.7
Weighted-average fair value per option	$	29.06		$	20.38		$	23.26

Expected volatility is calculated based on an analysis of historic volatility measures for Xylem. We use historical data to estimate option exercise and employee termination behavior within the valuation model. The expected term represents an estimate of the period of time options are expected to remain outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of option grant.

Restricted stock units awarded to employees vest over a three-year period. Prior to the time a restricted stock unit becomes fully vested, the awardees cannot transfer, pledge or encumber such units. Prior to the time a restricted stock unit is fully vested, the awardees do not have certain rights of a stockholder, such as the right to vote and receive dividends; however, dividends accrue during the vesting period and are paid upon vesting. If an employee leaves prior to vesting, whether through resignation or termination for cause, the restricted stock unit and related accrued dividends are forfeited. If an employee retires prior to vesting, a pro-rata portion of the restricted stock unit may vest in accordance with the terms of the applicable grant agreements. Restricted stock units awarded to member of our Board become fully vested upon the day prior to the next annual meeting. The fair value of the restricted stock unit awards is determined using the closing price of our common stock on date of grant.


	Share Units (in thousands)	Weighted Average Grant Date Fair Value / Share
Outstanding at January 1, 2023	553	$	88.88
Granted	1,049	103.08
Vested	(699)	38.29
Forfeited	(41)	51.52
Outstanding at December 31, 2023	862	$	98.49

Performance share units awarded under the long-term incentive plan vest based upon performance by the Company over a three-year period against targets approved by the Leadership Development & Compensation Committee of the Company's Board of Directors prior to the grant date. For the performance periods, the performance share units were awarded at a target of 100% with actual payout contingent upon the achievement of a pre-set, three-year adjusted ROIC performance target for ROIC performance share units, a pre-set third year revenue target for Revenue performance share units and a relative TSR performance for TSR performance share units. The calculated compensation cost for ROIC and Revenue performance share units is adjusted based on an estimate of awards ultimately expected to vest and our assessment of the probable outcome of the performance condition.

As approved by the Leadership Development & Compensation Committee of the Company's Board of Directors, for the 2023-2025 performance period, the completion of the acquisition of Evoqua transitioned one of the performance share unit metrics from a pre-set, three-year adjusted Return on Invested Capital ("ROIC") performance target to a pre-set, third-year adjusted earnings before interest, taxes, depreciation and amortization expense (“EBITDA”) performance target for the combined company. The fair value of the adjusted EBITDA performance share unit awards is determined using the closing price of our common stock on date of grant.


	Share units (in thousands)	Weighted Average Grant Date Fair Value / Share
Outstanding at January 1, 2023	146	$	88.78
Granted	36	100.69


Forfeited (a)	(68)	82.40
Outstanding at December 31, 2023	114	$	97.70


	Share units (in thousands)	Weighted Average Grant Date Fair Value / Share
Outstanding at January 1, 2023	178	$	100.67
Granted	72	108.54
Adjustment for Market Condition Achieved (a)	40	102.55
Vested	(102)	102.55
Forfeited	(8)	100.99
Outstanding at December 31, 2023	180	$	103.52

(a) Represents an increase in the number of original TSR performance share units awarded based on the final market condition achievement at the end of the performance period of such awards. The fair value of TSR performance share units were calculated on the date of grant using a Monte Carlo simulation model utilizing several key assumptions, including expected Company and peer company share price volatility, correlation coefficients between peers, the risk-free rate of return, the expected dividend yield and other award design features. The following are weighted-average key assumptions for 2023 grants.