In May 2018, the Company’s stockholders approved the Zebra Technologies 2018 Long-Term Incentive Plan (“2018 Plan”). The 2018 Plan superseded and replaced the Zebra Technologies Corporation 2015 Long-Term Incentive Plan (“2015 Plan”) on the approval date, except that the 2015 Plan, as well as the Zebra Technologies Corporation 2011 Long-Term Incentive Plan that was previously superseded by the 2015 Plan, remain in effect with respect to outstanding stock appreciation rights that were granted under those plans until such awards have been exercised, forfeited, cancelled, expired or otherwise terminated in accordance with their terms. Awards available under the 2018 Plan include stock-settled awards, including stock-settled restricted stock units, stock-settled performance stock units, restricted stock awards, performance share awards, stock appreciation rights, incentive stock options, and non-qualified stock options. Awards available under the 2018 Plan also include cash-settled awards, including cash-settled stock appreciation rights, cash-settled restricted stock units, and cash-settled performance stock units. No awards remain available for future grants under the 2015 Plan or previous plans.

The compensation expense from the Company’s share-based compensation plans and associated income tax benefit, excluding the effects of excess tax benefits or shortfalls, were included in the Consolidated Statements of Operations as follows (in millions):


	Three Months Ended				Six Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Cost of sales	$	1	$	2	$	2	$	4
Selling and marketing	6		7		10		13
Research and development	10		8		16		14
General and administration	10		10		16		17
Total compensation expense	$	27	$	27	$	44	$	48
Income tax benefit	$	5	$	4	$	8	$	7

The majority of the Company’s share-based compensation awards are generally issued as part of its employee and non-employee director incentive program during the second quarter of each fiscal year. The Company also issues awards associated with business acquisitions or other off-cycle events.

The Company began issuing stock-settled RSUs and stock-settled PSUs in the second quarter of 2021. Stock-settled RSUs and stock-settled PSUs each typically vest over a three-year service period, with stock-settled RSUs vesting ratably in three annual installments and stock-settled PSUs vesting at the end of the three-year period. Vesting for each participant is subject to restrictions, such as continuous employment, except in certain cases as set forth in each stock agreement. Upon vesting, stock-settled RSUs and stock-settled PSUs are converted into shares of Class A Common Stock that are released to participants.

Compensation cost for the Company’s stock-settled RSUs and stock-settled PSUs is expensed over each participant’s required service period. Compensation cost is calculated as the fair market value of the Company’s Class A Common Stock on the grant date multiplied by the number of units granted, net of estimated forfeitures. The fair value of PSUs also includes assumptions around achievement of certain Company-wide financial performance goals.

Prior to 2021, the Company’s restricted stock grants consisted of time-vested RSAs and PSAs as part of the Company’s annual incentive program. These awards are considered participating securities. The outstanding RSAs and PSAs are included as part of the Company’s Class A Common Stock outstanding. The RSAs and PSAs vest at each vesting date, subject to restrictions such as continuous employment, except in certain cases as set forth in each stock agreement. Upon vesting, RSAs and PSAs are released to holders and are no longer subject to restrictions.

Compensation cost for the Company’s RSAs and PSAs is expensed over each participant’s required service period. Compensation cost is calculated as the fair market value of the Company’s Class A Common Stock on the grant date multiplied by the number of units granted, net of estimated forfeitures. The fair value of PSAs also includes assumptions around achievement of certain Company-wide financial performance goals. The total required service period is typically three years.

The Company also issues RSAs to non-employee directors. The number of shares granted to each non-employee director is determined by dividing the value of the annual grant by the price of a share of the Company’s Class A Common Stock. New directors in any fiscal year earn a prorated amount. During the first six months of 2022, there were 5,686 shares granted to non-employee directors compared to 2,877 shares during the first six months of 2021. The shares vest immediately on the grant date.


	RSUs			PSUs			RSAs			PSAs
	Units	Weighted-Average Grant Date Fair Value		Units	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value
Outstanding at beginning of period	130,009	$	518.80	37,691	$	482.42	154,322	$	253.54	74,032	$	225.34
Granted	164,592	366.72		69,553	367.87		5,960	321.34		—	—
Released	(27,961)	492.78		(226)	482.42		(90,499)	233.33		(37,617)	205.54
Forfeited	(8,636)	512.86		(402)	482.42		(6,650)	253.00		(115)	244.62
Outstanding at end of period	258,004	$	424.54	106,616	$	407.69	63,133	$	288.01	36,300	$	245.80

SARs were previously granted primarily as part of the Company’s annual share-based compensation incentive program. Beginning in 2021, the Company no longer included SARs in its annual share based compensation award issuances and did not issue any SARs during the six months ended July 2, 2022.


SARs	SARs	Weighted-Average Exercise Price
Outstanding at beginning of period	474,151	$	121.05
Granted	—	—
Exercised	(16,533)	70.19
Forfeited	(953)	226.71
Expired	—	—
Outstanding at end of period	456,665	$	122.67
Exercisable at end of period	410,816	$	109.36

The intrinsic value of SARs exercised during the six months ended July 2, 2022 and July 3, 2021 was $6 million and $38 million, respectively. The total fair value of SARs vested during the six months ended July 2, 2022 and July 3, 2021 was $3 million and $5 million, respectively.

In connection with the Company’s September 2020 acquisition of Reflexis, the Company assumed the 2016 Stock Incentive Plan of Reflexis Systems, Inc. (the “Reflexis Plan”) and replaced certain unvested options under the Reflexis Plan with Zebra incentive stock options (“Reflexis Replacement Options”). Upon exercise of Reflexis Replacement Options, the Company receives cash proceeds equal to the exercise price and issues whole shares of Class A Common Stock to participants.

As of July 2, 2022, there were 19,540 outstanding Reflexis Replacement Options, of which 17,132 were exercisable. The outstanding awards have a weighted average exercise price and remaining contractual life of $57.69 and 5.9 years, respectively. The awards that are exercisable have a weighted average exercise price and remaining contractual life of $55.47 and 5.7 years, respectively. The intrinsic value of Reflexis Replacement Options exercised was $2 million each during the six months ended July 2, 2022 and July 3, 2021. The total fair value of Reflexis Replacement Options vested during the six months ended July 2, 2022 and July 3, 2021 was $1 million and $3 million, respectively.

The Company also has cash-settled share-based compensation awards, including cash-settled stock appreciation rights, cash-settled restricted stock units and cash-settled performance stock units that are classified as liability awards. These awards are expensed over the vesting period of the related award, which is typically three years. Compensation cost is calculated at the fair value on grant date multiplied by the number of share-equivalents granted. The fair value is remeasured at the end of each reporting period based on the Company’s stock price, with remeasurements reflected as an adjustment to compensation expense in the Consolidated Statements of Operations. Cash settlement is based on the fair value of share equivalents at the time of vesting, which was $4 million and $9 million for the six months ended July 2, 2022 and July 3, 2021, respectively. Share-equivalents issued under these programs totaled 64,056 and 9,262 during the six months ended July 2, 2022 and July 3, 2021, respectively.

In connection with the acquisition of Matrox, the Company granted $13 million of cash-settled RSUs to certain employees, which are attributable to service to be rendered subsequent to the acquisition and will generally be expensed over a 3-year service period.

In May 2020, the Company’s stockholders approved the Zebra Technologies Corporation 2020 Employee Stock Purchase Plan (“2020 ESPP”), which superseded the 2011 Employee Stock Purchase Plan (“2011 ESPP”) and became effective on July 1, 2020. Like the 2011 ESPP, the 2020 ESPP permits eligible employees to purchase common stock at 95% of the fair market value at the date of purchase. Employees may make purchases by cash or payroll deductions up to certain limits. The aggregate number of shares that may be purchased under the 2020 ESPP is 1,500,000 shares. As of July 2, 2022, 1,421,112 shares remained available for future purchase.