The 2016 Stock Incentive Plan (the “Stock Plan”) provides for the grant of stock appreciation rights, restricted stock units (“RSUs”) and performance stock units (“PSUs”) (collectively, “Stock Awards”), stock options, or any other stock-based award. A total of 43 million shares of our common stock have been authorized for issuance under the Stock Plan. As of December 31, 2022, approximately 16.2 million shares of our common stock remain available for issuance under the Stock Plan.

Stock options under the Stock Plan generally vest pro rata over a four-year or five-year period and terminate 10 years from the grant date, though the specific terms of each grant are determined by the Compensation Committee of our Board of Directors. Our executive officers and certain other employees may be awarded stock options with different vesting criteria and stock options granted to non-employee directors are fully vested as of the grant date. Exercise prices for stock options granted under the Stock Plan were equal to the closing price of Fortive’s common stock on the NYSE on the date of grant, while stock options issued as conversion awards in connection with the separation from Danaher were priced to maintain the economic value before and after the separation.

RSUs granted under the Stock Plan provide for the issuance of common stock at no cost to the holder. RSUs granted to employees generally vest over four or five years, although certain other employees and non-employee directors may be awarded RSUs with different time-based vesting criteria. Certain members of our senior management are also awarded incremental RSUs subject to performance-based vesting criteria. Prior to vesting, RSUs do not have dividend equivalent rights, do not have voting rights, and the shares underlying the RSUs are not considered issued or outstanding.

PSUs granted under the Stock Plan provide for the issuance of a share of the Company’s common stock at no cost to the holder and will vest at 0% to 200% of the target share amount based on achievement of performance targets. Grants made prior to 2022 are earned based on the Company’s total shareholder return ranking relative to the S&P 500 Index over a performance period of approximately three years. For grants made in 2022, the performance target is based on a mix of both achievement of an internal growth metric and the Company’s total shareholder return ranking, both over a performance period of approximately three years. PSUs issued are subject to an additional holding period of up to two years and are entitled to dividend equivalent rights. The PSU dividend equivalent rights are subject to the same vesting and payment restrictions as the related shares, but do not have voting rights and the shares underlying the PSUs are not considered issued and outstanding.

Other than pursuant to any retirement benefits provided under our Stock Plan, the equity compensation awards granted by the Company generally vest only if the employee is employed by us (or in the case of directors, the director continues to serve on the Board) on the vesting date. To cover the exercise of stock options, vesting of RSUs and PSUs, and issuances of RSAs, we generally issue shares authorized but previously unissued, although we may instead issue treasury shares; provided, however, that either type of issuance would equally reduce the number of shares available under our Stock Plan.

We account for stock-based compensation by measuring the cost of employee services received in exchange for all equity awards granted based on the fair value of the award as of the grant date. We recognize the compensation expense over the requisite service period (which is generally the vesting period but may be shorter than the vesting period, for example, if the employee becomes retirement eligible before the end of the vesting period).

The fair value of RSUs and performance based PSUs is calculated using the closing price of Fortive common stock on the date of grant. RSU’s are further adjusted for the impact of RSUs not having dividend rights prior to vesting. The fair value of market-based PSUs is calculated using a Monte Carlo pricing model. The fair value of the stock options granted is calculated using a Black-Scholes Merton (“Black-Scholes”) option pricing model.

Stock-based compensation has been recognized as a component of Selling, general, and administrative expenses in the Consolidated Statements of Earnings. The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are ultimately expected to vest. We estimate pre-vesting forfeitures at the time of grant by analyzing historical data and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. Ultimately, the total expense recognized over the vesting period will equal the fair value of awards that actually vest.

The following summarizes the components of our stock-based compensation expense under the Stock Plan for the years ended December 31 ($ in millions):


	2022		2021		2020
Stock Awards:
Pretax compensation expense	$	60.1	$	48.6	$	38.6
Income tax benefit	(8.7)		(7.9)		(6.0)
Stock Award expense, net of income taxes	51.4		40.7		32.6
Stock options:
Pretax compensation expense	33.7		28.8		24.0
Income tax benefit	(5.1)		(5.0)		(3.7)
Stock option expense, net of income taxes	28.6		23.8		20.3
Total stock-based compensation:
Pretax compensation expense	93.8		77.4		62.6
Income tax benefit	(13.8)		(12.9)		(9.7)
Total stock-based compensation expense, net of income taxes	$	80.0	$	64.5	$	52.9

When stock options are exercised by the employee or Stock Awards vest, we derive a tax deduction measured by the excess of the market value on such date over the grant date price. Accordingly, we record the excess of the tax benefit related to the exercise of stock options and vesting of Stock Awards over the expense recorded for financial statement reporting purposes (the “Excess Tax Benefit”) as a component of Income tax expense and as an operating cash inflow in the consolidated financial statements. During the years ended December 31, 2022, 2021, and 2020 we realized an Excess Tax Benefit of $1 million, $10 million, and $13 million, respectively, related to stock options that were exercised and Stock Awards that vested.

The following summarizes the unrecognized compensation cost for the Stock Plan awards as of December 31, 2022. This compensation cost is expected to be recognized over a weighted average period of approximately two years, representing the remaining service period related to the awards. Future compensation amounts will be adjusted for any changes in estimated forfeitures ($ in millions):

The following summarizes the assumptions used in the Black-Scholes model to value stock options granted under the Stock Plan during the years ended December 31:


	2022		2021		2020
Risk-free interest rate	1.7% - 3.9%		0.8% - 1.3%		0.3% - 1.5%
Volatility (a)	29.3	%	27.2	%	21.1	%
Dividend yield (b)	0.4	%	0.4	%	0.4	%
Expected years until exercise	5.5 - 8.0		5.5 - 8.0		5.5 - 8.0

(a) Expected volatility is based on a weighted average blend of the company’s historical stock price volatility from July 2, 2016 (the date of separation from Danaher) through the stock option grant date and the average historical stock price volatility of a group of peer companies for the expected term of the options.
(b) The dividend yield is calculated by dividing our annual dividend, based on the most recent quarterly dividend rate, by Fortive’s closing stock price on the grant date.

The following summarizes option activity under the Stock Plan (in millions, except price per share and numbers of years):


	Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value





Outstanding as of January 1, 2021	10.6	50.07
Granted	2.0	69.07
Exercised	(1.5)	36.40
Canceled/forfeited	(0.7)	64.28
Outstanding as of December 31, 2021	10.4	54.81
Granted	2.2	64.76
Exercised	(0.5)	38.19
Canceled/forfeited	(0.8)	65.56
Outstanding as of December 31, 2022	11.3	56.70	6	$	99.5
Vested and expected to vest as of December 31, 2022 (a)	11.1	56.57	6	$	99.4
Vested as of December 31, 2022	5.7	47.67	4	$	97.1

(a) The “expected to vest” options are the net unvested options that remain after applying the forfeiture rate assumption to total unvested options.

The aggregate intrinsic values in the table above represent the total pretax intrinsic value (the difference between the closing stock price of Fortive common stock on the last trading day of 2022 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2022. The amount of aggregate intrinsic value will change based on the price of Fortive’s common stock.

Options outstanding as of December 31, 2022 are summarized below (in millions; except price per share and number of years):


	Outstanding				Vested
Exercise Price	Shares	Average Exercise Price		Average Remaining Life (in years)	Shares	Average Exercise Price
$10.67 - $27.26	0.4	$	26.72	1	0.4	$	26.72
$27.27 - $45.00	2.3	35.29		2	2.3	35.29
$45.01 - $63.40	1.4	51.52		5	1.2	50.20
$63.41 - $67.64	5.5	65.07		8	1.2	64.55
$67.65 - $78.03	1.7	69.60		7	0.6	68.77
Total shares	11.3				5.7

The following summarizes aggregate intrinsic value and cash receipts related to stock options that were exercised under the Stock Plan for the years ended December 31 ($ in millions):


	2022		2021		2020
Aggregate intrinsic value of stock options exercised	$	12.4	$	55.9	$	65.8
Cash receipts from stock options exercised	$	17.6	$	52.4	$	46.7

The following summarizes information related to Stock Award activity under the Stock Plan for the years ended December 31, 2022 and 2021 (in millions; except price per share):


	Number of Stock Awards	Weighted Average Grant-Date Fair Value





Unvested as of January 1, 2021	2.3	$	63.04
Granted	1.1	68.90
Vested	(0.5)	55.78
Forfeited	(0.3)	65.28
Unvested as of December 31, 2021	2.6	66.43
Granted	1.4	64.01
Vested	(0.5)	63.51
Forfeited	(0.4)	64.01
Unvested as of December 31, 2022	3.1	66.00