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Employee Stock-based Compensation Plans | 12 Months Ended
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Dec. 31, 2021
Share-based Payment Arrangement [Abstract] |
Employee Stock-based Compensation Plans | Employee Stock-based Compensation Plans The Company recorded stock-based compensation expense for the years ended December 31 as follows:
In millions | 2021 |  | 2020 |  | 2019
Stock options | $ | — |  |  | $ | 1 |  |  | $ | 3 |
Restricted share units | 109 |  |  | 98 |  |  | 77 |
Employee stock repurchase program | 3 |  |  | 2 |  |  | 3 |
Total stock-based compensation before income taxes | 112 |  |  | 101 |  |  | 83 |
Tax benefit | (19) |  |  | (5) |  |  | (10) |
Total stock-based compensation, net of tax | $ | 93 |  |  | $ | 96 |  |  | $ | 73 |
The Teradata Corporation 2007 Stock Incentive Plan (the "2007 SIP"), as amended, and the Teradata 2012 Stock Incentive Plan (the "2012 SIP"), as amended, provide for the grant of several different forms of stock-based compensation. The 2012 SIP was adopted and approved by stockholders in April 2012 and no further awards may be made under the 2007 SIP after that time. A total of approximately 31.4 million shares were authorized to be issued under the 2012 SIP. In May 2020, the Teradata Board of Directors adopted the Teradata New Employee Stock Inducement Plan (the "NESIP"), effective June 1, 2020. Pursuant to the NESIP, the Company may grant equity incentive compensation as a material inducement for certain individuals to commence employment with Teradata within the meaning of Rule 303A.08 of the NYSE Listed Company Manual. A total of 2.2 million shares are reserved for grant under the NESIP, the Teradata Incentive Stock Purchase Plan, and new CEO award, subject to adjustment as provided in the NESIP. The NESIP is scheduled to terminate on June 1, 2023, or such earlier date that the Board shall determine. New shares of the Company’s common stock are issued as a result of the vesting of restricted share units and stock option exercises and at the time of grant for restricted shares, for awards under all plans. As of December 31, 2021, the Company’s primary types of stock-based compensation were restricted shares, restricted share units and the employee stock purchase program (the "ESPP"). Stock Options No options were granted in 2021, 2020 and 2019. The following table summarizes the Company's stock option activity for the year ended December 31, 2021:
Shares in thousands | Shares Under Option |  | Weighted-Average Exercise Price per Share |  | Average Remaining Contractual Term (in years) |  | Aggregate Intrinsic Value (in millions)
Outstanding at January 1, 2021 | 1,788 |  |  | $ | 40.14 |  |  | 3.30 |  | $ | — |
Granted | — |  |  | $ | — |  |  |  |  |
Exercised | (836) |  |  | $ | 36.82 |  |  |  |  |
Canceled | (139) |  |  | $ | 54.33 |  |  |  |  |
Forfeited | (32) |  |  | $ | 41.35 |  |  |  |  |
Outstanding at December 31, 2021 | 781 |  |  | $ | 41.12 |  |  |  |  |
Fully vested and expected to vest at December 31, 2021 | 781 |  |  | $ | 41.12 |  |  | 2.70 |  | $ | 5 |
Exercisable at December 31, 2021 | 781 |  |  | $ | 41.12 |  |  | 2.70 |  | $ | 5 |
The following table summarizes the total intrinsic value of options exercised and the cash received by the Company from option exercises under all share-based payment arrangements at December 31:
In millions | 2021 |  | 2020 |  | 2019
Intrinsic value of options exercised | $ | 12 |  |  | $ | — |  |  | $ | 9 |
Cash received from option exercises | $ | 31 |  |  | $ | — |  |  | $ | 32 |
Tax benefit realized from option exercises | $ | 2 |  |  | $ | — |  |  | $ | 2 |
Restricted Shares and Restricted Share Units The 2012 SIP provides for the issuance of restricted shares, as well as restricted share units. These grants consist of both service-based and performance-based awards. Service-based awards typically vest over a three-year period beginning on the effective date of grant. These grants are not subject to future performance measures. The cost of these awards, determined to be the fair market value at the date of grant, is expensed ratably over the vesting period. Performance-based grants are subject to future performance measurements over a one-to three-year period. All performance-based shares that are earned in respect of an award will become vested at the end of the performance and/or service period provided the employee is continuously employed by the Company and applicable performance measures and other vesting conditions are met. The fair value of each performance-based award is determined on the grant date, based on the Company’s stock price, and assumes that performance targets will be achieved. Over the performance period, the number of shares of stock that will be issued is adjusted upward or downward based upon management’s assessment of the probability of achievement of performance targets. The ultimate number of shares issued and the related compensation cost recognized as expense will be based on a comparison of the final achievement of performance metrics to the specified targets. For substantially all restricted share grants, at the date of grant, the recipient has all rights of a stockholder, subject to certain restrictions on transferability and a risk of forfeiture. A recipient of restricted share units does not have the rights of a stockholder and is subject to restrictions on transferability and risk of forfeiture. For both restricted share grants and restricted share units, any potential dividend rights would be subject to the same vesting requirements as the underlying equity award. As a result, such rights are considered a contingent transfer of value and consequently these equity awards are not considered participating securities. The following table reports restricted shares and restricted share unit activity during the year ended December 31, 2021:
Shares in thousands | Number of Shares |  | Weighted- Average Grant Date Fair Value per Share
Unvested shares at January 1, 2021 | 7,512 |  |  | $ | 27.00 |
Granted | 4,545 |  |  | $ | 41.18 |
Vested | (3,538) |  |  | $ | 30.94 |
Forfeited/canceled | (1,148) |  |  | $ | 30.01 |
Unvested shares at December 31, 2021 | 7,371 |  |  | $ | 33.38 |
The following table summarizes the weighted-average fair value of restricted share units granted for Teradata equity awards and the total fair value of shares vested.
| 2021 |  | 2020 |  | 2019
Weighted-average fair value of restricted share units granted | $ | 41.18 |  |  | $ | 20.74 |  |  | $ | 44.13 |
Total fair value of shares vested (in millions) | $ | 93 |  |  | $ | 80 |  |  | $ | 41 |
As of December 31, 2021, there was $144 million of unrecognized compensation cost related to unvested restricted share grants. The unrecognized compensation cost is expected to be recognized over a remaining weighted-average period of 1.0 years. The following table represents the composition of Teradata restricted share unit grants in 2021:
Shares in thousands | Number of Shares |  | Weighted- Average Grant Date Fair Value
Service-based restricted share units | 3,801 |  |  | $ | 41.26 |
Performance-based restricted share units | 744 |  |  | $ | 40.79 |
Total restricted share unit grants | 4,545 |  |  | $ | 41.18 |
Employee Stock Purchase Program The Company’s ESPP, effective on October 1, 2007, and as amended effective as of January 30, 2018, provides eligible employees of Teradata and its designated subsidiaries an opportunity to purchase the Company’s common stock at a discount to the average of the highest and lowest sale prices on the last trading day of each month. The ESPP discount is 15% of the average market price and is considered compensatory. The ESPP was amended as of August 2, 2021 to move from monthly purchases to purchases at the end of the 6-month purchase period. Additionally, a look-back feature was added to the plan whereby the purchase discount is based off the lower of the market prices at the beginning or end of each 6-month purchase period (September to February, and March to August). The ESPP discount remains at 15% of the relevant market price and is considered compensatory. Employees may authorize payroll deductions of up to 10% of eligible compensation for common stock purchases. A total of 7 million shares were authorized to be issued under the ESPP, with approximately 1.1 million shares remaining under that authorization at December 31, 2021. The shares of Teradata common stock purchased by a participant on an exercise date (the last day of each month), for all purposes, are deemed to have been issued and sold at the close of business on such exercise date. Prior to that time, none of the rights or privileges of a stockholder exists with respect to such shares. Employee purchases and aggregate cost were as follows at December 31:
In millions | 2021 |  | 2020 |  | 2019
Employee stock purchases | 0.3 |  |  | 0.7 |  |  | 0.6 |
Aggregate cost | $ | 10 |  |  | $ | 14 |  |  | $ | 20 |

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