SHARE-BASED COMPENSATION

In first quarter 2014, we granted 2,426,702 stock options, 678,271 restricted stock units, 309,642 performance share units and 73,605 stock appreciation rights. In addition, 427,135 outstanding restricted stock units and 216,622 outstanding performance share units vested during first quarter 2014. A total of 1,357,071 shares of common stock were issued as a result of restricted stock unit vesting, performance share unit vesting and stock option exercises.

STOCK OPTIONS

The weighted average exercise price of all of the stock options granted in 2014 was $30.16. The vesting and post-termination vesting terms for stock options granted in 2014 were as follows:


•	vest ratably over four years;


•	vest or continue to vest in the event of death while employed, disability or retirement at an age of at least 62;


•	continue to vest upon retirement at an age of at least 62, but a portion of the grant is forfeited if retirement occurs before the one year anniversary of the grant;


•	continue to vest for one year in the event of involuntary termination when the retirement criteria has not been met; and


•	stop vesting for all other situations including early retirement prior to age 62.

Weighted Average Assumptions Used in Estimating the Value of Stock Options Granted in 2014



	OPTIONS
Expected volatility	31.71		%
Expected dividends	2.92		%
Expected term (in years)	4.97
Risk-free rate	1.57		%
Weighted average grant date fair value	$	6.62

RESTRICTED STOCK UNITS

The weighted average fair value of the restricted stock units granted in 2014 was $30.16. The vesting provisions for restricted stock units granted in 2014 were as follows:


•	vest ratably over four years;


•	immediately vest in the event of death while employed or disability;


•	continue to vest upon retirement at an age of at least 62, but a portion of the grant is forfeited if retirement occurs before the one year anniversary of the grant;


•	continue vesting for one year in the event of involuntary termination when the retirement criteria has not been met; and


•	will be forfeited upon termination of employment in all other situations including early retirement prior to age 62.

PERFORMANCE SHARE UNITS

The weighted average grant date fair value of performance share units granted in 2014 was $30.62. The vesting provisions for performance share units granted in 2014 and that are earned were as follows:


•	vest 50 percent, 25 percent and 25 percent on the second, third and fourth anniversaries of the grant date, respectively, as long as the individual remains employed by the company;


•	fully vest in the event the participant dies or becomes disabled while employed;


•	continue to vest upon retirement at an age of at least 62, but a portion of the grant is forfeited if retirement occurs before the one year anniversary of the grant;


•	continue vesting for one year in the event of involuntary termination when the retirement criteria has not been met; and


•	will be forfeited upon termination of employment in all other situations including early retirement prior to age 62.

Weighted Average Assumptions Used in Estimating the Value of Performance Share Units Granted in 2014



	Performance Share Units
Performance period	1/1/2014 – 12/31/2015
Valuation date closing stock price	$	30.16
Expected dividends	2.91					%
Risk-free rate	0.03		%	–	0.79	%
Expected volatility	20.74		%	–	23.53	%

STOCK APPRECIATION RIGHTS

Stock appreciation rights are remeasured to reflect the fair value at each reporting period. The following table shows the weighted average assumptions applied to all outstanding stock appreciation rights as of March 31, 2014.

Weighted Average Assumptions Used to Remeasure the Value of Stock Appreciation Rights as of March 31, 2014



	MARCH 31, 2014
Expected volatility	22.89		%
Expected dividends	3.01		%
Expected term (in years)	1.65
Risk-free rate	0.39		%
Weighted average fair value	$	6.86

The vesting and post-termination vesting terms for stock appreciation rights granted in 2014 are the same as for stock options described above.