SHARE-BASED COMPENSATION

In year-to-date 2015, we granted 2,122,608 stock options, 433,469 restricted stock units, 238,662 performance share units and 58,373 stock appreciation rights. In addition, 364,576 outstanding restricted stock units and 241,734 outstanding performance share units vested during year-to-date 2015. A total of 1,626,146 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 2015 was $35.41. The vesting and post-termination vesting terms for stock options granted in 2015 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 2015



	OPTIONS
Expected volatility	25.92		%
Expected dividends	3.28		%
Expected term (in years)	4.77
Risk-free rate	1.54		%
Weighted average grant date fair value	$	5.85

RESTRICTED STOCK UNITS

The weighted average fair value of the restricted stock units granted in 2015 was $35.41. The vesting provisions for restricted stock units granted in 2015 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 2015 was $34.75.

The final number of shares granted in 2015 will range from 0 percent to 150 percent of each grant's target, depending upon actual company performance.

The ultimate number of performance share units earned is based on two measures:


•	our relative total shareholder return (TSR) ranking measured against the S&P 500 over a three year period and


•	our relative TSR ranking measured against an industry peer group of companies over a three year period.

The vesting provisions for performance share units granted in 2015 were as follows:


•	vest 100 percent on the third anniversary of the grant date 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 the employee has met the second anniversary of the grant date; 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 2015



	Performance Share Units
Performance period	1/1/2015 – 12/31/2017
Valuation date closing stock price	$	35.41
Expected dividends	3.26					%
Risk-free rate	0.05		%	–	1.07	%
Expected volatility	16.04		%	–	20.89	%

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 June 30, 2015.

Weighted Average Assumptions Used to Remeasure the Value of Stock Appreciation Rights as of June 30, 2015



	JUNE 30, 2015
Expected volatility	19.36		%
Expected dividends	3.56		%
Expected term (in years)	1.97
Risk-free rate	0.64		%
Weighted average fair value	$	9.17

The vesting and post-termination vesting terms for stock appreciation rights granted in 2015 are the same as for stock options described above.