SHARE-BASED COMPENSATION PLANS

UAL maintains several share-based compensation plans. These plans provide for grants of non-qualified stock options, incentive stock options (within the meaning of Section 422 of the Internal Revenue Code of 1986), stock appreciation rights, restricted shares, RSUs, performance compensation awards, performance units, cash incentive awards, other equity-based and equity-related awards, and dividends and dividend equivalents.

All awards are recorded as either equity or a liability in the Company's consolidated balance sheets. The share-based compensation expense is recorded in salaries and related costs.

During 2018, UAL granted share-based compensation awards pursuant to the United Continental Holdings, Inc. 2017 Incentive Compensation Plan. These share-based compensation awards included approximately 1.8 million RSUs consisting of 1.1 million time-vested RSUs and 0.7 million performance-based RSUs. The time-vested RSUs vest pro-rata, a majority of which vest on February 28th of each year over a three-year period from the date of grant. These RSUs are generally equity awards settled in stock for domestic employees and liability awards settled in cash for international employees. The cash payments are based on the 20-day average closing price of UAL common stock immediately prior to the vesting date. The performance-based RSUs vest based on the Company's relative improvement in pre-tax margin compared to a group of airline industry peers for the three years ending December 31, 2020. If the performance condition is achieved, cash payments will be made after the end of the performance period based on the 20-day average closing price of UAL common stock immediately prior to the vesting date and based on the level, if any, of the performance goal achieved. The Company accounts for the performance-based RSUs as liability awards.

The following table provides information related to UAL's share-based compensation plan cost for the years ended December 31 (in millions):



	2018		2017		2016
Compensation cost:
RSUs	$	98	$	63	$	58
Restricted stock	2		8		11
Stock options	1		2		1
Total	$	101	$	73	$	70

The table below summarizes UAL's unearned compensation and weighted-average remaining period to recognize costs for all outstanding share-based awards that are probable of being achieved as of December 31, 2018 (in millions, except as noted):

RSUs and Restricted Stock. All performance-based RSUs, as well as a portion of the outstanding time-vested RSUs, will be settled in cash. As of December 31, 2018, UAL had recorded a liability of $51 million related to its RSUs. UAL paid $28 million, $50 million and $69 million related to its RSUs during 2018, 2017 and 2016, respectively.

The table below summarizes UAL's RSUs and restricted stock activity for the years ended December 31 (shares in millions):



	Liability Awards		Equity Awards
	RSUs		RSUs		Weighted- Average Grant Price		Restricted Stock		Weighted- Average Grant Price
Outstanding at December 31, 2015	2.6		—		$	—	0.3		$	48.68
Granted	1.0		0.9		51.60		0.4		50.63
Vested	(1.4	)	—		—		(0.1	)	41.47
Forfeited	(0.1	)	(0.1	)	50.57		(0.1	)	53.42
Outstanding at December 31, 2016	2.1		0.8		51.67		0.5		52.00
Granted	0.6		1.0		71.68		—		—
Vested	(0.7	)	(0.3	)	51.81		(0.2	)	51.60
Forfeited	(0.2	)	(0.1	)	57.49		—		—
Outstanding at December 31, 2017	1.8		1.4		63.99		0.3		52.30
Granted	0.7		1.1		67.74		—		—
Vested	(0.5	)	(0.5	)	63.02		(0.2	)	53.24
Forfeited	(0.1	)	(0.2	)	67.34		—		—
Outstanding at December 31, 2018	1.9		1.8		66.29		0.1		51.17

The fair value of RSUs and restricted stock that vested in 2018, 2017 and 2016 was $70 million, $76 million and $80 million, respectively. The fair value of the restricted stock and the stock-settled RSUs was based upon the UAL common stock price on the date of grant. These awards are accounted for as equity awards. The fair value of the cash-settled RSUs was based on the UAL common stock price as of the last day preceding the settlement date. These awards are accounted for as liability awards. Restricted stock vesting and the recognition of the expense is similar to the stock option vesting described below.

Stock Options. During 2018, UAL did not grant any stock option awards. In 2017, UAL granted approximately 36,000 stock options with exercise prices equal to the fair market value of UAL's common stock on the date of grant with a weighted-average exercise price of $77.56 and a weighted-average grant date fair value of approximately $0.7 million. In 2016, UAL granted approximately 0.1 million stock options with exercise prices equal to the fair market value of UAL's common stock on the date of grant and an additional approximately 0.3 million stock options with exercise prices at a 25% premium of the grant date fair market value resulting in a weighted-average exercise price of $56.19 and a weighted-average grant date fair value of approximately $2.3 million. Expense related to each portion of an option grant is recognized on a straight-line basis over the specific vesting period for those options.

The Company determined the grant date fair value of stock options using a Black-Scholes option pricing model, which requires the use of several assumptions. The risk-free interest rate is based on the U.S. treasury yield curve in effect for the expected term of the option at the time of grant. The dividend yield on UAL's common stock was assumed to be zero since UAL did not have any plans to pay dividends at the time of the option grants. The volatility assumptions were based upon historical volatilities of UAL using daily stock price returns equivalent to the expected term of the option. The expected term of the options was determined based upon a simplified assumption that the option will be exercised evenly from vesting to expiration due to the Company's lack of relevant historical data related to stock options.

As of December 31, 2018, there were approximately 0.4 million outstanding stock option awards, 0.2 million of which were exercisable, with weighted-average exercise prices of $55.62 and $47.07, respectively, intrinsic values of $12 million and $6 million, respectively, and weighted-average remaining contractual lives (in years) of 5.8 and 3.8, respectively.

Unearned Compensation

Weighted-
Average
Remaining Period
(in years)

Stock options