NOTE 18 STOCK-BASED COMPENSATION

As part of its employee and director compensation programs, the Company currently may grant certain stock awards under the provisions of its stock incentive plan. The plan provides for grants of options to purchase shares of common stock at a fixed price equal to the fair value of the underlying stock at the date of grant. Option grants are generally exercisable up to ten years from the date of grant. In addition, the plan provides for grants of shares of common stock or stock units that are subject to restriction on transfer prior to vesting. Most stock and unit awards vest over three to five years and are subject to forfeiture if certain vesting requirements are not met. Stock incentive plans of acquired companies are generally terminated at the merger closing dates. Participants under such plans receive the Company’s common stock, or options to buy the Company’s common stock, based on the conversion terms of the various merger agreements. At December 31, 2015, there were 47 million shares (subject to adjustment for forfeitures) available for grant under various plans.

STOCK OPTION AWARDS

The following is a summary of stock options outstanding and exercised under prior and existing stock incentive plans of the Company:


Year Ended December 31	Stock Options/Shares			Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value (in millions)

2015
Number outstanding at beginning of period		33,649,198		$	29.31
Granted		1,122,697			44.28
Exercised		(8,721,834	)		29.59
Cancelled^(a)		(324,353	)		32.93

Number outstanding at end of period^(b)		25,725,708		$	29.82		3.6	$	331
Exercisable at end of period		22,446,095		$	28.68		3.0	$	314

2014
Number outstanding at beginning of period		46,724,765		$	29.12
Granted		1,246,451			40.32
Exercised		(13,851,590	)		29.59
Cancelled^(a)		(470,428	)		31.12

Number outstanding at end of period^(b)		33,649,198		$	29.31		4.0	$	526
Exercisable at end of period		28,923,260		$	28.79		3.4	$	467

2013
Number outstanding at beginning of period		63,171,918		$	28.83
Granted		1,168,011			33.99
Exercised		(17,260,740	)		28.41
Cancelled^(a)		(354,424	)		29.22

Number outstanding at end of period^(b)		46,724,765		$	29.12		4.4	$	527
Exercisable at end of period		39,556,000		$	29.19		3.8	$	444

(a)

Options cancelled include both non-vested (i.e., forfeitures) and vested options.

(b)

Outstanding options include stock-based awards that may be forfeited in future periods. The impact of the estimated forfeitures is reflected in compensation expense.

Stock-based compensation expense is based on the estimated fair value of the award at the date of grant or modification. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model, requiring the use of subjective assumptions. Because employee stock options have characteristics that differ from those of traded options, including vesting provisions and trading limitations that impact their liquidity, the determined value used to measure compensation expense may vary from the actual fair value of the employee stock options. The following table includes the weighted average estimated fair value of stock options granted and the assumptions utilized by the Company for newly issued grants:


Year Ended December 31	2015			2014			2013
Estimated fair value	$	12.23		$	11.38		$	12.13
Risk-free interest rates		1.7	%		1.7	%		1.0	%
Dividend yield		2.6	%		2.6	%		2.6	%
Stock volatility factor		.37			.38			.49
Expected life of options (in years)		5.5			5.5			5.5

Expected stock volatility is based on several factors including the historical volatility of the Company’s common stock, implied volatility determined from traded options and other factors. The Company uses historical data to estimate option exercises and employee terminations to estimate the expected life of options. The risk-free interest rate for the expected life of the options is based on the U.S. Treasury yield curve in effect on the date of grant. The expected dividend yield is based on the Company’s expected dividend yield over the life of the options.

The following summarizes certain stock option activity of the Company:


Year Ended December 31 (Dollars in Millions)	2015		2014		2013
Fair value of options vested	$	25	$	33	$	41
Intrinsic value of options exercised		130		171		144
Cash received from options exercised		257		408		489
Tax benefit realized from options exercised		50		66		56

To satisfy option exercises, the Company predominantly uses treasury stock.

Additional information regarding stock options outstanding as of December 31, 2015, is as follows:


	Outstanding Options						Exercisable Options
Range of Exercise Prices	Shares		Weighted- Average Remaining Contractual Life (Years)		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price
$11.02 – $15.00		2,664,092		3.1	$	11.20		2,664,092	$	11.20
$15.01 – $20.00		161,218		2.0		19.58		161,218		19.58
$20.01 – $25.00		2,051,039		4.2		23.85		2,051,039		23.85
$25.01 – $30.00		5,911,183		5.0		28.49		5,051,861		28.47
$30.01 – $35.00		9,215,909		2.6		32.21		8,719,854		32.11
$35.01 – $40.00		3,523,469		1.1		36.04		3,523,469		36.04
$40.01 – $44.32		2,198,798		8.6		42.32		274,562		40.32
Total		25,725,708		3.6	$	29.82		22,446,095	$	28.68

RESTRICTED STOCK AND UNIT AWARDS

A summary of the status of the Company’s restricted shares of stock and unit awards is presented below:


	2015					2014					2013
Year Ended December 31	Shares			Weighted- Average Grant- Date Fair Value		Shares			Weighted- Average Grant- Date Fair Value		Shares			Weighted- Average Grant- Date Fair Value
Outstanding at beginning of period		7,921,571		$	34.09		8,653,859		$	29.96		8,935,743		$	25.04
Granted		2,897,396			44.24		3,133,168			40.37		3,717,635			33.88
Vested		(3,428,736	)		33.27		(3,409,650	)		29.38		(3,744,411	)		22.17
Cancelled		(495,400	)		38.66		(455,806	)		34.05		(255,108	)		29.18
Outstanding at end of period		6,894,831		$	38.44		7,921,571		$	34.09		8,653,859		$	29.96

The total fair value of shares vested was $152 million, $139 million and $127 million for the years ended December 31, 2015, 2014 and 2013, respectively. Stock-based compensation expense was $125 million, $125 million and $129 million for the years ended December 31, 2015, 2014 and 2013, respectively. On an after-tax basis, stock-based compensation was $78 million, $78 million and $80 million for the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015, there was $158 million of total unrecognized compensation cost related to nonvested share-based arrangements granted under the plans. That cost is expected to be recognized over a weighted-average period of 2.5 years as compensation expense.