11. SHARE-BASED COMPENSATION

As of December 31, 2011, the Company has outstanding share-based awards under two long-term incentive compensation plans.

The first plan, which expired in February 2007, is a stock option plan which allowed grants for incentive stock options (ISOs) to employees and non-qualifying stock options (NQSOs) to employees and non-employee directors. The options have a term of 10 years and generally vest after three years. The exercise price of options granted under this plan is equal to the fair market value of a share of the Company’s common stock at the date of grant. Options granted before the plan’s expiration date remain outstanding in accordance with their terms.

The second long-term incentive compensation plan allows awards to Company employees for ISOs, NQSOs, restricted stock, restricted stock units, and stock appreciation rights. Non-employee directors are eligible for grants of NQSOs, restricted stock, and stock appreciation rights. Generally, the awards vest based upon time-based conditions or time- and performance-based conditions. Performance-based vesting conditions generally include the attainment of goals related to Company financial performance. As of December 31, 2011, approximately 14.9 million shares were available for future grants under this plan, and the only performance-based awards issued and outstanding were restricted stock awards.

Share-based awards granted to U.S.-based grantees are settled with authorized but unissued Company stock, while those issued to Japan-based grantees are settled with treasury shares.

The following table presents the expense recognized in connection with share-based awards for the periods ended December 31.


(In millions, except for per-share amounts)	2011		2010		2009
Earnings from continuing operations	$	39	$	39	$	38
Earnings before income taxes		39		39		38
Net earnings		27		27		27

Net earnings per share:
Basic	$	.06	$	.06	$	.06
Diluted		.06		.06		.06

We estimate the fair value of each stock option granted using the Black-Scholes-Merton multiple option approach. Expected volatility is based on historical periods generally commensurate with the estimated terms of the options. We use historical data to estimate option exercise and termination patterns within the model. Separate groups of employees that have similar historical exercise patterns are stratified and considered separately for valuation purposes. The expected term of options granted is derived from the output of our option model and represents the weighted-average period of time that options granted are expected to be outstanding. We base the risk-free interest rate on the Treasury note rate with a term comparable to that of the estimated term of the options. The weighted-average fair value of options at their grant date was $17.02 for 2011, compared with $17.81 for 2010 and $8.89 in 2009. The following table presents the assumptions used in valuing options granted during the years ended December 31.


	2011			2010			2009
Expected term (years)		6.9			6.9			6.6
Expected volatility		30.0	%		36.0	%		32.0	%
Annual forfeiture rate		1.6			1.8			1.6
Risk-free interest rate		3.4			3.1			3.2
Dividend yield		1.3			1.3			1.3

The following table summarizes stock option activity.


(In thousands of shares)	Stock Option Shares			Weighted-Average Exercise Price Per Share
Outstanding at December 31, 2008		16,336		$	37.95
Granted in 2009		2,220			26.74
Canceled in 2009		(161	)		35.62
Exercised in 2009		(1,978	)		26.13

Outstanding at December 31, 2009		16,417			37.89
Granted in 2010		1,342			48.41
Canceled in 2010		(187	)		36.77
Exercised in 2010		(3,066	)		27.55

Outstanding at December 31, 2010		14,506			41.06
Granted in 2011		1,216			52.32
Canceled in 2011		(151	)		41.43
Exercised in 2011		(1,008	)		30.00

Outstanding at December 31, 2011		14,563		$	42.76


(In thousands of shares)	2011		2010		2009
Shares exercisable, end of year		11,246		10,720		12,523

The following table summarizes information about stock options outstanding and exercisable at December 31, 2011.


(In thousands of shares)	Options Outstanding						Options Exercisable
Range of Exercise Prices Per Share	Stock Option Shares Outstanding		Wgtd.-Avg. Remaining Contractual Life (Yrs.)		Wgtd.-Avg. Exercise Price Per Share		Stock Option Shares Exercisable		Wgtd.-Avg. Exercise Price Per Share
$14.99 - $31.71		3,125		3.9		$27.25		1,959		$30.33
31.73 - 40.43		3,549		3.6		39.44		3,212		39.55
40.61 - 47.06		3,200		5.8		44.69		2,371		44.12
47.23 - 57.90		3,476		6.4		51.59		2,491		49.51
61.81 - 67.67		1,213		6.1		62.08		1,213		62.08

$14.99 - $67.67		14,563		5.0		$42.76		11,246		$43.54

The aggregate intrinsic value represents the difference between the exercise price of the stock options and the quoted closing common stock price of $43.26 as of December 31, 2011, for those awards that have an exercise price currently below the closing price. As of December 31, 2011, the aggregate intrinsic value of stock options outstanding was $64 million, with a weighted-average remaining term of 5.0 years. The aggregate intrinsic value of stock options exercisable at that same date was $37 million, with a weighted-average remaining term of 4.1 years.

The following table summarizes stock option activity during the years ended December 31.


(In millions)	2011		2010		2009
Total intrinsic value of options exercised	$	23	$	68	$	34
Cash received from options exercised		18		73		22
Tax benefit realized as a result of options exercised and restricted stock releases		14		30		15

The value of restricted stock awards is based on the fair market value of our common stock at the date of grant. The following table summarizes restricted stock activity during the years ended December 31.


(In thousands of shares)	Shares			Weighted-Average Grant-Date Fair Value Per Share
Restricted stock at December 31, 2008		997		$	51.68
Granted in 2009		579			23.79
Canceled in 2009		(15	)		39.97
Vested in 2009		(342	)		47.30

Restricted stock at December 31, 2009		1,219			39.81
Granted in 2010		468			47.53
Canceled in 2010		(41	)		41.31
Vested in 2010		(372	)		47.80

Restricted stock at December 31, 2010		1,274			40.26
Granted in 2011		405			56.22
Canceled in 2011		(35	)		42.44
Vested in 2011		(294	)		59.02

Restricted Stock at December 31, 2011		1,350		$	40.92

As of December 31, 2011, total compensation cost not yet recognized in our financial statements related to restricted stock awards was $25 million, of which $12 million (666 thousand shares) was related to restricted stock awards with a performance-based vesting condition. We expect to recognize these amounts over a weighted-average period of approximately 1.1 years. There are no other contractual terms covering restricted stock awards once vested.