Exelon grants stock-based awards through its LTIP, which primarily includes stock options, restricted stock units and performance share awards. At March 31, 2012, there were approximately 21 million shares authorized for issuance under the LTIP. For the three months ended March 31, 2012 and 2011, exercised and distributed stock-based awards were primarily issued from authorized but unissued common stock shares.

In connection with the acquisition of Constellation in March 2012, Exelon assumed Constellation's 1995 Long-Term Incentive Plan, 2002 Senior Management Long-Term Incentive Plan, Amended and Restated 2007 Long-Term Incentive Plan, Amended and Restated Management Long-Term Incentive Plan and Executive Long-Term Incentive Plan (collectively and as amended, if applicable, the "Constellation Plans"). Stock-based awards granted under the Constellation Plans and held by Constellation employees were generally converted into outstanding Exelon stock-based compensation awards with the estimated fair value determined to be $71 million using the Black-Scholes model. Refer to Note 3 - Merger and Acquisitions for further information regarding the merger transaction. Specifically, as of the merger closing: (1) Exelon converted 12,037,093 outstanding shares that were subject to Constellation stock options into 11,194,151 Exelon stock options valued at $65 million; and (2) Exelon converted 165,219 Constellation no-sale restricted stock units into 153,654 Exelon no-sale restricted stock units valued at $6 million.

Exelon generally grants most of its stock options in the first quarter of each year. In connection with the merger with Constellation, the Compensation Committee of Exelon's Board of Directors elected to delay the annual equity award grant from January 2012 to the effective date of the merger on March 12, 2012, in order to ensure that a majority of eligible employees receive grants on the same date and at the same market price.

The following table presents the stock-based compensation expense included in Exelon's Consolidated Statements of Operations for the three months ended March 31, 2012 and 2011:

		Three Months Ended
		March 31,

Components of Stock-Based Compensation Expense		2012		2011

Performance share awards		$	16	$	6
Stock options			7		5
Restricted stock units			19		16
Other stock-based awards			1		1

Total stock-based compensation expense included in
	operating and maintenance expense		43		28

Income tax benefit			(16)		(11)

Total after-tax stock-based compensation expense		$	27	$	17

The following table presents stock-based compensation expense (pre-tax) for the three months ended March 31, 2012 and 2011:

	Three Months Ended
	March 31,

Subsidiaries	2012		2011

Generation	$	14	$	13
ComEd		5		2
PECO		3		2
BGE (a)		2		0
BSC (b)		19		11

Total	$	43	$	28

(a) BGE's stock-based compensation expense (pre-tax) for the three months ended March 31, 2012 includes $2 million of cost incurred prior to the closing of Exelon's merger with Constellation on March 12, 2012. This amount is not included in Exelon's stock-based compensation expense for the three months ended March 31, 2012 shown in the table titled Components of Stock-Based Compensation Expense above. BGE's stock-based compensation expense (pre-tax) for the three months ended March 31, 2011 was $2 million.

(b) These amounts primarily represent amounts billed to Exelon's subsidiaries through intercompany allocations. These amounts are not included in the Generation, ComEd, PECO and BGE amounts above.

There were no significant stock-based compensation costs capitalized during the three months ended March 31, 2012 and 2011.

(b) These amounts primarily represent amounts billed to Exelon's subsidiaries through intercompany allocations. These amounts are not included in the Generation, ComEd, PECO and BGE amounts above.

Non-qualified stock options are granted under the LTIP with exercise prices equal to the fair market value of the underlying stock at the date of grant. Generally, the stock options vest ratably over a four-year vesting period and expire ten years from the date of grant.

The following table presents the weighted average assumptions used to value Exelon stock options at their grant date for the three months ended March 31, 2012 and 2011:

	Three Months Ended

	2012			2011

Dividend yield		5.28	%		4.84	%
Expected volatility		23.20	%		24.40	%
Risk-free interest rate		1.30	%		2.65	%
Expected life (years)		6.25			6.25

The assumptions above relate to Exelon stock options granted during the period and therefore do not include stock options that were converted in connection with the merger with Constellation during the three months ended March 31, 2012.

The following table summarizes Exelon's stock option activity for the three months ended March 31, 2012:

		Weighted Average
		Exercise Price
	Shares	(per share)

Balance of shares outstanding at December 31, 2011	11,553,761	$	48.49
Granted	1,840,000		39.79
Converted Constellation options	11,194,151		41.35
Exercised	(237,490)		25.29
Forfeited	(4,625)		53.51
Expired	(70,098)		45.28

Balance of shares outstanding at March 31, 2012	24,275,699	$	44.78

Exercisable at March 31, 2012 (a)	21,404,105	$	45.33

The following table summarizes Exelon's nonvested stock option activity for the three months ended March 31, 2012:


		Weighted Average
		Exercise Price
	Shares	(per share)

Nonvested at December 31, 2011 (a)	877,050	$	48.66
Granted (b)	1,840,000		39.79
Converted Constellation options	11,194,151		41.35
Vested (b) (c)	(10,969,509)		41.85
Forfeited	(70,098)		45.28

Nonvested at March 31, 2012 (a)	2,871,594	$	40.58

(a) Excludes 2,141,000 and 1,348,000 of stock options issued to retirement-eligible employees as of March 31, 2012 and December 31, 2011, respectively, as they are fully vested.

(b) Includes 8,684,709 of converted Constellation options that were vested prior to the Merger on March 12, 2012.

(c) Includes 1,013,000 of stock options issued to retirement-eligible employees in 2012 that vested immediately upon the employee reaching retirement eligibility.

At March 31, 2012, $14 million of total unrecognized compensation costs related to nonvested stock options are expected to be recognized over the remaining weighted-average period of 3.10 years.

Restricted stock units are granted under the LTIP with the majority being settled in a specific number of shares of common stock after the service condition has been met. The corresponding cost of services is measured based on the grant date fair value of the restricted stock unit issued. The requisite service period for restricted stock units is generally three to five years. However, certain restricted stock unit awards become fully vested upon the employee reaching retirement-eligibility.

The following table summarizes Exelon's nonvested restricted stock unit activity for the three months ended March 31, 2012:


		Weighted Average
		Grant Date Fair
	Shares	Value (per share)

Nonvested at December 31, 2011 (a)	1,074,484	$	48.08
Granted	1,035,280		39.81
Converted Constellation restricted stock	825,735		38.91
Vested	(292,923)		47.71
Forfeited	(10,784)		44.63
Undistributed vested awards (b)	(518,064)		39.68

Nonvested at March 31, 2012 (a)	2,113,728	$	42.57

(a) Excludes 610,398 and 448,827 of restricted stock units issued to retirement-eligible employees as of March 31, 2012 and December 31, 2011, respectively, as they are fully vested

(b) Represents restricted stock units that vested but were not distributed to retirement-eligible employees during 2012.

At March 31, 2012, Exelon had obligations related to outstanding restricted stock units not yet settled of $47 million, which are included in common stock in Exelon's Consolidated Balance Sheets. In addition, Exelon had obligations related to outstanding restricted stock units that will be settled in cash of $1 million at March 31, 2012, which are included in deferred credits and other liabilities in Exelon's Consolidated Balance Sheets. During the three months ended March 31, 2012 and 2011, Exelon settled restricted stock units with a fair value totaling $20 million and $15 million, respectively. At March 31, 2012, $70 million of total unrecognized compensation costs related to nonvested restricted stock units are expected to be recognized over the remaining weighted-average period of 2.52 years.

Performance share awards are granted under the LTIP with the 2012 and 2011 performance share awards being settled entirely in stock over the three-year vesting term. The performance shares granted prior to 2011 generally vest and settle over a three-year period with the holders receiving shares of common stock and/or cash annually during the vesting period.

These awards are recorded at fair value at the date of grant with the estimated grant date fair value based on the expected payout of the award, which may range from 75% to 125% of the payout target. The portion of the award pertaining to the 75% payout floor is valued based on Exelon's stock price on the grant date. The expected payout in excess of the 75% floor is remeasured each reporting period based on Exelon's current stock price and changes in the expected payout of the award; therefore this portion of the award is subject to volatility until the payout is established.

For nonretirement-eligible employees, stock-based compensation costs are recognized over the vesting period of three years using the graded-vesting method. For performance shares granted to retirement-eligible employees, the value of the performance shares in recognized ratably over the vesting period, which is the year of grant.

The following table summarizes Exelon's nonvested performance share awards activity for the three months ended March 31, 2012:


		Weighted Average
		Grant Date Fair
	Shares	Value (per share)

Nonvested at December 31, 2011 (a)	346,848	$	45.37
Granted	1,036,603		39.84
Vested	(151,700)		47.87
Forfeited	(2,183)		43.40
Undistributed vested awards (b)	(172,991)		40.37

Nonvested at March 31, 2012 (a)	1,056,577	$	40.41

(a) Excludes 274,813 and 455,418 of performance share awards issued to retirement-eligible employees as of March 31, 2012 and December 31, 2011, respectively, as they are fully vested.

(b) Represents performance share awards that vested but were not distributed to retirement-eligible employees during 2012.

During the three months ended March 31, 2012 and 2011, Exelon settled performance shares with a fair value totaling $18 million and $21 million, respectively, of which $3 million and $10 million was paid in cash, respectively. As of March 31, 2012, $41 million of total unrecognized compensation costs related to nonvested performance shares are expected to be recognized over the remaining weighted-average period of 2.75 years.