Common Stock (Exelon, Generation, ComEd, PECO and BGE)

The following table presents common stock authorized and outstanding as of December 31, 2014 and 2013:



				December 31,
				2014	2013
	Par Value		Shares Authorized	Shares Outstanding
Common Stock
Exelon	no par value		2,000,000,000	859,833,343	857,290,484
ComEd	$	12.50	250,000,000	127,016,947	127,016,896
PECO	no par value		500,000,000	170,478,507	170,478,507
BGE	no par value		175,000,000	1,000	1,000

ComEd had 73,533 and 73,709 warrants outstanding to purchase ComEd common stock at December 31, 2014 and 2013, respectively. The warrants entitle the holders to convert such warrants into common stock of ComEd at a conversion rate of one share of common stock for three warrants. At December 31, 2014 and 2013, 24,511 and 24,570 shares of common stock, respectively, were reserved for the conversion of warrants.

Equity Securities Offering

In June 2014, Exelon marketed an equity offering of 57.5 million shares of its common stock at a public offering price of $35 per share. In connection with such offering, Exelon entered into forward sale agreements requiring Exelon to, at its election, prior to October 29, 2015; i) physically settle the transaction through the issuance of 57.5 million shares of its common stock in exchange for net proceeds at the forward price specified in the agreements of between approximately $1.8 billion and $1.9 billion, after consideration of underwriters discount of approximately $60 million and subject to certain adjustments as provided in the forward sales agreement, or ii) net settle the transaction either through the payment of cash or shares of its common stock based on the then current market value of the shares minus the value of the shares at the forward price, net of the underwriters discount and the daily accretion rate. No amounts have or will be recorded in Exelon’s consolidated financial statements with respect to the equity offering until settlement of the forward sale agreements occurs. If Exelon elected to net share settle the contract as of December 31, 2014, Exelon would have been required to issue 4 million shares. If Exelon elects to cash settle the contract, the transaction costs will be recorded as a charge to earnings in the period in which it becomes probable that Exelon will cash settle. Otherwise, all transaction costs will be reflected as a reduction to the value of the common stock issued in Exelon’s Consolidated Balance Sheet. The net proceeds received upon settlement are expected to be used to finance a portion of the acquisition of PHI and for general corporate purposes. Until settlement, earnings per share dilution resulting from the forward sales agreement, if any, will be determined under the treasury stock method.

Concurrent with the forward equity transaction, Exelon also issued $1.15 billion of junior subordinated notes in the form of 23 million equity units. See Note 13 — Debt and Credit Agreements for further information on the equity units.

Share Repurchases

Share Repurchase Programs. In April 2004, Exelon’s Board of Directors approved a discretionary share repurchase program that allowed Exelon to repurchase shares of its common stock on a periodic basis in the open market. The share repurchase program was intended to mitigate, in part, the dilutive effect of shares issued under Exelon’s employee stock option plan and Exelon’s ESPP. The aggregate value of the shares of common stock repurchased pursuant to the program cannot exceed the economic benefit received after January 1, 2004 due to stock option exercises and share purchases pursuant to Exelon’s ESPP. The economic benefit consists of the direct cash proceeds from purchases of stock and the tax benefits associated with exercises of stock options. The 2004 share repurchase program had no specified limit on the number of shares that could be repurchased and no specified termination date. In 2008, Exelon management decided to defer indefinitely any share repurchases. Any shares repurchased are held as treasury shares, at cost, unless cancelled or reissued at the discretion of Exelon’s management. Under the share repurchase programs, 35 million shares of common stock are held as treasury stock with a cost of $2.3 billion at December 31, 2014. During 2014, 2013 and 2012, Exelon had no common stock repurchases.

Stock-Based Compensation Plans

Exelon grants stock-based awards through its LTIP, which primarily includes stock options, restricted stock units and performance share awards. At December 31, 2014, there were approximately 16 million shares authorized for issuance under the LTIP. For the years ended December 31, 2014, 2013 and 2012, exercised and distributed stock-based awards were primarily issued from authorized but unissued common stock shares.

The Compensation Committee of Exelon’s Board of Directors changed the mix of awards granted under the LTIP in 2013 by eliminating stock options in favor of the use of full value shares, consisting of 67% performance shares and 33% restricted stock units. The performance share awards granted in 2013 will cliff vest at the end of a three-year performance period. The performance share awards granted in 2012 and earlier had a one-year performance period and vested ratably over three years. To address the reduction in annual award opportunity resulting from the transition to a three-year cliff vesting performance period, the Compensation Committee also approved a one-time grant of performance share transition awards in 2013, which vested one-third after one year, with the remaining balance vesting over a two-year performance period. These one-time 2013 performance share transition awards will be settled 50% in common stock and 50% in cash, except for awards granted to executive vice presidents and higher officers that may be settled 100% in cash if certain Exelon stock ownership requirements are satisfied. In addition to this change, in 2013 ComEd and in 2014 PECO and BGE transitioned from Exelon stock-based awards to cash award programs with payouts based on the performance of each respective utility. The following tables do not include expense related to these plans as they are not considered stock-based compensation plans under the applicable accounting guidance.

The following table presents the stock-based compensation expense included in Exelon’s Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2014, 2013 and 2012:



	Year Ended December 31,
Components of Stock-Based Compensation Expense	2014			2013			2012
Performance share awards	$	59		$	48		$	46
Restricted stock units	61			61			50
Stock options	2			3			15
Other stock-based awards	5			6			4
Total stock-based compensation expense included in operating and maintenance expense	127			118			115
Income tax benefit	(47		)	(44		)	(44		)
Total after-tax stock-based compensation expense	$	80		$	74		$	71

The following table presents stock-based compensation expense (pre-tax) for the years ended December 31, 2014, 2013 and 2012:



	Year Ended December 31,
Subsidiaries	2014		2013		2012 ^(a)
Generation	$	52	$	48	$	42
ComEd	7		9		11
PECO	3		5		5
BGE	5		6		5
BSC ^(b)	60		50		52
Total	$	127	$	118	$	115

________________________

(a)

BGE’s stock-based compensation expense (pre-tax) for December 31, 2012 excludes $2 million of cost incurred in 2012 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 year ended December 31, 2012 shown in the table titled Components of Stock-Based Compensation Expense and the breakout by subsidiary above.


(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 years ended December 31, 2014, 2013 and 2012.

Exelon receives a tax deduction based on the intrinsic value of the award on the exercise date for stock options and the distribution date for performance share awards and restricted stock units. For each award, throughout the requisite service period, Exelon recognizes the tax benefit related to compensation costs. The tax deductions in excess of the benefits recorded throughout the requisite service period are recorded to common stock and are included in other financing activities within Exelon’s Consolidated Statements of Cash Flows. The following table presents information regarding Exelon’s tax benefits for the years ended December 31, 2014, 2013 and 2012:



	Year Ended December 31,
	2014		2013		2012
Realized tax benefit when exercised/distributed:
Stock options	$	—	$	—	$	3
Restricted stock units	17		11		11
Performance share awards	11		11		7
Stock deferral plan	—		1		—
Excess tax benefits included in other financing activities of Exelon’s
Consolidated Statements of Cash Flows:
Stock options	$	—	$	—	$	2

Stock Options

Non-qualified stock options to purchase shares of Exelon’s common stock were granted under the LTIP through 2012. Due to changes in the LTIP, there were no stock options granted in 2013 or 2014. For all stock options granted through 2012, the exercise price of the stock options is equal to the fair market value of the underlying stock on the date of option grant. The vesting period of stock options is generally four years. All stock options expire ten years from the date of grant.

The value of stock options at the date of grant is expensed over the requisite service period using the straight-line method. The requisite service period for stock options is generally four years. However, certain stock options become fully vested upon the employee reaching retirement-eligibility. The value of the stock options granted to retirement-eligible employees is either recognized immediately upon the date of grant or through the date at which the employee reaches retirement eligibility.

The fair value of each option is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. The following table presents the weighted average assumptions used in the pricing model for grants and the resulting weighted average grant date fair value of stock options granted for the year ended 2012:



	Year ended December 31, 2012
Dividend yield	5.28	%
Expected volatility	23.20	%
Risk-free interest rate	1.30	%
Expected life (years)	6.25
Weighted average grant date fair value (per share)	4.18

The assumptions above relate to Exelon stock options granted in 2012 and therefore do not include stock options that were converted in connection with the merger with Constellation during the year ended 2012.

The dividend yield is based on several factors, including Exelon’s most recent dividend payment at the grant date and the average stock price over the previous year. Expected volatility is based on implied volatilities of traded stock options in Exelon’s common stock and historical volatility over the estimated expected life of the stock options. The risk-free interest rate for a security with a term equal to the expected life is based on a yield curve constructed from U.S. Treasury strips at the time of grant. For each year presented, the expected life represents the period of time the stock options are expected to be outstanding and is based on the simplified method. Exelon believes that the simplified method is appropriate due to several factors that result in historical exercise data not being sufficient to determine a reasonable estimate of expected term. Exelon uses historical data to estimate employee forfeitures, which are compared to actual forfeitures on a quarterly basis and adjusted as necessary.

The following table presents information with respect to stock option activity for the year ended December 31, 2014:



	Shares		Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
Balance of shares outstanding at December 31, 2013	21,035,445		$	46.07
Options exercised	(291,805	)	25.27
Options forfeited	(8,886	)	55.78
Options expired	(1,903,787	)	41.47
Balance of shares outstanding at December 31, 2014	18,830,967		$	46.85	4.11	$	29
Exercisable at December 31, 2014 (a)	18,398,932		$	47.01	4.04	$	29

____________________


(a)	Includes stock options issued to retirement eligible employees.

The following table summarizes additional information regarding stock options exercised for the years ended December 31, 2014, 2013 and 2012:



	Year Ended December 31,
	2014		2013		2012
Intrinsic value^(a)	$	3	$	4	$	19
Cash received for exercise price	7		19		47

______________________


(a)	The difference between the market value on the date of exercise and the option exercise price.

The following table summarizes Exelon’s nonvested stock option activity for the year ended December 31, 2014:



	Shares		Weighted Average Exercise Price (per share)
Nonvested at December 31, 2013 (a)	847,118		$	40.22
Vested	(406,197	)	40.21
Forfeited	(8,886	)	55.78
Nonvested at December 31, 2014 (a)	432,035		$	39.91

_____________________


(a)	Excludes 746,140 and 1,348,913 of stock options issued to retirement-eligible employees as of December 31, 2014 and December 31, 2013, respectively, as they are fully vested.

At December 31, 2014, $1 million of total unrecognized compensation costs related to nonvested stock options are expected to be recognized over the remaining weighted-average period of 1.0 year.

Restricted Stock Units

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 value of the restricted stock units is expensed over the requisite service period using the straight-line method. 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 value of the restricted stock units granted to retirement-eligible employees is either recognized immediately upon the date of grant or through the date at which the employee reaches retirement eligibility. Exelon uses historical data to estimate employee forfeitures, which are compared to actual forfeitures on a quarterly basis and adjusted as necessary.

The following table summarizes Exelon’s nonvested restricted stock unit activity for the year ended December 31, 2014:



	Shares		Weighted Average Grant Date Fair Value (per share)
Nonvested at December 31, 2013 (a)	3,386,697		$	34.10
Granted	2,252,574		28.71
Vested	(1,216,016	)	35.36
Forfeited	(86,094	)	31.99
Undistributed vested awards^(b)	(578,943	)	29.17
Nonvested at December 31, 2014 (a)	3,758,218		$	31.27

_______________________


(a)	Excludes 975,116 and 931,628 of restricted stock units issued to retirement-eligible employees as of December 31, 2014 and December 31, 2013, respectively, as they are fully vested.


(b)	Represents restricted stock units that vested but were not distributed to retirement-eligible employees during 2014.

The weighted average grant date fair value (per share) of restricted stock units granted for the years ended December 31, 2014, 2013 and 2012 was $28.71, $31.06 and $39.94, respectively. At December 31, 2014 and 2013, Exelon had obligations related to outstanding restricted stock units not yet settled of $85 million and $77 million, respectively, which are included in common stock in Exelon’s Consolidated Balance Sheets. For the years ended December 31, 2014, 2013 and 2012, Exelon settled restricted stock units with fair value totaling $43 million, $28 million and $25 million, respectively. At December 31, 2014, $59 million of total unrecognized compensation costs related to nonvested restricted stock units are expected to be recognized over the remaining weighted-average period of 2.1 years.

Performance Share Awards

Performance share awards are granted under the LTIP. The 2014 and 2013 performance share awards are being settled 50% in common stock and 50% in cash at the end of the three-year performance period except for awards granted to executive vice presidents and higher officers that may be settled 100% in cash if certain ownership requirements are satisfied. The performance shares granted prior to 2012 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.

The common stock portion of the performance share and one-time 2013 performance share transition awards is considered an equity award and is valued based on Exelon's stock price on the grant date. The cash portion of the awards is considered a liability award which is remeasured each reporting period based on Exelon’s current stock price. As the value of the common stock and cash portions of the awards are based on Exelon’s stock price during the performance period, coupled with changes in the total shareholder return modifier and expected payout of the award, the compensation costs are subject to volatility until 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 share and one-time performance share transition awards 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 year ended December 31, 2014:



	Shares		Weighted Average Grant Date Fair Value (per share)
Nonvested at December 31, 2013 (a)	2,014,190		$	32.74
Granted	1,712,085		28.75
Change in performance	98,227		31.85
Vested	(497,714	)	35.05
Forfeited	(29,476	)	30.16
Undistributed vested awards ^(b)	(601,215	)	28.96
Nonvested at December 31, 2014 (a)	2,696,097		$	30.62

_______________________


(a)	Excludes 1,535,791 and 1,411,824 of performance share awards issued to retirement-eligible employees as of December 31, 2014 and December 31, 2013, respectively, as they are fully vested.


(b)	Represents performance share awards that vested but were not distributed to retirement-eligible employees during 2014.

The weighted average grant date fair value (per share) of performance share awards granted during the years ended December 31, 2014, 2013 and 2012 was $28.75, $31.55, and $39.71, respectively. During the years ended December 31, 2014, 2013 and 2012, Exelon settled performance shares with a fair value totaling $27 million, $26 million and $23 million, respectively, of which $13 million, $12 million and $3 million was paid in cash, respectively. As of December 31, 2014, $54 million of total unrecognized compensation costs related to nonvested performance shares are expected to be recognized over the remaining weighted-average period of 1.6 years.

The following table presents the balance sheet classification of obligations related to outstanding performance share awards not yet settled:



	December 31,
	2014		2013
Current liabilities^(a)	$	28	$	13
Deferred credits and other liabilities ^(b)	36		24
Common stock	33		32
Total	$	97	$	69

__________________________


(a)	Represents the current liability related to performance share awards expected to be settled in cash.


(b)	Represents the long-term liability related to performance share awards expected to be settled in cash.