Note I. Stock Incentive Plan

TJX has a stock incentive plan under which options and other share-based awards may be granted to its directors, officers and key employees. This plan has been approved by TJX’s shareholders, and all share-based compensation awards are made under this plan. The Stock Incentive Plan, as amended with shareholder approval, has provided for the issuance of up to 347.8 million shares with 45.6 million shares available for future grants as of February 1, 2014. TJX issues shares under the plan from authorized but unissued common stock. All share amounts and per share data presented have been adjusted to reflect the two-for-one stock split effected in February 2012 (See Note A).

As of February 1, 2014, there was $115.1 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the plan. That cost is expected to be recognized over a weighted-average period of two years.

Options for the purchase of common stock are granted at 100% of market price on the grant date and generally vest in thirds over a three-year period starting one year after the grant, and have a ten-year maximum term. When options are granted with other vesting terms (as in fiscal 2014, when certain options granted are scheduled to vest in full on the first anniversary of the grant date), such information is incorporated into the valuation.

The fair value of options is estimated as of the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:


	Fiscal Year Ended
	February 1, 2014			February 2, 2013			January 28, 2012
Risk-free interest rate		1.42	%		0.70	%		0.92	%
Dividend yield		1.0	%		1.0	%		1.4	%
Expected volatility factor		25.9	%		29.0	%		31.1	%
Expected option life in years		4.4			4.5			5.0
Weighted average fair value of options issued	$	11.92		$	10.28		$	6.55

The risk-free interest rate is for periods within the contractual life of the option based on the U.S. Treasury yield curve in effect at the time of grant. We use historical data to estimate option exercises, employee termination behavior and dividend yield within the valuation model. Expected volatility is based on a combination of implied volatility from traded options on our stock, and historical volatility during a term approximating the expected life of the option granted. The expected option life represents an estimate of the period of time options are expected to remain outstanding based upon historical exercise trends. Employee groups and option characteristics are considered separately for valuation purposes when applicable.

Stock Options: A summary of the status of TJX’s stock options and related weighted average exercise prices (“WAEP”) is presented below (shares in thousands):


	Fiscal Year Ended
	February 1, 2014					February 2, 2013					January 28, 2012
	Options			WAEP		Options			WAEP		Options			WAEP
	(53 weeks)
Outstanding at beginning of year		36,620		$	22.31		40,944		$	18.27		50,095		$	15.70
Granted		4,742			56.71		4,951			45.09		7,922			26.56
Exercised		(8,258	)		17.71		(8,385	)		15.90		(15,433	)		13.98
Forfeitures		(476	)		34.74		(890	)		23.35		(1,640	)		20.29

Outstanding at end of year		32,628		$	28.30		36,620		$	22.31		40,944		$	18.27

Options exercisable at end of year		22,473		$	20.19		24,050		$	17.02		24,540		$	15.04

The total intrinsic value of options exercised was $289.8 million in fiscal 2014, $223.8 million in fiscal 2013 and $210.9 million in fiscal 2012.

The following table summarizes information about stock options outstanding that were expected to vest and stock options outstanding that were exercisable as of February 1, 2014:


Shares in thousands	Shares		Aggregate Intrinsic Value		Weighted Average Remaining Contract Life		WAEP
Options outstanding expected to vest		9,484	$	109,443		8.8 years	$	45.82
Options exercisable		22,473	$	835,215		5.2 years	$	20.19

Total outstanding options vested and expected to vest		31,957	$	944,658		6.3 years	$	27.80

Options outstanding expected to vest represents total unvested options of 10.2 million adjusted for anticipated forfeitures.

Performance-Based Restricted Stock and Performance-Based Deferred Stock Awards: TJX issues performance-based restricted stock and performance-based deferred stock awards (collectively, “performance-based stock awards”) under the Stock Incentive Plan. These awards are granted without a purchase price to the recipient and are subject to vesting conditions, including specified performance criteria for a period generally of one to three years. The grant date fair value of the award is charged to income over the requisite service period during which the recipient must remain employed. The fair value of the awards is determined at date of grant in accordance with ASC Topic 718 and assumes that performance goals will be achieved. If such goals are not met, or only partially met, awards and related compensation costs recognized are reduced on a pro rata basis.

A summary of the status of our nonvested performance-based stock awards and changes during fiscal 2014 is presented below:


Shares in thousands	Restricted and Deferred Awards			Weighted Average Grant Date Fair Value
Nonvested at beginning of year		1,677		$	31.45
Granted		744			51.02
Vested		(586	)		24.26
Forfeited		(29	)		30.86

Nonvested at end of year		1,806		$	41.85

There were 743,576 shares of performance-based stock awards, with a weighted average grant date fair value of $51.02, granted in fiscal 2014, 730,500 shares of performance-based stock awards, with a weighted average grant date fair value of $41.74, granted in fiscal 2013 and 298,500 shares of performance-based stock awards, with a weighted average grant date fair value of $24.81, granted in fiscal 2012. The fair value of performance-based stock awards that vested was $14.2 million in fiscal 2014, $9.7 million in fiscal 2013 and $10.0 million in fiscal 2012. In fiscal 2013, TJX also awarded 281,076 shares of performance-based restricted stock which were not recognized under ASC Topic 718 as granted during fiscal 2013 because all of the applicable performance terms had not been established during the fiscal year. These shares were recognized as having been granted in fiscal 2014.

Other Awards: TJX also awards deferred shares to its outside directors under the Stock Incentive Plan. The outside directors are awarded two annual deferred share awards, each representing shares of TJX common stock valued at $70,000. One award vests immediately and is payable, with accumulated dividends, in stock at the earlier of separation from service as a director or a change of control. The second award vests based on service as a director until the annual meeting that follows the award and is payable, with accumulated dividends, in stock following the vesting date, unless an irrevocable advance election is made whereby it is payable at the same time as the first award. As of the end of fiscal 2014, a total of 269,405 of these deferred shares were outstanding under the plan.