Note 11. Stock Plans

On May 21, 2014, our shareholders approved the Amended and Restated 2005 Performance Incentive Plan (the “2005 Plan”). Under the amended plan, we make grants to non-employee directors under the 2005 Plan, and we no longer make any grants under the Amended and Restated 2006 Stock Compensation Plan for Non-Employee Directors (the “2006 Directors Plan”). We also increased the number of shares available for issuance under the 2005 Plan by 75.7 million, which includes the shares remaining available for issuance under the 2006 Directors Plan as of March 14, 2014. Under the 2005 Plan, we are authorized to issue a maximum of 243.7 million shares of our Common Stock. We may not make any grants under the 2005 Plan after May 21, 2024. As of December 31, 2015, there were 81.8 million shares available to be granted under the 2005 Plan.

In connection with the Spin-Off and divestiture of Kraft Foods Group, under the provisions of our existing plans, employee stock option and restricted stock and deferred stock unit grants were adjusted to preserve the fair value of the awards immediately before and after the Spin-Off. As such, we did not record any incremental compensation expense related to the conversion of the awards. In connection with the stock awards held by our respective employees at the time of the Spin-Off, we collected a $55 million cash net settlement for the awards from Kraft Foods Group in March 2013.

Stock Options:

Stock options (including stock appreciation rights) are granted at an exercise price equal to the market value of the underlying stock on the grant date, generally become exercisable in three annual installments beginning on the first anniversary of the grant date and have a maximum term of ten years.

We account for our employee stock options under the fair value method of accounting using a Black-Scholes methodology to measure stock option expense at the date of grant. The fair value of the stock options at the date of grant is amortized to expense over the vesting period. We recorded compensation expense related to stock options held by our employees of $50 million in 2015, $47 million in 2014 and $39 million in 2013 in our results from continuing operations. The deferred tax benefit recorded related to this compensation expense was $13 million in 2015, $12 million in 2014 and $11 million in 2013. The unamortized compensation expense related to our employee stock options was $62 million at December 31, 2015 and is expected to be recognized over a weighted-average period of 1 year.

Our weighted-average Black-Scholes fair value assumptions were:


	Risk-Free Interest Rate		Expected Life		Expected Volatility		Expected Dividend Yield		Fair Value at Grant Date

2015		1.70%		6 years		18.51%		1.61%	$	6.12
2014		1.87%		6 years		21.48%		1.64%	$	6.60
2013		1.15%		6 years		20.36%		1.94%	$	4.31

The risk-free interest rate represents the constant maturity U.S. government treasuries rate with a remaining term equal to the expected life of the options. The expected life is the period over which our employees are expected to hold their options. Volatility reflects historical movements in our stock price for a period commensurate with the expected life of the options. The dividend yield reflects the dividend yield in place at the time of the historical grants.

Stock option activity is reflected below:


				Weighted-
				Average		Average
	Shares Subject			Exercise or Grant Price		Remaining Contractual	Aggregate Intrinsic
	to Option			Per Share		Term	Value

Balance at January 1, 2013		52,753,039		$	20.45		$	264 million

Annual grant to eligible employees		11,644,280			27.05
Additional options issued		762,512			29.69

Total options granted		12,406,792			27.21
Options exercised ⁽¹⁾		(7,185,616	)		19.41		$	79 million
Options cancelled		(2,190,776	)		23.86

Balance at December 31, 2013		55,783,439			21.96		$	744 million

Annual grant to eligible employees		9,919,810			34.17
Additional options issued		500,250			33.65

Total options granted		10,420,060			34.14
Options exercised ⁽¹⁾		(8,076,550	)		20.85		$	125 million
Options cancelled		(1,695,398	)		27.65

Balance at December 31, 2014		56,431,551			24.19		$	685 million

Annual grant to eligible employees		8,899,530			36.94
Additional options issued		901,340			35.84

Total options granted		9,800,870			36.84
Options exercised ⁽¹⁾		(6,444,515	)		22.94		$	108 million
Options cancelled		(2,753,798	)		32.35

Balance at December 31, 2015		57,034,108			26.12	6 years	$	229 million

Exercisable at December 31, 2015		38,658,921			22.33	5 years	$	870 million

(1)

Cash received from options exercised was $148 million in 2015, $168 million in 2014 and $139 million in 2013. The actual tax benefit realized for the tax deductions from the option exercises totaled $58 million in 2015, $29 million in 2014 and $14 million in 2013.

Restricted Stock, Deferred Stock Units and Performance Share Units:

We may grant shares of restricted stock or deferred stock units to eligible employees, giving them, in most instances, all of the rights of shareholders, except that they may not sell, assign, pledge or otherwise encumber the shares and our deferred stock units do not have voting rights until vested. Shares of restricted stock and deferred stock units are subject to forfeiture if certain employment conditions are not met. Restricted stock and deferred stock units generally vest on the third anniversary of the grant date. Beginning in 2016, we will only grant deferred stock units and no longer grant restricted stock.

Performance share units granted under our 2005 Plan vest based on varying performance, market and service conditions. The unvested performance share units have no voting rights and do not pay dividends. Dividend equivalents accumulated over the vesting period are paid only after the performance share units vest.

The fair value of the restricted stock, deferred stock units and performance share units at the date of grant is amortized to earnings over the restriction period. We recorded compensation expense related to restricted stock, deferred stock units and performance share units of $86 million in 2015, $94 million in 2014 and $94 million in 2013 in our results from continuing operations. The deferred tax benefit recorded related to this compensation expense was $24 million in 2015, $26 million in 2014 and $28 million in 2013. The unamortized compensation expense related to our restricted stock, deferred stock units and performance share units was $138 million at December 31, 2015 and is expected to be recognized over a weighted-average period of 2 years.

Our restricted stock, deferred stock unit and performance share unit activity is reflected below:


					Weighted-Average		Weighted-Average
	Number				Fair Value		Aggregate
	of Shares			Grant Date	Per Share		Fair Value

Balance at January 1, 2013		12,815,911			$	21.55

Annual grant to eligible employees:				Feb. 20, 2013
Performance share units		1,542,600				26.24
Restricted stock		949,030				27.05
Deferred stock units		1,386,750				27.05
Additional shares granted ⁽¹⁾		1,353,057		Various		22.47

Total shares granted		5,231,437				25.63	$	134 million
Vested		(5,350,073	)			18.82	$	101 million
Forfeited		(1,048,688	)			23.23

Balance at December 31, 2013		11,648,587				24.48

Annual grant to eligible employees:				Feb. 19, 2014
Performance share units		1,143,620				34.97
Restricted stock		750,410				34.17
Deferred stock units		1,240,820				34.17
Additional shares granted ⁽¹⁾		935,463		Various		33.15

Total shares granted		4,070,313				34.16	$	139 million
Vested		(4,380,452	)			22.98	$	101 million
Forfeited		(755,808	)			28.14

Balance at December 31, 2014		10,582,640				28.56

Annual grant to eligible employees:				Feb. 18, 2015
Performance share units		1,598,290				36.94
Restricted stock		386,910				36.94
Deferred stock units		866,640				36.94
Additional shares granted ⁽¹⁾		1,087,322		Various		39.35

Total shares granted		3,939,162				37.61	$	148 million
Vested		(3,905,745	)			37.83	$	148 million
Forfeited		(1,197,841	)			32.51

Balance at December 31, 2015		9,418,216				28.00

(1)

Includes performance share units, restricted stock and deferred stock units.