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 31.5 million shares available for future grants as of January 28, 2017. TJX issues shares under the plan from authorized but unissued common stock.

Total compensation cost related to share-based compensation was $102.3 million, $94.1 million and $88.0 million in fiscal 2017, 2016 and 2015, respectively. As of January 28, 2017, there was $128.7 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 with an exercise price that is 100% of market price on the grant date, 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, the vesting information is reflected in 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
	January 28, 2017			January 30, 2016			January 31, 2015
Risk-free interest rate		1.20	%		1.50	%		1.79	%
Dividend yield		1.2	%		1.2	%		1.2	%
Expected volatility factor		23.8	%		24.4	%		24.2	%
Expected option life in years		4.8			4.5			4.5
Weighted average fair value of options issued	$	14.55		$	14.48		$	12.00

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
	January 28, 2017					January 30, 2016					January 31, 2015
	Options			WAEP		Options			WAEP		Options			WAEP
Outstanding at beginning of year		28,686		$	41.68		30,078		$	34.91		32,628		$	28.30
Granted		4,305			75.04		4,169			72.54		4,849			59.70
Exercised		(5,265	)		30.83		(5,124	)		25.87		(6,981	)		20.39
Forfeitures		(373	)		66.15		(437	)		55.06		(418	)		48.76
Outstanding at end of year		27,353		$	48.69		28,686		$	41.68		30,078		$	34.91
Options exercisable at end of year		18,980		$	38.69		20,175		$	31.75		21,001		$	25.75

The total intrinsic value of options exercised was $239.7 million in fiscal 2017, $227.4 million in fiscal 2016 and $286.3 million in fiscal 2015.

The following table summarizes information about stock options outstanding that were expected to vest and stock options outstanding that were exercisable as of January 28, 2017:


Shares in thousands	Shares		Aggregate Intrinsic Value		Weighted Average Remaining Contract Life		WAEP
Options outstanding expected to vest		7,747	$	24,974		8.9 years	$	71.42
Options exercisable		18,980	$	675,109		5.0 years	$	38.69
Total outstanding options vested and expected to vest		26,727	$	700,083		6.2 years	$	48.18

Options outstanding expected to vest represents total unvested options of 8.3 million adjusted for anticipated forfeitures.

Performance-Based Stock Awards: TJX has granted performance-based restricted stock, performance-based restricted stock units and performance-based deferred stock awards (collectively referred to as 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 aligned with management incentive plans for a period of generally one to three years. The grant date fair value of the awards 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 2017 is presented below:


Shares in thousands	Performance- based stock awards			Weighted Average Grant Date Fair Value
Nonvested at beginning of year		1,776		$	63.57
Granted		514			78.50
Vested		(706	)		54.47
Forfeited		(25	)		69.31

Nonvested at end of year		1,559		$	72.52

There were 513,573 shares of performance-based stock awards, with a weighted average grant date fair value of $78.50, granted in fiscal 2017, 696,057 shares of performance-based stock awards, with a weighted average grant date fair value of $70.41, granted in fiscal 2016, and 717,500 shares of performance-based stock awards, with a weighted average grant date fair value of $62.85, granted in fiscal 2015. The fair value of performance-based stock awards that vested was $38.5 million in fiscal 2017, $27.1 million in fiscal 2016, and $21.4 million in fiscal 2015.

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, which were valued at $80,000 for fiscal 2017. 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 a directors continued service until the annual meeting that follows the grant of the award (subject to possible earlier vesting in connection with or following a change of control) and is payable, with accumulated dividends, in stock upon vesting, 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 2017, a total of 313,367 of these deferred shares were outstanding under the plan.