COMPENSATION PLANS

The total stock-based compensation cost included in continuing operations within the Consolidated Income Statements was $128, $136 and $117 for 2015, 2014 and 2013, respectively. The income tax benefits related to stock-based compensation arrangements were $42, $45 and $39 for 2015, 2014 and 2013, respectively.

In connection with the completed separation of the Performance Chemicals segment through the spin-off of all of the issued and outstanding stock of Chemours, the provisions of our existing compensation plans required adjustments to the number and terms of outstanding employee stock options, stock appreciation rights (SARs), time-vested restricted stock units (RSUs) and performance-based restricted stock units (PSUs) to preserve the intrinsic value of the awards immediately before and after the separation. The outstanding awards will continue to vest over the original vesting period, which is generally three years from the grant date. Outstanding awards at the time of the spin-off were converted into awards of the holder’s employer following separation.

The stock awards held as of July 1, 2015 were adjusted as follows:

•

The number of stock options and stock appreciation rights were increased and the exercise price was decreased to maintain the intrinsic value of outstanding options and rights immediately before and after the spin-off. A comparison of the fair value of the outstanding option awards immediately before and after the spin-off resulted in $3 of incremental expense related to fully vested stock option awards and was expensed immediately.


•	The number of RSUs and PSUs were increased to preserve the intrinsic value of such awards immediately prior to separation. The company did not record any incremental compensation expense related to the conversion of these awards.

In April 2011, the shareholders approved amendments to the DuPont Equity and Incentive Plan (EIP). The EIP provides for equity-based and cash incentive awards to certain employees, directors, and consultants. Under the amended EIP, the maximum number of shares reserved for the grant or settlement of awards is 110 million shares, provided that each share in excess of 30 million that is issued with respect to any award that is not an option or stock appreciation right will be counted against the 110 million share limit as four and one-half shares. At December 31, 2015, approximately 40 million shares were authorized for future grants under the company's EIP. The company satisfies stock option exercises and vesting of RSUs and PSUs with newly issued shares of DuPont common stock.

The company's Compensation Committee determines the long-term incentive mix, including stock options, RSUs and PSUs and may authorize new grants annually.

Stock Options

The exercise price of shares subject to option is equal to the market price of the company's stock on the date of grant. Options granted prior to 2004 expire 10 years from date of grant; options granted between 2004 and 2008 serially vested over a three-year period and carry a six-year option term. Stock option awards granted between 2009 and 2015 expire seven years after the grant date. The plan allows retirement eligible employees to retain any granted awards upon retirement provided the employee has rendered at least six months of service following grant date.

For purposes of determining the fair value of stock options awards, the company uses the Black-Scholes option pricing model and the assumptions set forth in the table below. The weighted-average grant-date fair value of options granted in 2015, 2014 and 2013 was $11.57, $13.68 and $10.40, respectively.



	2015		2014		2013
Dividend yield	2.5	%	2.9	%	3.6	%
Volatility	22.52	%	31.33	%	34.86	%
Risk-free interest rate	1.4	%	1.7	%	1.0	%
Expected life (years)	5.3		5.3		5.3

The company determines the dividend yield by dividing the current annual dividend on the company's stock by the option exercise price. A historical daily measurement of volatility is determined based on the expected life of the option granted. The risk-free interest rate is determined by reference to the yield on an outstanding U.S. Treasury note with a term equal to the expected life of the option granted. Expected life is determined by reference to the company's historical experience.

For stock options outstanding prior to the spin-off, the weighted-average exercise prices in the table below reflect the historical exercise prices. Stock option awards as of December 31, 2015, and changes during the year then ended were as follows:



	Number of Shares (in thousands)		Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2014	18,895		$	48.34
Granted	5,812		73.21
Exercised	(4,736	)	41.38
Forfeited	(440	)	62.33
Cancelled	(2,070	)	58.17
Conversion for Spin-off of Chemours	699		53.59
Outstanding, December 31, 2015	18,160		$	54.89	4.27	$	232,453
Exercisable, December 31, 2015	8,632		$	45.82	2.93	$	179,408

The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value (the difference between the company's closing stock price on the last trading day of 2015 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options at year end. This amount changes based on the fair market value of the company's stock. Total intrinsic value of options exercised for 2015, 2014 and 2013 were $160, $219 and $230, respectively. In 2015, the company realized a tax benefit of $51 from options exercised.

As of December 31, 2015, $32 of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 1.57 years.

RSUs and PSUs

The company issues RSUs that serially vest over a three-year period and, upon vesting, convert one-for-one to DuPont common stock. A retirement eligible employee retains any granted awards upon retirement provided the employee has rendered at least six months of service following the grant date. Additional RSUs are also granted periodically to key senior management employees. These RSUs generally vest over periods ranging from two to five years. The fair value of all stock-settled RSUs is based upon the market price of the underlying common stock as of the grant date.

The company also grants PSUs to senior leadership. In 2015, there were 309,042 PSUs granted. Vesting for PSUs granted in 2015 is equally based upon year over year change in operating net income relative to target and total shareholder return (TSR) relative to peer companies. Operating net income is net income attributable to DuPont excluding income from discontinued operations after taxes, significant after tax benefits (charges), and non-operating pension and other post-retirement employee benefit costs. Vesting for PSUs granted in 2014 and 2013 is equally based upon corporate revenue growth relative to peer companies and TSR relative to peer companies. Performance and payouts are determined independently for each metric. The actual award, delivered as DuPont common stock, can range from zero percent to 200 percent of the original grant. The weighted-average grant-date fair value of the PSUs granted in 2015, subject to the TSR metric, was $96.24, and estimated using a Monte Carlo simulation. The weighted-average grant-date fair value of the PSUs, subject to the revenue metric, was based upon the market price of the underlying common stock as of the grant date.

Non-vested awards of RSUs and PSUs as of December 31, 2015 and 2014 are shown below. For RSUs and PSUs awarded prior to the spin-off, grant price information in the table below reflects historical market prices. The weighted-average grant-date fair value of RSUs and PSUs granted during 2015, 2014 and 2013 was $71.66, $64.64 and $48.06, respectively.



	Number of Shares (in thousands)		Weighted Average Grant Date Fair Value (per share)
Nonvested, December 31, 2014	3,757		$	57.60
Granted	1,641		71.66
Vested	(1,289	)	49.26
Forfeited	(300	)	70.45
Conversion for Spin-off of Chemours	127		61.63
Nonvested, December 31, 2015	3,936		$	59.54

As of December 31, 2015, there was $68 of unrecognized stock-based compensation expense related to nonvested awards. That cost is expected to be recognized over a weighted-average period of 1.65 years. The total fair value of stock units vested during 2015, 2014 and 2013 was $64, $75 and $75, respectively.

Other Cash-based Awards

Cash awards under the EIP plan may be granted to employees who have contributed most to the company's success, with consideration being given to the ability to succeed to more important managerial responsibility. Such awards resulted in compensation expense of $31, $34 and $52 for 2015, 2014 and 2013, respectively included in income from continuing operations within the Consolidated Financial Statements. The amounts of the awards are dependent on company earnings and are subject to maximum limits as defined under the governing plans.

In addition, the company has other variable compensation plans under which cash awards may be granted. These plans include the company's regional and local variable compensation plans and Pioneer's Annual Reward Program. Such awards resulted in compensation expense of $150, $137 and $290 for 2015, 2014 and 2013, respectively, included in income from continuing operations within the Consolidated Financial Statements.