ComEd 2013 Annual Report Download - page 228

presidentsand higher officersthat maybesettled100%incash if certainownershiprequirementsare satisfied. The performance
sharesgrantedprior to 2012 generallyvestandsettle over a three-year periodwiththeholdersreceivingsharesofcommon stock
and/or cash annuallyduringthevestingperiod.
The one-time 2013 performanceshare transition awards, which provide an opportunityto earn an awardcontingent on company
performance,will besettled50%incommon stock and50%incash, except for awards grantedto executivevice presidentsand
higher officersthat maybesettled100%incash if certainownershiprequirementsare satisfied. One-thirdoftheawardvestsandis
payable after a one-year performance period while theremainingtwo-thirds vestsandispayable after a two-year performance
period.
Thepayout ofthe 2013 performanceshare awards andone-time performanceshare transition awards are basedon theCompany’s
performanceagainstspecific operational andfinancial goalsset annuallyduringtherespective performance periods. Asaresult,the
2013 performanceshare awards havebeen dividedinto equal tranchesfor the purposeofexpenserecognition asthough the
respectiveawardwere multiple awards; witheach tranche representingacorresponding fiscal year.The one-time performance
share transition awards havealsobeen dividedinto multiple tranchesfor the purposeofexpenserecognition.One tranchereflects
the one-thirdoftheawards that vestsandare payable after a one-year period. Thetwo-thirds ofthe one-time performanceshare
transition awards that are subjecttoatwo-year performance periodhavealsobeen dividedinto equal tranches; witheach tranche
representingacorresponding fiscal year.Thegrant date for each trancheofthe 2013 performanceshare andone-time performance
share transition awards is thedate inwhich the performancegoalsfor that fiscal year are approvedandcommunicated, which
typicallyoccursat thecorrespondingJanuaryCompensation Committee meeting.
The 2013 performanceshare awards andone-time performanceshare transition awards are recordedat fairvalue at thegrant dates
for each tranche,withtheestimatedgrant date fairvalue basedon theexpectedpayout oftheaward, which mayrangefrom50%to
150%ofthepayout target.The 2013 performanceshare awards alsoinclude a total shareholder return modifier (TSR)that may
increaseordecreasetheawardup to 25% andan individual performancemodifier (IPM) that can decreasetheawardbyup to 50%
or increasetheawardbyup to 10%for SVPs and higher officersor up to 20%for vice presidents. The one-time performanceshare
transition awardisnot affectedbyeither TSRortheIPM.
Thecommon stock portion ofthe performanceshare andone-time performanceshare transition awards is consideredan equity
awardbeingvaluedbasedon Exelon’s stock priceonthegrant date.Thecash portion oftheawards is consideredaliabilityaward
which is remeasuredeach reportingperiodbasedon Exelon’s current stock price.Asthevalue ofthecommon stock andcash
portionsoftheawards are basedon Exelon’s stock priceduringthe performance period, coupledwithchangesinthe total
shareholder return modifier andexpectedpayout oftheaward, thecompensation costsare subjecttovolatilityuntilpayout is
established.
The 2012 performanceshare awards are recordedat fairvalue at thedate ofgrant withtheestimatedgrant date fairvalue basedon
theexpectedpayout oftheaward, which mayrangefrom 75% to 125% ofthepayout target.Thecommon stock portion is
consideredan equityawardwiththe75% payout floor beingvaluedbasedon Exelon’s stock priceonthegrant date.Thecash
portion oftheawardisconsideredaliabilityawardwiththe75% payout floor beingremeasuredeach reportingperiodbasedon
Exelon’s current stock price.Theexpectedpayout inexcess ofthe75% floor for theequityandliabilityportionsare remeasured
each reportingperiodbasedon Exelon’s current stock priceandchangesintheexpectedpayout oftheaward; therefore these
portionsoftheawardare subjecttovolatilityuntilthepayout is established.
For nonretirement-eligible employees, stock-basedcompensation costsare recognizedover thevestingperiodofthree yearsusing
thegraded-vestingmethod. For performanceshare andone-time performanceshare transition awards grantedto retirement-eligible
employees, thevalue ofthe performancesharesinrecognizedratablyover thevestingperiod, which is theyear ofgrant.
222