15. Incentive Program
The 2003 Incentive Program provides for grants of stock options, stock appreciation rights (SARs), restricted stock and other forms of award. Awards may be granted to eligible employees of the Corporation and those affiliates at least 50 percent owned. Outstanding awards are subject to certain forfeiture provisions contained in the program or award instrument. Options and SARs may be granted at prices not less than 100 percent of market value on the date of grant and have a maximum life of 10 years. The maximum number of shares of stock that may be issued under the 2003 Incentive Program is 220 million. Awards that are forfeited, expire or are settled in cash, do not count against this maximum limit. The 2003 Incentive Program does not have a specified term. New awards may be made until the available shares are depleted, unless the Board terminates the plan early. At the end of 2013, remaining shares available for award under the 2003 Incentive Program were 117 million.
Restricted Stock and Restricted Stock Units. Awards totaling 9,729 thousand, 10,017 thousand, and 10,533 thousand of restricted (nonvested) common stock and restricted (nonvested) common stock units were granted in 2013, 2012 and 2011, respectively. Compensation expense for these awards is based on the price of the stock at the date of grant and is recognized in income over the requisite service period. Shares for these awards are issued to employees from treasury stock. The units that are settled in cash are recorded as liabilities and their changes in fair value are recognized over the vesting period. During the applicable restricted periods, the shares and units may not be sold or transferred and are subject to forfeiture. The majority of the awards have graded vesting periods, with 50 percent of the shares and units in each award vesting after three years and the remaining 50 percent vesting after seven years. Awards granted to a small number of senior executives have vesting periods of five years for 50 percent of the award and of 10 years or retirement, whichever occurs later, for the remaining 50 percent of the award.
The Corporation has purchased shares in the open market and through negotiated transactions to offset shares issued in conjunction with benefit plans and programs. Purchases may be discontinued at any time without prior notice.
The following tables summarize information about restricted stock and restricted stock units for the year ended December 31, 2013.
| 2013 | ||||||
| Weighted Average | ||||||
| Grant-Date | ||||||
| Restricted stock and units outstanding | Shares | Fair Value per Share | ||||
| (thousands) | (dollars) | |||||
| Issued and outstanding at January 1 | 46,451 | 73.94 | ||||
| 2012 award issued in 2013 | 10,016 | 87.24 | ||||
| Vested | (11,068) | 68.15 | ||||
| Forfeited | (192) | 77.22 | ||||
| Issued and outstanding at December 31 | 45,207 | 78.29 | ||||
| Value of restricted stock and units | 2013 | 2012 | 2011 | |||
| Grant price (dollars) | 94.47 | 87.24 | 79.52 | |||
| Value at date of grant: | (millions of dollars) | |||||
| Restricted stock and units settled in stock | 843 | 797 | 766 | |||
| Units settled in cash | 76 | 77 | 72 | |||
| Total value | 919 | 874 | 838 | |||
As of December 31, 2013, there was $2,269 million of unrecognized compensation cost related to the nonvested restricted awards. This cost is expected to be recognized over a weighted-average period of 4.5 years. The compensation cost charged against income for the restricted stock and restricted stock units was $854 million, $854 million and $793 million for 2013, 2012 and 2011, respectively. The income tax benefit recognized in income related to this compensation expense was $78 million, $79 million and $73 million for the same periods, respectively. The fair value of shares and units vested in 2013, 2012 and 2011 was $1,040 million, $926 million and $801 million, respectively. Cash payments of $67 million, $66 million and $46 million for vested restricted stock units settled in cash were made in 2013, 2012 and 2011, respectively.
Stock Options. The Corporation has not granted any stock options under the 2003 Incentive Program and all stock options granted under the prior program were exercised by the end of 2011. In 2010, the Corporation granted 12,393 thousand of converted XTO stock options of which 1,506 thousand stock options, with an average exercise price of $85.57, were outstanding as of December 31, 2013.