Eversource 2002 Annual Report Download - page 55

In 2002 and 2001, the ESOP trust issued 607,475 and 546,610 of NU
common shares, respectively, to satisfy 401(k) Savings Plan obligations
to employees. At December 31, 2002 and 2001, total allocated ESOP
shares were 7,008,784 and 6,401,309, respectively, and total unallocated
ESOP shares were 3,791,401 and 4,398,876, respectively. The fair market
value of unallocated ESOP shares at December 31, 2002 and 2001, was
$57.5 million and $77.6 million, respectively.
D. Stock-Based Compensation
Employee Share Purchase Plan: Since July 1998, NU has maintained an
ESPP for all eligible employees. Under the ESPP, NU common shares
were purchased at 6-month intervals at 85 percent of the lower of the
price on the first or last day of each 6-month period. Employees may
purchase shares having a value not exceeding 25 percent of their
compensation as of the beginning of the purchase period. Effective
January 1, 2001, the ESPP was terminated because of a pending merger.
In the second quarter of 2001, a new ESPP was adopted by NU’s Board
of Trustees and approved by NU’s shareholders. During 2002, employees
purchased 188,774 shares at discounted prices of $14.15 and $15.39.
At December 31, 2002, 1,811,226 shares remained registered for future
issuance under the ESPP.
Incentive Plans: NU has long-term incentive plans authorizing various
types of awards, including stock options and performance units, to be
made to eligible employees and board members. The exercise price of
stock options, as set at the time of grant, is equal to the fair market
value per share at the date of grant, and therefore no stock-based
compensation cost is reflected in net income. A liability of $1.3 million
was recorded at December 31, 2002, for the fair value of the performance
units earned. Under the Northeast Utilities Incentive Plan (Incentive
Plan), the number of shares which may be utilized for or made subject
to issuance pursuant to grants and awards granted during a given calendar
year may not exceed the aggregate of one percent of the total number
of shares of NU common shares outstanding as of the first day of that
calendar year and the shares not utilized in previous years. At
December 31, 2002 and 2001, NU had 2,440,339 and 2,692,633 shares
of common stock, respectively, registered for issuance under the
Incentive Plan.
Stock option transactions for 2002, 2001 and 2000, including those options acquired in connection with the Yankee merger, are as follows:
Exercise Price Per Share
Options Range Weighted Average
Outstanding – December 31, 1999 1,826,256 $ 9.6250 – $ 21.1250 $ 14.0585
Granted 669,470 $18.4375 – $ 22.2500 $ 18.7029
Yankee merger 10,167 $ 9.3640 – $ 12.6888 $ 10.7653
Exercised (43,750) $14.9375 – $ 19.5000 $ 16.0658
Forfeited and cancelled (28,281) $14.9375 – $ 19.5000 $ 16.6515
Outstanding – December 31, 2000 2,433,862 $ 9.3640 – $ 22.2500 $ 15.2569
Granted 817,300 $17.4000 – $ 21.0300 $ 20.2065
Exercised (108,779) $ 9.3640 – $ 19.5000 $ 16.0970
Forfeited and cancelled (132,467) $14.8750 – $ 21.0300 $ 18.2217
Outstanding – December 31, 2001 3,009,916 $ 9.6250 – $ 22.2500 $ 16.4467
Granted 1,337,345 $16.5500 – $ 19.8700 $ 17.8284
Exercised (262,800) $10.0134 – $ 19.5000 $ 15.4666
Forfeited and cancelled (247,152) $14.9375 – $ 22.2500 $ 18.3473
Outstanding – December 31, 2002 3,837,309 $ 9.6250 – $22.2500 $16.8738
Exercisable – December 31, 2000 1,298,339 $ 9.3640 – $ 22.2500 $ 14.2021
Exercisable – December 31, 2001 1,712,260 $ 9.6250 – $ 22.2500 $ 14.4650
Exercisable – December 31, 2002 1,956,555 $ 9.6250 – $22.2500 $15.3758
In 1997, 500,000 options with a weighted average exercise price of
$9.625 were granted. These options, which are all exercisable at
December 31, 2002, have a remaining contractual life of 4.63 years.
Excluding these options from those outstanding at December 31, 2002,
the resulting range of exercise prices is $14.9375 to $22.25.
For certain options that were granted in 2002, 2001 and 2000, the vesting
schedule for these options is ratably over three years from the date of
grant. Additionally, certain options granted in 2002, 2001 and 2000 vest
50 percent at the date of grant and 50 percent one year from the date of
grant, while other options granted in 2002 vest 100 percent after five years.
NU has also made several small grants of restricted stock and other
incentive-based stock compensation under the Incentive Plan. During
2002, 2001 and 2000, $1 million, $1.2 million and $1.9 million, respectively,
was expensed related to this stock-based compensation.
The fair value of each stock option grant has been estimated on the
date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions:
2002 2001 2000
Risk-free interest rate 4.86% 5.34% 6.56%
Expected life 10 years 10 years 10 years
Expected volatility 23.71% 25.47% 26.15%
Expected dividend yield 2.11% 2.11% 1.82%
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