TD Bank 2002 Annual Report Download - page 62

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FINANCIAL RESULTS
Options outstanding Options exercisable
Weighted average Weighted Weighted
remaining average average
Number contractualexercise Number exercise
Range of exercise prices outstanding life (years) price exercisable price
$8.19 – $11.81 2,965,209 3.4 $11.05 2,965,209 $11.05
$17.45 – $25.43 6,175,903 5.6 $21.83 5,329,166 $21.26
$27.15 – $40.55 6,881,326 6.6 $33.77 4,134,554 $33.15
$40.80 – $42.90 7,836,975 8.6 $41.35 810,669 $41.70
Other stock-based compensation plans
Phantom share unit plans are offered to certain employees of the
Bank. Under these plans participants are granted phantom share
units equivalent to the Bank’s common stock that generally vest
over three to four years. A liability is established by the Bank
related to the phantom share units awarded and an incentive
compensation expense is recognized in the consolidated state-
ment of operations over the vesting period. At the maturity date,
the participant receives cash representing the value of the phan-
tom share units. The approximate number of Bank phantom
share units under this plan at October 31, 2002 is 1,905,700
(2001 – 350,100; 2000 – 203,700) subject to final determina-
tion in December 2002 based on then current share prices.
For the year ended October 31, 2002, the Bank recognized
compensation expense for these plans of $37 million (2001 –
$2 million; 2000 – $3 million).
A Senior Executive Deferred Share Unit Plan is offered to eligible
executives of the Bank. Under this plan, a portion of the partici-
pant’s annual incentive award may be deferred as share units
equivalent to the Bank’s common stock. The deferred share units
are redeemable when the participant ceases to be an employee
of the Bank and must be redeemed for cash within one year
thereafter. Dividend equivalents accrue to the participants.
Compensation expense for this plan is recorded in the year the
incentive awards are earned by the plan participants. As at
October 31, 2002, a total of 1,309,764 deferred share units
were outstanding (2001 – 1,197,524; 2000 – 938,316).
Dividend reinvestment plan
During the year, the Bank introduced a dividend reinvestment
plan for its common shareholders. Participation in the plan is
optional and under the terms of the plan, cash dividends on com-
mon shares are used to purchase additional common shares.
The common shares may be purchased either from the Bank’s
treasury at an average market price based on the last five trading
days before the date of the dividend payment with a discount
range of 0% to 5% at the Bank’s discretion or from the open
market at market price. Since the plan’s inception on February
20, 2002, a total of 5,171,110 common shares have been
issued from the Bank’s treasury at a discount of 2.5% of the
average market price under the dividend reinvestment plan.
Dividend restrictions
The Bank is prohibited by the Bank Act from declaring any divi-
dends on its preferred or common shares if there are reasonable
grounds for believing that the Bank is, or the payment would
cause the Bank to be, in contravention of the capital adequacy
The following table summarizes information relating to stock
options outstanding and exercisable at October 31, 2002.
Weighted Weighted Weighted
average average average
exercise exercise exercise
2002 price 2001 price 2000 price
Number outstanding, beginning of year 22,218,787 $ 26.65 23,403,443 $ 22.54 23,336,948 $ 18.39
Granted 4,708,800 41.11 3,639,640 41.66 4,527,000 36.20
Exercised – cash (1,673,495) 17.51 (2,593,303) 15.30 (2,840,740) 13.65
– shares (836,754) 15.84 (1,303,943) 13.38 (1,160,665) 11.52
Forfeited/cancelled (557,925) 36.06 (927,050) 32.27 (459,100) 29.29
Number outstanding, end of year 23,859,413 $ 30.35 22,218,787 $ 26.65 23,403,443 $ 22.54
Exercisable, end of year 13,239,598 $ 23.94 13,081,260 $ 20.49 12,910,639 $ 16.41
Employee savings plan
Under the Bank’s Employee Savings Plan (ESP), employees may
contribute up to 6% of their annual base earnings to a maximum
of $4,500 per calendar year toward the purchase of Bank com-
mon shares. The Bank matches 50% of the employee contribu-
tion amount. The Bank’s contributions vest once the employee
has completed two years of continuous service with the Bank.
For the year ended October 31, 2002, the Bank’s contributions
totalled $18 million (2001 –$13 million; 2000 –$13 million).
As at October 31, 2002, an aggregate of 4,476,634 common
shares were held under the ESP (2001 –5,001,746).
Stock option plan
Under the Bank’s stock option plan, options on common shares
are periodically granted to eligible employees and non-employee
directors of the Bank for terms of 10 years, vesting over a four-
year period. These options provide holders with the right to
purchase common shares of the Bank at a fixed price equal to
the closing market price of the shares on the day prior to the
date the options were issued. Under this plan, 22,075,610
common shares have been reserved for future issuance (2001 –
26,521,860). The outstanding options expire on various dates to
March 2012. The Bank’s predecessor plan, the 1993 stock
option plan, expired in 2000 and there will be no further issuance
of stock options from this plan. The outstanding options under
the 1993 stock option plan expire on various dates to July 2010.
A summary of the Bank’s stock option activity and related infor-
mation for the years ended October 31 is as follows: