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85
date of grant, or (2) when the quoted market price of the
stock reaches a predetermined price. These options generally
expire 10 years after the date of grant. Because the exercise
price of each PartnerShares grant has been equal to or higher
than the quoted market price of our common stock at the
date of grant, we have not recognized any compensation
expense in 2005 and prior years.
The following table summarizes stock option activity
and related information for the three years ended
December 31, 2005.
Director Plans Long-Term Incentive Plans Broad-Based Plans
Number Weighted-average Number Weighted-average Number Weighted-average
exercise price exercise price exercise price
Options outstanding as of December 31, 2002 349,108 $ 36.78 93,379,737 $ 40.35 50,088,196 $ 43.25
2003:
Granted 62,346 47.22 23,052,384(1) 46.04 — —
Canceled — — (1,529,868) 46.76 (4,293,930) 46.85
Exercised (59,707) 26.90 (13,884,561) 31.96 (6,408,797) 34.09
Acquisitions 4,769 31.42 889,842 25.89 — —
Options outstanding as of December 31, 2003 356,516 40.19 101,907,534 42.56 39,385,469 44.35
2004:
Granted 50,960 56.39 21,983,690(1) 57.41 — —
Canceled — — (1,241,637) 48.06 (2,895,200) 48.26
Exercised (21,427) 18.81 (18,574,660) 37.89 (3,792,605) 34.84
Options outstanding as of December 31, 2004 386,049 43.51 104,074,927 46.46 32,697,664 45.10
2005:
Granted 64,252 59.33 21,601,697(1) 60.12 — —
Canceled (3,594) 19.93 (623,384) 51.80 (2,475,617) 47.51
Exercised (57,193) 27.66 (14,514,952) 42.20 (5,729,286) 42.78
Acquisitions — — 52,824 27.35 — —
Options outstanding as of December 31, 2005 389,514 $48.67 110,591,112 $49.65 24,492,761 $45.51
Outstanding options exercisable as of:
December 31, 2003 353,131 $ 40.08 63,257,541 $ 40.33 12,063,244 $ 35.21
December 31, 2004 386,049 43.51 84,702,073 46.64 8,590,539 35.99
December 31, 2005 389,514 48.67 103,053,320 49.80 14,444,786 42.10
(1) Includes 4,014,597, 4,909,864 and 2,311,824 reload grants in 2005, 2004 and 2003, respectively.
The following table presents the weighted-average per
share fair value of options granted estimated using a Black-
Scholes option-pricing model and the weighted-average
assumptions used.
2005 2004 2003
Per share fair value of options granted:
Director Plans $6.27 $9.34 $9.59
Long-Term Incentive Plans 7.50 9.32 9.48
Expected life (years) 4.4 4.4 4.3
Expected volatility 16.1% 23.8% 29.2%
Risk-free interest rate 4.0 2.9 2.5
Expected annual dividend yield 3.4 3.4 2.9
BROAD-BASED PLANS In 1996, we adopted the PartnerShares®
Stock Option Plan, a broad-based employee stock option
plan. It covers full- and part-time employees who were
generally not included in the long-term incentive plans
described on the preceding page. The total number of
shares of common stock authorized for issuance under the
plan since inception through December 31, 2005, was
54,000,000, including 3,669,903 shares available for grant.
No options have been granted under the PartnerShares Plan
since 2002. The exercise date of options granted under the
PartnerShares Plan is the earlier of (1) five years after the