DuPont 2005 Annual Report Download - page 97

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E. I. du Pont de Nemours and Company
Notes to Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
however, beginning in 2004, with the re-design of the company’s long-term incentive program to include both stock options and
restricted stock units, options now serially vest over a three-year period and carry a six-year option term.
Options granted prior to 2004 are eligible for reload upon the exercise of stock options with the condition that shares received
from the exercise are held for at least two years. A reload option is granted at the market price on the date of grant and has
a term equal to the remaining term of the original option. The maximum number of reload options granted is limited to the
number of shares subject to the original option, times the original option price, divided by the option price of the reload option.
The maximum number of shares that may be subject to option for any consecutive five-year period is 72 million shares. Subject
to this limit, additional shares that may have been made subject to options or restricted stock units were 41,659,711 for 2005,
36,935,385 for 2004 and 29,606,134 for 2003.
The following table summarizes stock option activity for the last three years:
Number Weighted-
of Average
Shares Price
January 1, 2003 92,257,609 $45.25
Granted 12,079,909 $37.14
Exercised 2,337,712 $25.98
Forfeited 1,959,630 $44.37
December 31, 2003 100,040,176 $44.74
Granted 7,552,301 $43.62
Exercised 7,112,285 $28.93
Forfeited 2,096,389 $44.89
December 31, 2004 98,383,803 $45.79
Granted 7,305,688 $47.99
Exercised 10,096,785 $35.81
Forfeited 2,650,179 $50.99
December 31, 2005 92,942,527 $46.90
Options exercisable and weighted-average exercise prices at the end of the last three years and the weighted-average fair
values of options granted are as follows:
2005 2004 2003
Number of shares at year-end 72,183,632 44,592,980 48,498,026
Weighted-avg. price at year-end $46.30 $47.04 $45.11
Weighted-avg. fair value of options granted during year $8.78 $8.18 $8.98
The fair value of options granted is calculated using the Black-Scholes option pricing model. Assumptions used were as
follows:
2005 2004 2003
Dividend yield 2.9% 3.2% 3.6%
Volatility 23.35% 26.4% 28.1%
Risk-free interest rate 3.7% 3.0% 3.4%
Expected life (years) 4.5 4.5 6.2
F-38