Graco 2010 Annual Report Download - page 76

Newell Rubbermaid Inc. 2010 Annual Report
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72 NEWELL RUBBERMAID 2010 Annual Report
FOOTNOTE 15
STOCK-BASED COMPENSATION
The Company offers stock-based compensation to its employees that includes stock options, restricted stock awards, and
time-based and performance-based restricted stock units, as follows:
Stock Options
The Company has issued both nonqualified and incentive stock options at exercise prices equal to the Company’s common stock
price on the date of grant with contractual terms of ten years. Stock options issued by the Company generally vest and are expensed
ratably over three to five years, except that in the case of termination due to death, disability or retirement at age 65 or old e r,
options became fully vested and were exercisable for one year following termination. In 2008, the Company modified the
retirement provisions applicable to future option grants so that in the case of retirement (as defined in the stock option agreement),
options fully vest and are exercisable for a period of time depending on the employee’s age and years of service. Stock option
grants are generally subject to forfeiture if employment terminates prior to vesting, except upon retirement, in which case the
options may remain outstanding and exercisable for the remaining contractual term of the option.
Restricted Stock and Time-Based Restricted Stock Units
Awards of restricted stock and restricted stock units are independent of stock option grants and are generally subject to forfeiture
if employment terminates prior to vesting. The awards generally cliff-vest three years from the date of grant. In 2008, the Company
modified the retirement provisions applicable to future restricted stock awards so that in the case of retirement at age 65 or
older, the awards fully vest. With respect to future awards of restricted stock units, in the case of retirement (as defined in the
award agreement), awards vest depending on the employee’s age and years of service. Prior to vesting, ownership of restricted
shares cannot be transferred. The restricted stock has the same dividend and voting rights as the common stock, and the time-
based restricted stock units have rights to dividend equivalents payable in cash. The Company expenses the cost of restricted
stock awards and restricted stock units ratably over the vesting period, which is generally three years.
Performance-Based Restricted Stock Units
Performance-based restricted stock unit awards represent the right to receive unrestricted shares of stock based on the
achievement of Company performance objectives and/or individual performance goals established by the Organizational
Development & Compensation Committee and the Board of Directors. In 2010 and 2009, the Company awarded approximately
0.9 million and 1.2 million performance-based restricted stock units, respectively, which entitle recipients to shares of the
Company’s stock at the end of a three-year vesting period if specified market conditions are achieved by the Company. The
performance-based restricted stock units entitle recipients to shares of common stock equal to 0% up to 200% of the number
of units granted at the vesting date, depending on the level of achievement of the specified conditions. Performance-based
restricted stock units are not subject to the payment of dividend equivalents in the same manner as time-based restricted stock
units. Rather, with respect to performance-based restricted stock units, dividend equivalents are credited to the recipient and
are paid only to the extent the applicable performance criteria are met and the performance-based restricted stock units vest
and the related stock is issued. In the case of retirement (as defined in the award agreement), awards vest depending on the
employee’s age and years of service.
Stock Plans
The Company’s stock plans include plans adopted in 1993, 2003 and 2010. In 2010, a plan was approved by the Company’s
stockholders (the “2010 Plan”). Upon approval of the 2010 Plan, shares available for issuance of new awards under all plans other
than the 2010 Plan were cancelled, and all future grants are required to be made from the 2010 Plan. The total number of shares
of the Company’s common stock that may be issued under the 2010 Plan may not exceed 21.0 million; however, stock awards and
stock units for one share reduce availability under the 2010 Plan by 2½ shares. The 2010 Plan generally provides for awards to
vest over a minimum three-year period, except for performance-based grants, which may vest over a minimum of one year.
The following table depicts the number of shares authorized for issuance and availability under the 2010 Plan (shares in millions):
2010 Plan
Authorized for issuance 21.0
Reserved for issuance of outstanding:
Options —
Restricted stock awards/units 0.3
Performance-based restricted stock units —
Shares available for issuance 20.2