JP Morgan Chase 2005 Annual Report Download - page 103

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JPMorgan Chase & Co. /2005 Annual Report 101
The following table presents a summary of JPMorgan Chase’s option and SAR activity under the LTI Plans during the last three years:
2005 2004 2003
Year ended December 31,(a) Number of Weighted-average Number of Weighted-average Number of Weighted-average
(Options/SARs in thousands) options/SARs exercise price options/SARs exercise price options exercise price
Outstanding, January 1 376,330 $ 37.59 294,026 $ 39.88 298,731 $ 40.84
Granted 17,248 35.55 16,667 39.79 26,751 22.15
Bank One Conversion, July 1 NA NA 111,287 29.63 NA NA
Exercised (26,731) 24.28 (27,763) 25.33 (14,574) 17.47
Canceled (28,272) 44.77 (17,887) 46.68 (16,882) 47.57
Outstanding, December 31 338,575 $ 37.93 376,330 $ 37.59 294,026 $ 39.88
Exercisable, December 31 286,017 $ 38.89 246,945 $ 36.82 176,163 $ 37.88
(a) 2004 includes six months of awards for the combined Firm and six months of awards for heritage JPMorgan Chase. 2003 reflects the awards for heritage JPMorgan Chase only.
Restricted stock and RSUs are granted by JPMorgan Chase at no cost to the
recipient. These awards are subject to forfeiture until certain restrictions have
lapsed, including continued employment for a specified period. The recipient
of a share of restricted stock is entitled to voting rights and dividends on the
common stock. An RSU entitles the recipient to receive a share of common
stock after the applicable restrictions lapse; the recipient is entitled to receive
cash payments equivalent to any dividends paid on the underlying common
stock during the period the RSU is outstanding. Effective January 2005, the
equity portion of the Firm’s annual incentive awards were granted primarily
in the form of RSUs.
The vesting of certain awards issued prior to 2002 is conditioned upon certain
service requirements being met and JPMorgan Chase’s common stock reaching
and sustaining target prices within a five-year performance period. During
2002, it was determined that it was no longer probable that the target stock
prices related to forfeitable awards granted in 1999, 2000, and 2001 would
be achieved within their respective performance periods, and accordingly,
previously accrued expenses were reversed. The target stock prices for
these awards range from $73.33 to $85.00. These awards were forfeited as
follows: 1.2 million shares granted in 1999 were forfeited in January 2004;
and 1.2 million shares granted in 2000 were forfeited in January 2005.
Additionally, 1.2 million shares granted in 2001 were forfeited in January 2006.
Broad-based employee stock options
No broad-based employee stock option grants were made in 2005. Prior
awards were granted by JPMorgan Chase under the Value Sharing Plan, a
non-shareholder-approved plan. The exercise price is equal to JPMorgan
Chase’s common stock price on the grant date.The options become exercisable
over various periods and generally expire 10 years after the grant date.
The following table details the distribution of options and SARs outstanding under the LTI Plans at December 31, 2005:
Options/SARs outstanding Options/SARs exercisable
(Options/SARs in thousands) Weighted-average Weighted-average remaining Weighted-average
Range of exercise prices Outstanding exercise price contractual life (in years) Exercisable exercise price
$7.27–$20.00 2,504 $ 19.12 0.8 2,503 $ 19.12
$20.01–$35.00 125,422 28.02 5.8 88,418 27.22
$35.01–$50.00 135,263 40.04 4.9 119,710 40.13
$50.01–$63.48 75,386 51.27 4.8 75,386 51.27
Total 338,575 $ 37.93 5.2 286,017 $ 38.89
The following table presents a summary of JPMorgan Chase’s restricted stock
and RSU activity under the LTI Plans during the last three years:
(in thousands) Number of restricted stock/RSUs
Year ended December 31,(a) 2005 2004 2003
Outstanding, January 1 85,099 85,527 55,886
Granted 38,115 32,514 44,552
Bank One conversion NA 15,116 NA
Lapsed(b) (30,413) (43,349) (12,545)
Forfeited (8,197) (4,709) (2,366)
Outstanding, December 31 84,604 85,099 85,527
(a) 2004 includes six months of awards for the combined Firm and six months of awards for
heritage JPMorgan Chase. 2003 reflects the awards for heritage JPMorgan Chase only.
(b) Lapsed awards represent both restricted stock for which restrictions have lapsed and RSUs
that have been converted into common stock.