Bank of America 2003 Annual Report Download - page 55

106 BANK OF AMERICA 2003
Key Employee Stock Plan
The Key Employee Stock Plan, as amended and restated, provided for
different types of awards. These include stock options, restricted
stock shares and restricted stock units. Under the plan, ten-year
options to purchase approximately 130 million shares of common
stock were granted through December 31, 2002, to certain employ-
ees at the closing market price on the respective grant dates.
Options granted under the plan generally vest in three or four equal
annual installments. At December 31, 2003, approximately 72 mil-
lion options were outstanding under this plan. No further awards may
be granted under this plan.
Key Associate Stock Plan
On April 24, 2002, the shareholders approved the Key Associate
Stock Plan to be effective January 1, 2003. This approval authorized
and reserved 100 million shares for grant in addition to the remain-
ing amount under the Key Employee Stock Plan as of December 31,
2002, which was approximately 17 million shares plus any shares
covered by awards under the Key Employee Stock Plan that termi-
nate, expire, lapse or are cancelled after December 31, 2002. At
December 31, 2003, approximately 29 million options were out-
standing under this plan. Approximately 4 million shares of restricted
stock and restricted stock units were granted during 2003. These
shares of restricted stock generally vest in three equal annual install-
ments beginning one year from the grant date. The Corporation
incurred restricted stock expense of $276 million, $250 million and
$182 million in 2003, 2002 and 2001, respectively.
The Corporation has certain stock-based compensation plans
that were not approved by its shareholders. These broad-based plans
are the 2002 Associates Stock Option Plan, Take Ownership! and the
Barnett Employee Stock Option Plan. Descriptions of the material fea-
tures of these plans follow.
2002 Associates Stock Option Plan
The Bank of America Corporation 2002 Associates Stock Option Plan
covered all employees below a specified executive grade level. Under
the plan, eligible employees received a one-time award of a prede-
termined number of options entitling them to purchase shares of the
Corporation’s common stock. All options are nonqualified and have
an exercise price equal to the fair market value on the date of grant.
Approximately 54 million options were granted on February 1, 2002
at $61.36, the closing price for that day. The options vest as follows:
50 percent of the options become exercisable after the Corporation’s
common stock closes at or above $76.36 per share for ten consec-
utive trading days; the remaining 50 percent of the options become
exercisable after the Corporation’s common stock closes at or above
$91.36 for ten consecutive trading days. During 2003, the first
option vesting trigger was achieved. Regardless of the stock price, all
options will be fully exercisable beginning February 1, 2006. In addi-
tion, the options continue to be exercisable following termination of
employment under certain circumstances. At December 31, 2003,
approximately 28 million options were outstanding under this plan.
The options expire on January 31, 2007.
Take Ownership!
The Bank of America Global Associate Stock Option Program (Take
Ownership!) covered all employees below a specified executive grade
level. Under the plan, eligible employees received an award of a pre-
determined number of stock options entitling them to purchase
shares of the Corporation’s common stock at the fair market value on
the grant date. All options are nonqualified. The options, which were
granted on the first business day of 1999, 2000 and 2001, vested
25 percent on the first anniversary of the grant date, 25 percent on
the second anniversary of the grant date and 50 percent on the third
anniversary of the grant date. At January 2, 2004, all options issued
under this plan were fully vested. These options expire five years
after the grant date. In addition, the options continue to be exercis-
able following termination of employment under certain circum-
stances. At December 31, 2003, approximately 12 million options
were outstanding under this plan. No further awards may be granted
under this plan.
BANK OF AMERICA 2003 107
The following table presents information on equity compensation plans at December 31, 2003:
Number of Shares
Remaining for
Number of Shares to be Weighted Average Future Issuance
Issued Upon Exercise of Exercise Price of Under Equity
( Dollars in millions) Outstanding Options(1) Outstanding Options(2) Compensation Plans(3)
Plans approved by shareholders 125,192,323 $ 62.66 86,728,537
Plans not approved by shareholders 39,982,774 57.29 –
Total 165,175,097 $ 61.32 86,728,537
(1) Includes 5,009,407 unvested restricted stock units.
(2) Does not take into account unvested restricted stock units.
(3) Excludes shares to be issued upon exercise of outstanding options.
represents a long-term average view of the performance of the Pension
Plan and Postretirement Health and Life Plan assets, a return that may
or may not be achieved during any one calendar year. In a simplistic
analysis of the EROA assumption, the building blocks used to arrive at
the long-term return assumption would include an implied return from
equity securities of 9.0 percent, debt securities of 6.5 percent, and real
estate of 9.0 percent for all pension plans and postretirement health
and life plans.
The Pension Plan asset allocation at December 31, 2003 and
2002 and target allocation for 2004 by asset category are as follows:
Percentage of Plan Assets
2004 Target at December 31
Asset Category Allocation 2003 2002
Equity securities 65 - 80% 71% 63%
Debt securities 20 - 35% 28 35
Real estate 0 - 3% 12
Total 100% 100%
Equity securities include common stock of the Corporation in the
amounts of $809 million (9.02 percent of total plan assets) and
$725 million (9.64 percent of total plan assets) at December 31,
2003 and 2002, respectively.
The Postretirement Health and Life Plans’ asset allocation at
December 31, 2003 and 2002 and target allocation for 2004 by
asset category are as follows:
Percentage of Plan Assets
2004 Target at December 31
Asset Category Allocation 2003 2002
Equity securities 55 - 65% 69% 57%
Debt securities 35 - 45% 31 43
Total 100% 100%
The Postretirement Health and Life Plans had no investment in the
common stock of the Corporation at December 31, 2003 or 2002.
Projected Benefit Payments
Benefit payments projected to be made from the Qualified Pension
Plan, the Nonqualified Pension Plans and the Postretirement Health
and Life Plans are as follows:
Nonqualified Postretirement
Qualified Pension Health and
(Dollars in millions) Pension Plan(1) Plans(2) Life Plans(3)
2004 $495 $ 64 $ 93
2005 517 34 93
2006 542 47 92
2007 572 42 91
2008 627 47 89
2009 - 2013 3,651 284 427
(1) Benefit payments expected to be made from plan assets.
(2) Benefit payments expected to be made from the Corporation’s assets.
(3) Benefit payments (net of retiree contributions) expected to be made from a combination of
the plans’ and the Corporation’s assets.
Defined Contribution Plans
The Corporation maintains a qualified defined contribution retirement
plan and a nonqualified defined contribution retirement plan. There
are two components of the qualified defined contribution plan, the
Bank of America 401(k) Plan (the 401(k) Plan): an employee stock
ownership plan (ESOP) and a profit-sharing plan. Prior to 2001, the
ESOP component of the 401(k) Plan featured leveraged ESOP provi-
sions. See Note 14 of the consolidated financial statements for addi-
tional information on the ESOP provisions.
The Corporation contributed approximately $204 million, $200
million and $196 million for 2003, 2002 and 2001, respectively, in
cash and stock which was utilized primarily to purchase the
Corporation’s common stock under the terms of the 401(k) Plan. At
December 31, 2003 and 2002, an aggregate of 45 million shares
and 44 million shares, respectively, of the Corporation’s common
stock and 1 million shares and 1 million shares, respectively, of ESOP
Preferred Stock were held by the Corporation’s 401(k) Plan.
Under the terms of the ESOP Preferred Stock provision, pay-
ments to the plan for dividends on the ESOP Preferred Stock were $4
million for 2003 and $5 million for both 2002 and 2001. Payments
to the plan for dividends on the ESOP Common Stock were $45 mil-
lion, $34 million and $27 million during the same periods. Interest
incurred to service the debt of the ESOP Preferred Stock and ESOP
Common Stock amounted to $300 thousand for 2001. As of
December 31, 2001, all principal and interest associated with the
debt of the ESOP Preferred Stock and ESOP Common Stock have
been repaid.
In addition, certain non-U.S. employees within the Corporation
are covered under defined contribution pension plans that are sepa-
rately administered in accordance with local laws.
Note 17 Stock-based Compensation Plans
At December 31, 2003, the Corporation had certain stock-based
compensation plans that are described below. For all stock-based
compensation awards issued prior to January 1, 2003, the
Corporation applies the provisions of APB 25 in accounting for its
stock option and award plans. Stock-based compensation plans
enacted after December 31, 2002, are accounted for under the pro-
visions of SFAS 123. For additional information on the accounting for
stock-based compensation plans and pro forma disclosures, see
Note 1 of the consolidated financial statements.