Bank of America 2010 Annual Report Download - page 223

NOTE 20 Stock-based Compensation Plans
The Corporation administers a number of equity compensation plans, includ-
ing the Key Employee Stock Plan, the Key Associate Stock Plan and the Merrill
Lynch Employee Stock Compensation Plan. Descriptions of the material
features of the equity compensation plans are below. Under these plans,
the Corporation grants long-term stock-based awards, including stock options,
restricted stock shares and RSUs. For 2010, restricted stock awards gener-
ally vest in three equal annual installments beginning one year from the grant
date, with the exception of certain awards to financial advisors that vest eight
years from the grant date, and an award of restricted stock shares that was
vested on the grant date but released from restrictions over 18 months.
For most awards, expense is generally recognized ratably over the vesting
period net of estimated forfeitures, unless the associate meets certain
retirement eligibility criteria. For associate awards that meet retirement eli-
gibility criteria, the Corporation records the expense upon grant. For associ-
ates that become retirement eligible during the vesting period, the Corpora-
tion recognizes expense from the grant date to the date on which the
associate becomes retirement eligible, net of estimated forfeitures. The
compensation cost for the following stock-based plans was $2.0 billion,
$2.4 billion and $885 million in 2010, 2009 and 2008, respectively. The
related income tax benefit was $727 million, $892 million and $328 million
for 2010, 2009 and 2008, respectively.
Key Employee Stock Plan
The Key Employee Stock Plan, as amended and restated, provided for
different types of awards including stock options, restricted stock shares
and RSUs. Under the plan, 10-year options to purchase approximately
260 million shares of common stock were granted through December 31,
2002 to certain employees at the closing market price on the respective grant
dates. At December 31, 2010, approximately 36 million fully vested options
were outstanding under this plan. No further awards may be granted.
Key Associate Stock Plan
The Key Associate Stock Plan became effective January 1, 2003. It provides
for different types of long-term awards, including stock options, restricted stock
shares and RSUs. As of December 31, 2010, the shareholders had authorized
approximately 1.1 billion shares for grant under this plan. Additionally, any
shares covered by awards under the Key Employee Stock Plan or certain legacy
company plans that cancel, terminate, expire, lapse or settle in cash after a
specified date may be re-granted under the Key Associate Stock Plan.
In February 2010, the Corporation issued approximately 191 million RSUs
to certain employees under the Key Associate Stock Plan. These awards
generally vest in three equal annual installments beginning one year from the
grant date. Vested RSUs will be settled in cash unless the Corporation
authorizes settlement in common shares. Certain awards contain clawback
provisions which permit the Corporation to cancel all or a portion of the award
under specified circumstances. The compensation cost for cash-settled
awards and awards subject to certain clawback provisions is accrued over
the vesting period and adjusted to fair value based upon changes in the share
price of the Corporation’s common stock. The compensation cost for the
remaining awards is fixed and based on the share price of the common stock
on the date of grant, or the date upon which settlement in common stock has
been authorized. The Corporation hedges a portion of its exposure to vari-
ability in the expected cash flows for unvested awards using a combination of
economic and cash flow hedges as described in Note 4 – Derivatives.During
2010, the Corporation authorized approximately 100 million RSUs to be
settled in common shares and terminated a portion of the corresponding
economic and cash flow hedges. As a result of the decision to share-settle
these RSUs, these share-settled RSUs are no longer adjusted to fair value
based upon changes in the share price of the Corporation’s common stock.
At December 31, 2010, approximately 140 million options were outstand-
ing under this plan. There were no options granted under this plan during
2010 or 2009.
Merrill Lynch Employee Stock Compensation Plan
The Corporation assumed the Merrill Lynch Employee Stock Compensation
Plan. Shares can be granted under this plan in the future. Approximately
34 million shares of RSUs were granted in 2009 which generally vest in three
equal annual installments beginning one year from the grant date. Awards
granted prior to 2009 generally vest in four equal annual installments begin-
ning one year from the grant date. There were no shares granted under this
plan during 2010. At December 31, 2010, there were approximately 28 million
shares outstanding.
Other Stock Plans
As a result of the Merrill Lynch acquisition, the Corporation assumed the
obligations of outstanding awards granted under the Merrill Lynch Financial
Advisor Capital Accumulation Award Plans (FACAAP) and the Merrill Lynch
Employee Stock Purchase Plan (ESPP). The FACAAP is no longer an active plan
and no awards were granted in 2010 or 2009. Awards granted in 2003 and
thereafter are generally payable eight years from the grant date in a fixed
number of the Corporation’s common stock. For outstanding awards granted
prior to 2003, payment is generally made ten years from the grant date in a
fixed number of the Corporation’s common shares unless the fair value of
such shares is less than a specified minimum value, in which case the
minimum value is paid in cash. At December 31, 2010, there were 18 million
shares outstanding under this plan.
The ESPP allows eligible associates to invest from one percent to 10 per-
cent of eligible compensation to purchase the Corporation’s common stock,
subject to legal limits. Purchases were made at a discount of up to five percent
of the average high and low market price on the relevant purchase date and
the maximum annual contribution per employee was $23,750 in 2010. Up to
107 million shares have been authorized for issuance under the ESPP in
2010. There were 12 million shares available at January 1, 2010 and 3 million
shares purchased during the year. There were 9 million shares available at
December 31, 2010.
The weighted-average fair value of the ESPP stock purchase rights (i.e.,
the five percent discount on the Corporation’s common stock purchases)
exercised by employees in 2010 is $0.80 per stock purchase right.
Restricted Stock/Unit Details
The following table presents the status of the share-settled restricted stock/
unit awards at December 31, 2010 and changes during 2010.
Shares
Weighted-
average
Exercise Price
Outstanding at January 1, 2010 175,028,022 $14.30
Granted 216,874,053 14.40
Vested (164,904,893) 15.66
Cancelled (14,924,513) 13.81
Outstanding at December 31, 2010 212,072,669 13.37
At December 31, 2010, there was $944 million of total unrecognized
compensation cost related to share-based compensation arrangements for
all awards and it is expected to be recognized over a period up to seven years,
with a weighted-average period of 1.07 years. The total fair value of restricted
stock vested in 2010 was $2.4 billion. In 2010, the amount of cash used to
settle equity instruments was $186 million.
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