ABB » Topics » ESAP

This excerpt taken from the ABB 20-F filed Mar 10, 2009.

ESAP

        The Employee Share Acquisition Plan (ESAP) is an employee stock-option plan with a savings feature. Employees save over a 12-month period, by way of monthly salary deductions. The maximum monthly savings amount is the lower of 10 percent of gross monthly salary or the local currency equivalent of CHF 750. At the end of the savings period, employees choose whether to exercise their stock options to buy ABB shares (ADS in the case of employees in the U.S.) at the exercise price set at the grant date, or have their savings returned with interest. The savings are accumulated in a bank account held by a third-party trustee on behalf of the participants and earn interest.

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Table of Contents

        The maximum number of shares that each employee can purchase has been determined based on the exercise price and the aggregate savings for the 12-month period, increased by 10 percent to allow for currency fluctuations. If, at the exercise date, the balance of savings plus interest exceeds the maximum amount of cash the employee must pay to fully exercise their stock options, the excess funds will be returned to the employee. If the balance of savings and interest is insufficient to permit the employee to fully exercise their stock options, the employee has the choice, but not the obligation, to make an additional payment so that they may fully exercise their stock options.

        If an employee ceases to be employed by ABB, the accumulated savings as of the date of cessation of employment will be returned to the employee and the employee's right to exercise their stock options will be forfeited. Employees can withdraw from the ESAP at any time during the savings period and will be entitled to a refund of their accumulated savings.

        The exercise price per share and ADS of CHF 15.30 and USD 12.98, respectively, for the 2008 grant, were determined using the closing price of the ABB share on the SIX Swiss Exchange (SWX Europe) and ADS on the New York Stock Exchange on the grant date.

This excerpt taken from the ABB 20-F filed Mar 19, 2008.

ESAP

        The ESAP is an employee stock-option plan with a savings feature. Employees save over a twelve-month period, by way of monthly salary deductions. At the end of the savings period, employees choose whether to exercise their stock options using their savings plus interest to buy ABB Ltd shares (American Depositary Shares (ADS) in the case of employees in the United States—each ADS representing one registered share of the Company) at the exercise price set at the grant date, or have their savings returned with interest. The savings are accumulated in a bank account held by a third-party trustee on behalf of the participants and earn interest. Employees can withdraw from the ESAP at any time during the savings period and will be entitled to a refund of their accumulated savings.

        The fair value of each option is estimated on the date of grant using the same option valuation model as described under the MIP, using the assumptions noted in the table below. The expected term of the option granted has been determined to be the contractual one-year life of each option, at the end of which the options vest and the participants are required to decide whether to exercise their options or have their savings returned with interest. The risk-free rate is based on one-year Swiss franc interest rates, reflecting the one year contractual life of the options. In estimating forfeitures, the Company has used the data from previous ESAP launches.

 
  2007 grant
  2006 grant
  2005 grant
Expected volatility   34%   30%   27%
Dividend yield   0.89%   0.81%   0.97%
Expected term   1 year   1 year   1 year
Risk-free interest rate   2.82%   2.13%   1.40%

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Note 20—Share-based payment arrangements (Continued)

        Presented below is a summary of activity under the ESAP during the year ended December 31, 2007:

 
  Number of shares(1)
  Weighted-average exercise price (in Swiss francs)(2)
  Weighted-average remaining contractual term (in years)
  Aggregate
intrinsic value
(in millions of
Swiss francs)(2)(3)

Outstanding at January 1, 2007   4,022,310   18.55        
Granted   2,772,670   34.98        
Forfeited   (163,930 ) 18.55        
Exercised(4)   (3,730,651 ) 18.55        
Not exercised (savings returned plus interest)   (127,729 ) 18.55        
Outstanding at December 31, 2007   2,772,670   34.98   0.8  
Vested and expected to vest at December 31, 2007   2,658,991   34.98   0.8  
Exercisable at December 31, 2007        

(1)
Includes shares represented by ADS.

(2)
Information presented for ADS is based on equivalent Swiss franc denominated awards.

(3)
Computed using the closing price, in Swiss francs, of ABB Ltd shares on the SWX Swiss Exchange (virt-x) and the exercise price of each option in Swiss francs.

(4)
The cash received upon exercise amounted to $61 million and the corresponding tax benefit was $13 million. The shares were issued out of contingent capital.

        The exercise prices per ABB Ltd share and per ADS of 34.98 Swiss francs and $29.78, respectively, for the 2007 grant, 18.55 Swiss francs and $14.75, respectively, for the 2006 grant, and 10.30 Swiss francs and $7.88, respectively, for the 2005 grant were determined using the closing price of the ABB Ltd share on SWX Swiss Exchange (virt-x) and ADS on the New York Stock Exchange on the respective grant dates.

        At December 31, 2007, there was $10 million of total unrecognized compensation cost related to non-vested options granted under the ESAP. That cost will be recognized over the first 10 months of 2008. The weighted-average grant-date fair value of options granted during 2007, 2006 and 2005, was 4.93 Swiss francs, 2.32 Swiss francs and 1.12 Swiss francs, respectively. The total intrinsic value (on the day of exercise) of options exercised in 2007, 2006 and 2005 was 61 million Swiss francs, 50 million Swiss francs and 22 million Swiss francs, respectively.

EXCERPTS ON THIS PAGE:

20-F
Mar 10, 2009
20-F
Mar 19, 2008
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