ABB » Topics » Management incentive plan (MIP)

This excerpt taken from the ABB 20-F filed Apr 18, 2007.

Management incentive plan (MIP)

We maintain an MIP under which we offer stock warrants and warrant appreciation rights (WARs) to key employees for no consideration.

Warrants granted under the MIP allow participants to purchase shares of ABB Ltd at predetermined prices. Participants may sell the warrants rather than exercise the right to purchase shares. Equivalent warrants are listed by a third-party bank on the SWX Swiss Exchange, which facilitates pricing and transferability of warrants granted under the MIP. If the participant elects to sell the warrant on the market rather than exercise the right to purchase shares, the warrant may then be held by a non-employee of ABB. Each WAR gives the participant the right to receive, in cash, the market price of a warrant on the date of exercise of the WAR. The WARs are non-transferable.

Participants may exercise or sell warrants and exercise WARs after the vesting period, which is three years from the date of grant. Vesting restrictions can be waived in certain circumstances such as death or disability. All warrants and WARs expire six years from the date of grant.

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The details of the various unexpired grants as of December 31, 2006, are as follows:

Grant

 

 

 

Warrant exercise price in CHF

 

Subscription ratio

 

December 2001

 

 

13.49

 

 

 

100:25.21

 

 

December 2003

 

 

7.00

 

 

 

5:1

 

 

December 2004

 

 

7.50

 

 

 

5:1

 

 

February 2006

 

 

15.30

 

 

 

5:1

 

 

 

This excerpt taken from the ABB 20-F filed May 27, 2005.

Management Incentive Plan (MIP)

        We have a management incentive plan under which approximately 1,200 key employees received warrants and warrant appreciation rights for no consideration over the course of eight launches from 1998 to 2004. The warrants are exercisable for shares at a predetermined price, not less than the fair market value as of the date of grant. Participants may also sell the warrants rather than exercise the right to purchase shares. Equivalent warrants are listed on the SWX Swiss Exchange, which facilitates valuation and transferability of warrants granted under the management incentive plan.

        Each warrant appreciation right entitles the holder to an amount in cash equal to the market price of one equivalent warrant on the SWX Swiss Exchange on the date of exercise of the warrant appreciation right. Warrant appreciation rights are not transferable. Participants may exercise or sell warrants or exercise warrant appreciation rights only during the 30 days immediately following publication of our interim or annual results. No exercise or sale is permitted until after the vesting period, which is three years from date of grant, although vesting restrictions can be waived in certain circumstances such as death or disability. All warrants and warrant appreciation rights expire six years from the date of grant.

        As of March 31, 2005, the warrants outstanding represented the rights to acquire 21,894,263 of our shares (representing less than 2 percent of our total outstanding shares), including the right of the current members of our executive committee to acquire an aggregate of 740,330 shares. Also on that date, the warrant appreciation rights represented the rights to receive the cash equivalent to the market price of 131,030,020 warrants, including the right of the current members of our executive committee to receive the cash equivalent to the market price of 2,350,000 warrants. Our obligations under the management incentive plan are covered by contingent share capital. See Note 22 to the Consolidated Financial Statements for additional information regarding the management incentive plan.

        The amounts of warrants outstanding include those instruments held by employees of the former ABB ALSTOM POWER joint venture, a discontinued operation. Under the terms and conditions of the management incentive program, employees of the former ABB ALSTOM POWER joint venture retain their entitlements in the management incentive plan.

        As of March 31, 2005, 55,230,560 warrants representing the right to purchase 13,923,413 shares (representing less than 1 percent of our total outstanding shares) were exercisable and 80,540,520 warrant appreciation rights were exercisable.

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        The following table sets forth the number of warrants outstanding under the management incentive plan as of March 31, 2005.

Launch (Year)

  Warrants Outstanding
  Exercise Ratio
(Warrants: Shares)

  Number of Shares
Underlying Warrants

  Exercise Price
(CHF)

  Expiration Date
3 (1999)   4,648,060(1)   1:0.2521   1,171,758(1)   29.75   06/10/05
4 (1999)   14,565,000(1)   1:0.2521   3,671,781(1)   32.73   11/11/05
5 (2000)   19,630,000(1)   1:0.2521   4,948,648(1)   42.05   06/13/06
6 (2001)   16,387,500(1)   1:0.2521   4,131,226(1)   13.49   12/10/07
7 (2003)   25,379,250       1:0.2000   5,075,850       7.00   12/08/09
8 (2004)   14,475,000       1:0.2000   2,895,000       7.50   12/13/10

(1)
All of the warrants from Launches 3, 4, 5 and 6, representing the right to purchase an aggregate of 13,923,413 shares, are currently exercisable.

        The following table sets forth the number of warrant appreciation rights outstanding under the management incentive plan as of March 31, 2005.

Launch (Year)

  Warrant Appreciation Rights Outstanding(1)
  Expiration Date
3 (1999)   345,520   06/09/05
4 (1999)   16,700,000   11/10/05
5 (2000)   30,335,000   06/12/06
6 (2001)   33,160,000   12/09/07
7 (2003)   19,999,500   12/07/09
8 (2004)   30,490,000   12/13/10

(1)
With respect to each launch, the warrant appreciation right represents a future right to receive the cash equivalent of the market price of a warrant issued in the same launch year.

EXCERPTS ON THIS PAGE:

20-F
Apr 18, 2007
20-F
May 27, 2005
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