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The Company has
four stock incentive plans. The Ameritrade Holding
Corporation 1996 Long-Term Incentive Plan (the "Long-Term
Incentive Plan") and the 1996 Directors Incentive
Plan (the "Directors Plan") were established
by the Company. The Datek Online Holdings Corp.
1998 Stock Option Plan (the "Datek 1998 Plan")
and 2001 Stock Incentive Plan (the "Datek 2001
Plan") were established by Datek and amended
and restated by the Company effective September
9, 2002 in connection with the Datek merger.
The Long-Term Incentive Plan authorizes the award
of options to purchase Common Stock, Common Stock
appreciation rights, shares of Common Stock and
performance units. The Long-Term Incentive Plan
reserves 20,000,000 shares of the Company's Common
Stock for issuance to eligible employees. The Directors
Plan authorizes the award of options to purchase
Common Stock and shares of Common Stock. The Directors
Plan reserves 960,000 shares of the Company's Common
Stock for issuance to non-employee directors. Options
are generally granted by the Company at not less
than the fair market value at grant date, vest over
a one to four year period, and expire 10 years after
the grant date.
The Datek 1998 Plan and Datek 2001 Plan authorize
the award of options to purchase Common Stock. The
Datek 1998 Plan reserves 35,502,818 shares of the
Company's Common Stock for issuance to employees
or consultants of the Company; non-employee directors
of the Company; or employees of a corporation or
other business enterprise which has been acquired
by the Company, who hold options to purchase the
acquired company's stock, if the Company has agreed
to assume those options. The Datek 2001 Plan reserves
15,976,268 shares of the Company's Common Stock
for issuance to directors or non-voting observers
to the Board of Directors, officers and employees
of the Company. In connection with the Datek merger,
on September 9, 2002 the Company granted 14,179,898
replacement options pursuant to the Datek 1998 Plan,
9,618,010 replacement options pursuant to the Datek
2001 Plan and 1,399,873 replacement options pursuant
to individual compensation arrangements.
Pursuant to the Company's employment agreement with
its Chief Executive Officer (the "CEO"),
the Company is required to grant stock options to
the CEO on March 2, 2003 equal to two percent of
the then outstanding shares of Company Common Stock.
The options would be granted with an exercise price
equal to the fair market value of the Common Stock
on the grant date. The CEO must be employed by the
Company on March 2, 2003 in order to receive this
grant.
The following is a summary of the status of the
Company's outstanding stock options as of the fiscal
years ended: |
 |
| |
2002 |
|
2001 |
|
2000 |
|
|
|
|
|
|
|
|
Number
of
Options |
|
|
Weighted
Average Exercise Price |
|
|
Number
of
Options |
|
|
Weighted
Average Exercise Price |
|
|
Number
of
Options |
|
|
Weighted
Average Exercise
Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Outstanding at beginning of year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted: |
|
6,810 |
|
$ |
9.67 |
|
|
3,689 |
|
$ |
12.59 |
|
|
2,171 |
|
$ |
8.39 |
|
|
Exercise price equal to market value |
|
2,610 |
|
|
5.41 |
|
|
4,975 |
|
|
8.71 |
|
|
2,147 |
|
|
16.95 |
|
|
Exercise price below market value(1) |
|
5,943 |
|
|
1.70 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Exercise price above market value(1) |
|
19,255 |
|
|
4.71 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Exercised |
|
(619) |
|
|
1.36 |
|
|
(315) |
|
|
4.54 |
|
|
(251) |
|
|
2.11 |
|
Canceled |
|
(2,527) |
|
|
6.37 |
|
|
(1,539) |
|
|
14.62 |
|
|
(378) |
|
|
20.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Outstanding
at end of year |
|
31,472 |
|
$ |
5.20 |
|
|
6,810 |
|
$ |
9.67 |
|
|
3,689 |
|
$ |
12.59 |
| Exercisable
at end of year |
|
22,954 |
|
$ |
4.72 |
|
|
2,147 |
|
$ |
7.96 |
|
|
874 |
|
$ |
5.96 |
| Available
for future grant at end of year |
|
40,493 |
|
|
|
|
|
2,793 |
|
|
|
|
|
6,358 |
|
|
|
| Weighted
average fair value of options granted
during the year: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
price equal to market value |
|
|
|
$ |
3.66 |
|
|
|
|
$ |
6.13 |
|
|
|
|
$ |
12.68 |
|
Exercise
price below market value(1) |
|
|
|
$ |
2.03 |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
Exercise
price above market value(1) |
|
|
|
$ |
0.72 |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
| (1)
Options granted with exercise prices
above and below market value during
fiscal 2002 consist of replacement
options granted in connection with
the Datek merger. |
|
|
| The following
table summarizes information about the stock options
outstanding at September 27, 2002: |
|
| |
|
|
Options
Outstanding |
|
|
Options
Exercisable |
|
|
|
|
|
|
|
| Range
of Exercise Prices |
|
|
Number
of
Options |
|
|
Weighted
Average Remaining Contractual Life
(in years) |
|
|
Weighted
Average Exercise Price |
|
|
Number
of
Options |
|
|
Weighted
Average Exercise Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $0.99
- $4.00 |
|
|
6,484 |
|
|
3.6 |
|
$ |
1.85 |
|
|
6,364 |
|
$ |
1.82 |
| $4.01
- $8.00 |
|
|
20,626 |
|
|
6.5 |
|
|
4.85 |
|
|
14,020 |
|
|
4.71 |
| $8.01
- $12.00 |
|
|
3,133 |
|
|
8.3 |
|
|
9.03 |
|
|
1,839 |
|
|
8.66 |
| $12.01
- $16.00 |
|
|
20
|
|
|
7.6 |
|
|
15.19 |
|
|
10 |
|
|
15.19 |
| $16.01
- $20.00 |
|
|
1,019 |
|
|
7.0 |
|
|
16.80 |
|
|
531 |
|
|
16.80 |
| $20.01
- $30.00 |
|
|
87 |
|
|
7.5 |
|
|
23.19 |
|
|
87 |
|
|
23.19 |
| $30.01
- $40.00 |
|
|
103 |
|
|
6.1 |
|
|
36.50 |
|
|
103 |
|
|
36.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $0.99
- $40.00 |
|
|
31,472 |
|
|
6.1 |
|
|
5.20 |
|
|
22,954 |
|
|
4.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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| Pro forma information
regarding the net income (loss) and earnings (loss)
per share is required by SFAS No. 123. This information
is required as if the Company had accounted for
its stock-based awards to employees under the fair
value method. The fair value of options was estimated
at the date of the grant using the Black-Scholes
option pricing model with the following weighted
average assumptions for fiscal 2002, 2001 and 2000,
respectively: risk-free interest rate of 4.0 percent,
5.0 percent and 6.0 percent; dividend yield of zero
for all years; expected volatility of 82 percent,
90 percent and 85 percent; and an expected option
life of five years for all years. Pro forma net
loss and net loss per share are as follows for the
fiscal years ended: |
|
|
|
|
| From February
2001 to February 2002, Datek issued to certain employees
of a former subsidiary, The Island Holding Company,
Inc. ("Island"), Stock Appreciation Rights
("SARs") indexed to the value of Datek's
common shares. The Company issued replacement SARs
in connection with the Datek merger. Upon exercise
of these SARs, the Company must deliver cash in
an amount equal to the excess, if any, of the market
value of the Company's shares over the exercise
price. The Company includes the market value of
SARs in accrued expenses in the consolidated balance
sheet. The Company recognized compensation expense
of $0.9 million during fiscal 2002 for changes in
the market value of these SARs after the grant date.
The following table summarizes SAR activity for
fiscal 2002: |
|
|
|
|
During 2001, Datek issued to
certain of its employees SARs that are indexed to
the value of Island's Class A Shares ("Island
SARs"). Upon exercise of an Island SAR, the
Company must deliver to the employee cash in an
amount equal to the excess, if any, of the market
value of an Island Class A Share over the Island
SAR exercise price. To hedge its exposure under
the Island SAR obligations, Datek purchased from
Island options (the "Island Hedge Options")
to buy from Island Class A Shares at prices equivalent
to the exercise prices of the Island SARs. The Island
Hedge Options have exercise, forfeiture and expiration
terms that are equivalent to the Island SARs. In
September 2002, Island was acquired by Instinet
Group Incorporated ("Instinet"), which
resulted in the Island SARs and Island Hedge Options
converting to SARs and options, respectively, based
on the stock price of Instinet and the Island Hedge
Options becoming exercisable for Instinet shares.
The Company has elected to accelerate the Island
SARs in accordance with the terms of the Island
SAR plan, and accordingly will exercise the Island
Hedge Options and sell the Instinet shares acquired
under the options over a 30 day period beginning
November 6, 2002, pursuant to a resale shelf registration
statement. The Company's obligation to a holder
of an Island SAR will be equal to the excess of
the weighted average sale price from the sale of
the Instinet shares acquired upon exercise of the
Island Hedge Options, over the exercise price of
the Island SAR. At September 27, 2002, there were
1,424,055 Island SARs outstanding with a weighted
average exercise price of $0.91 per share.
Included as a reduction of additional paid-in capital
are limited recourse notes from stockholders of
$9.3 million and related accrued interest of $1.7
million as of September 27, 2002. These notes are
secured by the Common Stock issued pursuant to each
note, mature in five years from execution and accrue
interest at the prime rate. |
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