O'Reilly Auto Parts 2004 Annual Report Download - page 47

2004 ANNUAL REPORT 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company has in effect a performance incentive plan for the Company's senior management under which 400,000 shares of stock were reserved
for issuance. Shares awarded under the plan vest equally over a three-year period and are held in escrow until such vesting has occurred. Shares are for-
feited when an employee ceases employment. Shares, net of forfeitures, issued under the plan during the years ended December 31 were as follows:
Year Market
Funded Shares Value
2004 7,917 $302,000
2003 10,530 248,000
2002 4,779 175,000
NOTE 8—SHAREHOLDERS’ EQUITY
Shareholder Rights Plan
On May 17, 2002, the Board of Directors adopted a Shareholder Rights Plan. One Right was distributed for each share of common stock, par value
$.01 per share, of the Company held by stockholders of record as of the close of business on May 31, 2002. The Rights initially entitle stockholders
to buy a unit representing one one-hundredth of a share of a new series of preferred stock of the Company for $160 and expire on May 30, 2012.
The Rights generally will be exercisable only if a person or group acquires beneficial ownership of 15% or more of the Company's common stock or
commences a tender or exchange offer upon consummation of which such person or group would beneficially own 15% or more of the Company's
common stock. If a person or group acquires beneficial ownership of 15% or more of the Company's common stock, each Right (other than Rights
held by the acquiror) will, unless the Rights are redeemed by the Company, become exercisable upon payment of the exercise price of $160 for
common stock of the Company having a market value of twice the exercise price of the Right. A copy of the Stockholder Rights Plan was filed on
May 28, 2002, with the Securities and Exchange Commission, as Exhibit 99.1 to our report on Form 8-K.
Stock Option Plans
The Company has a stock option plan under which incentive stock options or non-qualified stock options may be granted to officers and key
employees. An aggregate of 12,000,000 shares of common stock were reserved for issuance under this plan. The exercise price of options granted
shall not be less than the fair market value of the stock on the date of grant and the options will expire no later than ten years from the date of grant.
Options granted pursuant to the plan become exercisable no sooner than six months from the date of grant. All grants under the plan since its
inception have been non-qualified stock option grants. A summary of outstanding stock options under this plan is as follows:
Number
Price per Share of Shares
Outstanding at December 31, 2001 $ 8.69 - 37.62 3,277,135
Granted 24.96 - 35.48 712,500
Exercised 8.69 - 30.23 (296,858)
Canceled 8.75 - 38.00 (202,075)
Outstanding at December 31, 2002 $ 8.94 - 37.62 3,490,702
Granted 23.01 - 44.81 1,035,750
Exercised 8.94 - 37.62 (1,051,940)
Canceled 8.94 - 38.98 (222,413)
Outstanding at December 31, 2003 $10.56 - 44.81 3,252,099
Granted 37.06 - 46.75 858,125
Exercised 10.56 - 40.39 (470,977)
Canceled 10.94 - 46.29 (239,114)
Outstanding at December 31, 2004 $10.94 - 46.75 3,400,133
Options to purchase 1,612,600, 1,223,409 and 1,566,104 shares of common stock were exercisable at December 31, 2004, 2003, and 2002, respectively.
The Company also maintains a stock option plan for non-employee directors of the Company under which 500,000 shares of common stock were
reserved for issuance. All director stock options are granted at fair market value on the date of grant and expire on the earlier of termination of service