Xerox 2003 Annual Report Download - page 84

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from us one three-hundredth of a new series of pre-
ferred stock at an exercise price of $250. Within the
time limits and under the circumstances specified in
the plan, the Rights entitle the holder to acquire either
our common stock, the stock of the surviving compa-
ny in a business combination, or the stock of the pur-
chaser of our assets, having a value of two times the
exercise price. The Rights, which expire in April 2007,
may be redeemed prior to becoming exercisable by
action of the Board of Directors at a redemption price
of $.01 per Right. The Rights are non-voting and, until
they become exercisable, have no dilutive effect on
the earnings per share or book value per share of our
common stock.
Note 17 – Common Stock
We have 1.75 billion authorized shares of common
stock, $1 par value. At December 31, 2003, 138 million
shares were reserved for issuance under our incentive
compensation plans. In addition, at December 31, 2003,
2 million common shares were reserved for the con-
version of convertible debt, 31 million common shares
were reserved for conversion of Series B Convertible
Preferred Stock, 113 million common shares were
reserved for the conversion of Convertible Securities
related to our liability to Trust II, 90 million common
shares were reserved for the conversion of the Series C
Mandatory Convertible Preferred Stock and 48 million
common shares were reserved for debt to equity
exchanges.
2003 2002 2001
Average Average Average
Stock Option Stock Option Stock Option
Employee Stock Options Options Price Options Price Options Price
Outstanding at January 1 76,849 $26 68,829 $29 58,233 $35
Granted 31,106 10 14,286 10 15,085 5
Cancelled (6,840) 21 (5,668) 34 (4,479) 28
Exercised (3,276) 6 (598) 5 (10) 5
Outstanding at December 31 97,839 21 76,849 26 68,829 29
Exercisable at end of year 58,652 45,250 36,388
Stock Option and Long-term Incentive Plans: We have
a long-term incentive plan whereby eligible employees
may be granted non-qualified stock options, shares of
common stock (restricted or unrestricted) and stock
appreciation rights (“SARs”). Stock options and stock
awards are settled with newly issued shares of our
common stock, while SARs are settled with cash.
We granted 1.6 million, 1.6 million and 1.9 million
shares of restricted stock to key employees for the years
ended December 31, 2003, 2002 and 2001, respectively.
No monetary consideration is paid by employees who
receive restricted shares. Compensation expense for
restricted grants is based upon the grant date market
price and is recorded over the vesting period which on
average ranges from one to three years. Compensation
expense recorded for restricted grants was $15, $17 and
$15 in 2003, 2002 and 2001, respectively.
SARs permit the employee to receive cash equal
to the excess of the market price at date of exercise
over the market price at the date of grant. SARs gener-
ally vest over a three-year period and expire 10 years
from the date of grant. In 2003, we recorded $2 of
compensation expense relating to SARs.
Stock options generally vest over a period of six
months to three years and expire between eight and
ten years from the date of grant. The exercise price of
the options is equal to the market value of our com-
mon stock on the effective date of grant.
At December 31, 2003 and 2002, 21.4 million and
43.2 million shares, respectively, were available for
grant of options or awards. The following table pro-
vides information relating to the status of, and changes
in, stock options granted for each of the three years
ended December 31, 2003 (stock options in thousands):