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Table of Contents
Index to Financial Statements
Stock Purchase Plan
In July 1996, the Company’s shareholders approved the 1996 Stock Purchase Plan (the “1996 Purchase Plan”), and reserved 2,600,000
shares of common stock for sale to employees at a price no less than 85% of the lower of the fair market value of the common stock at the
beginning of the two-year offering period or the end of each of the six-month purchase periods. During 2002, the reserved shares of the 1996
Purchase Plan were reduced to zero, with 341,904 additional shares remaining to be purchased by employees. In May 2002, the Company’s
shareholders approved an increase in the authorized shares by 341,904, which were subsequently purchased by employees. As a result, these
shares were accounted for as variable plan options on which the Company recognized a charge of $0.4 million in 2002 during the time they
were in escrow. Also in May 2002, the shareholders of the Company approved the 2002 Employee Stock Purchase Plan (the “2002 Purchase
Plan”), and reserved 5,000,000 shares of common stock for sale to employees at a price no less than 85% of the lower of the fair market value
of the common stock at the beginning of the one-year offering period or the end of each of the six-month purchase periods. At December 31,
2003, 3,428,519 shares were available for purchase under the 2002 Purchase Plan.
Additional Stock Plan Information
As permitted by SFAS No. 123, the Company applied APB Opinion 25 and related interpretations in accounting for its stock option
based on the fair value of options at the grant date as prescribed by SFAS No. 123, the related pro forma expense that would have been
recorded is described in Note 2.
The Company’s calculations were made using the Black-Scholes option-pricing models with the following weighted-
average assumptions
applied to grants made in the following periods:
Under SFAS No. 123, the fair value of stock-based awards to employees is calculated using option pricing models, even though such
models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly
differ from the Company’s stock option awards. These models also require subjective assumptions, including future stock price volatility and
expected time to exercise, which greatly affect the calculated values.
The Company’s calculations are based on a multiple option valuation approach and forfeitures are recognized as they occur. The
valuations of the computed weighted-average fair values of option grants under SFAS No. 123 were $2.83 for 2003, $4.69 for 2002 and $4.14
for 2001.
Supplemental Executive Retirement Plan
Year Ended December 31,
2003
2002
2001
Dividend yield
—
—
—
Expected volatility
66
%
71
%
74
%
Risk
-
free interest rate
3
%
4
%
5
%
Expected life of option following vesting (in months)
19
36
32
The Board of Directors adopted the SERP for certain executive officers in 2001, which was terminated in April 2003. The Company
made cash contributions to the SERP of $15.6 million in 2002 and $12.1 million in 2001. The Company did not make any contributions in
2003 and recovered approximately $6 million of cash previously contributed to the SERP in October 2003. The Company recognized $24.5
million in compensation expense for 2001 related to the SERP. In 2002, the Company recognized a benefit of $16.1 million in executive
agreement and loan settlement related to the return of vested benefits in the SERP by the Company’s former CEO.
87