9. Stock Incentive and Option Plans

The company’s stock incentive and option plans provide for grants of stock options and stock awards. Common shares available for grant as of December 31 were 1,899,571 for 2001, 3,501,782 for 2000 and 6,291,653 for 1999.

Options may be granted to purchase shares of the company’s stock at not less than fair market value at the date of grant. Options granted in 2000 and 2001 generally become exercisable over three years from date of grant and expire within ten years from date of grant. A summary of stock option activity and average exercise prices is as follows:

Information related to stock options outstanding and stock options exercisable as of December 31, 2001, is as follows:

Stock awards are subject to forfeiture in the event of termination of employment. The value of a stock award at the date of the grant is charged to income over the periods during which the restrictions lapse.

The expense associated with shares issued under the company’s restricted stock plan is based on the market price of the company’s stock at the date of grant and is amortized on a straight-line basis over the periods during which the restrictions lapse. Restricted stock awards generally vest over a 4-year period with 50 percent vesting 2 years after grant and the remaining 50 percent vesting 4 years after grant. Stock awards are not performance based and vest with continued employment. In the computation of basic earnings per share, unvested restricted shares are not considered. The effect of restricted stock awards, cancellations and vesting are included in the computation of diluted earnings per share using the treasury stock method.

The company measures compensation cost for its stock incentive and option plans using the intrinsic value-based method of accounting.

Had the company used the fair value-based method of accounting to measure compensation expense for its stock incentive and option plans beginning in 1995 and charged compensation cost against income, over the vesting periods, based on the fair value of options at the date of grant, net income and the related basic and diluted per common share amounts for 2001, 2000 and 1999 would have been reduced to the following pro forma amounts:

The weighted-average grant-date fair value of options granted in 2001, 2000 and 1999, and the significant assumptions used in determining the underlying fair value of each option grant on the date of grant utilizing the Black-Scholes option-pricing model, were as follows: