Notes to Financial Statements

NOTE 18—Stock and Other Plans

Stock Plans
Under the Company’s 1998 Equity and Incentive Plan ("1998 Plan"), the Company may grant up to an aggregate of 10,000,000 shares of stock. Awards under the 1998 Plan may be made in the form of options (whether incentive or otherwise), stock appreciation rights, restricted stock, dividend equivalents and other stockbased awards. Options granted have a term of ten years and generally vest either over a three to five year period in equal installments or in one installment nine years from the date of grant, unless sooner vested upon the achievement of certain performance targets and other factors. The Company has also granted options to purchase 758,333 shares of Common Stock having a ten year term and vesting five to nine years from the date of grant, unless sooner vested upon the achievement of certain performance targets or unless "put" to the Company by the executive or "called" by the Company in accordance with the terms of the respective grant agreements. The total "put" and/or "call" rights are limited to $14.5 million plus interest, of which $4.5 million expired during 2000 in accordance with the terms of the option agreement and was reclassified from other liabilities to equity. Options have generally been granted at fair market value. The exercise price of all options outstanding on April 15, 1999 was reduced by $0.15 per share as a result of the spinoff of ProcureNet (see Note 5—Operations To Be Disposed Of). During 2000, the Company recorded a noncash compensation expense of $3.7 million in selling, general and administrative expense relating to a one-time change in the terms of certain stock options.

Prior to the 1998 Plan, Fisher had three stock option plans. Under these plans, the Company granted options of 21,982,000 through January 21, 1998 at which point all outstanding options vested, pursuant to the Merger Agreement. Outstanding options under these stock plans were granted at 100% of market value on the date of grant.

A summary of the status of the Company’s stock option plans at December 31, 2000, 1999, and 1998 and changes during the years then ended is presented in the following table:






Pursuant to the Merger Agreement, the vesting of all options accelerated on the date of the Recapitalization. Of the 17,570,000 options outstanding at December 31, 1997, approximately 6,720,000 were converted to cash and the remainder were converted to common stock. When the options were converted, the Company recorded compensation expense of approximately $56 million to reflect the "cashless" conversion of the options into cash or common stock having a value on the date of the Recapitalization equal to the product of (x) the excess of $9.65 over the exercise price per share of Common Stock subject to such option, and (y) the total number of shares of Common Stock subject to such option, subject to any required tax withholdings.

Restricted Unit Plan
Pursuant to the restricted unit plan of Fisher, each non-employee director of the Company received a one-time grant of 25,000 units upon becoming a director of the Company. The units represent the right to receive an equivalent number of shares of Common Stock upon separation from service as a member of the Board of Directors, subject to certain restrictions. The units are subject to certain transfer restrictions for a specified period during which the director has the right to receive dividends. The units vest 25% for each year of service. Unvested units are generally forfeited if the director ceases to be a non-employee director prior to the end of the restricted period. During 1996 and 1991, 25,000 and 100,000 units, respectively, were granted under the restricted unit plan. Pursuant to the Merger Agreement, the vesting of all units accelerated and the units were converted to cash.

SFAS 123 Pro Forma Disclosures
Had compensation cost for options granted subsequent to January 1, 1995 been based upon fair value determined under SFAS No. 123, the Company’s 2000, 1999, and 1998 net income (loss) would have been $20.4 million, $20.3 million, and ($51.2) million, respectively, with basic earnings (loss) per share of $0.51 for both 2000 and 1999 and ($1.28) for 1998, and diluted earnings (loss) per share of $0.46, $0.47, and ($1.28) for 2000, 1999, and 1998, respectively. The fair value of each option grant is estimated on the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2000, 1999, and 1998: risk-free interest rates of approximately 6.0%, 6.6% and 5.2%, respectively, annual dividend of $0; expected lives of 5 years and expected volatility of 55%, 48%, and 50%, respectively. In order to reflect the restrictive nature of the stock underlying the options granted, discount factors of 33% and 25%, depending upon the specific type of option, were applied in determining fair value.