Stockholder Rights Plan Restricted Stock Treasury Stock Other Employee Stock Purchase Plan The Company also maintains the Nonemployee Directors and Consultants Stock Incentive Program (the “Nonemployee Program”), which became effective April  1 , 2000 , and was amended on March  1 , 2001 . Under the Nonemployee Program, each non-employee director annually receives  10,000 stock options. Additionally each non-employee director may elect to receive all or a portion of the cash retainer to which the director is otherwise entitled through the issuance of stock options. As of December  31 , 2001 , 81,370 options were issued under the Nonemployee Program. Stock option activity under the Program and the Nonemployee Program was as follows: option-pricing model with the following assumptions: expected life of five years, expected volatility of  45 %, risk- free interest rate of  5.8 % and no dividend yield. The weighted- average fair value for options granted during  2001 and  2000 was $ 7.00 and $ 6.39 , respectively. The Company expects to grant additional awards in future years. In connection with the Distribution, the Company adopted a Stockholder Rights Plan to protect stockholders’ rights in the event of a proposed or actual acquisition of  15 % or more of the outstanding shares of the Company’s common stock. As part of this plan, each share of the Company’s common stock carries a right to purchase one one-hundredth ( 1/100 ) of a share of Series A Junior Participating Preferred Stock (the “Rights”), par value $ 0.01 per share, subject to adjustment, which becomes exercisable only upon the occurrence of certain events. The Rights are subject to redemption at the option of the Board of Directors at a price of $ 0.01 per right until the occurrence of certain events. The Rights expire on March  31 , 2010 , unless earlier redeemed or exchanged by the Company. The Company has made one-time grants of  5,000 shares of restricted stock to each of the non-employee directors pursuant to the Nonemployee Program. These grants vest  50 % after one year and the balance vests after two years from the date of grant. An aggregate of  300,000 shares of the Company’s common stock has been authorized for issuance pursuant  to the Nonemployee Program. Grants of restricted stock to non-employees are charged to unearned compensation in Stockholders’ Equity at their intrinsic value and recognized as expense over the vesting period. Compensation expense recognized for such grants was approximately $ 0.2 million for both  2001 and  2000 . During  2000 , Edwards Lifesciences issued to certain hourly employees approximately  125,000 shares of the Company’s common stock valued at $ 1.7 million. The Company currently has two employee stock purchase plans (“ESPPs”) for eligible employees to purchase shares of the Company’s common stock at  85 % of the lower of the fair market value of Edwards Lifesciences common stock on the effective date of subscription or the date of purchase. One of the plans is for eligible U.S. employees, and the other is for eligible international employees. Under the ESPPs, employees can authorize the Company to withhold up to  12 % of their compensation during any offering periods for common stock purchases, subject to certain limitations. The ESPPs were implemented on June  1 , 2001 . The ESPP for eligible United States employees is qualified under Section  423 of the Internal Revenue Code. The Board of Directors authorized an aggregate of  2,150,000 shares of the Company’s common stock for issuance under the ESPPs. As of December  31 , 2001 , a total of  160,309 shares have been issued under the plans. In November  2001 , the Company’s Board of Directors approved a stock repurchase program authorizing the Company to purchase on the open market and in privately negotiated trans- actions up to  2 million shares of the Company’s outstanding common stock. Stock repurchased under the program will primarily be used to offset dilution resulting from shares issued under the Company’s employee stock option programs. During  2001 , the Company repurchased  26,800 shares at an aggregate cost of approximately $ 686,000 . The timing and size of any future stock repurchases are subject to a variety of factors, including market conditions, stock prices and other cash requirements. if compensation expense for the Company’s stock options had been recognized, based upon the fair value of awards granted, the Company’s net income for  2001 and  2000 would have been reduced by $ 9 million and $ 7 million, respectively, resulting in a net loss of $ 20 million and $ 279 million, respectively, or $( 0.34 ) and pro forma $( 4.79 ) per share, respectively, for both basic and diluted net loss per share. The fair value of each option granted during  2001 and  2000 is estimated based on the date of grant using the Black-Scholes The Company applies the provisions of Accounting Principles Board (“APB”) Opinion No. 25 , “Accounting for Stock Issued to Employees,” in accounting for stock-based compensation; therefore, no compensation expense has been recognized for its fixed stock option plans as options generally are granted at fair market value based upon the closing price on the date immediately preceding the grant date. The Company has adopted the disclosure requirements for SFAS No. 123 , “Accounting for Stock-Based Compensation.” Accordingly, The following table summarizes stock options outstanding at December  31 , 2001 : Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 2001 2000 Weighted Weighted Average Average Number Exercise Number Exercise (options in thousands) of Options Price of Options Price Outstanding, beginning of year 7,686 $ 13.59 — $ — Options issued with the Distribution — — 7,852 13.37 Options granted during period 1,123 22.01 424 16.87 Options exercised ( 481 ) 12.14 — — Options canceled ( 612 ) 14.33 ( 590 ) 13.14 Outstanding, end of year 7,716 14.79 7,686 13.59 Exercisable, end of year 1,857 $ 13.46 523 $ 10.20 Outstanding Exercisable Average Weighted Weighted Remaining Average Average Number Contractual Exercise Number Exercise Range of Exercise Prices  (options in thousands) of Options Life (Years) Price of Options Price $ 13.88 (Founders Options) 4,690 8.3 $ 13.88 4 $ 13.88 $ 10.20 - $ 15.71 (Conversion Options) 1,637 6.4 12.22 1,454 11.91 $ 15.44 - $ 26.64 (Other options) 1,389 9.3 20.90 399 19.11 7,716 8.0 14.79 1,857 13.46 44 Edwards Lifesciences Corporation 45 Edwards Lifesciences Corporation