NOTE 14– STOCK PROGRAMS NOTE 13– COMMON STOCK The Company has established the Fiscal 2002 Share Incentive Plan, the Fiscal 1999 Share Incentive Plan, the Fiscal 1996 Share Incentive Plan and the Non-Employee Director Share Incentive Plan (collectively, the “Plans”) and, additionally, has made available stock options and share units that were, or will be, granted pursuant to these Plans and certain employment agreements. These stock- based compensation programs are described below. As of June 30, 2003, the Company’s authorized common stock consists of 650 million shares of Class A Common Stock, par value $.01 per share, and 240 million shares of Class B Common Stock, par value $.01 per share. Class B Common Stock is convertible into Class A Common Stock, in whole or in part, at any time and from time to time at the option of the holder, on the basis of one share of Class A Common Stock for each share of Class B Com- mon Stock converted. Holders of the Company’s Class A Common Stock are entitled to one vote per share and holders of the Company’s Class B Common Stock are entitled to ten votes per share. Total net compensation expense attributable to the granting of share units and the increase in value of exist- ing share units was $1.4 million and $0.7 million in fiscal 2003 and 2001, respectively. Total net compensation income attributable to the granting of share units and the related decrease in value of existing share units was $0.2 million in fiscal 2002. Information about the Company’s common stock out- standing is as follows: The Plans provide for the issuance of 30,750,000 shares to be awarded in the form of stock options, stock appre- ciation rights and other stock awards to key employees and stock options, stock awards and stock units to non- employee directors of the Company. As of June 30, 2003, 6,457,000 shares of Class A Common Stock were reserved and were available to be granted pursuant to the Plans. The exercise period for all stock options generally may not exceed ten years from the date of grant. Pursuant to the Plans, stock option awards in respect of 6,651,200, 2,175,300 and 2,709,500 shares were granted in fiscal 2003, 2002 and 2001, respectively, and share units in respect of 57,800, 50,000 and 43,100 shares were granted in fiscal 2003, 2002 and 2001, respectively. During fiscal 2003, approximately 800 share units were converted into shares of Class A Common Stock. During fiscal 2002, 40,700 share units were cancelled without the issuance of any shares, but the value of such units was transferred to a deferred compensation account. Gener- ally, the stock option awards become exercisable at various times through January 2007, while the share units will be paid out in shares of Class A Common Stock at a time to be determined by the Company. On September 18, 1998, the Company’s Board of Direc- tors authorized a share repurchase program to repurchase a total of up to 8.0 million shares of Class A Common Stock in the open market or in privately negotiated trans- actions, depending on market conditions and other fac- tors. In October 2002, the Board of Directors authorized the repurchase of up to 10.0 million additional shares of Class A Common Stock increasing the total authorization under the share repurchase program to 18.0 million shares. As of June 30, 2003, approximately 13.8 million shares have been purchased under this program. In addition to awards made by the Company, certain outstanding stock options were assumed as part of the October 1997 acquisition of Sassaby. Of the 221,200 originally issued options to acquire shares of the Com- pany’s Class A Common Stock, 14,100 were outstanding as of June 30, 2003, all of which were exercisable and will expire through May 2007. 76 THEEST{E LAUDER COMPANIES INC. Share Incentive Plans Class A Class B (Shares in thousands) Balance at June 30, 2000 124,181.7 113,679.3 Acquisition of treasury stock (0.9) — Conversion of Class B to Class A 189.0 (189.0) Stock option programs 806.2 — Balance at June 30, 2001 125,176.0 113,490.3 Acquisition of treasury stock (1,500.0) — Conversion of Class B to Class A 5,077.8 (5,077.8) Stock option programs 436.3 — Balance at June 30, 2002 129,190.1 108,412.5 Acquisition of treasury stock (11,245.2) — Conversion of Class B to Class A 950.0 (950.0) Share grants 4.0 — Share units converted 0.8 — Stock option programs 1,094.0 — Balance at June 30, 2003 119,993.7 107,462.5