Sony 2003 Annual Report Download - page 206

Consolidated Financial Information 2003
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17. Stock-based compensation plans
Sony has four types of stock-based compensation plans as incentive plans for directors and selected
employees.
(1) Warrant plan:
Upon issuance of unsecured bonds with detachable warrants which are described in Note 12, Sony
Corporation has purchased all of the detachable warrants and distributed them to the directors and selected
employees of Sony. By exercising a warrant, directors and selected employees can purchase the common
stock or subsidiary tracking stock of Sony Corporation, the number of which is designated by each plan. The
warrants generally vest ratably over a period of three years, and are generally exercisable up to six years
from the date of grant.
(2) Convertible Bond plan:
In April 2000, Sony adopted an equity-based compensation plan for selected executives of Sony’s United
States of America subsidiaries using U.S. dollar-denominated non-interest bearing convertible bonds which
have characteristics similar to that of an option plan. Each convertible bond can be converted into 100
shares of the common stock of Sony Corporation at an exercise price based on the prevailing market rate
shortly before the date of grant. The convertible bonds vest ratably over a three-year period and are
exercisable up to ten years from the date of grant. As the convertible bonds were issued in exchange for a
non-interest bearing employee loan, no accounting recognition was given to either the convertible bonds or
the employee loans in Sony’s consolidated balance sheet as a right of offset exists between the convertible
bonds and the employee loans.
(3) Stock Acquisition Rights:
During the year ended March 31, 2003, Sony adopted an equity-based compensation plan that issues
common stock acquisition rights for the purpose of granting stock options to the directors and selected
employees of Sony, and subsidiary tracking stock acquisition rights for the purpose of granting stock options
to the directors and selected employees of Sony Communication Network Corporation, pursuant to the
Commercial Code of Japan. The stock acquisition rights generally vest ratably over a three-year period and
are exercisable up to ten years from the date of grant.