NEW YORK, N.Y. -- Cendant Corp., which owns Avis and is in the process of acquiring Budget Group, announced it will expense future stock option grants beginning Jan. 1, 2003.

The company said it expects to reduce the issuance of stock options for employees in the future and instead use grants of restricted stock. Cendant estimated the prospective per-share expense of its equity compensation programs will be 3 to 4 cents in 2003 and gradually increase over time.

In addition, the Cendant Board of Directors voted to extend Chairman and CEO Henry R. Silverman's contract through 2012 but eliminate his annual stock option grant. Instead, Silverman will receive an incentive bonus tied to Cendant's pre-tax earnings. He won't receive restricted stock.

In 2002, Silverman's reported compensation is expected to drop by more than 50% and is estimated to be approximately $15 million, Cendant said. In comparison, Silverman's reported compensation in 2001 was $36 million.

Silverman, who voluntarily forfeited his annual stock option grant in 2002, is one of Cendant's largest stockholders. He directly owns 8 million shares of Cendant common stock and has options to purchase 36.4 million shares of Cendant common stock.