DDIC » Topics » Background

This excerpt taken from the DDIC DEF 14A filed Apr 17, 2007.

Background

The Board of Directors adopted the 2005 Plan as the preferred vehicle for making future awards of share-based incentive compensation to eligible employees, consultants and directors of the Company and its affiliates.

The 2005 Plan permits the granting of stock options (both incentive and nonqualified), share appreciation rights (“SARs”), restricted Common Stock, deferred share units and performance awards. Each of the Company’s executive officers, directors and nominees for election as a director is eligible to receive awards pursuant to the 2005 Plan. Currently, the maximum number of shares of its Common Stock that may be issued pursuant to awards under the 2005 Plan is 2,142,857 shares. As of the Record Date, options to purchase 1,917,743 shares of Common Stock have been awarded and not cancelled under the 2005 Plan (of which options to purchase 35,951 shares have been exercised and options to purchase 1,881,792 shares remain outstanding), leaving only 225,114 shares of Common Stock remaining to be issued or transferred pursuant to awards made under the 2005 Plan.

The Board of Directors continues to believe that such a compensatory award program is an important factor in attracting, retaining and motivating officers, other key employees, directors and consultants of the Company and its subsidiaries. In light of the number of employees of the Company and its subsidiaries, and the fact that the Company may in the future make acquisitions resulting in the hiring of additional employees, the Board of Directors has recognized the need for an additional number of shares of Common Stock which may be issued or transferred in connection with awards made under the 2005 Plan.

In view of the foregoing, the Board of Directors believes that it is appropriate to increase the number of shares of Common Stock which may be issued or transferred pursuant to the 2005 Plan in the form of an amendment to the 2005 Plan to be presented to the stockholders. Accordingly, the Board of Directors has adopted, subject to stockholder approval, the Share Amendment to the 2005 Plan, which amends Section 3 of the 2005 Plan to increase the number of shares of Common Stock that may be issued or transferred pursuant to awards granted under the Incentive Plan by 1,000,000 shares, from 2,142,857 to 3,142,857 shares of Common Stock.

If the Share Amendment is not approved by the stockholders at the Annual Meeting, the 2005 Plan will remain in effect; however, as stated above, only 225,114 shares of Common Stock remain available for grant as of the Record Date. If the Share Amendment is approved by the stockholders at the Annual Meeting, further dilution to the stockholders would occur upon the exercise of such future awards granted under the Amended Incentive Plan.

The Board of Directors believes that the 2005 Plan is an important factor in attracting, retaining and motivating employees, consultants and directors of the Company and its affiliates. The Board believes that the Company needs the flexibility both to have an increased reserve of Common Stock available for future equity-based awards.

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