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This excerpt taken from the XIDE DEF 14A filed Jul 16, 2007. Options
The Committee views the granting of stock options as an integral
element of any equity-based award. Under the Company’s 2004
Plan, options vest over a three-year period and must be
exercised within ten years of the grant date. An option’s
value increases or decreases in connection with the fluctuations
in price of the Company’s common stock. Consequently, the
Committee views such awards as aligning executives’
interests with long-term shareholder return.
The number of options granted is based, in part, on the
theoretical value of the options. The Committee uses the
Black-Scholes Valuation Model (“BSVM”), a common form
of fair value model. The BSVM is a complex calculation designed
to provide the theoretical value of an option at the date of
grant. The BSVM calculates a probability distribution of future
stock prices at a future exercise date by using an expected
return equal to the risk-free rate of return. The return varies
with the volatility of the security calculated as of the date of
grant. Probability-weighted future payouts are then discounted
back to present day dollars based on a risk-free rate of return.
The parameters used in valuations include:
• Volatility: The
tendency of the underlying option’s market price to
fluctuate either up or down.
• Grant
Price: Market value of stock
price on day stock option was granted.
The Committee does not set the exercise price of stock options
as of the date the award is granted. Rather, as a result of the
Company’s obligation to comply with the terms of its
Warrant Agreement, dated May 5, 2004, the Committee
determined that the award of options for the first
3,125,000 shares under the 2004 Plan must be issued with an
exercise price based on the ten-day trailing average closing
price of the Company’s common stock prior to the date of
grant. The actual exercise price for options can therefore be
greater than, equal to or less than the stock price on the date
of grant. For each of the Company’s October 13, 2004
and November 29, 2005 grants, the exercise price was
greater than the closing price of the Company’s stock on
the date of grant. The exercise price for options granted on
September 21, 2006 and March 22, 2007 was lower than
the closing price on the grant date.
This excerpt taken from the XIDE DEF 14A filed Jul 27, 2006. Options
Pursuant to the 2004 Plan, 603,038 options (net of forfeitures)
were granted to executive officers in fiscal 2006, representing
68.2% of all options awarded. The options have a three-year
vesting period, with one-third of the options vesting on
November 29, 2006, one-third vesting on November 29,
2007 and the remaining one-third vesting on November 29,
2008. The option awards are valued using the Black-Scholes model
based on outside consultant review and determination of peer
companies and their volatility rates and the exercise price was
set at the
10-day
trailing average closing price of common stock immediately prior
to the grant date.
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