ISTA » Topics » Description of the Amendments

This excerpt taken from the ISTA DEF 14A filed Oct 30, 2009.

Description of the Amendments

General. The purpose of the Amendments are to enable us to attract, retain and motivate our employees and consultants, as well as our non-employee directors, by providing for or increasing the proprietary interests of such employees, consultants or non-employee directors in the Company. The maximum number of shares of common stock that may be issued pursuant to awards under the 2004 Plan is currently 6,153,107, subject to certain adjustments to prevent dilution. It is proposed that, through the adoption of the Amendments, the maximum number of shares of common stock that may be issued pursuant to awards under the 2004 Plan be increased by 6,000,000 shares, or from 6,153,107 to 12,153,107 shares, subject to certain adjustments to prevent dilution. The Amendments also propose to increase correspondingly the maximum limitation on the number of shares subject to incentive options from 5,453,107 to 10,703107 shares and subject to restricted stock and performance shares from 700,000 to 1,450,000 shares, subject to certain adjustments to prevent dilution. The above increases in the number of authorized shares and the corresponding increases in the maximum limitation on inventive stock options and restricted and performance shares are the only proposed changes to the 2004 Plan currently in effect included in the Amendments.

Shares Reserved for Issuance. Stockholder approval of the Amendments will authorize us to grant options and/or rights to purchase or otherwise acquire up to an additional 6,000,000 shares, or an aggregate of 12,153,107 shares of common stock, of which up to 1,450,000 shares may only be issued in connection with restricted stock and performance-share awards.

In the event that all or any portion of any option, restricted stock or performance shares granted or offered under the 2004 Plan can no longer under any circumstances be exercised or, with respect to restricted stock or performance shares solely, is reacquired by us, the shares of common stock allocable to the unexercised portion of such option or such stock purchase agreement, or, with respect to restricted stock or performance shares solely, the shares so reacquired, will become available for grant or issuance under the 2004 Plan. Additionally, the number of shares available for issuance under the 2004 Plan will be subject to adjustment in the event of stock splits, stock dividends or certain other similar changes in our capital structure.

 

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Administration. The 2004 Plan is administered by an “Administrator,” which, under the Amendments, shall be either the Board of Directors or a committee appointed by the Board of Directors. The Compensation Committee of the Board of Directors currently administers the 2004 Plan. Subject to the provisions of the 2004 Plan, the Administrator has full authority to implement, administer and make all determinations necessary under the 2004 Plan.

The Board of Directors may from time to time alter, amend, suspend or terminate the 2004 Plan in such respects as the Board of Directors may deem advisable; provided, however, that no such alteration, amendment, suspension or termination shall be made that would substantially affect or impair the rights of any person under any incentive option, nonqualified option, restricted share or performance share theretofore granted to such person without his or her consent. Unless previously terminated by the Board of Directors, the 2004 Plan will terminate on June 10, 2014.

Eligibility. The 2004 Plan provides that awards may be granted to employees, officers, directors, consultants, independent contractors and advisors of the Company or of any parent or subsidiary corporation of the Company, whether now existing or hereafter created or acquired, or an Affiliated Company, as defined in the 2004 Plan, as may be determined by the Administrator. In no event may any employee be granted options under the 2004 Plan for more than 400,000 shares of our common stock in any one calendar year. However, in connection with his or her initial service to the Company, an employee may be eligible to be granted options for up to 800,000 shares of our common stock during the calendar year which includes such individual’s initial service to the Company.

Terms of Stock Options. As discussed above, the Administrator determines many of the terms and conditions of awards granted under the 2004 Plan, including whether an option will be an “incentive stock option,” or an ISO, or a “non-qualified stock option,” or an NQSO. Each option is evidenced by any agreement in such form as the Administrator approves and is subject to the following conditions (as described in further detail in the 2004 Plan):

 

   

Vesting and Exercisability: Options become vested and exercisable, as applicable, within such periods as determined by the Administrator and as set forth in the related stock option agreement, provided that options must expire no later than ten years from the date of grant (or five years with respect to incentive stock options, or ISOs, granted to optionees who own more than 10% of the outstanding common stock). Option agreements may also provide that options shall become vested upon the achievement of certain performance goals, as determined by the Administrator.

 

   

Exercise Price: The exercise price must be at least 100% of the fair market value of a share of common stock at the time such option is granted, provided that the exercise price of any ISO granted to an optionee that owns more than 10% of the outstanding common stock shall not be less than 110% of the fair market value of a share of common stock at the time of grant.

 

   

Method of Exercise: Payment of the exercise price may be made, in the discretion of the Administrator, in cash, by check, by delivery of shares of our common stock, through a broker-assisted “cashless exercise,” or any combination of the foregoing methods of payment or any other consideration or method of payment as shall be permitted by applicable corporate law.

 

   

Termination of Service: Options cease vesting on the date of termination of service or the death or disability of the optionee, unless provided otherwise in the applicable option agreement or unless otherwise determined by the Administrator. Under applicable law, ISOs granted under the 2004 Plan generally expire no later than three months after the termination of the optionee’s service, except in the case of death or disability, in which case the awards generally may be exercised up to 12 months following the date of death or termination of service due to disability.

 

   

Change of Control: In the event of a change in control of the Company (as defined in the 2004 Plan), the Administrator may at its discretion provide for vesting arrangements in option agreements, including arrangements which provide for full acceleration of vesting upon a change in control whether or not the acquiring entity agrees to assume or substitute for existing options in such change in control.

 

   

Additional Restrictions: No ISOs may be granted to an optionee under the 2004 Plan if the aggregate fair market value (determined at the time of grant) of the stock with respect to which ISOs first become exercisable by such optionee in any calendar year under our stock option plans and any Affiliated Company exceeds $100,000. To the extent an ISO exceeds this $100,000 limit, that portion of the option in excess of such limitation shall be treated as a non-qualified stock option, or NQSO. Options are nontransferable, other than by will and the laws of descent and distribution or in any manner permitted by the Administrator that is not prohibited by the Code.

 

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Terms of Restricted Stock Awards. Each restricted stock award is evidenced by a restricted stock purchase agreement in such form as the Administrator approves and is subject to the following conditions (as described in further detail in the 2004 Plan):

 

   

Vesting: Shares subject to a restricted stock award may become vested over time or upon completion of performance goals set out in advance.

 

   

Purchase Price: Each restricted stock purchase agreement states the purchase price, which may not be less than the par value of our common stock on the date of the award, payment of which generally may be made as described under “Terms of Stock Options” above.

 

   

Termination of Service: Restricted stock awards shall cease to vest immediately if a participant is terminated for any reason, unless provided otherwise in the applicable restricted stock purchase agreement or unless otherwise determined by the Administrator, and we will generally have the right to repurchase any unvested shares subject thereto.

 

   

Change of Control: Restricted stock awards shall be treated in the same manner as described under “Terms of Stock Options” above.

Terms of Performance Shares. The 2004 Plan provides for the grant of performance shares, or Performance Shares, subject to such conditions and the attainment of such performance goals over such periods as the Administrator determines in writing and sets forth in a written agreement. Performance Shares are unfunded bookkeeping entries generally having initial values equal to the fair market value determined on the grant date of a share of common stock. A predetermined amount of Performance Shares that may be earned by the participant to the extent that one or more predetermined performance goals are attained within a predetermined performance period will be specified. To the extent earned, Performance Shares are settled in shares of common stock (including shares of restricted stock). Following completion of the applicable performance period, the Administrator will certify in writing the extent to which the applicable performance goals have been attained and the resulting number of shares credited to the participant. If a participant’s service terminates due to the participant’s death, disability or retirement prior to completion of the applicable performance period, the Administrator may apply for full or partial credit as the Administrator may determine consistent with the 2004 Plan. No Performance Shares may be sold or transferred other than by will or the laws of descent and distribution prior to the end of the applicable performance period.

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