This excerpt taken from the SMSI DEF 14A filed Aug 21, 2007.
Non-Employee Director Automatic Option Grant Program
Under the Automatic Option Grant Program, each individual will receive, at the time he or she first becomes a non-employee Board member, whether through election by the stockholders or appointment by the Board, an option grant for 10,000 shares of common stock, provided such individual was not previously in the Companys employ. In addition, at each annual stockholders meeting each individual who is re-elected to the Board as a non-employee Board member will automatically be granted a stock option to purchase 5,000 shares of common stock, provided such individual has served as a non-employee Board member for at least six months. There will be no limit on the number of such annual grants which any one non-employee Board member may receive over his or her period of Board service, and non-employee Board members who have previously served in the Companys employ will be fully eligible for one or more annual grants over their period of Board service.
Each option under the Automatic Option Grant Program will have an exercise price per share equal to one hundred percent (100%) of the fair market value per share of common stock on the option grant date and have a maximum term of ten (10) years measured from such grant date. The option will be immediately exercisable for all the option shares, but any shares acquired pursuant to such early exercise will be subject to repurchase by the Company, at the exercise price paid per share, upon the optionees cessation of Board service prior to vesting in those shares. The shares subject to each initial option will vest (and the Companys repurchase rights will lapse) in four (4) successive equal annual installments over the optionees period of Board service, with the first such installment to vest upon the completion of one (1) year of Board service measured from the option grant date. The shares of common stock subject to each annual option grant will vest (and the Companys repurchase rights will lapse) upon optionees completion of one (1) year of Board service measured from the option grant date.
The shares subject to each outstanding automatic option grant will immediately vest should the optionee die or become permanently disabled while a Board member. Each automatic option grant held by an optionee upon his or her termination of Board service will remain exercisable, for any or all of the option shares in which the optionee is vested at the time of such termination, for up to a twelve (12)-month period following such termination date.
During the lifetime of the optionee, each automatic option grant may be transferred to one or more members of the optionees immediate family or to a trust established exclusively for one or more such family members.