This excerpt taken from the SMSI DEF 14A filed Aug 21, 2007.
PROPOSAL 1: APPROVAL OF AN AMENDMENT AND RESTATEMENT OF THE
2005 STOCK OPTION/STOCK ISSUANCE PLAN
Our 2005 Stock Option/Stock Issuance Plan (the 2005 Plan) was adopted by the Board of Directors in February 2005 and was approved by the Companys stockholders in July 2005. In July 2007, the Board of Directors adopted and approved an amendment and restatement of the 2005 Plan to, among other things, increase the maximum number of shares of common stock that may be issued under the 2005 Plan from 5,000,000 shares (plus an annual increase described below) to 7,000,000 shares (plus the annual increase). Under applicable NASDAQ Stock Market rules, the company is required to obtain stockholder approval of this amendment and restatement of the 2005 Plan. Such approval is also necessary to permit the company to continue to grant incentive stock options to employees under Section 422 of the Internal Revenue Code of 1986, as amended (the Code), and to ensure that compensation paid under the Plan continue to be eligible for an exemption from the limits on the tax deductibility imposed by Section 162(m) of Code. Code Section 162(m) limits the deductibility of certain compensation paid to individuals who are covered employees as defined under Section 162(m) and described in more detail below.
As of July 31, 2007, there were awards outstanding under the 2005 Plan to acquire 4,307,470 shares of common stock at a weighted average exercise price of $10.63 per share. As of July 31, 2007, eight executive officers, five non-employee Board members and approximately 189 other employees and consultants were eligible to participate in the Discretionary Option Grant and Stock Issuance Programs, and five non-employee Board members were eligible to participate in the Automatic Option Grant Program.
The purpose of the 2005 Plan is to promote the interests of the Company and its stockholders by providing officers and other employees of the company with appropriate incentives and rewards to encourage them to enter into and remain in their positions with the company and to acquire a proprietary interest in the long term success of the company, thereby aligning their interests more closely with the interests of the companys stockholders. As of July 31, 2007, no shares of common stock remained available for issuance under the 2005 Plan. If the stockholders do not approve this amendment, the 2005 Plan will continue in full force in accordance with its terms as they are now in effect.
The following summary of the material terms of the 2005 Plan, as amended and restated, does not purport to be a complete description of all the provisions of the Plan, and is qualified in its entirety by the terms of the 2005 Plan, as amended and restated, a copy of which is attached as Appendix A hereto.