STOCK OPTIONS AND STOCK BASED COMPENSATION
The Board of Directors adopted the 2004 Stock Option Plan (2004 Plan) in August 2004 and the 1995 Stock
Option Plan (1995 Plan) in December 1995, which was amended in August 1996 and restated in August 1998.
An option granted under the 2004 Plan and/or 1995 Plan (the Plans) might be either an incentive stock option
(ISO), or a nonstatutory stock option (NSO). ISOs may be granted only to employees and members of the Board
of Directors of the Company and are subject to certain limitations, in addition to restrictions applicable to all
stock options under the Plan. Options not meeting these limitations will be treated as NSOs. The purchase price
of ISOs is fair market value on the date of grant; the purchase price of NSOs may vary from fair market value.
Vesting is at the discretion of the compensation committee of the Board of Directors, but generally is either 50%
at grant date and 16.7% on each anniversary thereafter; 25% at grant date and 25% on each anniversary thereafter
or 0% at grant date and 33% on each anniversary date thereafter. The Company initially reserved 400,000 shares
for issuance under the 1995 Plan and 300,000 shares for issuance under the 2004 Plan. The 1995 Plan expired in
December 2005 and no additional options may be issued under the 1995 Plan, although expiration of the 1995
Plan did not affect the rights of persons who received stock grants under the 1995 Plan. Stock-based
compensation recognized in the Company’s Consolidated Financial Statements for the years ended May 31,
2014, 2013 and 2012 includes compensation cost for stock-based awards granted. All outstanding options will
expire no later than 2023.
The Company uses the Black-Scholes option pricing model as its method of valuation for stock-based awards.
The Company’s determination of the fair value of stock-based awards on the date of grant using an option pricing
model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective
variables. Although the fair value of stock-based awards is determined in accordance with ASC Topic 718, the
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STOCK OPTIONS AND STOCK BASED COMPENSATIONThe Board of Directors adopted the 2004 Stock Option Plan (2004 Plan) in August 2004 and the 1995 StockOption Plan (1995 Plan) in December 1995, which was amended in August 1996 and restated in August 1998.An option granted under the 2004 Plan and/or 1995 Plan (the Plans) might be either an incentive stock option(ISO), or a nonstatutory stock option (NSO). ISOs may be granted only to employees and members of the Boardof Directors of the Company and are subject to certain limitations, in addition to restrictions applicable to allstock options under the Plan. Options not meeting these limitations will be treated as NSOs. The purchase priceof ISOs is fair market value on the date of grant; the purchase price of NSOs may vary from fair market value.Vesting is at the discretion of the compensation committee of the Board of Directors, but generally is either 50%at grant date and 16.7% on each anniversary thereafter; 25% at grant date and 25% on each anniversary thereafteror 0% at grant date and 33% on each anniversary date thereafter. The Company initially reserved 400,000 sharesfor issuance under the 1995 Plan and 300,000 shares for issuance under the 2004 Plan. The 1995 Plan expired inDecember 2005 and no additional options may be issued under the 1995 Plan, although expiration of the 1995Plan did not affect the rights of persons who received stock grants under the 1995 Plan. Stock-basedcompensation recognized in the Company’s Consolidated Financial Statements for the years ended May 31,2014, 2013 and 2012 includes compensation cost for stock-based awards granted. All outstanding options willexpire no later than 2023.The Company uses the Black-Scholes option pricing model as its method of valuation for stock-based awards.The Company’s determination of the fair value of stock-based awards on the date of grant using an option pricingmodel is affected by our stock price as well as assumptions regarding a number of highly complex and subjectivevariables. Although the fair value of stock-based awards is determined in accordance with ASC Topic 718, thePage
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