Sunnyvale chip-maker Zoran’s board of directors last week approved a plan to exchange shares held in underwater options for a lesser number of shares of restricted stock, according to a preliminary proxy filing the company made today in advance of its June 26 annual meeting, where it will ask shareholders to approve the plan.
“Like many semiconductor companies, our stock price has experienced a significant decline driven primarily by the impact the worldwide economic downturn has had on our business,” says the company in its presentation of the proposal “As a result, many of our employees
hold options with exercise prices significantly higher than the current market price of our common stock.”
Of the 8.4 million shares covered by all the outstanding options at Zoran as of April 23, 2.1 million had exercise prices ranging from $16.22 per share to $29.13 per share, while the closing price of Zoran’s stock that day was $9.03. “These ‘out-of-the-money’ options are no longer effective as performance and retention incentives,” the company argues.
The company is limiting the options that may be exchanged to those that were granted more than two years before the exchange commences and that will have a remaining term of life of more than two years as of that date, as that will also be the vesting period for the newly issued stock units.
The exchange will also be limited to options with an exercise price higher than the highest closing price of Zoran’s stock during the previous 52 weeks. Currently, that is $15.81, the closing price on June 5, 2008.