Edgy:

You are right that management appears to be getting a bit greedy with the proposal to add to the option pot by an additional 9 million shares. It appears that there are already some 15.5 million shares under option under the two previous plans. The weighted average exercise price of the 3.9 million from the first plan is $0.68 and of the 11.6 million under the present plan $2.28. So the bulk of management's option shares are way under water. There are still 2.7 million shares available for issuance under the present plan. I found it a bit alarming that any one beneficiary can be awarded shares amounting to 5% of the outstanding total issued and outstanding "in any 12-month period." That would be exciting- 14 million shares if there were that many in the pool.

The option concept was originally thought to be a good way to motivate employees to act in ways that would be seen to be positive for the company's share price although it would seem justifiable for shareholders to expect that of them in any case. Creating a pot of 24 million shares in the present case seems a bit excessive to me but the notice of meeting points out that persons listed on the proxy are all for it so it will likely happen.

My initial thought when I looked at the numbers was to wonder whether the shares under the present plan should be repriced at a level below $2.28 rather than adding shares to the pot but if the addition is inevitable, as it probably is, then leaving them at that price provides more motivation than would a lower price. The risk of adding 9 million now is that they will be promptly awarded at the present depressed stock value to water down the overall exercise price in any case.

My personal preference, when things like option plans and bonus schemes are going to be implemented, is to make them available to all employees in values related to their salaries so that the company is seen to believe that everyone has the interests of the shareholders at heart when doing their daily jobs. I have been involved in situations where we paid all employees a bonus from a pool that was a percent of profits and they were all kept informed regularly about our success in achieving targets. The resulting motivation to make daily decisions that would improve the bottom line was truly amazing to witness. Giving management a huge pool of shares while leaving the rest of the organization outside the plan doesn't appeal to me.