The following summary is designed to answer some of the questions you may have about the Offer. How the Option Repurchase Works.
Beginning on the date you receive this Offer to Repurchase and ending at P. For each eligible option that you elect to cancel, you will receive a Cash Payment equal to the value of the outstanding portion of that option.
In determining the amount of the Cash Payment, the Company valued the eligible options based on a Black-Scholes method of valuation. The Cash Payment varies among the eligible options due to the different vesting schedules and exercise prices, which were based on the market price of the common stock on the grant date.
Once the Black-Scholes value was determined, the Company then applied a reasonable discount based on the fact that you will receive an immediate cash payment in exchange for the eligible options. The Cash Payment amounts for the different eligible options are listed in the table below. To determine how your total Cash Payment was calculated, take the number of eligible options for each type of eligible option and multiply it by the cash value of that option listed in the table below and then sum the values calculated for each type of option.
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No interest will accrue and no interest will be paid on any portion of the payment, regardless of when paid. Can I forfeit any portion of my Cash Payment after receiving it? If you have elected to tender your eligible options in connection with the Offer, you may not forfeit your associated Cash Payment. The principal reason the Company originally granted the eligible options was to provide an incentive to valued employees to remain employees of the Company, to help us create stockholder value and to share in the stockholder value that they create.
Accordingly, we are providing you the opportunity to obtain the more certain benefit associated with the Cash Payment, in lieu of the less certain, but potentially more valuable benefit you could receive if you elect to retain your stock options.
Determinants and Consequences of Share Repurchase Decisions
Participating in this repurchase program involves a number of risks, including the risk that the price of our common stock could increase in the future, including as the result of a merger with another company after the expiration date of the Offer, although there is no such merger transaction contemplated at this time. If the price of our common stock rises above the exercise price of your option, your tendered options might be worth more than the Cash Payment you receive in exchange for tendering them.
We cannot guarantee that you would not ultimately receive greater value form your eligible options. You should carefully evaluate all the information contained in the offering materials and consult with your own advisors, including tax advisors, before making any decisions regarding the Offer. You must tender all your eligible options for the Cash Payment if you want to tender any. Effective as of P.
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You will no longer have any rights or obligations with respect to those options. The shares of common stock that could have otherwise been purchased under the cancelled eligible options will be returned to the pool of options available to the Company for grants of new awards under the Plan. To participate, you must complete and sign the Letter of Transmittal and deliver it to the Company by email to Steve. We must receive your Letter of Transmittal by P.
If you do not return your executed Letter of Transmittal by the deadline, you will not participate in the option repurchase, and all eligible options you currently hold will remain unchanged with their original exercise price and original terms. The Offer is completely voluntary, and there are no penalties for electing not to participate. If you do not elect to participate, your outstanding options will remain outstanding under the terms and conditions under which they were granted.
To elect not to participate, you do not need to do anything or otherwise contact the Company. If you decide not to participate in the Offer, you do not need to submit a Letter of Transmittal. Federal Income Tax Considerations. The Cash Payment will be treated as regular cash compensation. As such, you will recognize ordinary income in the year in which your Cash Payment is paid to you. The ordinary income resulting from your Cash Payment will be reflected in the Form W-2 reported to the Internal Revenue Service for the year in which the payment is made.
At the time your Cash Payment is made, the Company will reduce your payment to reflect all required income and payroll tax withholdings and will send those amounts to the appropriate tax or other authorities. Depending on where you live, there may be additional state or local tax imposed on your tender. We recommend that you consult with a tax advisor prior to participating in the Offer to determine the specific tax considerations and tax consequences relevant to your participation in the Offer. How to Get More Information. To Planar Systems, Inc.
For purposes of participating in the repurchase offer, I hereby give up my entire ownership interest in all of my eligible options, and understand that those options will become null and void as of the date of my acceptance of the offer. Douglas K.
How share buybacks work: 3 things to watch out for when a company buys back its shares
And I want to own great, cutting-edge businesses that use their capital in the right way. You have to ask: Is that really the best use of company cash? Either way, shareholders should have a say in that. Another example: Hewlett-Packard.
That risk is senseless. HP knows they are facing existential threats from upstart competitors, but instead of paying out dividends or letting cash accrue on the balance sheet, HP is choosing the riskiest option.
Now, I have some theories on why stock buybacks have gotten so out of control. New industries like cloud computing, electric cars, and streaming video are rapidly changing the world. But in my opinion, older companies like HP have been too slow to adapt, and rather than investing in research and development or simply holding onto cash the corporate boards of legacy businesses are bolstering stock prices the only way they know how: playing defense and buying back stock.
But Rule 10b, the rule proposed in , gives executives total power and a blank check to determine their own incentive-based compensation. In some cases, a company may truly have an undervalued stock, and using excess cash to repurchase shares is actually a prudent, if not potent use of that shareholder cash. But right now, without shareholder approval, corporate boards freely swap a safe asset cash for a risky asset stock. Source: FactSet.