Underwater Stock Options Research Resources

In order to provide our clients with accurate market practices data, Radford maintains a comprehensive database of underwater exchanges executed since 2005. Our researchers use multiple sources of information to populate the database including tender offers and annual statements filed with the US Securities and Exchange Commission as well as news stories and press releases. High-level findings from this research are provided complimentary on Radford's Underwater Option Portal. For more information or to discuss exchange programs in greater detail, please contact us. The market practices outlined here, and their implications for program design, are addressed in our white paper Addressing Underwater Options: Measured Responses to a Contentious Problem.

Contents of Radford Research

Note, some figures may not sum to 100% due to rounding.

1. Company Profile

General information on researched company industry: revenue, employee size and historic total shareholder return (TSR).

Company profile statistics

2. Prevalence of Underwater Exchange Approaches

Percent of companies studied using each of the three primary exchange types.

Prevalence of Underwater Exchange Approaches

3. Option Holder Eligibility

Categories of option holders allowed to participate in the tender offer to exchange underwater options.

Option Holder Eligibility

4. Price Floor for Grant Eligibility

Predominant practice is to establish an exercise price floor above which outstanding option awards are eligible to be exchanged. Here we summarize where that floor is established relative to the trading price of the company's stock on the day the offer to exchange commences.

Price Floor for Grant Eligibility

5. Exchange Ratios

The first chart illustrates the prevalence of one-for-one exchanges vs. offers with ratios greater than one-for-one (i.e., return fewer new shares than the number of underwater options tendered). For plans greater than one-for-one, ratio size statistics are also provided.

Exchange Ratios

The second chart illustrates the number of ratio buckets according to the type of exchange approach used (options-for-options or options-for-stock).

Exchange Ratios

6. Vesting of New Awards

Summary of vesting requirements attached to the new awards (option-for-option and option-for-stock programs)

Mapped Vesting — transfers the vested position of the underwater award to the new award

Full Vesting Reset — introduces a fresh vesting schedule to the new award based on typical practices (e.g., four years)

Partial Vesting Reset — new award is reset to zero vested at grant, but uses a shorter schedule than is typically used for equity awards (e.g., two years instead of the normal four year requirement).

Vesting of New Awards

7. Program Participation Rates

Participation rates are measured as a percent of total eligible underwater option shares tendered (or turned in for exchange) in the program.

The first chart illustrates participation rates by type of underwater exchange offered.

Program Participation Rates

The second chart illustrates participation rates by a subjective assessment by Radford of the "Employee Friendliness" of a plan from the option holder's perspective. In general, our subjective assessments were made as follows:

"Employee Friendly" — reasonable number of exchange rate tiers, seemingly fair ratios, and new award vesting that recognizes some of the vesting already earned on tendered award (usually mapping or partial reset vesting).

"Non-Employee Friendly" — complex exchange rates (large number of tiers or a unique exchange rate offered for each individual outstanding award), relatively high exchange ratios, onerous vesting restrictions on new awards.

Program Participation Rates

8. Shareholder Friendliness Tests

The following charts illustrate the pass rates for what Radford defines as "Shareholder Friendly Tests" broken down by the type of exchange offer used. As would be expected, those that have been shareholder approved have more shareholder friendly terms.

Shareholder Friendliness Tests

9. List of Companies Studied

Companies Included in Radford's Underwater Option Exchange Database
2005 Programs 2006 Programs
Actel Corporation
Agile Software Corp.
Ariba, Inc.
Magma Design Automation
Marsh & McLennan
Monolithic System Technology
Tenet Healthcare
Watchguard Technology
Accelrys, Inc.
Advanced Analogic Technologies Inc.
Check Point Software Technologies LTD.
Critical Path, Inc.
Electronic Arts
iCAD, Inc.
Maxim Integrated Products
Mercury Computer Systems
Micro Linear
Strayer Education
Tegal Corporation
Threshold Pharma
2007 Programs 2008 Programs
Applied Micro Circuits Corp.
Bluefly, Inc.
Boston Scientific Corp.
Bronco Drilling Company
Catalyst Semiconductor, Inc.
Meritage Homes Corporation
Natural Health Trends Corp.
PAR Pharmaceutical Companies, Inc
Photon Dynamics
Rackable Systems
Rockville Financial
Sanmina-Sci Corporation
Smart Video Technologies
Sycamore Networks, Inc.
Sypris Solutions
Advanced Analogic Technologies Inc.
Alsius Corp.
Atari, Inc.
AXS-One Inc.
Bioform Medical Inc.
Builders Firstsource, Inc.
Credence Systems Corporation
Cumulus Media Inc.
Echelon Corporation
EnerNOC, Inc.
Exar Corporation
GlobalOptions Group, Inc.
Healthways Inc.
Isle of Capri Casinos, Inc.
Kopin Corporation
Lattice Semiconductor
Leapfrog Enterprises Inc.
Limelight Networks, Inc.
Magma Design Automation
MannKind Corp.
Marvell Technology Group Ltd.
Maxim Integrated Products
MDC Holdings
Metabasis Threapeutics Inc.
MGM Mirage
On Assignment, Inc.
PDF Solutions
Pharmacopeia, Inc.
Power Integrations Inc.
Quantum Fuel Systems Technologies
Radvision Ltd.
R.H. Donnelley Corp.
Retractable Technologies
Silicon Storage Technology, Inc.
Sirona Dental Systems
Sonic Solutions
Spark Networks, Inc.
Symyx Technologies Inc.
Sypris Solutions
Toll Brothers Inc.
Ubid.Com Holdings
United Therapeutics Corp.
UTStarcom, Inc.
ValueClick, Inc.
Virage Logic Corporation
Vmware, Inc.
Zhone Technologies Inc.
2009 Programs 2009 Programs (Continued)
Acme Packet
Active Power, Inc.
Adolor Corporation
Advanced Micro Devices
Altigen Communications, Inc.
American Reprographics Co.
AMN Healthcare Services, Inc.
Analog Devices, Inc.
Antigenics, Inc.
Applied Energetics, Inc.
Aruba Networks, Inc.
Aspect Medical Systems, Inc.
Atmel Corporation
Avid Technology, Inc.
Aware, Inc.
Beazer Homes USA Inc.
Bebe Stores, Inc.
Brigham Exploration Company
BTU International, Inc.
Calamos Asset Management, Inc.
Cardinal Health
Cascade Microtech, Inc.
CB Richard Ellis Group, Inc.
Consumer Portfolio Services
Cray Inc.
Crocs, Inc.
Crosstex Energy, LP
Cutera, Inc.
DealerTrack Holdings, Inc.
Delek US Holdings, Inc.
Digirad Corporation
Domino's Pizza, Inc.
Ebay, Inc.
Electronic Arts
Electronics for Imaging, Inc.
Emulex Corporation
Entropic Communications
Exelixis, Inc.
Fairchild Semiconductor International, Inc.
Flextronics International Ltd
General Communication, Inc.
Genworth Financial, Inc
Geokinetics Inc.
GLU Mobile Inc.
Google Inc.
Hastings Entertainment, Inc.
Hologic, Inc.
Hughes Communications, Inc.
i2 Telecom International Inc.
Icx Technologies, Inc.
Ikanos Communications, Inc.
Image Sensing Systems Inc.
Integrated Device Technology
Integrated Silicon Solution, Inc.
Intel Corporation
Intellon Corporation
International Game Technology
Intersil Corporation
Iridex Corporation
iRobot Corporation
Isilon Systems, Inc.
Lakes Entertainment, Inc.
Lamar Advertising
Leapfrog Enterprises
Liberty Global, Inc.
Liberty Media Corporation
Lime Energy Co.
Luxottica Group SpA
Mellanox Technologies
Mercury Computer Systems
MF Global Ltd.
Micrel, Inc
Mindspeed Technologies, Inc.
MKS Instruments, Inc.
Motorola, Inc.
Nanometrics Incorporated
National Semiconductor Corporation
NetApp, Inc.
NetSuite, Inc.
Network Equipment Technologies, Inc.
New York & Company, Inc.
Nice Systems
NightHawk Radiology Holdings Inc.
NVIDIA Corporation
Oclaro, Inc.
Omniture, Inc.
Omnivision Technologies, Inc.
PLX Technology, Inc.
Polycom, Inc.
QAD, Inc.
Radisys Corporation
RCN Corporation
RealNetworks, Inc.
Red Robin Gourmet Burgers, Inc.
RF Micro Devices, Inc.
Scripps Networks Interactive, Inc.
ShoreTel, Inc.
Sigma Designs, Inc.
Sirona Dental Systems
SMART Modular Technologies (WWH), Inc.
Somaxon Pharmaceuticals, Inc.
Sonus Networks, Inc.
Spectrum Pharmaceuticals, Inc.
Sport Chalet, Inc.
Starbucks Corporation
Stereotaxis, Inc.
Support.com, Inc.
Tessera Technologies, Inc.
thinkorswim Group, Inc.
Threshold Pharmaceuticals, Inc.
Ultratech, Inc.
Unica Corporation
VeriFone Holdings, Inc.
WellCare Health Plans, Inc.
Williams Sonoma Inc.
Willis Group Holdings, Ltd.
Winn Dixie Stores, Inc.
Xeta Technologies Inc.
ZipRealty, Inc.
Zymogenetics, Inc.
2010 Programs
Sprint Nextel Corp
Quicksilver Inc.