Memorex 2010 Annual Report Download - page 62

exercised are issued from our treasury stock. The purchase of treasury stock is discretionary and will be subject to
determination by our Board of Directors each quarter following its review of our financial performance and other factors.
The Directors Plan was approved and adopted by 3M Company, as our sole shareholder, and became effective on
July 1, 1996. The outstanding options are non-qualified, normally have a term of ten years and generally became
exercisable one year after grant date. Exercise prices are equal to the fair market value of our common stock on the date
of grant. As a result of the approval and adoption of the 2005 Incentive Plan in May 2005, no further shares are available
for grant under the Directors Plan.
The 2000 Incentive Plan was approved and adopted by our shareholders on May 16, 2000, and became effective
immediately. The outstanding options are non-qualified, normally have a term of seven to ten years and generally became
exercisable 25 percent per year beginning on the first anniversary of the grant date. Exercise prices are equal to the fair
market value of our common stock on the date of grant.
The 2005 Incentive Plan was approved and adopted by our shareholders on May 4, 2005, and became effective
immediately. The 2005 Incentive Plan permitted the granting of incentive and non-qualified stock options, stock appreciation
rights, restricted stock, restricted stock units, dividend equivalents, performance awards and other stock and stock-based
awards. The total number of shares of common stock that could have been issued or awarded under the 2005 Incentive
Plan was not to exceed 2.5 million, of which the maximum number of shares that could have been awarded pursuant to
grants of restricted stock, restricted stock units and stock awards was 1.5 million. The outstanding options are non-qualified
and normally have a term of ten years. For employees, the options generally become exercisable 25 percent per year
beginning on the first anniversary of the grant date. For directors, the options generally became exercisable in full on the
first anniversary of the grant date. Exercise prices for stock options are equal to the fair market value of our common
stock on the date of grant. As a result of the approval and adoption of the 2008 Incentive Plan in May 2008, no further
shares are available for grant under the 2005 Incentive Plan.
The 2008 Incentive Plan was approved and adopted by our shareholders on May 7, 2008 and became effective
immediately. The 2008 Incentive Plan permits grants of stock options, stock appreciation rights, restricted stock, restricted
stock units, dividend equivalents, performance awards, stock awards and other stock-based awards (collectively, Awards).
The Board of Directors and Compensation Committee have the authority to determine the type of Awards as well as the
amount, terms and conditions of each Award under the 2008 Incentive Plan, subject to the limitations and other provisions
of the 2008 Incentive Plan. The total number of shares of common stock that may be issued or granted under the 2008
Incentive Plan may not exceed 4.0 million, of which the maximum number of shares that may be provided pursuant to
grants of Awards other than options and stock appreciation rights is 2.0 million. The number of shares available for
Awards, as well as the terms of outstanding Awards, is subject to adjustments as provided in the 2008 Incentive Plan for
stock splits, stock dividends, recapitalization and other similar events. The outstanding options are non-qualified and
normally have a term of ten years. For employees, the options generally become exercisable and restricted stock vests
25 percent per year beginning on the first anniversary of the grant date, subject to the employees continuing service to the
Company. For directors, the options generally become exercisable and restricted stock vests in full on the first anniversary
of the grant date. Exercise prices for stock options are equal to the fair market value of our common stock on the date of
grant. Awards may be granted under the 2008 Incentive Plan until May 6, 2018 or until all shares available for Awards
under the 2008 Incentive Plan have been purchased or acquired; provided, however, that incentive stock options may not
be granted after March 11, 2018. As of December 31, 2010, there were 1,073,031 shares available for grant under our
2008 Incentive Plan.
Stock Options
The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model.
The assumptions used in the valuation model are supported primarily by historical indicators and current market conditions.
Volatility was calculated using the historical weekly close rate for a period of time equal to the expected term. The risk-free
rate of return was determined by using the U.S. Treasury yield curve in effect at the time of grant. The expected term was
calculated on an aggregated basis and estimated based on an analysis of options already exercised and any foreseeable
trends or changes in recipients’ behavior. In determining the expected term, we considered the vesting period of the
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)