Understanding Reprice Administration
This section lists prerequisites and provides an overview of repricing and the repricing procedure.
Before you begin to reprice stock or run the Reprice Grants process, back up all of your data.
If the value of a company's stock declines such that the current fair market value of the stock is less than the option price of outstanding stock options, the option is considered to be underwater. The company may decide to reprice some or all of the options. Optionee's can choose not to participate in the repricing, and you might want to exclude individuals and groups, such as insiders or foreign offices.
When a stock is repriced, optionees surrender their higher-priced stock options in exchange for lower-priced options. Repricing affects stock options with option prices that exceed a specified break price. A repricing cancels the shares that remain outstanding on the original grant and creates a new grant for the outstanding shares at a new, lower option price on a specific date. The new stock option, granted as a result of the repricing, usually retains many of the characteristics of the old stock option.
The number of shares in the new stock option grant is equal to the number of outstanding shares in the old stock option grant as of the cancel date of the option. All transactions that occurred before the repricing remain with the repriced option.
When a stock is repriced, optionees surrender their higher-priced stock options in exchange for lower-priced options.
To reprice your stock:
Set up the reprice parameters including stock ID, eligibility, and vesting, through the Stock Reprice component.
Run the Reprice Eligibility process to determine who can participate in the reprice using the Reprice Eligibility Process page.
Print Reprice Election forms and send to plan participants for their acceptance (optional).
Enter individuals' elections to participate in the stock repricing using the Reprice Participation page.
Run the Reprice Grants process using the Reprice Grants Process page.
If necessary, run the Reverse Reprice process using the Reverse Reprice Grants Process page.
Note: Check the Reprice Messages page after you run any of the reprice processes.