Non-Qualified ESPP - 1 year hold, but 50% discount?

[Semag]

Hey all-

We just received an email yesterday with links to our annual report, and they're floating a new ESPP by the stockholders to possibly offer us.  Based on my reading, this is what it looks like, and I was wondering if any of you had heard of this and/or if it sounds worthwhile?

* 6 month offering period
* No discount
* 0% - 25% of income allowed
* At the exercise date (end of period) you BUY shares at market price with deferred income
* Company issues an equal number of shares that are restricted for 1 year
* I believe you cannot sell either set of shares until the 1 year anniversary

If I read this right, it seems like a 50% discount on the shares, but you are forced into a 1 year hold time.  My company isn't huge (CALX) 300M market cap, some struggles getting and staying profitable, etc.  The main question I have to find out is the item above requiring holding for 1 year on shares purchased with my own money - I'm not sure if that's right, but that it sounds like in the document:

Unless otherwise determined by the Administrator, no Shares issued upon exercise of an Option under the Plan
may be assigned, transferred, pledged or otherwise disposed of in any way by the Participant until the first anniversary of the Exercise Date upon
which such Shares were purchased. Notwithstanding the foregoing, in the event a Participant ceases to be an Employee prior to the first
anniversary of the Exercise Date upon which Shares were purchased, the Restricted Shares acquired on such Exercise Date shall be forfeited for
no consideration, and the transfer restrictions applicable to the Purchased Shares purchased on such Exercise Date shall immediately lapse.

This is ON TOP of the regular ESPP (15%).

So, with 401K (15%) and ESPP (15%), if I participated fully in this new one (25%) I'd have to use savings to float my spending for 6 month periods as this eats up most of my take home pay.

Thoughts?

[MDM]

Seems a high risk/reward situation.  Company stock price has been going sideways or slightly down over the past several years. 

If you think realistic worst case is "stock price declines ~30%" then go for it, because in that situation you still make ~20% on your investment.

If you think realistic worst case is worse than above, then "how lucky do you feel?"

[Goldy]

We have a similar plan where they match your shares after a vesting period of 3 years.  The max we can invest is 5k per year but to me it's a no brained to do it.

[Semag]

Thanks for the replies, it does seem a little strange, things to think about. Part of me looks at the fact the company has been around 17+ years and wonder if really our valuation / performance will be down by 50% over a year period.  The last company I worked for was acquired by this one - so not all changes in company result in a large stock dip downwards.  But as per Bender's post, it seems like a strange way to try to "retain talent" as they were saying in the annual report. In other words trying to give people compensation without paying for it.

[MustacheAndaHalf]

This strikes me as not only worst case scenario:
"... the Restricted Shares acquired on such Exercise Date shall be forfeited for
no consideration ..."

But very likely: you leave the company without timing it to coincide with their stock program.  And in that case, you take a -100% loss on all the money you have locked up.

I'm not sure they can call this a regular ESPP while taking 100% of your money away in very common circumstances.  Might want to run this past a lawyer before you invest.

[Goldy]

This strikes me as not only worst case scenario:
"... the Restricted Shares acquired on such Exercise Date shall be forfeited for
no consideration ..."

But very likely: you leave the company without timing it to coincide with their stock program.  And in that case, you take a -100% loss on all the money you have locked up.

I'm not sure they can call this a regular ESPP while taking 100% of your money away in very common circumstances.  Might want to run this past a lawyer before you invest.

I don't think this is a risk.  If you were employed for 3 years and quit you would be able to collect your three years worth of contributions and two years worth of matching.  The restricted shares are the matching shares from the third year tranch that have not vested by the time you quit and were therefor not awarded.

In my opinion this is possibly one of the most lucrative company stock plans I have ever seen.  If the company keeps plugging along at the same rate and you max your contributions you get a bonus 25% of your salary as a match every year.  The stock would need to cut in half just for you to break even.