(CN) - Abaxis violated its 2005 Equity Incentive Plan by issuing "excessive and improper shares" to company employees, investors claim in federal court.
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Lead plaintiff St. Louis Police Retirement System claims that the board of Abaxis violated the plan, originally approved in October 2005, by issuing more than two million restricted stock units to officers and other company employees.
The plan constrained the number to 500,000 shares, but company allegedly approved more than four times that amount.
In a filing with the Securities and Exchange Commission, the company admitted to exceeding the limit, according to the complaint in the Northern District of California. It allegedly said NASDAQ had sent it a letter detailing the failure to comply with a listing rule requiring stockholder approval of "material amendments to an equity compensation plan.
"Irrespective of defendants' purported belief that the restricted stock limit had somehow been increased, which is hard to believe in light of the fact that the defendants who received the restricted stock units and approved such awards were the same individuals who developed and administered the 2005 plan, Abaxis has sustained millions of dollars in damages, and the officer defendants and other employees have garnered millions of dollars in unlawful proceeds as a result of ultra vires grants of hundreds of thousands of restricted stock units," the complaint states.
Moreover the company plans to hold a vote to amend the plan at its upcoming annual meeting, but the proxy issued for the meeting is misleading, shareholders claim.
The proxy leaves "shareholders either uninformed or misinformed" because it fails to mention that "the bases for the compensation committee's decision to eliminate the Restricted Stock Limit - e.g., that the grantor defendants had already violated the 2005 Plan by dramatically exceeding the restricted stock limit," the complaint states.
Shareholders want an injunction to halt the meeting, scheduled for Oct. 24, 2012, until the company's board corrects the "materially false and misleading 2012 proxy."
The class is represented by Ramzi Abadou and Eric Peterson in San Francisco, Erin Zager, James Miller and Matthew Goldstein in Radnor, Pa. of Kessler Topaz Meltzer & Check.
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